http://kalwnews.org/audio/oakland-general-strike-1946
http://www.indybay.org/olduploads/oakland_gstrike.mp3
http://www.archive.org/details/SanFranc1934

a “WORK HOLIDAY”
http://content.cdlib.org/view?docId=kt2h4n993g&chunk.id=d0e1403&brand=calisphere&doc.view=entire_text
http://www.flyingpicket.org/node/12
http://libcom.org/library/oakland-general-strike-stan-weir
1946: The Oakland General Strike
by Stan Weir / Nov 22 2005

By nightfall the strikers had instructed all stores except pharmacies and food markets to shut down, Bars were allowed to stay open, but they could serve only beer and had to put their juke boxes out on the sidewalk to play at full volume and no charge. ‘Pistol Packin’ Mama, Lay That Pistol Down’, the number one hit, echoed off all the buildings. That first 24-hour period of the 54-hour strike had a carnival spirit. A mass of couples danced in the streets. The participants were making history, knew it, and were having fun.

The Oakland (California) General Strike was an extension of the national strike wave. It was not a ‘called’ strike. Shortly before 5 a.m., Monday, December 3, 1946, the hundreds of workers passing through downtown Oakland on their way to work became witness to the police herding a fleet of scab trucks through the downtown area. The trucks contained commodities to fill the shelves of two major department stores whose clerks (mostly women) had long been on strike. The witnesses, that is, truck drivers, bus and streetcar operators and passengers, got off their vehicles and did not return. The city filled with workers, they milled about in the city’s core for several hours and then organised themselves.



By nightfall the strikers had instructed all stores except pharmacies and food markets to shut down, Bars were allowed to stay open, but they could serve only beer and had to put their juke boxes out on the sidewalk to play at full volume and no charge. ‘Pistol Packin’ Mama, Lay That Pistol Down’, the number one hit, echoed off all the buildings. That first 24-hour period of the 54-hour strike had a carnival spirit. A mass of couples danced in the streets. The participants were making history, knew it, and were having fun. By Tuesday morning they had cordoned off the central city and were directing traffic. Anyone could leave, but only those with passports (union cards) could get in. The comment made by a prominent national network newscaster, that ‘Oakland is a ghost town tonight,’ was a contribution to ignorance. Never before or since had Oakland been so alive and happy for the majority of the population. It was a town of law and order. In that city of over a quarter mil lion, strangers passed each other on the street and did not have fear, but the opposite.

Before the second day of the strike was half over a large group of war veterans among the strikers formed their own squads and went through close-order drills. They then marched on the Tribune Tower, offices of the anti-labour OAKLAND TRIBUNE, and from there marched on City Hall demanding the resignation of the mayor and city council. Sailor’s Union of the Pacific (SUP) crews walked off the three ships at the Oakland Army base loaded with military supplies for troops in Japan. By that night the strikers closed some grocery stores in order to conserve dwindling food supplies. In all general strikes the participants are very soon forced by the very nature of events to themselves run the society they have just stopped. The process in the Oakland experiment was beginning to deepen. There was as yet little evidence of official union leadership in the streets. The top local Teamster officials, except one, were not to be found; the exception would be fired five months later for his strike activity. International Teamster President Dave Beck wired orders ‘to break the strike’ because it was a revolutionary attempt ‘to overthrow the government’. He ordered all Teamsters who had left their jobs to return to work. (OAKLAND TRIBUNE, December 5, 1946)

A number of the secondary Oakland and Alameda County union leaders did what they could to create a semblance of straight trade-union organisation. The ranks, unused to leading themselves and having no precedent for this sort of strike in their own experience, wanted the well-known labour leaders in the Bay Area to step forward with expertise, aid, and public legitimisation. The man who was always billed as leader of the 1934 San Francisco General Strike, ILWU President Harry Bridges, who was then also State CIO President, refused to become involved,, ,just as he did 18 years later during the Berkeley Free Speech Movement struggles. The rank-and-file longshoremen and warehouse- men who had been drawn to the street strike were out there on their own. No organised contingents from the hundreds available in the warehouse and longshore hiring halls were sent to help, No CIO shops were given the nod to walk out or ‘sick-out’. Only through CIO participation could significant numbers of blacks have been drawn into this mainly white strike. The ILWU and other CIO unions would honour picket lines like those around the Tribune Tower or at the Oakland Army Base, but otherwise they minded their own business. Bridges had recently committed himself to a nine-year extension of the wartime no-strike pledge.


Oakland general strike. December 5, 1946. Photographer unknown.

The one major leader of the San Francisco General Strike who would come to Oakland was the SUP’s Secretary Treasurer, Harry Lundeberg. On the second night of the strike he was the principal speaker at the mass meeting in the overflowing Oakland Auditorium. He had been alerted when the strike was less than three hours old via a call from an old-time member at a pay phone on an Oakland street. By noon there were contingents composed mainly of Hawaiians acting as ‘flying squads’, patrolling to find any evidence of strike-breaking activity. They enlarged Upon their number by issuing large white buttons to all seamen or persons on the Street that they knew. The buttons contained the words ‘ Brotherhood of the Sea’, They represented the first officially-organised activity on the street, They did not attempt to run the entire strike or take over. It takes a time for seamen to get over the idea that they are somehow outsiders, The feeling is all the stronger among Hawaiian seamen ashore or residing in the States. They limited their activity to trouble-shooting. They won gratitude and respect. When Lundeberg spoke at the meeting, he had no program of action beyond that of the Oakland AFL leaders. But he got a wild response. He did not approach the microphone reluctantly. His demeanour reflected no hesitancy. Unlike the other speakers, he bellowed with outrage against the city council on behalf of the strikers. In a heavy Norwegian accent he accused: ‘These finky gazoonies who call themselves city fathers have been taking les sons from Hitler and Stalin. They don’t believe in the kind of unions that are free to strike.’ All true, but whether he knew it or not, by focusing on the City Council and no more, he was contributing to the undercutting of the strike, Instead of dealing with the anti-labour employers and city officials through the medium of the strike, plans were already being formulated to deal with the crisis in the post-strike period by attacking the City Council through use of the ballot box. The top Alameda County CIO officials were making hourly statements for the record that they could later use to cover up their disloyalty, The AFL officials couldn’t get them to come near the strike, but they could be expected to participate in post-strike electoral action.

The strike ended 54 hours old at 11 a.m. on December 5. The people on the street learned of the decision from a sound truck put on the Street by the AFL Central Labour Council. It was the officials’ first really decisive act of leadership. They had consulted among themselves and decided to end the strike on the basis of the Oakland City Manager’s promise that police would not again be used to bring in scabs. No concessions were gained for the women retail clerks at Kahn’s and Hastings Department Stores whose strikes had triggered the General Strike; they were left free to negotiate any settlement they could get on their own. Those women and many other strikers heard the sound truck’s message with the form of anger that was close to heartbreak, Numbers of truckers and other workers continued to picket with the women, yelling protests at the truck and appealing to all who could hear that they should stay out. But all strikers other than the clerks had been ordered back to work and no longer had any protection against the disciplinary actions that might be brought against them for strike-caused absences, By noon only a few score of workers were left, wandering disconsolately around the now-barren city, The CIO mass meeting that had been called for that night to discuss strike ‘unity’ was never held.

In the strike’s aftermath every incumbent official in the major Oakland Teamsters Local 70 was voted out of office. A United AFL-CIO Political Action Committee was formed to run candidates in the race for the five open seats on the nine-person City Council. Four of them won, the ballot listed the names of the first four labour challengers on top of each of the incumbents, but reversed the order for the fifth open office, It was felt that the loss was due to this trick and anti-Semitism. The fifth labour candidate’s name was Ben Goldfarb. Labour’s city councilmen were regularly outvoted by the five incumbents; however, the four winners were by no means outspoken champions of labour. They did not utilise their offices as a tribune for a progressive labour-civic program. They served out their time routinely, and the strike faded to become the nation’s major unknown general strike.




The Oakland General Strike was related to the 1946 Strike Wave in time and spirit, and revealed an aspect of the tem per of the nation’s industrial-working-class mood at war’s end. Labour historians of the immediate post-war period have failed to examine the Oakland Strike, and thus have failed to consider a major event of the period and what it reveals about the mood of that time. In developing their analyses they have focused almost entirely on the economic demands made by the unions that participated in the Strike Wave. These demands were not unimportant. But economic oppression was not the primary wound that had been experienced daily during the war years.

The ‘spontaneous’ Oakland General Strike was a massive event in a major urban area with a population similar to that of all major World War II defence-industry centres, Thousands had come to the Bay Area from all corners of the nation-rural and urban-in the early war years, and had stayed. Every theatre of war was represented among armed-forces veterans returning to or settling in this largest of Northern California’s central city cores. The Oakland General Strike revealed fundamental characteristics of a national and not simply a regional mood. Its events combined to make a statement of working-class awareness that World War II had not been fought for democracy. Or, more pointedly, it was a retaliation for the absence of democracy that the people in industry and the armed forces had experienced while ‘fighting to save democracy in a war to end all wars’. The focus of people’s lives was still on the war. They hadn’t fought what they believed to be ‘a war against fascism’ to return home and have their strikes broken and unions housebroken.

Emotionally, their war experiences were still very real, and yet they were just far enough away from those experiences to begin playbacks of memory tapes. The post-war period had not yet achieved an experiential identity. The Oakland Key System bus drivers, streetcar conductors, and motormen who played a leading role in the strike wore their Eisenhower jackets as work uniforms, but the overseas bars were still on their sleeves. Like most, they had lost four years of their youth; and while they would never complain about that loss in those terms, there were other related grievances over which resentment could be expressed.


Crowds Gather on first of Seattle General Strike

the SEATTLE GENERAL STRIKE of 1919
http://content.lib.washington.edu/lawsweb/strike.html
The Seattle General Strike of 1919, and its Aftermath

Although Seattle’s industries had profited in 1917-1918 from the boom in wartime production, the workers in those industries had not seen any related increase in their wages. As a result, in January 1919, the Metal Trades Council of Seattle went on strike, and shortly thereafter, the Central Labor Council of Seattle led many other local unions in calling a city-wide general strike, which lasted from the 6th to the 11th of February. The scale of the strike—tens of thousands of workers participated—panicked local and state officials, who mobilized police and military personnel despite the strike’s non-violent character. Ultimately the workers ended the strike without having won any concessions from the targeted businesses: in the months that followed, politicians and businessmen blamed the strike on “Bolshevik” union leaders, while the Seattle labor movement attempted to understand why the strike had failed and what steps should now be taken to work for change.

The University of Washington’s digital collections contain a small sampling of photographs and documents from the Seattle General Strike itself and the days immediately before and after the strike. Included are minutes from meetings of the Central Labor Council of Seattle, which organized the strike, as well as a photograph of workers on the city’s streets during the strike itself. The Central Labor Council of Seattle remained powerful and influential in the wake of the strike: the U.W.’s digital collections contain a wide range of correspondence, minutes, reports, ephemera, and news clippings that give some account of the work of the Seattle C.L.C. in the late 1910s and early 1920s. Included among the documents are minutes of Council meetings (along with labor spy reports giving different accounts of those same meetings), as well as selected letters from the correspondence of Anna Louise Strong, a prominent member of the Seattle labor movement.



Preparing for the General Strike, Seattle, 1919

The Central Labor Council’s official newspaper, the Seattle Union Record, played a prominent role in the build-up to the general strike, and became the subject of tense internal arguments in the city’s labor movement in the early 1920s. The U.W.’s digital collections include a wide range of documents relating to the Union Record, including clippings from the newspaper, a history of the paper up to 1923, as well as references to the paper appearing correspondence and reports from that era. Our digital collections also include documents relating to the life and work of Harry Ault — Ault was editor of the Union Record from 1912 to its demise in 1928, and his work was both credited for the paper’s widespread influence and denounced as “capitalist” and traitorous to the labor movement’s ideals. The documents include reminiscences composed by Ault about Equality Colony, the socialist commune he grew up in, as well as correspondence and reports that refer to his work as editor.

Anna Louise Strong was a progressive reformer whose work in Seattle initially addressed living conditions for impoverished children, but her writings about the Everett Massacre trial influenced her to become an outspoken activist on behalf of workers. Strong wrote extensively for the Seattle Union Record, and her editorial regarding the 1919 General Strike, entitled “No One Knows Where”, was perhaps the most widely distributed statement of the workers’ aims. The U.W.’s digital collections include correspondence, manuscripts, ephemera, and photographs which illuminate Strong’s career in connection with the labor movement in Seattle, and the Seattle general strike in particular.


the ’46 STRIKE WAVE
http://www.bitsofnews.com/content/view/6638/
http://www.oakland1946.blogspot.com/
http://www.flyingpicket.org/?q=node/42
Interview with Stan Weir – November and December, 1990

Pat McAuley: What I meant to ask was: a lot of these short, wildcat-type strikes, like the sit-down strike that you led, did these contribute to the General Strike that occurred in 1946 or 1947 in Oakland?
Stan Weir: Well, the General Strike was part of the ’46 strike wave. You can’t extract one from the other. There was a great deal of dammed up militancy. People who worked throughout the War had been taking all this crap from employers in the name of the War effort, that kind of phony patriotism, instead of real patriotism. It was time to catch up after the War, so there were wildcat strikes going on apace. As a matter of fact, there were more people out on strike in 1946 in the ’46 strike wave than any time before or since. It is the largest strike wave that ever occurred in the United States. That occurred as a last gasp of a labor force that was coming back, of a labor force that was still in place. That is, the G.I.’s were not all back yet, and the people who had spent this last four years together were still pretty much together, or they hadn’t been swamped by new workers coming in or guys returning from the Armed Forces. A lot of new technology and new mechanization had not yet been introduced.
The Oakland General Strike was, I think, in December. Mary got in my jeep and drove down with some of her girlfriends from campus to travel around the streets and look at it. We in the CIO were not a part of it officially. That is, the State of California CIO was run by Percy Peers. They were for having the General Strike after the War – having a no-strike pledge almost permanently for nine years after the War. When the General Strike broke out, the three ships at the Oakland Army Base, the gangs all walked off ‘em and went out in the streets and went on strike. Bridges immediately sent gangs of politicals back to those ships and kept working. In order to participate in that general strike, we had to stay out of work, be on absenteeism.

McAuley: The Maritime workers were a big part of this, weren’t they?
Weir: Well, they were, partly because I found them. That is, I was still a member of the Sailors’ Union. I am downtown, in Oakland. I got off the streetcar. The strike had started. There was no bus to take me the rest of the way to East Oakland to my job. I didn’t see any official leadership. There was not an official leader anywhere to be found. They’re all hiding. This is strictly rank and file. Downtown alone went on strike alone. So, I (and it might not have been the best thing to do) phoned up the Sailors’ Union, got Lundeberg, and said, “Hey, there’s a strike over here and there’s no organization. We need a way of developing a network. Whatever you can do.” What he did was he sent about thirty Hawaiians with a bunch of SIU-SUP Brotherhood of the Sea buttons and (they) began distributing those as some kind of strike police badge. At the Oakland General Strike meeting downtown in the Oakland Auditorium, Lundeberg was the only one to know what to say. It was all demagogy – “the Oakland City Council had tried to break the strike.” Going on that “the General Strike had taken lessons from Hitler and Stalin, and they were finks.” Anyway, he was the only one who talked radical like that, ‘cause he knew from the past, the recent past, although he had already sold out. I hadn’t yet absorbed that sellout, and that’s why I would call the union, get him, and tell him to get some forces over there.

McAuley: Did the strike die because of lack of strong leadership?
Weir: Yes. The leadership of the retail clerks’ and that of the Teamsters was very different. That is, finally the retail clerks’ leadership did show up. But they had all this strength. Remember, the General Strike was called in support of the workers at Kahn’s and Hastings department stores. Here, they had the town shut down. That leadership did not come up with an agreement that would protect the jobs of those people and settle their grievances. They went back to work with no protection and with no gains.

McAuley: But a lot of other workers were so ready to strike.
Weir: Yes!

McAuley: That they walked out in support of these retail clerks.
Weir: Yes. Absolutely. That accidental strike, the so-called accidental strike, without any leadership, with no one calling it, turned out to be an opportunity for people to vent their feelings about what had happened to them on the job during the War. The leaders, the real leaders of that strike, were the Key system bus drivers, who were just back from after the War. They were still wearing the Eisenhower jackets, but now they had converted them to bus driver jackets. A lot of them still had their gold hatch marks, overseas marks, on their jackets. I remember, and I’ve told this a number of times, an Army recruiting truck came down the street during the General Strike. Some young lieutenant in back of the truck says into the microphone over the loud P.A. system: “You ought to be ashamed of yourselves striking. You ought to be out fighting for your country.” It was so recently after the War, maybe he thought he could get away with that. Some big guy said, “Where do you think we got these?” and pointed to his overseas marks. He said, “Fall in!” and about 50 to 75 guys fell in, in close order, and he started them in a close order drill, and more guys, and more guys. Pretty soon, we had a company, not a platoon but a company. Pretty soon, he had more than a company. I mean he had hundreds, in close order drill. What are you going to do with them now? Marched on City Hall. Demanded to see the head of the City Council. No one would come out to talk to them. But they went to the seat of power in the city, the ones who had called on scab trucks from L.A. to come and be herded into those stores by Oakland police.

Pat McAuley: It is now December 5th (1990). I am in Stan Weir’s office of Singlejack Books, (in San Pedro), overlooking the harbor in Los Angeles. Stan, when we last talked, we were talking about the General Strike in Oakland. Is there anything else about that General Strike that comes to your mind?
Stan Weir: The General Strike confirmed for me ideas that I had been having for some time. It seemed to me that wherever I looked, the membership of unions, and of political parties I belonged to, a political grouping I belonged to, the membership was ahead of the leadership. But I’m going to talk about unions now. It seemed to me not only were the members of the unions I had been in, and was in, ahead of the official line on how to fight the employer and willingness to fight the employer, way ahead. They were way ahead when it came to the invention of democratic methods for furthering that fight. Those methods developed a societal set of attitudes on the part of these people. The officialdom you mentioned, when I said that you couldn’t find a union official in downtown Oakland, and you asked me before we started here today, “Do you think that shocked the officials?” Well, it had to have shocked them half out of their senses. At that time, it was close after the War. I, for example, at Cedar and San Pablo, got a bus to Ashby, got a trolley in downtown Oakland, then got a bus to East Oakland, where I was working in the East Oakland Chevrolet plant. When we got to downtown Oakland that morning, we rolled in somewhere between 6 and 7:30. A man came running over to our streetcar and talked briefly, just briefly, and fast, and hard, to our conductor and motorman on the streetcar. They got off and began to walk away. We yelled at them, “Hey! What’s this?!” He explained that Los Angeles scab-driven trucks with merchandise for the two department stores that were on strike, Kahn’s and Hastings department stores, that these trucks were being herded through the city, right now, by the Oakland police, and that’s why. And they disappeared. So, we were all there downtown. We couldn’t get to work. Immediately, a carnival kind of attitude hit us.

McAuley: Did they think the trolley-
Weir: Right here. And the trucks the men were driving, they just left them right at that spot. They didn’t even pull them to the curb. Of course, they did it with a method. It had its own method. It’s another way of protesting. Well, the first thing that hit us in this whole thing was we got a good excuse. We can’t get to work. And we’re here. So, it was kind of a carnival. It wasn’t half an hour before we were going into bars and saying, “No hard liquor. Serve beer and wine, if you must, but mainly beer,” and “You can stay open only if you bring your jukebox out in front and turn it on loud.” And we were dancing at 7 o’clock in the morning. Men and women. And joking, and so on. (Laughing) Feeling like, you know, God, freedom. It was marvelous. When you’re a factory hand, you get to sit down three minutes in a day, more than your lunchtime. You figure, like, it’s a great day if you beat ‘em out of three minutes! You know?

McAuley: Yeah.
Weir: When the line would break down, it would be like I would go into laughter almost immediately, and stay there. I’d laugh at anybody’s joke – and so would everybody else – if the line, the assembly line broke down at Chevrolet.

McAuley: The CIO wasn’t supporting this General Strike then.
Weir: No.

McAuley: Did the workers stay out?
Weir: Well, those who couldn’t get to work didn’t go to work. Yeah. But the CIO was led by the Communist Party at the time. And the Communist Party supported us. I think I’ve said that here on this tape. It was me at the State CIO Convention that year that got up and challenged Dick, the Chair of the Convention. He was from the Local 6 warehouse, IOWU. His dad owned a warehouse, and he struck against his father. That’s how he got started in unionism. (I’ve forgotten his last name.) But I said, “Where was the CIO in the Oakland General Strike? We had to stay away from work in order to participate. What is this? Where is the solidarity?” Paul Schlitt, the Secretary-Treasurer of the CIO, got up and said, “It wasn’t a general strike. We weren’t in it.” Well, that kind of double-think, using Orwell’s term, it was a transplantation of that kind of thinking into the situation in Oakland. But here we were, and without any leadership. By noon that day, the carnival was kind of over. We think we can’t go on like this forever. They’ll come and get us. (Laughing) Somebody will come and get us, you know, and it won’t be good. So, I had made a phone call to the Sailors’ Union to see what kind of help I could get from the seamen who were ashore and not working. And I talked to Lundeberg. Lundeberg spoke the next night, I believe it was, at the Oakland Auditorium in the General Strike meeting. He demagogically was militant and he gave people what they wanted to hear. He denounced the City fathers and the police as people who had been reading the writings of Stalin and Hitler. He knew that it was time to get mad. He wasn’t afraid, like the rest of the officials who were afraid to get up there and even sound off. Without any leadership, we cordoned the town off. You could get out without a union card. You couldn’t get in without a union card. There was a guy going down the street, a great big guy with a typewriter. People said, “Hey, where are you goin’ with the typewriter?,” and he began to run. They ran and they arrested him, in effect, until he explained that he wasn’t stealing the typewriter, that he didn’t believe in the strike and he was taking his work home ‘cause he might not be able to get to work the next day. They said, “Go. Get in your car and go.”

McAuley: So, was it the residents on these blocks?
Weir: No, this was downtown.

McAuley: Alright. Well, I meant the residents of the offices that form these informal authorities for these groups.
Weir: No, it was the people who got off the buses and the streetcars. It was the truck drivers. It was the people in their cars going to work. It wasn’t the residents so much. Although in West Oakland, which is close by, the blacks involved in this strike, some of them had just walked up from there, where they lived. But people in the offices, many were non-union. Now, the OPEIU, the office workers and the union, and the retail clerks did participate in the strike, because it was for Kahn’s and Hastings department store workers. But, that I know of, there was no general outpour of office workers – just, boom, like that – who were non-union and suddenly got the word. We did have experiences like this. Non-union people would come out and they’d be going to go home and they didn’t know for how long. They were impressed at the order, the neatness. That is, we kept the streets clean. There was no littering. Like I say, there were people who had cordoned, we had cordoned the city off, all the streets leading out of downtown Oakland. We had downtown, 10 square blocks. Maybe it was more than that. Maybe it was more like twenty blocks. But there was a desire to really do the right thing by everybody, everybody who was on your side. There was no rousting anybody, or anybody stealing gas from other people’s cars, or breaking in. So far as we could tell, those fifty-four hours were crimeless downtown. It’s like, in Albert Rhys Williams’ book, Through the Russian Revolution, He was a journalist and he went to Russia, because of the Russian Revolution, in February. He came back and wrote a book about what he saw. He was a good journalist. He is walking up and down the streets of Leningrad. He sees people walking by shoe stores, for example, with broken panes, and no one is reaching inside and grabbing those shoes and running away with them. Already there was a sense of collective property. “That’s not ours just to steal. We will take care of it. We will divie that up, so to speak.” Then, of course, I had read about Antonov Gouzenko in that book, the same book. There was open warfare between the Whites and the Reds. The Whites had captured the telephone building. I’ve forgotten whether it was Moscow or St. Petersburg, Leningrad. The Whites had captured Antonov Gouzenko, the head of the workers’ Red militia, and he’s imprisoned in the telephone building. People are shooting at one another and killing one another in this situation. The Reds are ringing and the cordon is all the way around the building. The Whites send out a Red Cross truck that they have captured, ostensibly with wounded. The Reds let the truck go through the line, the Red Cross truck, and get out around the corner, out of sight of the Whites. They grabbed the truck, and there were no wounded in it. The people inside confessed immediately that they were going for munitions. The Reds turned into a Trojan horse. They stuck highly armed people into that Red Cross truck and they went back in through a half an hour later. Zap! That was the end of that. The whites immediately surrendered. “Where is Antonov Gouzenko? This is your neck unless you produce him.” They release him and Antonov Gouzenko is just standing there. The rest of the Reds move to kill or harm bodily all the Whites standing there who had imprisoned him. He grabbed a gun away from someone and said, “The first one who puts a hand on any of these Whites that we’ve been fighting right now, I will shoot him.” They said, “What? You’re going to shoot us? We’re on your side.” He says, “I know. But you will damn the revolution by doing wrong. These people deserve a trial, like prisoners of war. You don’t represent the new (society) if you just (shoot them) because you said that they’d do it to us. Of course, they’d do it to us. But we don’t do it to them. We represent the new society.” He had been on the streets the whole time as head of the workers’ militia. Albert Rhys Williams says that the people caught on immediately. Simply, Gouzenko was the first to become objective in this situation. Then, the Reds led the Whites through the town, from the telephone building to the jail. Many of them were attacked and beat up by townspeople who were saying, “You got Whites?! Well, let’s get ‘em now! Let’s do ‘em in!” And the same Reds who would want to do ‘em in half an hour earlier. They said, “No, we’re taking him. We’re going to try him.” Of course, a lot of Whites got out of jail real quick just by promising. The Reds were very lenient at that time. But there was this morality, the feeling that ends and means have to always stick together. This is the working class itself, at the very bottom, insisting upon that, without any kind of long rationalizations about, “well, this is a special situation,” and all that malarkey. (They) just hung to it and stayed with it until the revolution itself had been starved out.

McAuley: So, in Oakland?
Weir: You could see that in Oakland. You could see the potential for that, right there in the streets.

McAuley: Mm hm. The spontaneous morality.
Weir: Yes.

McAuley: Do you think that the fact that people had just gone through the World War II experience, did that contribute in any way to this – this natural, but not always spontaneous, morality, but incredible order that took place?
Weir: I don’t know. I mean there’s no way of knowing the answer to that. I can only tell you what my feeling was. I think that there were people there who hadn’t really thought about a number of these things, that the General Strike posed for them in their minds. They approached the problem in their minds and they came up with these kinds of answers. Because the kinds of lives they lead doesn’t lead them to start moaning on the terrible people workers are; they’re lazy; they’re this or that and the other thing; or they don’t pay their rent on time; and all that. The people have nothing to gain by that. These people came up with brilliant ideas. Some of them had thought it through beforehand, in all probability. Trotsky speaks of this in The History of the Russian Revolution, that suddenly people’s minds are liberated. It staggers them. Suddenly they are free. Some of those who had been the most servile, the day before October or February, became the most bold. Zap! No one knows the exact process of the thinking of a crowd in that way.

McAuley: You saw this happen in Oakland?
Weir: In my experience, crowds of this kind, rather than being surly, lynch-mob types, or very close to that, just on the other side of the fence. No. My experience is that it is in the crowd that there is the most genius. At the Chevrolet plant, when we had the sit-down strike, the same thing occurred. That is, I stopped people from walking out. When we all gathered together again on the loading docks of the East Oakland plant, I said, “If any of us clock out—“, but I didn’t finish my sentence. Someone said, “A lot of us will never get back in.” Someone else said, “But if we hang tough here, available for work, the moment they begin to live up (to) the contract and the grievance we’ve just won, then we’ll see.” No one even said, “We’ll survive.” I mean the sentence was never totally finished. Everybody understood immediately. And that’s what we did. We stayed right there, visible, and available to work the moment that they quit reneging on the supply of gloves, which we wore out at three pair a week. It’s that same brilliance of people who have been released from the necessity to hide their feelings. Who knows what anybody really believes when they’re working on the job for an employer? You ask them a million questions, they are always going to answer the same way. Whatever strengthens their position on the job. They are not going to weaken there. That is, if you’re an interviewer from somewhere. If you come as a psychologist or an academic and you come interviewing people on the job, even if you’re (saying), “Harry Bridges sent me down here to the waterfront, fellas, and he said it was o.k. that I talk to you fellas,” you think they’re going to tell them, “This guy’s really the score”? Never.

McAuley: Yeah, yeah. Well, Stan, I want to get back to your party, WP [Workers’ Party], and they asked you to get inside of, you know, to get into the auto (industry) in order to support the Reuther caucus. What was so important about the (Walter) Reuther caucus? Who did they oppose?
Weir: Well, this fight shaped up with the Reuther caucus opposed to the R.G. Thomas and George Addes caucus. That was a coalition caucus, a coalition between the Phillip Murry-ites, the middle-of-the-road, conservative, CIO top leadership, which R.J. Thomas followed, and the supporters of the Communist Party point of view, their labor beliefs. They had had the leadership of the union all the way through the War, and they had misled it terribly all the way through the War, giving up conditions that were hard-won in the strikes of the thirties. They were for going back to peace work. They were for National Labor conscription. They were for a no-strike pledge during and after the War. And so on. Reuther, at least in the beginning, opposed them from the Left. Now, Reuther had taken over the rank and file caucus, which was built primarily by left-wing politicals during the War. That means mainly by Trotskyists, except it did not include the orthodox and largest group of the Trotskyists, the Socialist Workers’ Party people. They were in the R.J. Thomas and George Addes caucus 90% of the time. I think there was one brief interlude where they jumped over to Reuther for a moment, or at least differed with the Addes-Thomas people. People who were opposed to the CP from the Left as rank and filers or as politicals made up the rank and file caucus. Reuther wouldn’t touch it. It meant job action during the War, and he didn’t want that connected with his own history, his own reputation. But the minute the War was over, or in Europe, he began making innuendo and then directly. He did take over the leadership for the rank and file caucus, and it became the Reuther caucus. Now, he needed these Leftists and these militants. They made him president of the union. They didn’t give him a majority on the executive board. At the next convention, he got a majority on the executive board. Who did he need to get to get all that crowd? He needed the Catholics, for example, the ACTU, the Association of Catholic Trade Unions. They were the ones who were really red-baiting the hell out of the other side. And you can begin to see Reuther moving over into a red-baiting position in order to get a clean sweep.

cops protect freight san pablo.jpg

Cops block the street to keep strikers out. From the Oakland Museum of California

ORGANIZED LABOR
http://bayradical.blogspot.com/2007/06/this-is-strike-support-our-cause-part.html

In the first few days of December 1946, retail workers at Hastings’ and Kahn’s department stores, across the street from each other where Broadway meets Telegraph, had been on strike for more than a month. Most of the workers were women. Their pay was shitty, less than $16 a week, and worse, they were subjected to an absurd procedure where they had to show up to work first thing in the morning, and then wait in the basement (unpaid), until they were called to the floor to work. A clerk could easily be stuck in the basement all morning, or even all day. The Teamsters local had supported the retail workers strike from the beginning. They refused to deliver anything to the struck stores. (When I was at the Labor Archives, I even saw minutes from the Teamsters Local 70 meeting showing a member being expelled for trying to deliver to Kahn’s in November.) The local NAACP and National Negro Congress publicly supported the striking workers. And union laborers had stopped painting and construction of a new elevator at Kahn’s in solidarity. On the business side, the Oakland Tribune, then run by republican powerhouse Joe Knowland, advocated a citywide ban of pickets. According to Albert Lannon’s Fight or Be Slaves, right-wing city council members were publicly objecting to the use of the word ‘scab’. Most detrimentally, the city agreed to send out the police force to escort delivery trucks to the stores, so they could keep stock for the Christmas shopping season.

cops escort freight telegraph.jpg
OPD escorting delivery trucks from the notoriously anti-union company G.I. Trucking. From the Oakland Museum of California.

That move was too much for the local labor council. The night of December 1st, a Saturday, Teamsters patrolled every roadway into Oakland to keep the delivery trucks away, and the labor council organized members to use their cars to block the parking spaces surrounding the effected stores. Several hundred picketers came out in the middle of the night to keep the scabs out.

At 4 in the morning the cops started towing the strikers cars and blocking off sections of Broadway, Telegraph, and San Pablo. When they waved the streetcars through their police line at 6:30 Sunday morning, a driver told the cops that he’d never crossed a picket line, got out of the car and removed its control box, causing an immovable backup along the streetcar line. The general strike was on, although it was another day before the whole city was out.

streetcars stopped
Tribune clipping from the Oakland History Room.

At a long and fevered meeting of various local AFL union leaders Sunday afternoon (the clerks were affiliated with the AFL), Teamsters pledged that because of the strikebreaking deliveries, they would shut down work in the East Bay starting Monday. Every other union but the milk truck drivers’ agreed, and the milk truck drivers only insisted on working in order to get milk to local hospitals. Labor leaders went on the radio to declare Monday a ‘work holiday’ and to call everyone downtown, to the center of the strike, to show their support.

gen strike downtown.jpgFrom the Oakland Museum of California.

At the peak, as many as 30,000 people were packed into the rainy downtown streets. The mood was excited to say the least. Bars were allowed to stay open, but they were only allowed to serve beer, and were told to turn their jukeboxes out to face the street, where people were literally dancing. All AFL building trades were shut down. All East Bay newspapers were shut down. Buses, streetcars, greyhounds, taxis, and trucking were stopped. Gas stations were closed too. Hotels, movie theaters, and larger restaurants and grocery stores were shut.

happy strikers.jpgThe picture’s pretty blurry, but can you make out those huge grins? From the Oakland Museum again.

I’ve read conflicting stories on this, but from what I understand, the CIO, the second-largest umbrella union organization in Oakland, had offered their support the night before the strike. They were patently turned down. AFL leaders didn’t want to be associated with the CIO whose on-the-ground organizers were largely communist. Robert Ash, the head of the labor council was quite progressive, but balked at working together, imagining headlines in the paper saying “Reds cause Anarchy Downtown” and so forth. Besides the communist associations, the AFL and CIO were rivals not comrades. Working directly with the CIO would have brought about ugly repercussions from national AFL leadership. The CIO honored picket lines anyway, and finally, on the third day of the strike, called for a general meeting to vote on whether to walk out themselves. A CIO walkout would have cut off gas and electricity to most of the city. At this suggestion, Oakland’s city manager was ready to settle. But the unions had lost the upper hand. The national vice president of the Teamsters, Dave Beck, told the local to withdraw from the general strike. He didn’t support revolution, and apparently, the strike was developing that flavor. Rumors circulated that Governor Earl Warren was going to send in the National Guard, and the mayor had declared a state of emergency.

Instead of holding their ground, the union negotiated with Oakland’s city manager only for an agreement that police would not be used to break strikes. There was no settlement for the department store clerks (who stayed on strike for eight more months, and then had to settle for a weak contract before they finally negotiated a better deal and a closed union shop in May of ’47). There was certainly no attempt to make structural change in the city. Robert Ash from the Labor Council admitted later, in retrospect, that had they held out, they could have had more. Maybe they could have gotten the whole right-wing city leadership to resign. But even that laudable goal suffers from a failure of imagination. Workers owned the city for those three days. They could have done anything. On the other hand, what can you do when you suddenly control your own world? When you have the power to rearrange everything, if only you can agree with tens of thousands of others who share that power? Who knew what to do with complete worker control of a city?

A year later that kind of question hardly mattered anyway. In 1947, congress passed the Taft-Hartley Act outlawing secondary boycotts (boycotts of union companies that do business with a struck company), removing government protection for wildcat (unofficial) strikers, and allowing the president to force workers back to their jobs if he feels that their strike “imperils the national health”. The phenomenon of the General Strike came to an abrupt end.

In the aftermath, the Teamsters local withdrew from the central labor council (and not long after, the national Teamsters withdrew from the AFL). Voters elected a labor slate of candidates for the City Council in ’47, but not enough to get a majority, and the winners didn’t work very well as a team, and were voted out a few years later. Oakland changed dramatically after the war, demographics changed, the beginnings of civil right struggles emerged, but worker control was not on the agenda.

soldiarity never 2
Found at the Oakland History Room.

If you’re interested in the Oakland general strike, I’d recommend Chris Rhomberg’s No There There. Online you can listen to a nice KPFA documentary on the strike that features interviews with participants and more on the historical context that led to the strike. Also, check out longshoreman and publisher Stan Weir‘s account of the strike at the very cool libcom.org or Dick Meister’s summery on ZNet.


States of emergency are bad

WHAT’S a GENERAL STRIKE?
http://recompositionblog.wordpress.com/2011/03/11/ralph-chaplin-on-the-general-strike/

Ralph Chaplin on the General Strike

This post is an excerpt from a pamphlet written by Ralph Chaplin, the author of the famous anthem “Solidarity Forever” and an organizer with the Industrial Workers of the World.

There has been a great deal of confusion as to just what was meant by the term, General Strike. In the past any strike of considerable proportions has usually been referred to as a “General Strike.” But many times this definition was not really applicable. Much of the misconception results from an erroneous or limited conception as to what a General Strike is and what it is supposed to do. The General Strike, as its name implies, must be a revolutionary or class strike instead of a strike for amelioration of conditions. It must be designed to abolish private ownership of the means of life and to supplant it with social ownership. It must be a strike, not of a few local, industrial or national groupings of workers but of the industrial workers of the world as an entity. If we keep in mind that there are four phases of the General Strike it will help to understand clearly what we mean by using the term:

* A General Strike in a community.
* A General Strike in an Industry.
* A national General Strike.
* A revolutionary or class strike– THE General Strike.

It will be seen from the above that, while the first three are General Strikes in the limited and commonly accpeted meaning of the term, only the last, or revolutionary class strike, is a General Strike in the full meaning of the term. The first three have been attempted at times with varying degrees of success, but the last has yet to be organized and made effective. Thus, for instance, the display of industrial power by the workers of Finland and Russia in 1905 or that in connection with the upheaval in Moscow which resulted in the overthrow of the Kerensky government in 1917, or the strike of the French Railroad workers in 1909, the great strike in Sweden in 1909, or the strike in Germany when the administration of Von Kapp was embarrassed in the same manner. There were also important General Strikes in Belgium in 1913, in Buenos Aries in 1920 and again in Great Britain in 1926. All these have been referred to as “General Strikes.” And they are General Strikes in the limited sense defined above.

Outstanding “General Strikes”
The so-called General Strike in Denmark which was called by the Socialists to block the forming of an unpopular cabinet by the King is an example in point, as is the now famous attempt of the Italian workers to take over the industries in 1920. The I.W.W. strikes of 100,000 lumber jacks or 40,000 copper miners in 1917 are fair examples of the industrial General Strike, while those affecting Seattle and Winnipeg are examples of the community General Strike. Volumes might be written about each of the instances cited. But in the end it would be plain that in each case the strikes did not cover sufficient area and were not supported by a sufficient number of workers in the various industries. Nor was the abolition of wage-slavery the objective of these strikes. In other words they were merely the foreshadowing of what Labor could do for itself under greater provocation, inspired by a greater sense of solidarity and with a more perfected organization at its disposal.

The conditions necessary for the successful operation of any of the four kinds of General Strike enumerated above have never existed. But, because it has not as yet been possible to use the economic power of Labor to full advantage, is no sign that such conditions will never exist. It has often been said, quite truthfully that, “one swallow does not make the spring.” It is equally true that swallows never visit us in the dead of winter. The fact that Labor has succeeded to a limited extent indicates that it can use its economic power to a much greater extent. The General Strike, once clearly defined and understood, offers Labor a weapon in the use of which Labor has shown great aptitude and willingness– a weapon with which all other weapons in the class war are puny in comparison. Just as gunpowder replaced the bow and arrow, so economic action will displace Labor’s cruder and less potent weapons in the final struggle for emancipation from wage slavery.

The One Big Strike on the Job
It may be argued however that the General Strike might prove to be as difficult to control and, due to the possible paralysis of transport, equally productive of privation as civil war. If State power were not captured by the workers would not the armed forces of the master class crush the strike with military power? Would not the result in the long run be the same as far as mass starvation and disorganization are concerned? The answer is that, as the I.W.W. conceives of the General Strike, it would be so perfectly organized by workers and technicians and effectually used that the feeding, supplying and transportation of armed mercenaries would be practically impossible. The strikes at Seattle and Winnipeg gave some indication of the ability of strikers to organize, picket and police their strike and, at the same time arrange for the adequate distribution of food stuffs to the population. As for machine guns, tanks, airplanes and bombs of asphyxiating or incendiary character, it is well to remember that such things are only available when they are manufactured and transported by labor and would be more difficult to use against workers stationed in and about the nation’s widely spread industries than against mobs massed together in the labor ghettoes of the great cities.

According to the modern idea of the General Strike it would not be at all necessary, during a well organized class movement of this sort for the employed workers to leave their assigned places in industry at all. On the contrary, the effort would be made to get workers into the industries instead of out of them in order to keep the wheels of production going. The General Strike, in other words would be a means of feeding rather than of starving the people. This is in keeping with the I.W.W. program of STRIKING ON THE JOB. The only difference would be that the factory doors, under the direction of the technical managerial staff of the productive forces, would be thrown wide open to absorb the millions of unemployed. The wheels of industry would operate in their customary manner only for the purpose of supplying human needs instead of the enrichment of a profit-greedy Kept Class. The General Strike therefore would simply mean that the army of production under competent technical and managerial direction, would continue to man and remain in the industries, producing and transporting goods for consumption but refusing any longer to yeild up surplus value to the parasite class. The General Strike would be a General Lockout against these idle drones who now hold as their `private property’ the machinery upon which the human race depends for life.

Mass Opposition to Exploitation
The General Strike is conditioned upon the WILL of the workers to make it effective and their stubborn determination to put an end to exploitation by producing goods for USE instead of PROFIT. Unlike the small strike the General Strike does not necessarily depend on the complete withdrawal of productive effort from machinery, but rather their ability to withdraw or withhold only such effort as will put a complete stop to the profits of the parasitic ‘owners’. The ultimate aim of the General Strike as regards wages is to give each producer the full product of his labor. The demand for better wages becomes revolutionary only when it is coupled with the demand that the exploitation of labor must cease. Labor is exploited at the point of production, and it is at the point of production alone that Labor can stop the idle, absentee drones from receiving any more than they produce. Only the complete disallowal of any share whatever to nonproducers will guarantee economic justice to the working class. Working conditions under capitalism have occasioned many bitter controversies but even the most necessary demands for their betterment could hardly be called revolutionary. Even under Industrial Democracy such things will be matters of expediency and consistently sustained improvement, in keeping with recognized needs.


#OccupyOakland repurposes a fence

YOU meaning ‘WORKERS’
http://www.mercurynews.com/breaking-news/ci_19211212
Occupy Oakland makes plans for citywide general strike
by Scott Johnson and Angela Woodall / 10/27/2011

Occupy Oakland protesters debated Thursday evening the practical difficulties of organizing a citywide general strike with the aim of shutting down the city of Oakland on Nov. 2. Speakers urged teachers, students, union members and workers of all stripes to participate in whatever way they could, and said the entire world was watching Oakland. “Oakland is the vanguard and epicenter of the Occupy movement,” said Clarence Thomas, a member of the powerful International Longshoreman and Warehouse Union who urged the hundreds of assembled people to support the strike. Protesters said the aim of the strike was to involve Oakland more aggressively in the global Occupy movement, and to help mobilize millions of Americans to protest against what they see as the excesses of Wall Street, unfair banking regulations and disparities in the nation’s health care system.

The call for a strike originated Wednesday evening during a General Assembly which drew at least a thousand people from all walks of life to Oakland’s Frank Ogawa Plaza, which protesters had turned into a de-facto camp site before police kicked them out last week. Many people said they felt mobilized to participate after seeing videos and pictures from Tuesday night’s violence, when at least 200 riot police from around the Bay Area clashed with protesters, lobbing tear gas, flash-bang grenades and so-called “nonlethal” projectiles to attempt to corral and contain them.

Scott Olsen, a U.S.Marine corporal and Iraqi war veteran remained in intensive care at Highland Hospital after suffering critical wounds to the head from an unidentified police projectile. His condition was improving but as of Thursday evening he remained unable to talk. Spurred on by Olsen’s injury, the actions of the police and the relative absence of Mayor Jean Quan from the debate, the calls for a general strike gained momentum as the week progressed. Oakland last had a general strike over half a century ago, in 1946, when unions shut the city down for 56 hours. Bars were allowed to remain open, but could only serve beer. Jukeboxes were left to play, but had to be placed on public sidewalks so the maximum number of people could enjoy the music. A commonly heard song was “Pistol Packin’ Mama, Lay that Pistol Down,” a national hit at the time.

Today’s protesters say the next step is to involve as many local and national unions, community organizations, churches and student movements in the shortest time possible. “We’re going to have to do a lot of work, but we understand the importance of it,” said Josie Camacho, executive secretary and treasurer of the Alameda Labor Council, which has 120 affiliated unions and claims over 100,000 Bay Area members. “This movement has its own momentum,” Camacho said, adding that she and others were urging the AFL-CIO to join their ranks.

Some who support the movement have nevertheless expressed concern about the implications of a major strike. “There are a lot of people in this city who are struggling to hold on to their jobs,” said Noweli Alexander, an East Oakland resident and comptroller at a local design company. “I support this strike, but there needs to be more discussion about the economic consequences.”

Pastor George Cummings with Imani Community Church in Oakland and a leader with the Oakland Community Organizations, or OCO, a federation of congregations, schools, and allied community organizations, representing more than 40,000 families in Oakland, said the organization had not yet taken a stand on the proposed strike. However, Cummings continued, “As a leader of OCO, to the extent that the sentiments of the movement attempt to hold the financial institutions accountable, then we would support that,” Cummings said.

So far, both a nurses association and an Oakland teachers union have come out strongly in support of the Oakland protest’s goals, but have fallen short of giving their full endorsement for a general strike. Some teachers have expressed support for the strike, but said they would not bring students along for reasons of “legal liability.” “However energetic we are about the cause, we also are law-abiding organizations that are very cautious,” said Matthew Goldstein, president of the Peralta Federation of Teachers, which represents faculty at the four East Bay schools in the Peralta Community College District. The union planned to discuss the strike with its members and with its parent organization, the California Federation of Teachers, before deciding whether to participate.

“A general strike on the order of the 1946 general strike in Oakland is an ambitious goal, especially in just a few days,” Goldstein said. “It requires groundwork to be laid. There is still much to be determined.” “I’ll definitely be here,” said Max Bell Alper, a member of United Here 2850, a hotel and hospitality workers union, headquartered near Frank Ogawa Plaza. Alper said his family was hit hard by the recession and housing crisis. Occupy Oakland, he said, was an inspiration. “It looks like we’re on course to be the next 1946.”




OAKLAND POLICEMAN CHARGED with ATTEMPTED MURDER
http://www.reddit.com/r/politics/comments/lqv57/marines_to_oakland_police_you_did_this_to_my/
by SawOnPoint  1 day ago

“Former Marine with special operations training in riot control.

Before gas goes into a crowd shield bearers have to be making no progress moving a crowd or crowd must be assaulting the line. Not with sticks and stones but a no bullshit assault. 3 warnings must be given to the crowd in a manner they can hear that force is about to be used. Shield bearers take a knee and CS gas is released in grenade form first to fog out your lines because you have gas masks. You then kick the canisters along in front of your lines. Projectile gas is not used except for longer ranged engagement or trying to steer the crowd ( by steering a crowd I mean firing gas to block a street off ). You also have shotguns with beanbags and various less than lethal rounds for your launchers. These are the rules for a WARZONE!!
How did a cop who is supposed to have training on his weapon system accidentally SHOOT someone in the head with a 40mm gas canister? Simple. He was aiming at him.

I’ll be the first to admit a 40mm round is tricky to aim if you are inexperienced but anyone can tell the difference between aiming at head level and going for range.

The person that pulled that trigger has no business being a cop. He sent that round out with the intention of doing some serious damage to the protestors. I don’t care what the protestors were doing. I never broke my rules of engagement in Iraq or Afghanistan. So I can’t imagine what a protestor in the states did to deserve a headshot with a 40mm. He’s damn lucky to be alive and that cop knows he was using lethal force against a protestor he is supposed to be protecting.”

[–]Oldforkeye 1 day ago

So… send in the National Guard to protect the marines from the police defending the banks that are screwing the people?

[–]go_boy 1 day ago

…perhaps she’ll die…

(There was an old woman who swallowed a fly…)

http://www.wilsoncenter.org/events/docs/A%20National%20Strategic%20Narrative.pdf
by Mr. Y

http://www.foreignpolicy.com/articles/2011/04/13/the_y_article

On Friday, April 8, as members of the U.S. Congress engaged in a last-minute game of chicken over the federal budget, the Pentagon quietly issued a report that received little initial attention: “A National Strategic Narrative.” The report was issued under the pseudonym of “Mr. Y,” a takeoff on George Kennan’s 1946 “Long Telegram” from Moscow (published under the name “X” the following year in Foreign Affairs) that helped set containment as the cornerstone of U.S. strategy for dealing with the Soviet Union. The piece was written by two senior members of the Joint Chiefs of Staff in a “personal” capacity, but it is clear that it would not have seen the light of day without a measure of official approval. Its findings are revelatory, and they deserve to be read and appreciated not only by every lawmaker in Congress, but by every American citizen.

The narrative argues that the United States is fundamentally getting it wrong when it comes to setting its priorities, particularly with regard to the budget and how Americans as a nation use their resources more broadly. The report says Americans are overreacting to Islamic extremism, underinvesting in their youth, and failing to embrace the sense of competition and opportunity that made America a world power. The United States has been increasingly consumed by seeing the world through the lens of threat, while failing to understand that influence, competitiveness, and innovation are the key to advancing American interests in the modern world.

Courageously, the authors make the case that America continues to rely far too heavily on its military as the primary tool for how it engages the world. Instead of simply pumping more and more dollars into defense, the narrative argues:

By investing energy, talent, and dollars now in the education and training of young Americans — the scientists, statesmen, industrialists, farmers, inventors, educators, clergy, artists, service members, and parents, of tomorrow — we are truly investing in our ability to successfully compete in, and influence, the strategic environment of the future. Our first investment priority, then, is intellectual capital and a sustainable infrastructure of education, health and social services to provide for the continuing development and growth of America’s youth.

Yet, it is investments in America’s long-term human resources that have come under the fiercest attack in the current budget environment. As the United States tries to compete with China, India, and the European Union, does it make sense to have almost doubled the Pentagon budget in the last decade while slashing education budgets across the country?

TEACHING SOFT POWER
http://hegemonicobsessions.com/?p=386
by HANS-INGE LANGØ / April 15th, 2011

Foreign Policy‘s John Norris has picked up on an article written by two U.S. military officers that seems to have gone largely unnoticed by the press. The article, titled “A National Strategic Narrative,” is being compared to George F. Kennan’s famous article “The Sources of Soviet Conduct” for laying out a new direction in U.S. foreign policy (Kennan used the pseudonym “X” for the article which was published inForeign Affairs in July 1947). The authors, U.S. Navy Captain Wayne Porter and U.S. Marine Corps Colonel Mark Mykleby, invite this comparison by signing it “Mr. Y” and making several references to Kennan’s important note. Whereas Kennan laid the intellectual foundation for a strategy of containtment vis-à-vis the Soviet Union, Porter and Mykleby are calling for a strategy of sustainment: “It is time for America to re-focus our national interests and principles through a long lens on the global environment of tomorrow. It is time to move beyond a strategy of containment to a strategy of sustainment (sustainability); from an emphasis on power and control to an emphasis on strength and influence; from a defensive posture of exclusion, to a proactive posture of engagement. We must recognize that security means more than defense, and sustaining security requires adaptation and evolution, the leverage of converging interests and interdependencies.”

The authors lay out three priorities as part of this new national strategy: investing in education to build the economy; relying less on military force and utilizing other parts of the foreign policy tool box, such as development and aid, to ensure long-term security; and developing sustainable access to, cultivation and use of natural resources. These are not ideas one would normally associate with the military, but something seems to be changing at the Pentagon. Secretary of Defense Robert Gates has warned that the civilian side of U.S. foreign policy (e.g. the State Department and USAID) is underfunded. In a 2007 speech, he called cuts to ‘soft power’ tools during the 1990s “short-sighted,” saying it was a “gutting of America’s ability to engage, assist, and communicate with other parts of the world.” The message has not changed since then. In fact, both Gates and Admiral Michael Mullen, the Chairman of the Joint Chiefs of Staff, have vigorously opposed cuts to the State Department budget on repeated occasions. The Y article seems to be a continuation of this emphasis of ‘soft power’, and John Norris rightfully concludes that though the article was written in a personal capacity, “it would not have seen the light of day without a measure of official approval.”

It is a fundamentally optimistic proposition, confident in the capability of the United States to achieve positive influence in the world and the willingness of others to cooperate, rather than compete. Both these assertions are debatable. Should the United States move away from interventionism, it could find it has more influence through soft power than blunt coercion, yet there is no guarantee for that. As others countries rise, like the United States once did, they too will seek their place in the world, testing the boundaries of cooperation and accommodation. In the next couple of decades, Asia will be ripe for conflicts as China and India assert themselves, with Japan, South Korea and a host of other countries seeking physical and economic security. That is not to say that Asia is doomed to repeat the mistakes of Europe. One could make the case that economic and cultural developments, with their accompanying interdependencies, lessen the incentives for war. While China is asserting itself through territorial claims in the South China Sea and elaborate navy exercises, Beijing is primarily concerned with keeping the economy running at a brisk pace. War is bad for business, and China’s military remains inferior to that of the United States – let alone a coalition of U.S. and other regional forces. In addition, nuclear proliferation serves as a deterrent of total war that was woefully lacking in Europe during the 19th century and the first half of the 20th century. Yet despite these disincentives, all the major players in Asia are building up their military capabilities, and some are even making significant changes to their national security strategies in anticipation of a more threatening China. This development is taking place largely independently of U.S. actions in the region and despite security guarantees given to South Korea and Japan. The United States is even encouraging Japan to take a larger share of its own security burden, which basically means more defense spending and a more offensive posture. Perhaps this is due to fiscal concerns, as the United States can ill afford to subsidize its allies’ security forever, but it might also come from a realization that there are limits to U.S. influence in the region. The Asian powers have their own national interests irrespective of U.S. concerns. This means that even if the United States adopts a more cooperative approach to foreign policy, others might not follow.

Direct confrontation is not the only challenge facing the United States. One could even make the case that war is not even at the top of the list. Competition for natural resources and access to markets is likelier to result in lawfare, economic sanctions and other soft power confrontations than kinetic actions. To solve these issues, the United States needs a large toolbox, so Porter and Mykleby are right in this respect to focus on ‘smart power’. The danger is that a normative approach to foreign policy might crash into a real world of realpolitik and hard power. Speaking softly will only get you so far, unless you carry a big stick. Looking beyond the emphasis on ‘soft power’, there is a more fundamental message coming out of the Y article. Though a cliché it may be, one is reminded of John Winthrop and his famous sermon “City Upon A Hill” from 1630 when reading the article. The authors urge policymakers, and Americans in general, to examine the role of the United States in an increasingly interdependent world: “This Narrative advocates for America to pursue her enduring interests of prosperity and security through a strategy of sustainability that is built upon the solid foundation of our national values. As Americans we needn’t seek the world’s friendship or to proselytize the virtues of our society. Neither do we seek to bully, intimidate, cajole, or persuade others to accept our unique values or to share our national objectives. Rather, we will let others draw their own conclusions based upon our actions.”

As Jonathan Monten describes it in his excellent article “The Roots of the Bush Doctrine,” American exceptionalism in foreign policy has historically taken on two distinct characters: exemplarism and vindicationism. We last saw the former during the presidency of George W. Bush, when foreign policy thinking was dominated by the belief that the United States had to take active measure to promote American values of liberty abroad. Merely being an example was not enough to cause change. The latter, which is on display in the Y article, is the idea that the United States should sort out its own house first and act as a beacon of light to the world, instead of forcing its ideals on others. The practical implication of this would likely be a policy of offshore balancing, and here is the real potential of Porter and Mykleby’s proposition. This would not be isolationism – as noninterventionism is often, and mistakenly, called. It would be a policy based on the genuine belief that the United States cannot, and should not, run the world. There are limits to U.S. power, and nationbuilding schemes like the ones Iraq and Afghanistan come with huge opportunity costs both abroad and at home.

CHINA POLITELY COMMENTS
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Facts and Figures: U.S. Human Rights Situation

BEIJING, April 10 (Xinhua) — China’s Information Office of the State Council, or cabinet, published a report titled “The Human Rights Record of the United States in 2010” here Sunday. Following is the full text:

Human Rights Record of the United States in 2010

The State Department of the United States released its Country Reports on Human Rights Practices for 2010 on April 8, 2011. As in previous years, the reports are full of distortions and accusations of the human rights situation in more than 190 countries and regions including China. However, the United States turned a blind eye to its own terrible human rights situation and seldom mentioned it. The Human Rights Record of the United States in 2010 is prepared to urge the United States to face up to its own human rights issues.

I. On Life, Property and Personal Security

The United States reports the world’s highest incidence of violent crimes, and its people’s lives, properties and personal security are not duly protected.

Every year, one out of every five people is a victim of a crime in the United States. No other nation on earth has a rate that is higher. In 2009, an estimated 4.3 million violent crimes, 15.6 million property crimes and 133,000 personal thefts were committed against U.S. residents aged 12 or older, and the violent crime rate was 17.1 victimizations per 1,000 persons, according to a report published by the U.S. Department of Justice on October 13, 2010 (Criminal Victimization 2009, U.S. Department of Justice, http://www.ojp.usdoj.gov). The crime rate surged in many cities in the United States. St. Louis in Missouri reported more than 2,070 violent crimes per 100,000 residents, making it the nation’s most dangerous city (The Associated Press, November 22, 2010). Detroit residents experienced more than 15,000 violent crimes each year, which means the city has 1,600 violent crimes per 100,000 residents. The United States’ four big cities – Philadelphia, Chicago, Los Angeles and New York – reported increases in murders in 2010 from the previous year (USA Today, December 5, 2010). Twenty-five murder cases occurred in Los Angeles County in a week from March 29 to April 4, 2010; and in the first half of 2010, 373 people were killed in murders in Los Angeles County (www.lapdonline.org). As of November 11, New York City saw 464 homicide cases, up 16 percent from the 400 reported at the same time last year (The Washington Post, November 12, 2010).

The United States exercised lax control on the already rampant gun ownership. Reuters reported on November 10, 2010 that the United States ranks first in the world in terms of the number of privately-owned guns. Some 90 million people own an estimated 200 million guns in the United States, which has a population of about 300 million. The Supreme Court of the United States ruled on June 28, 2010 that the second amendment of the U.S. Constitution gives Americans the right to bear arms that can not be violated by state and local governments, thus extending the Americans’ rights to own a gun for self-defense purposes to the entire country (The Washington Post, June 29, 2010). Four U.S. states – Tennessee, Arizona, Georgia and Virginia – allow loaded guns in bars. And 18 other states allow weapons in restaurants that serve alcohol (The New York Times, October 3, 2010). Tennessee has nearly 300,000 handgun permit holders. The Washington Times reported on June 7, 2010 that in November 2008, a total of 450,000 more people in the United States purchased firearms than had bought them in November 2007. This was a more than 10-fold increase, compared with the change in sales from November 2007 over November 2006. From November 2008 to October 2009, almost 2.5 million more people bought guns than had done so in the preceding 12 months (The Washington Times, June 7, 2010). The frequent campus shootings in colleges in the United States came to the spotlight in recent years. The United Kingdom’s Daily Telegraph reported on February 21, 2011 that a new law that looks certain to pass through the legislature in Texas, the United States, would allow half a million students and teachers in its 38 public colleges to carry guns on campus. It would become only the second state, after Utah, to enforce such a rule.

The United States had high incidence of gun-related blood-shed crimes. Statistics showed there were 12,000 gun murders a year in the United States (The New York Times, September 26, 2010). Figures released by the U.S. Department of Justice on October 13, 2010 showed weapons were used in 22 percent of all violent crimes in the United States in 2009, and about 47 percent of robberies were committed with arms (www.ojp.usdoj.gov, October 13, 2010). On March 30, 2010, five men killed four people and seriously injured five others in a deadly drive-by shooting (The Washington Post, April 27, 2010). In April, six separate shootings occurred overnight, leaving 16 total people shot, two fatally (www.myfoxchicago.com). On April 3, a deadly shooting at a restaurant in North Hollywood, Los Angeles, left four people dead and two others wounded (www.nbclosangeles.com, April 4, 2010). One person was killed and 21 others wounded in separate shootings around Chicago roughly between May 29 and 30 (www.chicagobreakingnews.com, May 30, 2010). In June, 52 people were shot at a weekend in Chicago (www.huffingtonpost.com, June 21, 2010). Three police officers were shot dead by assailants in the three months from May to July (Chicago Tribune, July 19, 2010). A total of 303 people were shot and 33 of them were killed in Chicago in the 31 days of July in 2010. Between November 5 and 8, four people were killed and at least five others injured in separate shootings in Oakland (World Journal, November 11, 2010). On November 30, a 15-year-old boy in Marinette County, Wisconsin, took his teacher and 24 classmates hostage at gunpoint (abcNews, November 30, 2010). On January 8, 2011, a deadly rampage critically wounded U.S. Rep. Gabrielle Giffords. Six people were killed and 12 others injured in the attack (Los Angeles Times, January 9, 2011).

II. On Civil and Political Rights

In the United States, the violation of citizens’ civil and political rights by the government is severe.

Citizen’ s privacy has been undermined. According to figures released by the American Civil Liberties Union (ACLU) in September 2010, more than 6,600 travelers had been subject to electronic device searches between October 1, 2008 and June 2, 2010, nearly half of them American citizens. A report on The Wall Street Journal on September 7, 2010, said the Department of Homeland Security (DHS) was sued over its policies that allegedly authorize the search and seizure of laptops, cellphones and other electronic devices without a reasonable suspicion of wrongdoing. The policies were claimed to leave no limit on how long the DHS can keep a traveler’ s devices or on the scope of private information that can be searched, copied or detained. There is no provision for judicial approval or supervision. When Colombian journalist Hollman Morris sought a U.S. student visa so he could take a fellowship for journalists at Harvard University, his application was denied on July 17, 2010, as he was ineligible under the “terrorist activities” section of the U.S.A. Patriot Act. An Arab American named Yasir Afifi, living in California, found the FBI attached an electronic GPS tracking device near the right rear wheel of his car. In August, ACLU, joined by the Asian Law Caucus and the San Francisco Bay Guardian weekly, had filed a lawsuit to expedite the release of FBI records on the investigation and surveillance of Muslim communities in the Bay Area. The San Francisco FBI office has declined to comment on the matter “because it’ s still an ongoing investigation.” (The Washington Post, October 13, 2010). In October 2010, the Transportation Security Administration raised the security level at U.S. airports requiring passengers to go through a full-body scanner machine or pat-downs. It also claimed that passengers can not refuse the security check based on their religious beliefs. Civil rights groups contended the more intensive screening violates civil liberties including freedom of religion, the right to privacy and the constitutional protection against unreasonable searches (AP, November 16, 2010). The ACLU and the U.S. Travel Association have been getting thousands of complaints about airport security measures (The Christian Science Monitor, November 20, 2010).

Abuse of violence and torturing suspects to get confession is serious in the U. S. law enforcement. According to a report of Associated Press on October 14, 2010, the New York Police Department (NYPD) paid about 964 million U.S. dollars to resolve claims against its officers over the past decade. Among them was a case that an unarmed man was killed in a 50-bullet police shooting on his wedding day. The three police officers were acquitted of manslaughter and the NYDP simply settled the case with money (China Press, October 15, 2010). In a country that boasts “judicial justice,” what justice did the above-mentioned victims get? In June 2010, a federal jury found former Chicago police lieutenant Jon Burge guilty of perjury and obstruction of justice. Burge and officers under his command shocked, suffocated and burned suspects into giving confessions in the 1970s and 1980s (The Boston Globe, November 5, 2010). According to a report on Chicago Tribune on May 12, 2010, Chicago Police was charged with arresting people without warrants, shackling them to the wall or metal benches, feeding them infrequently and holding them without bathroom breaks and giving them no bedding, which were deemed consistent with tactics of “soft torture” used to extract involuntary confessions. On March 22, a distraught homeless man was shot dead in Potland, Oregon, by four shots from a police officer (China Press, April 1, 2010). An off-duty Westminster police officer was arrested on suspicion of kidnapping and raping a woman on April 3 while a corrections officer was accused of being an accessory (Los Angeles Times, April 6, 2010). On April 17 in Seattle, Washington, a gang detective and patrol officer kicked a suspect and verbally assaulted him (Seattle Post-Intelligencer, May 10, 2010). On March 24, Chad Holley, 15, was brutally beaten by eight police officers in Houston. The teen claimed he was face down on the ground while officers punched him in the face and kneed him in the back. After a two-month-long investigation, four officers were indicted and fired (Houston Chronicle, May 4, June 23, 2010). On August 11, three people were injured by police shooting when police officers chased a stolen van in Prince George’ s County. Family members of the three injured argued why the police fired into the van when nobody on the van fired at them (The Washington Post, August 14, 2010). On September 5, 2010, a Los Angeles police officer killed a Guatemalan immigrant by two shots and triggered a large scale protest. Police clashed with protesters and arrested 22 of them (The New York Times, September 8, 2010). On November 5, 2010, a large demonstration took place in Oakland against a Los Angeles court verdict which put Johannes Mehserle, a police officer, to two years in prison as he shot and killed unarmed African American Oscar Grant two years ago. Police arrested more than 150 people in the protest (San Francisco Chronicle, November 9, 2010).

The United States has always called itself “land of freedom,” but the number of inmates in the country is the world’ s largest. According to a report released by the Pew Center on the States’ Public Safety Performance Project in 2008, one in every 100 adults in the U.S. are in jail and the figure was one in every 400 in 1970. By 2011, America will have more than 1.7 million men and women in prison, an increase of 13 percent over that of 2006. The sharp increase will lead to overcrowding prisons. California prisons now hold 164,000 inmates, double their intended capacity (The Wall Street Journal, December 1, 2010). In a New Beginnings facility for the worst juvenile offenders in Washington DC, only 60 beds are for 550 youths who in 2009 were charged with the most violent crimes. Many of them would violate the laws again without proper care or be subject to violent crimes (The Washington Post, August 28, 2010). Due to poor management and conditions, unrest frequently occurred in prisons. According to a report on Chicago Tribune on July 18, 2010, more than 20 former Cook County inmates filed suit saying they were handcuffed or shackled during labor while in the custody, leaving serious physical and psychological damage. On October 19, 2010, at least 129 inmates took part in a riot at Calipatria State Prison, leaving two dead and a dozen injured (China Press, October 20, 2010). In November, AP released a video showing an inmate, being beaten by a fellow inmate in an Idaho prison, managed to plead for help through a prison guard station window but officers looked on and no one intervened until he was knocked unconscious. The prison was dubbed “gladiator school” (China Press, December 2, 2010).

Wrongful conviction occurred quite often in the United States. In the past two decades, a total of 266 people were exonerated through DNA tests, among them 17 were on death row (Chicago Tribune, July 11, 2010). A report from The Washington Post on April 23, 2010, said Washington DC Police admitted 41 charges they raised against a 14-year-old boy, including four first-degree murders, were false and the teen never confessed to any charge. Police of Will County, Illinois, had tortured Kevin Fox to confess the killing of his three-year-old daughter and he had served eight months in prison before a DNA test exonerated him. Similar case happened in Zion, Illinois, that Jerry Hobbs were forced by the police to confess the killing of his eight-year-old daughter and had been in prison for five years before DNA tests proved his innocence. Barry Gibbs had served 19 years in prison when his conviction of killing a prostitute in 1986 was overturned in 2005 and received 9.9 million U.S. dollars from New York City government in June 2010 (The New York Times, June 4, 2010).

The U.S. regards itself as “the beacon of democracy.” However, its democracy is largely based on money. According to a report from The Washington Post on October 26, 2010, U.S. House and Senate candidates shattered fundraising records for a midterm election, taking in more than 1.5 billion U.S. dollars as of October 24. The midterm election, held in November 2010, finally cost 3.98 billion U.S. dollars, the most expensive in the U.S. history. Interest groups have actively spent on the election. As of October 6, 2010, the 80 million U.S. dollars spent by groups outside the Democratic and Republican parties dwarfed the 16 million U.S. dollars for the 2006 midterms. One of the biggest spenders nationwide was the American Future Fund from Iowa, which spent 7 million U.S. dollars on behalf of Republicans in more than two dozen House and Senate races. One major player the 60 Plus Association spent 7 million dollars on election related ads. The American Federation of States, County and Municipal Employees spent 103.9 million U.S. dollars on the campaigns from October 22 to 27 (The New York Times, November 1, 2010). U.S. citizens have expressed discontent at the huge cost in the elections. A New York Times/CBS poll showed nearly 8 in 10 U.S. citizens said it was important to limit the campaign expense (The New York Times, October 22, 2010).

While advocating Internet freedom, the U.S. in fact imposes fairly strict restriction on cyberspace. On June 24, 2010, the U.S. Senate Committee on Homeland Security and Governmental Affairs approved the Protecting Cyberspace as a National Asset Act, which will give the federal government “absolute power” to shut down the Internet under a declared national emergency. Handing government the power to control the Internet will only be the first step towards a greatly restricted Internet system, whereby individual IDs and government permission would be required to operate a website. The United States applies double standards on Internet freedom by requesting unrestricted “Internet freedom” in other countries, which becomes an important diplomatic tool for the United States to impose pressure and seek hegemony, and imposing strict restriction within its territory. An article on BBC on February 16, 2011 noted the U.S. government wants to boost Internet freedom to give voices to citizens living in societies regarded as “closed” and questions those governments’ control over information flow, although within its borders the U.S. government tries to create a legal frame to fight the challenge posed by Wikileaks. The U.S. government might be sensitive to the impact of the free flow of electronic information on its territory for which it advocates, but it wants to practice diplomacy by other means, including the Internet, particularly the social networks.

An article on the U.S.-based Foreign Policy Magazine admitted that the U.S government’s approach to the Internet remains “full of problems and contradictions” (Foreign Policy Magazine website, February 17, 2011).

III. On Economic, Social and Cultural Rights

The United States is the world’s richest country, but Americans’ economic, social and cultural rights protection is going from bad to worse.

Unemployment rate in the United States has been stubbornly high. From December 2007 to October 2010, a total of 7.5 million jobs were lost in the country (The New York Times, November 19, 2010). According to statistics released by the U.S. Department of Labor on December 3, 2010, the U.S. unemployment rate edged up to 9.8 percent in November 2010, and the number of unemployed persons was 15 million in November, among whom, 41.9 percent were jobless for 27 weeks and more (Data.bls.gov). The jobless rate of California in January 2010 was 12.5 percent, its worst on record. Unemployment topped 20 percent in eight California counties (The Los Angeles Times, March 11, 2010). Unemployment rate of New York State was 8.3 percent in October 2010. There were nearly 800,000 people unemployed statewide, and about 527,000 people were collecting unemployment benefits from the state (The New York Times, November 19, 2010). Employment situation for the disabled was worse. According to statistics released by the U.S. Department of Labor on August 25, 2010, the average unemployment rate for disabled workers was 14.5 percent in 2009, and nearly a third of workers with disabilities worked only part-time. The jobless rate for workers with disabilities who had at least a bachelor’s degree was 8.3 percent, which was higher than the 4.5 percent rate for college-educated workers without disabilities (The Wall Street Journal, August 26, 2010). The unemployment rate for those with disabilities had risen to 16.4 percent as of July 2010 (The Wall Street Journal, August 26, 2010). In 2009, more than 21,000 disabled people complained to Equal Employment Opportunity Commission (EEOC) about their experience of employment discrimination, an increase of 10 percent and 20 percent over the numbers of 2008 and 2007 (The World Journal, September 25, 2010).

Proportion of American people living in poverty has risen to a record high. The U.S. Census Bureau reported on September 16, 2010 that a total of 44 million Americans found themselves in poverty in 2009, four million more than that of 2008. The share of residents in poverty climbed to 14.3 percent in 2009, the highest level recorded since 1994 (The New York Times, September 17, 2010). In 2009, Mississippi’s poverty rate was 23.1 percent (www.census.gov). Florida had a total of 2.7 million people living in poverty (The Washington Post, September 19, 2010). In New York City, 18.7 percent of the population lived in poverty in 2009, as an additional 45,000 people fell below the poverty line that year (New York Daily News, September 29, 2010).

People in hunger increased sharply. A report issued by the U.S. Department of Agriculture in November 2010 showed that 14.7 percent of U.S. households were food insecure in 2009 (www.ers.usda.gov), an increase of almost 30 percent since 2006 (The Washington Post, November 21, 2010). About 50 million Americans experienced food shortage that year. The number of households collecting emergency food aid had increased from 3.9 million in 2007 to 5.6 million in 2009 (The China Press, November 16, 2010). The number of Americans participating in the food-stamp program increased from 26 million in May 2007 to 42 million in September 2010, approximately one in eight people was using food stamps (The Associated Press, October 22, 2010). In the past four years, 31.6 percent of American families tasted poverty for at least a couple of months (The Globe and Mail, September 17, 2010).

Number of homeless Americans increased sharply. According to a report by USA Today on June 16, 2010, the number of families in homeless shelters increased 7 percent to 170,129 from fiscal year 2008 through fiscal year 2009. Homeless families also were staying longer in shelters, from 30 days in 2008 to 36 in 2009, and about 800,000 American families were living with extended family, friends, or other people because of the economy. The number of homeless students in the U.S. increased 41 percent over that in the previous two years to one million (The Washington Post, September 23, 2010; USA Today, July 31, 2010). In New York City, 30 percent of homeless families in 2009 were first-time homeless (www.usatoday.com). The city’s homeless people increased to 3,111, with another 38,000 people living in shelters (The New York Times, March 19, 2010). New Orleans had 12,000 homeless people (News Week, August 23, 2010). An estimated 254,000 men, women and children experienced homelessness in Los Angeles County during some part of the year. Approximately 82,000 people were homeless on any given night. African Americans made up approximately half of the Los Angeles County homeless population, 33 percent were Latino, and a high percentage, as high as 20 percent, were veterans (www.laalmanac.com). American veterans served in the Iraq and Afghanistan wars could become homeless one year and a half after they retired, and about 130,000 retired veterans become homeless each year in the US (homepost.kpbs.org). Statistics from the National Coalition for the Homeless showed that more than 1,000 violent offences against homeless people have occurred in the U.S. which caused 291 deaths since 1999. (The New York Times, August 18, 2010)

The number of American people without health insurance increased progressively every year. According to a report by USA Today on September 17, 2010, the number of Americans without health insurance increased from 46.3 million in 2008 to 50.7 million in 2009, the ninth consecutive annual rise, which accounted for 16.7 percent of the total U.S. population. Sixty-eight adults under 65 years old died due to lack of health insurance each day on average in the US. A report from the Centers for Disease Control and Prevention (CDC) in November 2010 showed that 22 percent of American adults between 16 and 64 had no health insurance (Reuters, November 10, 2010). A report issued by the Center for Health Policy Research, University of California, Los Angeles indicated that 24.3 percent of adults under 65 in California State in 2009 had no health insurance, representing a population of 8.2 million, up from the 6.4 million in 2007. Proportion of children without health insurance in the state rose from 10.2 percent in 2007 to 13.4 percent in 2009 (The China Press, March 17, 2010, citing the Los Angeles Times).

IV. On Racial Discrimination

Racial discrimination, deep-seated in the United States, has permeated every aspect of social life.

An Associated Press-Univision Poll, reported by the Associated Press on May 20, 2010, found that 61 percent of people overall said Hispanics face significant discrimination, compared with 52 percent who said blacks do. The New York Times reported on October 28, 2010 that more than 6 in 10 Latinos in the United States say discrimination is a “major problem” for them, a significant increase in the last three years.

Minorities do not enjoy the same political status as white people. The New York city’s non-Hispanic white population is 35 percent, while more than 70 percent of the senior jobs are held by whites. Since winning a third term in November 2009, Mayor Michael R. Bloomberg has announced a parade of major appointments: bringing aboard three new deputy mayors and six commissioners. All nine are white. Of the 80 current city officials identified by the Bloomberg administration as “key members” on its Website, 79 percent are white. Of 321 people who advise the mayor or hold one of three top titles at agencies that report directly to him – commissioners, deputy commissioners and general counsels, and their equivalents – 78 percent are white. And of the 1,114 employees who must live in the city, under an executive order, because they wield the most influence over policies and day-to-day operations, 74 percent are white (The New York Times, June 29, 2010).

Minority groups confront discrimination in their employment and occupation. The black people are treated unfairly or excluded in promotion, welfare and employment (Chicago Tribune, March 12, 2010). It is reported that one-third of black people confronted discrimination at work, against which only one-sixteenth of the black people would lodge a complaint. The Washington Post reported on October 15, 2010 that about 30 black firefighters alleged systematic racial discrimination within the D.C. Department of Fire and Emergency Medical Services, claiming that black employees faced harsher discipline. Shirley Sherrod, who was black, was fired by the Agricultural Department after a blogger posted her truncated comments that 24 years ago, she did not help a white farmer when she was working for a nonprofit agency established to help black farmers. The U.S. Agriculture Department in February, 2010 reached a 1.25-billion-dollar settlement in a decades-long struggle by African-American farmers who had suffered from discrimination within farm loans (The Washington Post, July 23, 2010). The New York Times reported on September 23, 2010 that by September 30, 2009, Muslim workers had filed a record 803 claims of complaints over employment discrimination, up 20 percent from the previous year.

Minority groups have high unemployment rate. According to the U.S. Bureau of Labor Statistics, in July 2010, among the population 16 to 24 years of age, 2,987,000 unemployed people were white, with unemployment rate reaching 16.2 percent; 992,000 were black or African American people, with unemployment rate of 33.4 percent; 165,000 were Asians, with unemployment rate of 21.6 percent; 884,000 belonged to Hispanic or Latino ethnicity, with unemployment rate of 22.1 percent (www.bls.gov/news.release/pdf/youth.pdf). According to a report of the working group of experts on people of African descent to the Human Rights Council of the United Nations in August 2010, unemployment was a very serious issue for the Afro-descendant community in the United States, with levels of unemployment being, proportionately, four times higher among this population than in the white community. Reference was made to a case where the New York City Fire Department was found to have discriminated against people of African descent who had applied for employment as firemen. Of the 11,000 firemen employed by the New York City Fire Department, only about 300 were of African descent, despite their being about 27 percent of the population of New York (UN document A/HRC/15/18). Nearly one-sixth of black residents in the city were unemployed in the third quarter of 2010. About 140,000 of the city’s 384,000 unemployed residents, or 36 percent, were black (The New York Times, October 28, 2010).

Poverty proportion for minorities is also high in the United States. The U.S. Census Bureau announced in September, 2010 that the poverty proportion of the black was 25.8 percent in 2009, and those of Hispanic origin and Asian were 25.3 percent and 12.5 percent respectively, much higher than that of the non-Hispanic white at 9.4 percent. The median household income for the black, Hispanic origin and non-Hispanic white were 32,584, 38,039 and 54,461 U.S. dollars respectively (The USA Today, September 17, 2010). A survey released by the America Association of Retired Persons on February 23, 2010 found that over the previous 12 months, a third (33 percent) of African Americans age 45+ had problems paying rent or mortgage, 44 percent had problems paying for essential items, such as food and utilities, almost one in four (23 percent) lost their employer-sponsored health insurance, more than three in ten (31 percent) had cut back on their medications, and a quarter (26 percent) prematurely withdrew funds from their retirement nest eggs to pay for living expenses. Even in the tough employment environment, 12 percent of African Americans age 65+ returned to the workforce from retirement, while nearly 20 percent of African Americans age 45 to 64 increased the number of hours worked and 12 percent took a second job (The Los Angeles Times, February 23, 2010). In 2009, there were more than 30,000 black children living in poverty in the nation’s capital, almost 7,000 more than two years before. Among black children in the city, childhood poverty shot up to 43 percent, from 36 percent in 2008. In contrast, the poverty rate for Hispanic children was 13 percent, and the rate for white children was 3 percent (The Washington Post, September 29, 2010).

The U.S. minority groups face obvious inequality in education. A latest report released by America’s Promise Alliance, Civic Enterprises, and the Everyone Graduates Center at Johns Hopkins University showed that 81 percent of white, 64 percent of Hispanic, and 62 percent of African-American students graduated from high schools in 2008 (The World Journal, December 2, 2010). As of 2008, among white men aged 55 to 64, the college completion rate was 43 percent, while 19 percent of Hispanics. Among white men aged 25 to 34, the completion rate was 39 percent, compared with 14 percent of Hispanics (The Washington Post, October 20, 2010). In New York City, the number of white adults with a master degree were three times more than Hispanics. According to a report released by the Sacramento State University, only 22 percent of Latino students and 26 percent African American students completed their two-year studies in the university, compared with 37 percent of white students (The San Jose Mercury News, October 20, 2010). A report released from New York City’ s Department of Education in January 2010 found that 6,207 or 4.7 percent-out of a total of 130,837 disciplinary incidents reported in the City’s public schools during the 2008-09 school year were bias-related with gender, race/color, gender identity, gender expression, or sexual orientation (The China Press, January 18, 2010). The USA Today on October 14, 2010 reported that African American boys who were suspended at double and triple the rates of their white male peers. At the Christina School District in Delaware, 71 percent of black male students were suspended in a recent school year, compared to 22 percent of their white male counterparts. African-American students without disabilities were more than three times as likely to be expelled as their white peers. African-American students with disabilities were over twice as likely to be expelled or suspended as their white counterparts (USA Today, March 8, 2010).

The health care for African-American people is worrisome. Studies showed that nearly a third of ethnic minority families in the United States did not have health insurance. Life expectancy was lower and infant mortality higher than average (BBC, the social and economic position of minorities). Mortality of African American children was two to three times higher than that of their white counterparts. African American children represented 71 percent of all pediatric HIV/AIDS cases. African American women and men were 17 times and 7 times, respectively, more likely to contract HIV/AIDS than white people, and twice more likely to develop cancer.

Racial discrimination is evident in the law enforcement and judicial systems. The New York Times reported on May 13, 2010, that in 2009, African Americans and Latinos were 9 times more likely to be stopped by the police to receive stop-and-frisk searches than white people. Overall, 41 percent of the prison population was estimated to be African American. The rate of African Americans serving a life sentence was more than 10 times higher than that of whites. Males of African descent who dropped out of school had a 66 percent chance of ending up in jail or being processed by the criminal justice system (UN document A/HRC/15/18). A report said 85 percent of the people stopped in New York to receive stop-and-frisk searches over the past six years had been black or Latino (The Washington Post, November 4, 2010). According to a report of the Law School of the Michigan State University, among the 159 death row inmates in North Carolina, 86 were black, 61 were white and 12 were from other ethnic groups. During the trial process of the 159 capital cases, the number of black members taken out from the jury by prosecutors more than doubled that of non-black members. According to statistics from the Chicago Police Department, the proportion of black people being the criminals and the victims of all murder cases is the highest, reaching 76.3 and 77.6 percent respectively (portal.chicagopolice.org). The Homicide Report of the Los Angeles Times showed 2,329 homicides in Los Angeles County from January 1, 2007 to November 14, 2010, with victims of 1,600 Latinos and 997 black people (projects.latimes.com/homicide/map/).

Racial hate crimes are frequent. The FBI said in an annual report that out of 6,604 hate crimes committed in the United States in 2009, some 4,000 were racially motivated and nearly 1,600 were driven by hatred for a particular religion. Overall, some 8,300 people fell victim to hate crimes in 2009. Blacks made up around three-quarters of victims of the racially motivated hate crimes and Jews made up the same percentage of victims of anti-religious hate crimes. Two-thirds of the 6,225 known perpetrators of all U.S. hate crimes were white (AFP, November 22, 2010).

Immigrants’ rights and interests are not guaranteed. Lawmakers in the Arizona Senate in April 2010 passed a bill to curb illegal immigration. The law requires state and local police to determine the status of people if there is “reasonable suspicion” that they are illegal immigrants and to arrest people who are unable to provide documentation proving they are in the country legally (The Los Angeles Times, April 13, 2010). Another proposed Arizona law, supported by Republicans of the state, would deny birth certificates to children born in the United States to illegal immigrant parents (CNN U.S., June 15, 2010). A group of UN human rights experts on migrants, racism, minorities, indigenous people, education and cultural rights expressed serious concern over the laws enacted by the state of Arizona, saying that “a disturbing pattern of legislative activity hostile to ethnic minorities and immigrants has been established”. The Arizona immigration law requires state law enforcement officers to arrest a person, without a warrant. It also makes it a crime to be in the country illegally, and specifically targets day laborers, making it a crime for an undocumented migrant to solicit work, and for any person to hire or seek to hire an undocumented migrant. The law may lead to detaining and subjecting to interrogation persons primarily on the basis of their perceived ethnic characteristics. In Arizona, persons who appear to be of Mexican, Latin American, or indigenous origin are especially at risk of being targeted under the law. The Atlanta Journal-Constitution reported on November 19, 2010 that a large group of human rights organizations prepared to hold a vigil in South Georgia in support of suspected illegal immigrants being held in a prison in Lumpkin. As of September 17, 2010, the prison was holding 1,890 inmates. Court cases for inmates at the prison were pending for 63 days on average. With regard to immigration detainees, the Special Rapporteur on the human rights of migrants said, in a report to the Human Rights Council in April 2010, that he received reports of detainees being willfully and maliciously denied proper medical treatment, to which they are entitled by legislation, while they are in the custody of the national authorities. The Special Rapporteur observed during his country missions that irregular migrant workers are often homeless or living in crowded, unsafe and unsanitary conditions (UN document A/HRC/14/30).

V. On the rights of women and children

The situation regarding the rights of women and children in the United States is bothering.

Gender discrimination against women widely exists in the United States. According to a report released on August 11, 2010 by the Daily Mail, 90 percent of women have suffered some form of sexual discrimination in the workplace. Just 3 percent of Fortune 500 CEOs are women. A report by the American Association of University Women released on March 22, 2010 showed that women earned only 21 percent of doctorate degrees in computer science, around one-third of the doctorates in earth, atmospheric, and ocean sciences, chemistry, and math. Women doing the same work as men often get less payment in the United States. According to a report on September 17, 2010 by the Washington Post, in nearly 50 years, the wage gap has narrowed by only 18 cents. The census report released on September 16, 2010 showed that working women are paid only 77 cents for every dollar earned by a man. The New York Times reported on April 26, 2010 that Wal-Mart was accused of systematically paying women less than men, giving them smaller raises and offering women fewer opportunities for promotion in the biggest employment discrimination case in the nation’s history. The plaintiffs stressed that while 65 percent of Wal-Mart’s hourly employees were women, only 33 percent of the company’s managers were (The New York Times, April 26, 2010).

Women in the United States often experience sexual assault and violence. Statistics released in October 2010 by the National Institute of Justice show that some 20 million women are rape victims in the country (www.justice.gov/opa/pr/2010/october/10-ag-1220.html). About 60,000 female prisoners fall victims to sexual assault or violence every year. Some one fifth female students on campus are victims of sexual assault, and 60 percent of campus rape cases occurred in female students’ dorms (World Journal, August 26, 2010).

According to the Human Rights Watch report released in August last year, 50 detainees in the Immigration and Customs Enforcement detention centers have been alleged victims of sexual assault since 2003. Most of these victims were women, and some of the alleged assailants, including prison guards, were not prosecuted. In one case, a guard in a Texas detention center pretended to be a doctor and sexually assaulted five women in the center’s infirmary (World Journal, August 26, 2010). According to figures from Pentagon, cited by the Time magazine on March 8, 2010, nearly 3,000 female soldiers were sexually assaulted in fiscal year 2008, up 9 percent from the year before. Close to one third of the retired female soldiers said they were victims of rape or assault while they were serving.

Women are also victims of domestic violence. In the United States, some 1.3 million people fall victim to domestic violence every year, and women account for 92 percent. One in four women is a victim of domestic violence at some point during her life, and the violence kills three women each day in the United States by a current or former intimate partner (CNN, October 21, 2010). In 2008, police in the New York City received reports of more than 230,000 domestic violence cases, which equals to 600 cases per day (China Press, April 3, 2010). In all homicide cases in 2009, of the female murder victims for whom their relationships to the offenders were known, 34.6 percent were murdered by their husbands or boyfriends (www2.fbi.gov). In the Santa Clara County in California, police receive more than 4,500 domestic violence related calls every year, and more than 700 women and children live in shelters to avoid domestic violence (World Journal, October 15, 2010; China Press, October 9, 2010).

Women’s health rights are not properly protected in the United States. According to the Amnesty International, more than two women die every day in the United States from complications of pregnancy and childbirth. African-American women are nearly four times more likely to die of pregnancy-related complications than white women in the past 20 years. Native American and Alaska Native women are 3.6 times, African-American women 2.6 times and Latina women 2.5 times more likely than white women to receive no or late pre-natal care (UN document A/HRC/14/NGO/13).

Children in the U.S. live in poverty. The Washington Post reported on November 21, 2010, that nearly one in four children struggles with hunger, citing the U.S. Department of Agriculture. More than 60 percent of public school teachers identify hunger as a problem in the classroom. Roughly the same percentage go into their own pockets to buy food for their hungry students (The Washington Post, November 21, 2010). According to figures released on Sept. 16, 2010 by the U.S. Census Bureau, the poverty rate increased for children younger than 18 to 20.7 percent in 2009, up 1.7 percentage points from that in 2008 (www.census.gov). Poverty among black children in the Washington D.C. is as high as 43 percent (The Washington Post, September 29, 2010), and some 2.7 million children in California live in impoverished families. The number of poor children in six counties in the San Francisco Bay Area has increased by 15 to 16 percent. Statistics show that at least 17 million children in the United States lived in food insecure households in 2009 (World Journal, May 8, 2010).

Violence against children is very severe. Figures from the official website of Love Our Children USA show that every year over 3 million children are victims of violence reportedly and the actual number is 3 times greater. Almost 1.8 million are abducted and nearly 600,000 children live in foster care. Every day one out of seven kids and teens are approached online by predators, and one out of four kids are bullied and 43 percent of teens and 97 percent of middle schoolers are cyberbullied. Nine out of 10 LGBT students experienced harassment at school. As many as 160,000 students stay home on any given day because they’ re afraid of being bullied (www.loveourchildrenusa.org). According to a report released on October 20, 2010 by the Washington Post, 17 percent of American students report being bullied two to three times a month or more within a school semester. Bullying is most prevalent in third grade, when almost 25 percent of students reported being bullied two, three or more times a month. According to a UN report of the Special Rapporteur on the right to education, 20 states and hundreds of school districts in the United States still permit schools to administer corporal punishment in some form, and students with mental or physical disabilities are more likely to suffer physical punishment (UN document A/HRC/14/25/ADD.1).

Children’ s physical and mental health is not ensured. More than 93,000 children are currently incarcerated in the United States, and between 75 and 93 percent of children have experienced at least one traumatic experience, including sexual abuse and neglect (The Washington Post, July 9, 2010). According to a report made by the Child Fatality Review Team from the New York City Department of Health and Mental Hygiene, between 2001 and 2008, injury-related deaths among children aged one to 12 years old in the United States was 8.9 deaths per 100,000. The figure for those in the New York City was 4.2 deaths per 100,000 (China Press, July 3, 2010). Thirteen children and young adults have died at a Chicago care facility for children with severe disabilities since 2000 due to failure to take basic steps to care for them (Chicago Tribune, October 10, 2010). According to a study published on October 14, 2010 in the Journal of the American Academy of Child and Adolescent Psychiatry, about half of American teens aged between 13 and 19 met the criteria for a mental disorder. Fifty-one percent of boys and 49 percent of girls aged 13 to 19 had a mood, behavior, anxiety or substance use disorder, and the disorder in 22.2 percent of teens was so severe it impaired their daily activities (World Journal, October 15, 2010). Pornographic content is rampant on the Internet and severely harms American children. Statistics show that seven in 10 children have accidentally accessed pornography on the Internet and one in three has done so intentionally. And the average age of exposure is 11 years old – some start at eight years old (The Washington Times, June 16, 2010). According to a survey commissioned by the National Campaign to Prevent Teen and Unplanned Pregnancy, 20 percent of American teens have sent or posted nude or seminude pictures or videos of themselves. (www.co.jefferson.co.us, March 23, 2010). At least 500 profit-oriented nude chat websites were set up by teens in the United States, involving tens of thousands of pornographic pictures.

VI. On U.S. Violations of Human Rights against Other Nations

The United States has a notorious record of international human rights violations.

The U.S.-led wars in Iraq and Afghanistan have caused huge civilian casualties. A trove, released by the WikiLeaks website on October 22, 2010, reported up to 285,000 war casualties in Iraq from March 2003 through the end of 2009. The documents revealed that at least 109,000 people were killed in the Iraq war, and 63 percent of them were civilians (World Journal, October 23, 2010). In an attack in Baghdad in July 2007, an American helicopter shot and killed 12 people, among whom were a Reuters photographer and his driver (The New York Times, April 5, 2010). On February 20, 2011, a U.S. military operation in northeastern Afghanistan killed 65 innocent people, including 22 women and more than 30 children, causing the most serious civilian casualties in months (The Washington Post, February 20, 2011). According to a report in the Washington Post on October 15, 2010, Iraq’ s Human Rights Ministry reported in 2009 that 85,694 Iraqis were killed from January 2004 to October 31, 2008. Iraq Body Count, an organization based in Britain, said that a total of 122,000 civilians had been killed since the U.S. invasion of Iraq (Newsday, October 24, 2010).

The U.S. military actions in Afghanistan and other regions have also brought tremendous casualties to local people. According to a report by McClatchy Newspapers on March 2, 2010, the U.S.-led North Atlantic Treaty Organization (NATO) troops had caused 535 Afghan civilian deaths and injuries in 2009. Among them 113 civilians were shot and killed, an increase of 43 percent over 2008. Since June 2009, air strikes by the U.S. military had killed at least 35 Afghan civilians. On January 8, 2010, an American missile strike in the northwestern region of Pakistan killed four people and injured three others (The San Francisco Chronicle, January 9, 2010). During an American Special Operation in Afghanistan on February 12, five innocent civilians were shot to death, and two of them were pregnant mothers (The New York Times, April 5, 2010, page A4). On April 12, American troops raked a passenger bus near Kandahar, killing five civilians and wounding 18 others (The New York Times, April 13, 2010). The Washington Post reported on September 18, 2010, that from January 2010, a “kill team” formed by five soldiers from the 5th Stryker Combat Brigade, 2nd Infantry Division of the U.S. forces in Afghanistan, had committed at least three murders, where they randomly targeted and killed Afghan civilians, and dismembered the corpses and hoarded the human bones (The Washington Post, September 18, 2010).

The U.S. counter-terrorism missions have been haunted by prisoner abuse scandals. The United States held individuals captured during its “war on terror” indefinitely without charge or trial, according to a joint study report submitted to the United Nations Human Rights Council in May 2010 by the UN’s Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, the Special Rapporteur on torture and other cruel, inhuman or degrading treatment or punishment, and the Working Group on Arbitrary Detention. The report said the United States established detention centers in Guantanamo Bay and many other places in the world, keeping detainees secretly. The U.S. Central Intelligence Agency (CIA) established secret detention facilities to interrogate so-called “high-value detainees”. The study said the U.S. Principal Deputy Assistant Attorney General Stephen G. Bradbury had stated that the CIA had taken custody of 94 detainees, and had employed “enhanced techniques” to varying degrees, including stress positions, extreme temperature changes, sleep deprivation, and “waterboarding,” in the interrogation of 28 of those detainees (UN document A/HRC/13/42). The United States makes arrests outside its border under the pretext of the “war on terror.” According to a report of the Associated Press on December 9, 2010, documents released by the WikiLeaks website indicated that in 2003, some U.S. agents were involved in an abduction of a German citizen mistakenly believed to be a terrorist. The U.S. agents abducted him in Macedonia, and secretly detained him in a CIA-run prison in Afghanistan for five months. However, a top diplomat at the U.S. Embassy in Berlin warned the German government not to issue international arrest warrants against the involved CIA agents.

The United States has seriously violated the right of subsistence and right of development of Cuban residents. On October 26, 2010, the 65th session of the UN General Assembly overwhelmingly adopted a resolution entitled “Necessity of ending the economic, commercial and financial embargo imposed by the United States of America against Cuba,” the 19th such resolution in a row. Only two countries, including the United States, voted against the resolution. The blockade imposed by the United States against Cuba qualifies as an act of genocide under Article II of the Convention on the Prevention and Punishment of the Crime of Genocide, which was adopted in 1948.

The United States refuses to join several key international human rights conventions, failing to fulfill its international obligations. To date, the United States has ratified neither the International Covenant on Economic, Social and Cultural Rights, nor the Convention on the Elimination of All Forms of Discrimination against Women. In 2006, the UN General Assembly adopted the Convention on the Rights of Persons with Disabilities. Up to now 96 countries have ratified the Convention. The United States, however, has not ratified it. So far, a total of 193 countries have joined the Convention on the Rights of the Child as states parties, but the United States is among the very few countries that have not ratified it.

On August 20, 2010, the U.S. government submitted its first report on domestic human rights situation to the UN Human Rights Council. During the UN Universal Periodic Review (UPR) of the record on November 5, the United States received a record 228 recommendations by about 60 country delegations for improving its human rights situation. These recommendations referred to, inter alia, ratifying key international human rights conventions, rights of ethnic minorities and indigenous peoples, racial discriminations and Guantanamo prison. The United States, however, only accepted some 40 of them. On March 18, 2011, the UN Human Rights Council adopted the outcome of the UPR on the United States, and many countries condemned the United States for rejecting most of the recommendations. In the discussion on the United States, speakers from some country delegations expressed their regret and disappointment over the United States’ refusal of a large number of the recommendations. They noted that the United States’ commitment to the human rights area was far from satisfying, and they urged the United States to face up to its own human rights record and take concrete actions to tackle the existing human rights problems.

The above-mentioned facts illustrate that the United States has a dismal record on its own human rights and could not be justified to pose as the world’s “human rights justice.” However, it released the Country Reports on Human Rights Practices year after year to accuse and blame other countries for their human rights practices. The United States ignores its own serious human rights problems, but has been keen on advocating the so-called “human rights diplomacy,” to take human rights as a political instrument to defame other nations’ image and seek its own strategic interests. These facts fully expose its hypocrisy by exercising double standards on human rights and its malicious design to pursue hegemony under the pretext of human rights.

We hereby advise the U.S. government to take concrete actions to improve its own human rights conditions, check and rectify its acts in the human rights field, and stop the hegemonistic deeds of using human rights issues to interfere in other countries’ internal affairs.

http://www.ukuncut.org.uk/

Playcentre: In Camden, north London, demonstrators invaded a NatWest and set up a creche where children played, practiced musical instruments while parents caught up
Playcentre: In Camden, north London, demonstrators invaded a NatWest and set up a creche where children played, practiced musical instruments while parents caught up.

BANK BRANCH as COMMUNITY CENTER
http://www.dailymail.co.uk/news/article-1360925/Activists-turn-40-British-bank-branches-creches-classrooms-shelters-job-centres-protest-bonuses-cuts.html
Reclaiming the banks: Activists turn British banks into creches, classrooms and launderettes in protest over public service cuts  /  26th February 2011

Activists stormed more than 40 banks across Britain in protest over executive bonuses and public service cuts –  and turned them into a variety of ad hoc walk-in centres. UK Uncut said demonstrators set up creches, laundries, school classrooms, libraries, homeless shelters, drama clubs, walk-in clinics, youth centres, job centres and leisure centres at branches of RBS, NatWest and Lloyds. At 10am in Camden, north London, demonstrators invaded a NatWest and set up a creche where children played, practiced musical instruments while parents caught up. Meanwhile in nearby Islington 50 activists set up a laundry in an RBS branch in reaction to alleged council moves to cut services to the elderly, including a much-needed laundry service. They set up washing lines, clothes horses, buckets for handwashing and a team of window cleaners on the outside. The protest was attended by over 15 pensioners and local Labour MP Jeremy Corbyn. Banks were transformed into ‘hospitals’ in Liverpool and Redhill, a classroom in Cardiff, a leisure centre in Eastleigh, a job centre in Birmingham. Twenty people took tents and sleeping bags into NatWest in Brixton to create a homeless shelter.

Meanwhile in Islington 50 activists set up a laundry in an RBS branch in reaction to alleged council moves to cut services to the elderly, including a much-needed laundry serviceMeanwhile in Islington 50 activists set up a laundry in an RBS branch in reaction to alleged council moves to cut services to the elderly, including a much-needed laundry service

They set up washing lines, clothes horses, buckets for handwashing and a team of window cleaners on the outsideThey set up washing lines, clothes horses, buckets for handwashing and a team of window cleaners on the outside 

Aisha Atkins, 32, said: ‘There are alternatives to the cuts, for example, making the banks pay for a crisis they created or by stopping tax-dodging by big business and the super rich. ‘But the Government is making a political choice to reduce the deficit by making ordinary people pay with job losses and savaged services. We are transforming the banks into schools, leisure centres, laundry services and homeless shelters to show that it’s our society that’s too big to fail, not a broken banking system.’ An RBS spokeswoman said: ‘We fully respect the right to peaceful protest. Minimising disruption to our customers is our priority.’

PRO-TAX-PAYING
http://www.guardian.co.uk/uk/2011/feb/27/uk-uncut-stage-protests-banks
by Jonathan Paige / 27 February 2011

UK Uncut, the anti-cuts campaign group, staged protests at more than 40 bank branches throughout Britain on a day when the group’s American counterpart, US Uncut, staged at least 50 protests. The fast growing British group, still under six months old, staged the Big Society Bail In protests to show the range of services it says have had to be cut in order to support the financial sector. Last week the group focused on Barclays, which admitted it paid just £113m tax in the UK in 2009 on reported profits of £11.6bn. This week the protests were aimed at 84% state-owned RBS, which has revealed that more than 100 of their bankers were paid more than £1m last year, while total bonuses reached close to £1bn on the bailed-out bank’s reported losses of £1.1bn for 2010. Other banks’ branches, including NatWest and Lloyds, in which the Treasury holds 41% of shares, were also targeted. In Islington, protesters turned up at a branch of RBS with buckets of soapy water, washing lines and clothes pegs in to highlight claimed council cuts to services for the elderly. Supporters included the Labour MP for Islington North, Jeremy Corbyn and pensioners from the borough. Emma, speaking for the demonstrators, said: “The banks caused the financial crisis yet it’s ordinary people across the country having to pay for it, through cuts to vital public services. By propping up banks like RBS with billions of pounds of bailout money the government has forced cuts to services like laundry help for the elderly, which is why we’re here today. “The cuts are a political choice, not a necessity.”

In Brixton, 20 people brought tents and sleeping bags into NatWest to create a homeless shelter, while a branch of Lloyds in Oxford Street saw a teach-in featuring lecturers from other tax campaign groups including the Robin Hood Campaign and Tax Justice. A bank branch in Birmingham temporarily became a “job centre” while protesters in Nottingham set up a “big society reading room”. Many smaller towns also staged actions. Protesters in Redhill, Surrey set up a “hospital” in a branch of Natwest, while a bank branch in Eastleigh, Hampshire was turned into a “leisure centre” and one in Lewes became a drama club. Daniel Garvin, a spokesman for UK Uncut, said: “The day went extremely well. There 40 actions across the UK, which have hammered home the link between the crisis caused by the banks and the cuts to our essential services. The movement has gone international with the US staging 50 protests. It’s become a global issue, proving people can work across borders to tackle issues like corporate tax avoidance and cuts to services.”

US Uncut, despite being formed three weeks ago, has already come to the attention of the right-wing Fox News host Glenn Beck, who suggested the protests are part of a global conspiracy that includes anti-union law protests in Wisconsin and the revolts in the Middle East. In Washington DC, over 100 protesters temporarily closed down a branch of the Bank of America, which received and repaid $45 billion in the 2009 US federal bailout. US Uncut said it has exploited the tax code to pay no federal income taxes in 2009, while paying its top executives millions of dollars. “We were inspired by UK Uncut to stage a teach-in,” said Rizvi Qureshi, of US Uncut DC. “It went on for about half an hour, before people left of their own accord and carried on protesting outside. There was a very small police presence and the protest ended without any trouble. “This is just the beginning of a larger national campaign about tax avoidance in response to federal budget cuts. We hope to do something equally creative in the future.”

Protests have taken place in Boston, New York and the Midwest. Many actions are still underway on the west coast of the US, from Seattle in the north to San Diego in the south. A protest is also taking place in Nova Scotia, Canada, with more planned across the country. RBS said: “We fully respect the right to peaceful protest. Minimizing disruption to our customers is our priority.” The group’s chairman, Sir Philip Hampton, said the number of millionaires was lower than a year ago and that a quarter of the group’s 18,700 investment bankers would not receive a bonus from the £950m payout pool agreed with UK Financial Investments.

BANK of AMERICA PAYS NO U.S. TAXES
http://www.huffingtonpost.com/2011/02/27/us-uncut-bank-of-america-liberal-tea-party_n_828782.html

Demonstrators posing as a liberal Tea Party disrupted service at banks across the country on Saturday, in an effort to spotlight the gimmicks multi-billion dollar corporations use to avoid paying their fair share in taxes. Self-organized through anti-austerity movementU.S. Uncut, regional captains helped organize demonstrators at more than 40 different branchesof Bank of America. The newly-minted group was inspired by an article published recently in The Nation by Johann Hari: “How to Build a Progressive Tea Party.” Hari writes:

Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind … Instead of the fake populism of the Tea Party, there is a movement based on real populism. It shows that there is an alternative to making the poor and the middle class pay for a crisis caused by the rich. It shifts the national conversation … This may sound like a fantasy–but it has all happened. The name of this parallel universe is Britain. As recently as this past fall, people here were asking the same questions liberal Americans have been glumly contemplating: Why is everyone being so passive? Why are we letting ourselves be ripped off? Why are people staying in their homes watching their flat-screens while our politicians strip away services so they can fatten the superrich even more?

Hari evokes the spirit of UK Uncut — a movement made up of British citizens, who, in the face of brutal budget cuts, have sought to shame corporate tax dodgers through public demonstrations — and suggests Americans follow suit. U.S. Uncut is doing just that; though many members of the group have disowned the title of Tea Party, telling HuffPost that while they were inspired by the article in The Nation, they do not want to be identified as an opposition group.

Saturday marked the group’s first coordinated event. “Billionaires got bonuses, bailouts and tax cuts, too — the least they can do is pay their fair share of taxes,” said Ryan Clay, a 28-year-old media analyst who helped organize the U.S. Uncut demonstration in Washington, DC. “I got inspired, other people got inspired, we met online, and we’re working through social media to really bring these abhorrent facts to the public.” A rally in San Francisco drew scores of protesters to a branch of Bank of America at Union Square; dressed in ordinary street clothes, they filed into the bank one by one, getting in line to speak with the tellers. Each of them carried a fake check from Bank of America made out to “The United States c/o Tax Paying Citizens,” for $1.5 billion. The sum would cover all the bank’s unpaid taxes on its 2009 earned income of $4.4 billion, demonstrators said.

Only a few people had presented their fake checks to the tellers before the bank temporarily closed for business; protesters were peacefully escorted out of the building by the police. Once on the street, however, they stayed put and kept handing out fake checks, which had facts about corporate tax avoidance written in fine print on the back, as fliers. “Two-thirds of all U.S. corporations do not pay federal income tax,” the fliers said. “BofA is the largest bank and the 5th largest corporation in America.”

“People seemed more eager to accept these fliers and actually read the information they contained than what one would usually expect from handouts with political messages,” said Leslie Dreyer, 32, a resident of Oakland, Calif., who came up with the idea of using checks as props. “When asked ‘would you like a check for 1.5 billion to cash at any BoA?’, they were amused and intrigued enough to ‘read the fine print.'” A Bank of America spokeswoman did not immediately return a request for comment. Many of the largest corporations in the country have mastered the art of evading taxes, booking expenses in the U.S. and profits in low-tax countries. A list compiled by Forbes shows that Bank of America was far from being the only multi-billion dollar corporation to avoid paying taxes on billions of dollars in earnings in 2009; it is also not the only bank to spark angry demonstrations this week.

On Wednesday morning, New York City Councilman Jumaane Williams marched into a Park Avenue Chase bank to denounce the bank’s failure to help homeowners avoid foreclosure. HuffPost’s Laura Basset reports:

“After denouncing the bank to a cheering crowd and calling its executives “bloodsuckers” for accepting bailout money and refusing to help the suffering homeowners they “preyed on,” Williams was stopped by security guards at the door and told the branch was closed. The mob then chanted “open the door” until Williams was let in, at which point he closed his account.Williams told HuffPost that when campaigning in New York City, he met at least two people on every block with mortgage troubles. He said he doesn’t want the bank to use his money to “further deteriorate the community” he represents, especially in light of chief executive Jamie Dimon’s recent $17 million bonus.”

“It’s incredible what these banks are making people go through,” he said. “It’s disgusting. They’re like bloodsuckers, just sucking the lifeblood out of communities and refusing to help out. I understand that people need to get paid to get the best and brightest and these bonuses help with that, but you can’t do that and then not assist the community and then get a taxpayer bailout to the tune of billions of dollars. That’s just greed at its worst.”

Several demonstrators crashed Bank or America’s Investor Conference Tuesday to make the point that when corporations don’t pay taxes, governments are forced to lay off public workers. A blog posting by the anti-austerity group U.S. Uncut called for protesters to gather Tuesday morning at what they called Bank of America’s “Tax Dodger Conference.” “Call your broker- if you have any shares in BofA, you’re free to come inside to the conference and tell everyone you see about BofA’s tax dodging,” the statement said. After the conference had gotten underway, demonstrators unfurled a banner reading “Tax Dodger.” “When corporations like Bank of America don’t pay their fair share of taxes, we have to ‘cut’ teachers, firefighters, and public servants,” one protester shouted. “Do you pay your taxes? So do we. Why don’t corporations pay their fair share, just like everyone else? Bank of America is Bad for America,” he added. “Bank of America pockets billions in profits and bailouts, but $0 in American taxes – that’s immoral and un-American.”

Last month, the same group organized demonstrations at 40 different Bank of America branches.
U.S. Uncut credited an article in The Nation by John Hari called “How to Build a Progressive Tea Party” with calling the group to action. “Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind,” he wrote. “Instead of the fake populism of the Tea Party, there is a movement based on real populism.” The group takes their name from the British groupU.K. Uncut, which seeks to use public protests to shame corporations into paying taxes. A list compiled by Forbes showed that Bank of America paid no taxes on $4.4 billion in income in 2009.

UK UNCUT
http://www.thenation.com/article/158282/how-build-progressive-tea-party
How to Build a Progressive Tea Party
by Johann Hari | February 3, 2011

Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind. Enraged citizens gather in every city, week after week—to demand the government finally regulate the behavior of corporations and the superrich, and force them to start paying taxes. The protesters shut down the shops and offices of the companies that have most aggressively ripped off the country. The swelling movement is made up of everyone from teenagers to pensioners. They surround branches of the banks that caused this crash and force them to close, with banners saying, You Caused This Crisis. Now YOU Pay. As people see their fellow citizens acting in self-defense, these tax-the-rich protests spread to even the most conservative parts of the country. It becomes the most-discussed subject on Twitter. Even right-wing media outlets, sensing a startling effect on the public mood, begin to praise the uprising, and dig up damning facts on the tax dodgers.

Instead of the fake populism of the Tea Party, there is a movement based on real populism. It shows that there is an alternative to making the poor and the middle class pay for a crisis caused by the rich. It shifts the national conversation. Instead of letting the government cut our services and increase our taxes, the people demand that it cut the endless and lavish aid for the rich and make them pay the massive sums they dodge in taxes. This may sound like a fantasy—but it has all happened. The name of this parallel universe is Britain. As recently as this past fall, people here were asking the same questions liberal Americans have been glumly contemplating: Why is everyone being so passive? Why are we letting ourselves be ripped off? Why are people staying in their homes watching their flat-screens while our politicians strip away services so they can fatten the superrich even more?

And then twelve ordinary citizens—a nurse, a firefighter, a student, a TV researcher and others—met in a pub in London one night and realized they were asking the wrong questions. “We had spent all this energy asking why it wasn’t happening,” says Tom Philips, a 23-year-old nurse who was there that night, “and then we suddenly said, That’s what everybody else is saying too. Why don’t we just do it? Why don’t we just start? If we do it, maybe everybody will stop asking why it isn’t happening and join in. It’s a bit like that Kevin Costner film Field of Dreams. We thought, If you build it, they will come.”

The new Conservative-led government in Britain is imposing the most extreme cuts to public spending the country has seen since the 1920s. The fees for going to university are set to triple. Children’s hospitals like Great Ormond Street are facing 20 percent cuts in their budgets. In London alone, more than 200,000 people are being forced out of their homes and out of the city as the government takes away their housing subsidies. Amid all these figures, this group of friends made some startling observations. Here’s one. All the cuts in housing subsidies, driving all those people out of their homes, are part of a package of cuts to the poor, adding up to £7 billion. Yet the magazine Private Eye reported that one company alone—Vodafone, one of Britain’s leading cellphone firms—owed an outstanding bill of £6 billion to the British taxpayers. According to Private Eye, Vodaphone had been refusing to pay for years, claiming that a crucial part of its business ran through a post office box in ultra-low-tax Luxembourg. The last Labour government, for all its many flaws, had insisted it pay up.

But when the Conservatives came to power, David Hartnett, head of the British equivalent of the Internal Revenue Service, apologized to rich people for being “too black and white about the law.” Soon after, Vodafone’s bill was reported to be largely canceled, with just over £1 billion paid in the end. Days later George Osborne, the finance minister, was urging people to invest in Vodafone by taking representatives of the company with him on a taxpayer-funded trip to India—a country where that company is also being pursued for unpaid taxes. Vodafone and Hartnett deny this account, claiming it was simply a longstanding “dispute” over fees that ended with the company paying the correct amount. The government has been forced under pressure to order the independent National Audit Office to investigate the affair and to pore over every detail of the corporation’s tax deal. “It was clear to us that if this one company had been made to pay its taxes, almost all these people could have been kept from being forced out of their homes,” says Sam Greene, another of the protesters. “We keep being told there’s no alternative to cutting services. This just showed it was rubbish. So we decided we had to do something.”

They resolved to set up an initial protest that would prick people’s attention. They called themselves UK Uncut and asked several liberal-left journalists, on Twitter (full disclosure: I was one of them), to announce a time and place where people could meet “to take direct action protest against the cuts and show there’s an alternative.” People were urged to gather at 9:30 am on a Wednesday morning outside the Ritz hotel in central London and look for an orange umbrella. More than sixty people arrived, and they went to one of the busiest Vodafone stores—on Oxford Street, the city’s biggest shopping area—and sat down in front of it so nobody could get in. “What really struck me is that when we explained our reasons, ordinary people walking down Oxford Street were incredibly supportive,” says Alex Miller, a 31-year-old nurse. “People would stop and tell us how they were terrified of losing their homes and their jobs—and when they heard that virtually none of it had to happen if only these massive companies paid their taxes, they were furious. Several people stopped what they were doing, sat down and joined us. I guess it’s at that point that I realized this was going to really take off.”

That first protest grabbed a little media attention—and then the next day, in a different city, three other Vodafone stores were shut down in the northern city of Leeds, by unconnected protests. UK Uncut realized this could be replicated across the country. So the group set up a Twitter account and a website, where members announced there would be a national day of protest the following Saturday. They urged anybody who wanted to organize a protest to e-mail them so it could be added to a Google map. Britain’s most prominent tweeters, such as actor Stephen Fry, joined in. That Saturday Vodafone’s stores were shut down across the country by peaceful sit-ins. The crowds sang songs and announced they had come as volunteer tax collectors. Prime Minister David Cameron wants axed government services to be replaced by a “Big Society,” in which volunteers do the jobs instead. So UK Uncut announced it was the Big Society Tax Collection Agency.

The mix of people who turned out was remarkable. There were 16-year-olds from the housing projects who had just had their £30-a-week subsidy for school taken away. There were 78-year-olds facing the closure of senior centers where they can meet their friends and socialize. A chuckling 64-year-old woman named Mary James said, “The scare stories will say this protest is being hijacked by anarchists. If anything, it’s being hijacked by pensioners!” They stopped passers-by to explain why they were protesting by asking, “Sir, do you pay your taxes? So do I. Did you know that Vodafone doesn’t?” The police looked on, bemused. There wasn’t much they could do: in a few places, they surrounded the Vodafone stores before the protesters arrived, stopping anyone from going in or out—in effect doing the protesters’ job for them. One police officer asked me how this tax dodge had been allowed to happen, and when I explained, he said, “So you mean I’m likely to lose my job because these people won’t pay up?”

UK Uncut organized entirely on Twitter, asking what it should do next and taking votes. There was an embarrassment of potential targets: the National Audit Office found in 2007 that a third of the country’s top 700 corporations paid no tax at all. UK Uncut decided to expose and protest one of the most egregious alleged tax dodgers: Sir Philip Green. He is the ninth-richest man in the country, running some of the leading High Street chain stores, including Topshop, Miss Selfridge and British Home Stores. Although he lives and works in Britain, and his companies all operate on British streets, he avoids British taxes by claiming his income is “really” earned by his wife, who lives in the tax haven of Monaco. In 2005 the BBC calculated that he earned £1.2 billion and paid nothing in taxes—dodging more than £300 million in taxes.

Far from objecting, Cameron’s government appointed Green as an official adviser, with special responsibility for “cutting waste.” So UK Uncut drew a direct line from Green’s tax exemption to the cuts in services for ordinary people. For example, Cameron had just announced the closure of the school sports partnership, which makes it possible for millions of schoolchildren to engage in healthy, competitive exercise. The protesters pointed out that if Green was made to pay taxes, the entire program could be saved, with more than £120 million left as small change. So they declared a day of action.

At the London protests against Green, everybody was asked to turn up at the largest branch of Topshop—again on Oxford Street—and mill around like ordinary shoppers. Once a whistle was blown, they were to start chanting, put on sports clothing to dramatize what was being taken away from schoolchildren and sit down by the counters to stop sales. It was the Saturday before Christmas. There was a strange frisson as everyone turned up and looked around. It was impossible to tell who was a shopper and who was a protester: they looked the same. The whistle blew—and they shut down one of the largest retail stores in Europe.

Across Britain, the same thing was happening. Even in Tunbridge Wells—a town synonymous with ultraconservatism—the Vodafone store was blockaded. Again, many people spontaneously joined in. The protests were all over that evening’s TV news. It was the most-read story on the websites of the BBC and the country’s most-read newspaper, the Daily Mail. The prime-time Channel 4 News reported, “A more eloquent and informed group of demonstrators would be hard to come across and one is struck by the wide appeal across ages and incomes, of what they had to say.” The uprisings in Tunisia and Egypt have shown how social media can be used to conduct the unfocused rage of a scattered population and harden it into a weapon. UK Uncut shows the same tactics can be used in a democracy—and there is the same need. Unemployment in the United States is at the same level as in Egypt before the uprising: 9 percent.

The UK Uncut message was simple: if you want to sell in our country, you pay our taxes. They are the membership fee for a civilized society. Most of the protesters I spoke with had never attended a demonstration before, but were driven to act by the rising unemployment, insecurity and austerity that are being outpaced only by rising rewards for the superrich. Ellie Mae O’Hagan, a 25-year-old office worker in Liverpool, one of the most economically depressed places in the country, said she was “absolutely outraged to discover that I was paying more than Philip Green in taxes.” She added, “I could see what all the cuts were doing. My brother had been made redundant, loads of my friends were unemployed and I could see it all getting worse, while these bankers get even bigger bonuses. And I thought, Right, you’ve got to do something. So I e-mailed UK Uncut to ask if there was a protest happening in Liverpool. They said, Not yet, so you organize one. So I spent forty-eight hours arranging one. And a hundred people turned up—an amazing mixture of people, who I had never met, and who didn’t know each other—and we shut down both Vodafone stores. Suddenly, it felt like we weren’t passive anymore. We were standing up for ourselves.”

At every protest, a clear and direct line was drawn from tax avoidance to real people’s lives. If they pay their bill, you won’t be forced out of your home. If they pay their bill, your grandmother won’t lose her government support. If they pay their bill, our children’s hospitals won’t be slashed. The protests began to influence the political debate. Public opinion had already been firmly for pursuing tax dodgers, with 77 percent telling YouGov pollsters there should be a crackdown. But by dramatizing and demonstrating this mood, the protesters forced it onto the agenda—and stripped away Cameron’s claims that there was no alternative to his cuts.

Polly Toynbee is one of Britain’s most influential columnists: imagine Maureen Dowd with principles instead of snark. Toynbee attended the London protests and was manhandled out of Topshop by security guards. She reported later that the protests were being watched very nervously on Downing Street. “It is no coincidence that the government immediately hurried out a ‘clampdown’ on tax avoidance, collecting £2 billion,” she tells me, “or that [its coalition partners] the Liberal Democrats suddenly remembered this was one of their big commitments. Of course, that sum is only a drop in the ocean. But this really was a jolt to the political system. It was hugely important.”

But perhaps the most striking response was from the right. One of Britain’s most famous businessmen, Duncan Bannatyne, came out in support of the protests, declaring, “We need to rebel against tax dodgers…as Government won’t.” The Financial Times conceded that “the protesters have a point” but then grumbled about them. Surprisingly, the Daily Mail, Britain’s most right-wing newspaper, became one of the movement’s most sympathetic allies. The editors could see that their Middle England readers were outraged to be paying more taxes than the superrich. So they ran their own exposé on Philip Green’s tax affairs, along with straightforward and detailed reporting of the protests.

The only part of the media that attacked UK Uncut outright was, predictably, Rupert Murdoch’s empire. This isn’t surprising given that his company, News International, is one of the world’s most egregious tax dodgers, contributing almost nothing to the US or UK treasuries. His tabloid the Sun accused UK Uncut of being a “group of up to 30,000 anarchists” scheming “to bring misery to millions of Christmas shoppers,” with plans to “set off stink bombs, leave mouldy cheese in clothes and rack up huge sales at tills and then refuse to pay.” After one of the people named in the article reported the Sun to the Press Complaints Commission, the newspaper was forced to retract the article by removing it from its website.

But these smear jobs were the best the right could muster. Conservatives ran into hiding, with almost nobody prepared to defend tax avoiders. Only a few stray voices emerged: ultraconservative blogger Tim Montgomerie, regarded as highly influential with Cameron; and Labour MP Tom Harris, our equivalent of a Blue Dog Democrat. They argued that tax avoidance is legal and therefore fine. The protesters responded that they were obviously arguing for a change in the law.

The tax-evasion defenders also tried to argue that a crackdown would “drive away” corporations, to the detriment of the nation. But the corporations are already, for all intents and purposes, “away.” They pay nothing to Britain. They have relocated everything they can. They can’t, however, physically relocate their British shops to Bangalore. It’s impossible. That remnant can certainly be taxed. What are they going to do?

Besides, the right’s claim that enforcing fair taxes drives away the rich was recently tested—and proved wrong. Toward the end of the last Labour government, officials increased the top tax rate to 50 percent. (This is still far short of the 90 percent levied on US taxpayers by President Eisenhower, during the biggest boom in American history.) Conservatives predicted disaster: London Mayor Boris Johnson said it would reduce the city to a ghost town as bankers fled to Switzerland. Yet after the taxes rose, the number of rich people applying for visas to leave Britain for Switzerland actually fell by 7 percent.

After the empirical argument collapsed, a few on the right tried to shift the argument to a moral one. They said that Green “earns all his money on his own,” so why should he have to pay any of it back to the rest of us? I responded on TV and in a blog post by suggesting a small experiment. Let’s take one branch of Topshop, and for twelve months we’ll deny any services funded by collective taxation to that store. When the rubbish piles up, we won’t send garbage men to collect it. When the rat outbreak begins, we won’t send pest control. When they catch a shoplifter, we won’t send the police. When there’s a fire, we won’t send the fire brigade. When suppliers want to get their goods to the store, there may be a problem: we won’t maintain the roads. When the employees get sick, we won’t treat them in the publicly funded hospitals. Then let Philip Green come back and tell us he does it all himself.

The last argument of the defenders has been to say it’s impossible to do anything about tax havens, so we’ll just have to accept them. But this is false. After the 9/11 attacks, the world—under US pressure—passed virtually universal laws to freeze Al Qaeda–related accounts and so prevent them from stashing or accessing money from tax havens. Where there is political will, they can be brought to heel rapidly. In the early 1960s Monaco was refusing to hand over details of French tax dodgers to the French authorities. President Charles de Gaulle surrounded the country with tanks and cut off its water supply until it relented. On a more prosaic level, many countries have integrated into their law something called a General Anti-Avoidance Principle, which stipulates that any act contrary to the spirit of the nation’s tax laws is illegal. It slams shut most loopholes overnight.

There has been an obsessive hunt by the media to discover who UK Uncut “really are.” They assume there must be secretive leaders pulling the strings somewhere. But the more I dug into the movement, the more I realized this is a misunderstanding. The old protest movements were modeled like businesses, with a CEO and a managing board. This protest movement, however, is shaped like a hive of bees, or like Twitter itself. There is no center. There is no leadership. There is just a shared determination not to be bilked, connected by tweets. Every decision made by UK Uncut is open and driven by the will of its participants. Alongside many people who had never protested, activists from across the spectrum have poured into the movement, from the students occupying their universities to protest the massive hike in fees, to antipoverty groups like War on Want, to trade unions. Indeed, even the trade union at Britain’s IRS came out in support, with ordinary tax collectors rebelling against their bosses for letting the rich wriggle out of taxes.

Think of it as an open-source protest, or wikiprotest. It uses Twitter as the basic software, but anyone can then mold the protest. The Western left has been proud of its use of social media and blogging, but all too often this hasn’t amounted to much more than clicktivism. By contrast, these protesters have tried at every turn to create a picture of George Osborne, Cameron’s finance minister, sitting in his office, about to sign off on another big tax break for a rich person, paid for by cuts to the rest of us. Is a big Facebook group going to stop him? No. Is an angry buzz on the blogosphere going to stop him? No. But what these protesters have done—putting all the online energy into the streets and straight into the national conversation—just might. And by creating a media buzz, it draws in people from far beyond the tech-savvy Twitterverse, with older activist groups—from trade unions to charities—clamoring to join.

As one UK Uncut participant, Becky Anadeche, explains, “So many campaigns rely on the premise that the less you ask somebody to do, the more likely they are to do it. This campaign has proved the opposite. People who have never even been on a protest before have been organizing them.”

British liberals and left-wingers have been holding marches and protests for years and been roundly ignored. So why did UK Uncut suddenly gain such traction? Alex Higgins, another protester, explains, “It’s because we broke the frame that people expect protest to be confined to. Suddenly, protesters were somewhere they weren’t supposed to be—they were not in the predictable place where they are tolerated and regarded as harmless by the authorities. If UK Uncut had just consisted of a march on Whitehall [where government departments are located], where we listened to a few speakers and went home, nobody would have heard of it. But this time we went somewhere unanticipated. We disrupted something they really value: trade.” A wave of bankers’ bonuses is due to be announced in February, and it would be surprising if UK Uncut did not respond with a similar program of direct action.

Can this model be transferred to the United States? Remember that a few months ago, Brits were as pessimistic about the possibility of a left-wing rival to the Tea Party as Americans are now. Of course, there are differences in political culture and tax law structure and enforcement, but there are also strong parallels. In the United States the same three crucial factors that created UK Uncut are in place. First, at the state level, Americans are facing severe budget cuts, causing the recession to worsen. Nobel Prize–winning economist Paul Krugman says state governors are acting like “50 Herbert Hoovers…slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future.”

Second, most of these cuts could be prevented simply by requiring superrich individuals and corporations to pay their taxes. The Government Accountability Office (GAO) calculated in 2008 that eighty-three of the 100 biggest US corporations hide fortunes in tax havens. And even without these shelters, the rich have been virtually exempted from taxes across America. Billionaire Warren Buffet recently conducted a straw poll in his office and found he paid a lower proportion of his income in taxes than anybody else there—and considerably less than his secretary. Indeed, tax expert Nicholas Shaxson says that in many ways “America itself is a tax haven for many rich people.” WikiLeaks is poised to release the details of a whole raft of corporations and banks using tax havens in the Cayman Islands, laying out the dodging for all to see. And third, public opinion is firmly behind going after the rich and corporations. A poll in January for 60 Minutes and Vanity Fair asked Americans which policy they would choose to reduce the deficit. By far the most popular, chosen by 61 percent of respondents, was to increase taxes on the rich. The next most popular, chosen by 20 percent, was to cut military spending. Other polls bear this out. So Americans are facing the same cuts as the Brits. They are being ripped off by corporations and rich people just like the Brits. And they are as angry as the Brits. “All it takes,” says Tom Philips, “is for a few people to do what we did in that pub that night and light the touch paper.”

During the 2008 presidential campaign, Barack Obama promised to go after tax havens. He pointed out that one building in the Cayman Islands claims to house 12,000 corporations, and said: “That’s either the biggest building or the biggest tax scam on record.” He promised he would “pay for every dime” of his spending and tax cut proposals “by closing corporate loopholes and tax havens.” Yet in office he hasn’t done this. In 2009 Congress passed the Foreign Accounts Tax Compliance Act, which shuffled a few inches forward but still doesn’t even require the automatic exchange of information from tax havens that EU law requires as a matter of right. So if a rich person opens a tax account in the Cayman Islands and hides his money there, the IRS isn’t told and doesn’t know. Yes, President Obama’s deficit commission made a few passing noises about closing tax loopholes, but the bulk of its recommendations and energy focused on going after benefits for the poor and middle class, like Social Security.

What should US Uncut target? “It’s important to go after brand names that exist in every city in America,” says Tom Purley, a UK Uncut participant. “The key to our success was that it was so easily replicated. People could do it anywhere. It took something that seems like a remote issue and connected it to a place they see every day.” Most of the companies that engage in the worst tax avoidance in the United States are Big Pharma and financial companies, which don’t have stores. But the GAO also named a number of major brands that are exploiting tax havens. They include Apple, Bank of America, Best Buy, ExxonMobil, FedEx (whose president, Frederick Smith, was named by Obama as the businessman he most admires), Kraft Foods, McDonald’s, Safeway and Target. That’s a wealth of potential targets. American citizens should ask themselves: I work hard and pay my taxes, so why don’t the richest people and the corporations? Why should I pick up the entire tab for keeping the nation running? Why should the people who can afford the most pay the least? If you’re happy with that situation, you can stay at home and leave the protesting to the Tea Party. For the rest, there’s an alternative. For too long, progressive Americans have been lulled into inactivity by Obama’s soaring promises, which come to little. As writer Rebecca Solnit says, “Hope is not a lottery ticket you can sit on the sofa and clutch, feeling lucky…. Hope is an ax you break down doors with in an emergency.” UK Uncut has just shown Americans how to express real hope—and build a left-wing Tea Party.

NOTE: “Participating in a botnet with the intention of shutting down a Web site violates the Computer Fraud and Abuse Act,” said Jennifer Granick, a lawyer at Zwillinger Genetski who specializes in Internet law and hacking cases. “The thing people need to understand is that even if you have a political motive, it doesn’t change the fact that the activity is unlawful.” Also, LOIC protesters’ IP addresses are not masked, so attacks can be traced back to the computers launching them.

ANONYMOUS ATTACKS
http://wlcentral.org/node/528
http://www.guardian.co.uk/world/2010/dec/08/wikileaks-visa-mastercard-operation-payback
WikiLeaks supporters disrupt Visa and MasterCard sites in ‘Operation Payback’
by Esther Addley and Josh Halliday / 9 December 2010

It is, according to one breathless blogger, “the first great cyber war”, or as those behind it put it more prosaically: “The major shitstorm has begun.” The technological and commercial skirmishes over WikiLeaks escalated into a full-blown online assault yesterday when, in a serious breach of internet security, a concerted online attack by activist supporters of WikiLeaks succeeded in disrupting MasterCard and Visa. The acts were explicitly in “revenge” for the credit card companies’ recent decisions to freeze all payments to the site, blaming illegal activity. Though it initially would acknowledge no more than “heavy traffic on its external corporate website”, MasterCard was forced to admit last night that it had experienced “a service disruption to the MasterCard directory server”, which banking sources said meant disruption throughout its global business. Later, Visa’s website was also inaccessible. A spokeswoman for Visa said the site was “experiencing heavier than normal traffic” and repeated attempts to load the Visa.com site was met without success. MasterCard said its systems had not been compromised by the “concentrated effort” to flood its corporate website with “traffic and slow access”. “We are working to restore normal service levels,” it said in a statement. “There is no impact on our cardholders’ ability to use their cards for secure transactions globally.”

In an attack referred to as Operation Payback, a group of online activists calling themselves Anonymous said they had orchestrated a DDoS (distributed denial of service) attack on the site, and issued threats against other businesses which have restricted WikiLeaks’ dealings. Also targeted in a dramatic day of internet activity was the website of the Swedish prosecution authority, which is currently seeking to extradite the WikiLeaks founder, Julian Assange, on sex assault charges, and that of the Stockholm lawyer who represents them. The sites of the US senator Joe Lieberman and the former Alaska governor Sarah Palin, both vocal critics of Assange, were also attacked and disrupted, according to observers. Palin last night told ABC news that her site had been hacked. “No wonder others are keeping silent about Assange’s antics,” Palin emailed ABC. “This is what happens when you exercise the First Amendment and speak against his sick, un-American espionage efforts.”

An online statement from activists said: “We will fire at anything or anyone that tries to censor WikiLeaks, including multibillion-dollar companies such as PayPal … Twitter, you’re next for censoring #WikiLeaks discussion. The major shitstorm has begun.” Twitter has denied censoring the hashtag, saying confusion had arisen over its “trending” facility. A Twitter account linked to the activists was later suspended after it claimed to have leaked credit card details online. Though DDoS attacks are not uncommon by groups of motivated activists, the scale and intensity of the online assault, and the powerful commercial and political critics of WikiLeaks ranged in opposition to the hackers, make this a high-stakes enterprise that could lead to uncharted territory in the internet age. A spokesman for the group, a 22-year-old from London who called himself Coldblood, told the Guardian it was acting for the “chaotic good” in defence of internet freedom of speech. It has been distributing software tools to allow anyone with a computer and an internet connection to join in the attacks. The group has already succeeded this week in bringing down the site of the Swiss bank PostFinance, which was successfully attacked on Monday after it shut down one of WikiLeaks’ key bank accounts, accusing Assange of lying. A PostFinance spokesman, Alex Josty, told Associated Press the website had buckled under a barrage of traffic. “It was very, very difficult, then things improved overnight, but it’s still not entirely back to normal.”

Other possible targets include Amazon, which removed WikiLeaks’ content from its EC2 cloud on 1 December, and EveryDNS.net, which suspended dealings with the site two days later. PayPal has also been the subject of a number of DDoS attacks – which often involve flooding the target site with requests so that it cannot cope with legitimate communication – since it suspended all payments to WikiLeaks last week. A PayPal spokesman told the Guardian that while a site called ThePayPalBlog.com had been successfully silenced for a few hours, attempts to crash its online payment facilities had been unsuccessful. The site suggested today its decision to freeze payments had been taken after it became aware of the US state department’s letter saying WikiLeaks’s activities were deemed illegal in the US. Tonight PayPal said that it was releasing the money held in the WikiLeaks account, although it said the account remains restricted to new payments. A statement from PayPal’s general counsel, John Muller, sought to “set the record straight”. He said that the company was required to comply with laws around the world and that the WikiLeaks account was reviewed after “the US department of state publicised a letter to WikiLeaks on November 27, stating that WikiLeaks may be in possession of documents that were provided in violation of US law. PayPal was not contacted by any government organisation in the US or abroad. We restricted the account based on our Acceptable Use Policy review. Ultimately, our difficult decision was based on a belief that the WikiLeaks website was encouraging sources to release classified material, which is likely a violation of law by the source. “While the account will remain restricted, PayPal will release all remaining funds in the account to the foundation that was raising funds for WikiLeaks. We understand that PayPal’s decision has become part of a broader story involving political, legal and free speech debates surrounding WikiLeaks’ activities. None of these concerns factored into our decision. Our only consideration was whether or not the account associated with WikiLeaks violated our Acceptable Use Policy and regulations required of us as a global payment company. Our actions in this matter are consistent with any account found to be in violation of our policies.” PayPal did not explain how WikiLeaks violated this policy in their statement and requests for further information went unanswered.

There have been accusations that WikiLeaks is being targeted for political reasons, a criticism repeated yesterday after it emerged that Visa had forced a small IT firm which facilitates transfers made by credit cards including Visa and MasterCard, and has processed payments to WikiLeaks, to suspend all of its transactions – even those involving other payees. Visa had already cut off all donations being made through the firm to WikiLeaks. DataCell, based in Iceland, said it would take “immediate legal action” and warned that the powerful “duopoly” of Visa and MasterCard could spell “the end of the credit card business worldwide”. Andreas Fink, its chief executive, said: “Putting all payments on hold for seven days or more is one thing, but rejecting all further attempts to donate is making the donations impossible. “This does clearly create massive financial losses to WikiLeaks, which seems to be the only purpose of this suspension. This is not about the brand of Visa, this is about politics and Visa should not be involved in this … It is obvious that Visa is under political pressure to close us down.”

Operation Payback, which refers to itself “an anonymous, decentralised movement that fights against censorship and copywrong”, argues that the actions taken by Visa, MasterCard and others “are long strides closer to a world where we cannot say what we think and are unable to express our opinions and ideas. We cannot let this happen. This is why our intention is to find out who is responsible for this failed attempt at censorship. This is why we intend to utilise our resources to raise awareness, attack those against and support those who are helping lead our world to freedom and democracy.” The MasterCard action was confirmed on Twitter at 9.39am by user @Anon_Operation, who later tweeted: “We are glad to tell you that http://www.mastercard.com/ is down and it’s confirmed! #ddos #WikiLeaks Operation: Payback (is a bitch!) #PAYBACK”. The group, Coldblood said, is about 1,000-strong. While most of its members are teenagers who are “trying to make an impact on what happens with the limited knowledge they have”, others include parents and IT professionals, he said. Anonymous was born out of the influential internet messageboard 4chan in 2003, a forum popular with hackers and gamers. The group’s name is a tribute to 4chan’s early days, when any posting to its forums where no name was given was ascribed to “Anonymous”. But the ephemeral group, which picks up causes “whenever it feels like it”, has now “gone beyond 4chan into something bigger”, its spokesman said. There is no real command structure; membership of the group has been described as being “like a flock of birds” – the only way you can identify members is by what they are doing together. Essentially, once enough people on the 4chan message boards decide some cause is worth pursuing in large enough numbers, it becomes an “Anonymous” cause. “We’re against corporations and government interfering on the internet,” Coldblood said. “We believe it should be open and free for everyone. Governments shouldn’t try to censor because they don’t agree with it. Anonymous is supporting WikiLeaks not because we agree or disagree with the data that is being sent out, but we disagree with any from of censorship on the internet.” Last night WikiLeaks spokesman Kristinn Hrafnsson said: “Anonymous … is not affiliated with WikiLeaks. There has been no contact between any WikiLeaks staffer and anyone at Anonymous. We neither condemn nor applaud these attacks. We believe they are a reflection of public opinion on the actions of the targets.”

LOIC
http://en.wikipedia.org/wiki/LOIC
http://mashable.com/2010/12/09/how-operation-payback-executes-its-attacks/
http://nakedsecurity.sophos.com/2010/12/09/low-orbit-ion-cannon-the-tool-used-in-anonops-ddos-attacks/
Hacker toolkits attracting volunteers to defend WikiLeaks
by Vanja Svajcer / December 9, 2010

The attacks are coordinated through the AnonOps webpages, IRC server infrastructure as well as several Twitter accounts. The operation of the voluntary botnet is very simple but it seems to be quite effective. Yesterday, Twitter decided to shut down some of the Twitter accounts inviting users to join the attacks. However, the attack on the main VISA website after the attacks on Mastercard, PayPal and Swiss Bank Post Finance was successfully launched. Following these initial attacks, which seriously influenced the operation of the sites under attack, another attack on Mastercard Securecode card verification program was launched. This attack seriously affected payment service providers and the financial damage for Mastercard still needs to be determined.

Immediately after the AnonOps attacks on the payment processing companies started, a retaliation DDoS attack on AnonOps hosting infrastructure has been launched. Their main site anonops.net is unresponsive at the time of writing this post. It looks like there is an outright war going on. However, contrary to many discussions following the discovery of Stuxnet, the sides in the conflict are not sovereign states but groups of internet users spread around the globe proving that warfare on internet brings out a whole new dimension to the term. Participation in DDoS attacks is illegal in many countries and users accepting the invite by AnonOps are under a serious risk of litigation. Many people believe that privacy on the internet can be somewhat protected, but beware, the source IP addresses of attackers, which will inevitably end up in the target’s website log files, can easily be matched with user’s accounts if ISPs decide to cooperate with the law enforcement agencies.

The workflow of an AnonOps attack is quite simple:
– Visit the AnonOps website to find out about the next target
– Decide you are willing to participate
– Download the required DDoS tool – LOIC
– Configure LOIC in Hive Mind mode to connect to an IRC server
– The attack starts simultaneously, when the nodes in the voluntary botnet receive the command from the IRC server

Since the principle of the operation is already well known I wanted to take a look at the main weapon used to conduct DDoS attacks – LOIC (Low Orbit Ion Cannon). LOIC is an open source tool, written in C# and the project is hosted on the major open source online repositories – Github and Sourceforge. The main purpose of the tool, allegedly, is to conduct stress tests of the web applications, so that the developers can see how a web application behaves under a heavier load. Of course, a stress application, which could be classified as a legitimate tool, can also be used in a DDoS attack. LOIC main component is a HTTP flooder module which is configured through the main application window. The user can specify several parameters such as host name, IP address and port as well as the URL which will be targeted. The URL can also be pseudo-randomly generated. This feature can be used to evade the attack detection by the target’s intrusion prevention systems. The Hive Mind option is responsible for connecting to the IRC server used for attack coordination. Using the Hive Mind mode, AnonOps can launch attacks on any site, not just the one you voluntarily agreed to target. The connection uses a standard HTTP GET request with a configurable timeout and a delay between the attempted connections. Most of the web servers will have a configurable limit on the number of connections they accept and when that limit is reached the server will stop serving all following request which has the same effect as the server being offline. The IRC communication protocol is implemented using the free C# IRC library SmartIRC4Net. There is a Java version of the tool – JavaLoic, which uses a Twitter account as the command and control channel. However, the Java version is much easier to detect using intrusion prevention systems as the attack uses fragmented HTTP requests forming a static string “hihihihihihihihihihihihihihihihihihihihihihi”. Sophos products have been detecting LOIC as a potentially unwanted application since 14 February 2008.

OPERATION PAYBACK
http://news.netcraft.com/archives/2010/12/08/mastercard-attacked-by-voluntary-botnet-after-wikileaks-decision.html

mastercard.com is currently under a distributed denial of service (DDoS) attack, making the site unavailable from some locations.

The attack is being orchestrated by Operation Payback and forms part of an ongoing campaign by Anonymous. They announced the attack’s success a short while ago on their Twitter stream:

Operation Payback is announcing targets via its website, Twitter stream and Internet Relay Chat (IRC) channels. To muster the necessary volume of traffic to take sites offline, they are inviting people to take part in a ‘voluntary’ botnet by installing a tool called LOIC (Low Orbit Ion Cannon – a fictional weapon of mass destruction popularised by computer games such as Command & Conquer). The LOIC tool connects to an IRC server and joins an invite-only ‘hive’ channel, where it can be updated with the current attack target. This allows Operation Payback to automatically reconfigure the entire botnet to switch to a different target at any time.

Yesterday, Operation Payback successfully brought down the PostFinance.ch website after the Swiss bank decided to close Julian Assange’s bank account. Later in the day, they also launched an attack against the Swedish prosecutor’s website, www.aklagare.se. The attack was successful for several hours, but now appears to have stopped. The Director of Prosecution, Ms. Marianne Ny, stated yesterday that Swedish prosecutors are completely independent in their decision making, and that there had been no political pressure. The same group also successfully took down the official PayPal blog last week, after WikiLeaks’ PayPal account was suspended. As more companies distance themselves from WikiLeaks, we would not be surprised to see additional attacks taking place over the coming days. Concurrent attacks against the online payment services of MasterCard, Visa and PayPal would have a significant impact on online retailers, particularly in the run up to Christmas. Although denial of service attacks are illegal in most countries, Operation Payback clearly has a sufficient supply of volunteers who are willing to take an active role in the attacks we have seen so far. They are a force to be reckoned with. A real-time performance graph for http://www.mastercard.com can be viewed here.”

‘DISORGANIZATION’
http://kimmons.tv/blahg/?p=102

“Because none of us are as cruel as all of us.” – Anonymous

One of the many side stories in the ongoing WikiLeaks media circus is that ofAnonymous. Trying to explain Anonymous to the general public is like trying to explain the actions of a schizophrenic sociopathic genius to the average Joe, and expecting him to empathize. Anonymous, and 4chan by extension, have been in the national and world news several times, but most recently due to their support of Julian Assange in the form of orchestrating DDoS attacks on PayPalVISA and MasterCard, who have all refused to process donations for his organization, WikiLeaks.

This article isn’t trying to make a moral judgment of their actions, but simply tries to explain what Anonymous is. Anonymous can’t be called an organization, because it isn’t organized. One could almost refer to it as a ‘disorganization’, if such a noun existed, due to its decentralized nature and lack of leadership. It’s more like a school of piranha which travel along with no leader or particular direction, until something attracts the school and they attack in unison. The first fish to see the target might momentarily lead the pack, but once the rest of the school becomes aware of the target, that leader becomes just another fish in the school. The concept of Anonymous is extremely difficult to explain, due to most people having a clear understanding of the usual structure of an organization. Companies have a CEO. Armies have generals. Countries have presidents or prime ministers or kings. In any case, there is always someone in charge; someone at the top with whom a face can be associated, and likewise credited or blamed.

Anonymous has no leader. It doesn’t even have sub-leaders. It has no face. It is an army comprised completely of foot soldiers, but each soldier knows the mission through a general pervasive awareness. It is also quite usual for not all of Anonymous to agree, and some members simply choose to not participate in whatever ongoing project the group is engaged in. There have even been times where Anonymous is split and attack both sides of an issue, and each other in the process. In his novel Prey, Michael Crichton wrote about the concept of decentralized groups, using nanobots as an example, and how they can be used to solve problems, or wreak havoc. It’s an entertaining and informative way to learn about decentralized systems. If you’re interested in understanding the concept, it’s a good place to start.

As for the motives of Anonymous, it is ostensibly for the laughs. Their targets range from Scientology to Iran to Habbo Hotel. They are just as likely to use their abilities to attack a children’s website as they are to help track down a pedophile. While it is tempting to attribute good intentions to the group, as most of their exploits are often on the side, or at least towards the side of what the majority considers ‘right’, if they had an alignment, it would be chaotic neutral. They usually don’t care if the end results are good or bad, they just care that there are results.

Their main Internet social site is the /b/ channel of 4chan. It is an imageboard where the posting of anything is permissible, aside from child pornography. However, that third rail of the site is regularly stepped on. If you go there, be prepared to see things you don’t want to see. Anonymous have been referred to as the “first Internet-based superconsciousness”, which is an apt description. Think of them as a brain, and the participating members as firing synapses. No one synapse controls the thought process, but when enough of a certain type fire in a particular pattern, the brain forms a thought, which is then acted on.

Anonymous have squarely come down on the side of WikiLeaks in their current dustup. While they can be a powerful ally or dreadful enemy, they generally lose interest when another topic which piques their interest comes along. It is hard to like or dislike them, since in a given year they are equally likely to do something which either outrages you, or makes you want to cheer them on. I view them as one would a coin toss; equally likely to elate or disappoint, and truly not caring about the outcome.

A very short list of some of Anonymous’ work:
– Hacking Sarah Palin’s Yahoo! account
– Trolling Fox News
– Disagreeing with Gene Simmons of KISS

SHIFTING TACTICS
http://www.wired.com/threatlevel/2010/12/wikileaks-attacks-sputter/
Pro-WikiLeaks Attacks Sputter After Counterattacks, Dissent Over Tactics
by Ryan Singe / December 10, 2010

The attacks by pro-WikiLeaks supporters against companies that cut off services to the secret-spilling website have fallen into disrepair Friday, as the attackers attempt to decide the future of the so-called “Operation Payback.” Much of the organization and communication among the group, which calls itself Anonymous, was taking place on chat rooms hosted on anonops.net. On Thursday, one room hosted more than 2,000 participants, while on Friday most of the rooms seem to have been shut down due to counterattacks. The few protestors able to connect — less than 100 on Friday – appear to be devoting their energies to combat a counter-protester who keeps blasting the message: “WHAT YOU’RE DOING IS ILLEGAL. STOP NOW AS YOU SUCK AT IT. WIKILEAKS SUCKS AS WELL.”

Adding to the confusion, the site anonops.info is reporting that their DNS provider ENOM has cut services to the domain hosting the chat channels, and that the operation is suffering from its own popularity and outside attacks. Still the group is struggling on, and in a chatroom that was still operable, one member requested that protesters register their vote for the next target, using an embeddable Google form to collect the info.

The group made headlines around the world Wednesday when the ragtag band of computer activists successfully overwhelmed both Visa.com and MasterCard.com, the homepages of the two giant payment processors. The attack cut off the ability to make donations to WikiLeaks using those companies’ cards. The companies said they made the decision after deciding that WikiLeaks’ publication of secret U.S. diplomatic cables provided to it by a whistleblower violated their terms of service, though the site has not been charged with a crime. The companies’ payment systems were not affected by the flood of traffic. Anonymous then shifted their focus to PayPal — which had also shut off the ability to donate to WikiLeaks — where they briefly disrupted the popular online payment firm by targeting the company’s payment system directly.

The attacks aren’t hacks in the real sense of the word, since they don’t penetrate the companies’ computer systems and leave no lasting damage. They simply overwhelm servers with web requests, in an attempt to make a site inaccessible to real users. The attacks on Visa.com and MasterCard.com were, in effect, an internet-age version of taking over a college campus building as a protest — potentially illegal, but leaving no lasting damage. That distinction was lost on many, and even the august New York Times used the word “cyberwar” in its lead sentence in its report on the attacks Thursday.

Parts of Anonymous seemed to realize that it was losing in the propaganda war, which was exacerbated by media reports that the group would be attacking Amazon.com, which cut off WikiLeaks from Amazon’s robust web-hosting service.  In a press release, someone purporting to speak for the group tried to explain that the purpose of the attacks were to raise awareness, not mess with Christmas shopping: “[T]he point of Operation: Payback was never to target critical infrastructure of any of the companies or organizations affected. Rather than doing that, we focused on their corporate websites, which is to say, their online public face’. It is a symbolic action — as blogger and academic Evgeny Morozov put it, a legitimate expression of dissent.”

As for the reported attacks on Amazon.com, the press release said the group refrained because they didn’t want to be seen as disrupting Christmas. (An attack would not likely have a chance against Amazon, whose infrastructure is so good that it rents it out to other companies.) “Simply put, attacking a major online retailer when people are buying presents for their loved ones, would be in bad taste. The continuing attacks on PayPal are already tested and preferable: while not damaging their ability to process payments, they are successful in slowing their network down just enough for people to notice and thus, we achieve our goal of raising awareness.”

While these are smart public relations sentiments, the Anonymous attacks on PayPal that started on Wednesday night and continue (albeit in much smaller volume) on Friday morning, went after PayPal’s payment infrastrucure (technically, its payment API, which merchants use to communicate with PayPal.com), not the website. Anonymous members made it clear in one heavily used chat room Thursday that they were gunning to shut PayPal down, not simply “slow down” the service.

Another communique, perhaps unofficial, re-published by BoingBoing Thursday night, announced that Anonymous would be halting the denial of service attacks and instead turning their attention to the leaked cables. The idea was for Anonymous to spend its time looking for little reported revelations in the cables, create videos and stories about them, and bombard sites, including YouTube, with links to them. The FBI has said they are looking into the attacks, and already Dutch police have arrested a 16 year-old boy in connection with the attacks. Two people involved in Anonymous’s previous attacks on Scientology were convicted on jailed on charges of violating federal computer crime statutes. Those who join in the attacks using their own computers and IP addresses that can be traced back to them are making themselves very vulnerable to similar prosecutions. Few who are part of Anonymous are actual “hackers,” and instead join in the attacks by running specialized software provided by more technically adept members. Instruction for which sites to target and when are passed around dedicated online chat channels and websites, creating a sort of online insurgency.

Anonymous’ DDoS tool has an unusual twist, according to 3Crowd CEO and DDOS expert Barrett Lyon, incorporating features that allow members to connect to the botnet voluntarily, rather than mobilizing hijacked zombie machines. It is called LOIC, which stands for “Low Orbit Ion Cannon,” and evolved from an open source website load-testing utility. A new feature called Hivemind was added, which connects LOIC to anonops for instructions, and allows members to add their machines to an attack at will. In a further development, Anonymous members have also created a JavaScript version of the tool, dubbed JS LOIC, which only requires someone to connect to a webpage and press a button to turn their computer into a dedicated attacking machine. However neither that site nor the downloaded software masks a user’s IP address, and the downloadable software has generated complaints from its users that it sucks up all their available bandwidth when it’s in attack mode.


Elizabeth Cook’s artist impression of WikiLeaks founder Julian Assange’s appearance at Westminster Magistrates Court in London, where he was denied bail after appearing on an extradition warrant.

‘INSURANCE’
http://en.wikipedia.org/wiki/Kompromat
http://en.wikipedia.org/wiki/Dead_man’s_switch
http://en.wikipedia.org/wiki/Rubber-hose_cryptanalysis
http://iq.org/~proff/marutukku.org/
http://caml.inria.fr/pub/ml-archives/caml-list/2000/08/6b8b195b3a25876e0789fe3db770db9f.en.html
http://www.bbc.co.uk/news/uk-11937110
http://wlcentral.org/node/505
http://www.theaustralian.com.au/in-depth/wikileaks/dont-shoot-messenger-for-revealing-uncomfortable-truths/story-fn775xjq-1225967241332
http://www.popsci.com/technology/article/2010-12/how-secure-julian-assanges-thermonuclear-insurance-file
How Secure Is Julian Assange’s Insurance File?
by Dan Nosowitz / 12.07.2010

Once your leader has been compared to a Bond villain, you might as well go all the way, right? A few months back, Wikileaks released a giant file that’s been referred to as the “thermonuclear” option, should the organization’s existence be threatened: A huge compendium of some of the most damaging secrets Wikileaks has collected, protected with an intense brand of secure encryption–for use as insurance. With Assange now in police custody on sex crimes charges, the “poison pill” is on everyone’s mind. The pill in question is a 1.4GB file, circulated by BitTorrent. It’s been downloaded tens of thousands of times, no mean feat for what, at the moment, is a giant file with absolutely no use whatsoever. It’s waiting on the hard drives of curious Torrenters, Wikileaks supporters, and (you can bet) government agents worldwide, awaiting the password that’ll open the file to all. Although no one is sure of its contents, the file is speculated to contain the full, un-redacted documents collected by the organization to date (including, some are guessing, new documents on Guantanamo Bay or regarding the financial crisis). It has yet to be cracked, at least not publicly, though there is a hefty amount of activity from those trying, at least a little, to break into it before Assange releases the key.

What makes this so pressing is Assange’s recent arrest in London, on, to say the least, somewhat controversial sex crimes charges in Sweden. There’s been speculation that this could be the lead-up to more severe prosecution–certain American politicians have called for prosecuting Assange for “treason,” apparently not realizing or caring that Assange is an Australian national–and could in turn lead to his releasing of the password for these documents. The file is titled “insurance.aes256,” implying that it’s protected with an AES 256-bit key, one of the strongest in the world. The thing is, there’s no actual way to figure out the type of encryption used. Though there’s no particular reason for Assange to lie about the security he used, it’s something to keep in mind. Let’s assume for the moment that it is indeed an AES-256 encryption, which begs the question: What is AES?

Advanced Encryption Standard
Advanced Encryption Standard, or AES, is a cipher standard which came into wide use in 2001. AES is a block cipher rather than a stream cipher, meaning “blocks” of data are converted into encrypted gibberish, 128 bits at a time. It’s perhaps the most-used block cipher in the world, used by, for example, the Wi-Fi protection known as WPA2. But it came to prominence in 2001 as a result of winning a contest held by the National Institute of Standards and Technology to find a new standard encryption. That led to its adoption by the NSA. That’s right, Assange’s “poison pill” is secured by the U.S. government’s own standard. Though AES is an open and public cipher, it’s the first to be approved by the NSA for “Top Secret” information, the term used for the most dangerous classified information. It is, in short, a tremendously badass form of protection. An AES encryption doesn’t work like, say, a login. The keys are just strings of binary (in the case of AES-256, 256 binary symbols) rather than words or characters, and entering the wrong key won’t simply disallow access — it’ll produce elaborately encoded gibberish. There are three variants of AES, which differ in the size of their keys (128, 192, or 256 bits), though they all use the same 128-bit block size. The size of the key has other implications within the algorithm itself (and slightly increases the encoding time), but mostly, it increases the amount of time needed to break it with what’s called a “brute force attack” (more on that in a bit). The three variants also carry different numbers of “rounds” protecting their keys. Each round is sort of like a layer of further obscurity, making the original data all the more disguised. AES-128 has ten rounds, AES-192 has twelve, and AES-256 has fourteen. Those rounds make it effectively impossible to compare the ciphered data with its key and divine any sort of pattern, since the data has been so thoroughly mangled by, in this case, 14 rounds of highly sophisticated manipulation that it’s unrecognizable. The rounds make an already secure algorithm that much more secure.

Possible Attacks
There are a few different ways of cracking a code like this. Many rely on some other information besides the code given. Side-channel attacks, for example, require an observation of the actual decoding: This might include data like the timing of deciphering, the power it takes to run the computer doing the deciphering, or even the noise a computer makes while deciphering. There are measures you can take to spoof this kind of thing, but even if Assange hasn’t, side-channel attacks won’t work in this case. Another kind of attack, the one that’s come closest, is the related-key attack. This method requires multiple keys, somehow related, working on the same cipher. Cryptographers have actually had some very limited success with related-key attacks, managing to greatly reduce the amount of possible correct passwords–but there are huge caveats to that. Related-key attacks require an advanced knowledge of the cipher and key that cryptographers never really have in the real world, like, say, a ciphered text and a deciphered text. Most modern key generation tools, like TrueCrypt and WPA2, have built-in protections against related-key attacks. And, worst of all, that success, which broke a 256-bit code, required a handicap: an altered encryption with less rounds. A related-key attack won’t work on Assange’s jacket-full-of-dynamite.

The time it takes to crack a code is thought of in terms of how many possible correct passwords there could be. If you’re looking at a 256-bit password with no knowledge of anything, trying to just enter every conceivable combination of 0s and 1s, you’d have a “time” of 2^256. Nobody measures the time it would take to crack one of these codes in hours, months, years, or centuries–it’s too big for all of that, so they just use combinations. Trying to crack all of those combinations manually is called, aptly, a brute force attack, and in a 256-bit instance like this one, it’d take, roughly, a bajillion years to succeed (that being the scientific estimation). Even with all the supercomputers in the world working in concert, with a flawless algorithm for trying the different combinations, it would take hundreds of thousands of years. Your average dude with an Alienware? Forget about it. In the case of the successfully cracked 256-bit code above, the cryptographers only managed to narrow it down to 2^70 possibilities–and they only got through the 11th round. Besides, 2^70 combinations is, in real world terms, not really much closer to cracked than 2^256. It’s still dramatically unfeasible.

The best possible method of cracking the code might be the simplest: Beat it out of him. This is, I swear to God, a real technique, called rubber-hose cryptanalysis. Assange is already in custody–the most efficient way to get his password is, by far, torture. It’s also authentic in that it’s the only type of cracking you’d actually see in a Bond movie. Sure as hell better than waiting several million years for a brute-force attack, right?

DUTCH TEEN ARRESTED for DDoS
http://www.wired.com/threatlevel/2010/12/wikileaks_anonymous_arrests/
http://www.theregister.co.uk/2010/12/09/wikileaks_ddos_arrest/
Dutch police arrest 16-year-old WikiLeaks avenger
by Dan Goodin / 9th December 2010

Dutch police said they have arrested a 16-year-old boy for participating in web attacks against MasterCard and Visa as part of a grassroots push to support WikiLeaks. A press release issued on Thursday (Google translation here) said the unnamed boy confessed to the distributed denial-of-service attacks after his computer gear was seized. He was arrested in The Hague, and is scheduled to be arraigned before a judge in Rotterdam on Friday. It is the first known report of an arrest in the ongoing attacks, which started earlier this week. The arrest came shortly after anonops.net, a Netherlands-hosted website used to coordinate attacks against companies perceived as harming WikiLeaks, was taken offline. A Panda Security researcher said the website was itself the victim of DDoS attacks, but the investigation by the Dutch High Tech Crime Team has also involved “digital data carriers,” according to the release. It didn’t specify the crimes the boy was charged with or say exactly what his involvement in the attacks was. According to researchers, the Low Orbit Ion Cannon tool, which thousands of WikiLeaks sympathizers are using to unleash the DDoS attacks, takes no steps to conceal their IP addresses. It wouldn’t be surprising if attackers who used the application from internet connections at their home or work also receive a call from local law enforcement agencies.

IMPACT ASSESSMENT
http://213.251.145.96/cablegate.html
http://edition.cnn.com/2010/OPINION/12/10/rushkoff.hacking.wikileaks/
Why WikiLeaks hackers are a glitch, not a cyberwar
by Douglas Rushkoff / December 10, 2010

Like a momentary glitch on a flat-panel display, the attacks by hackers calling themselves “Anonymous” came and went. Visa, PayPal, MasterCard and Amazon report no significant damage, and business goes on as usual. The corporations acting to cut off WikiLeaks remain safe. Although many are unsettled by the thought of a site such as WikiLeaks revealing state secrets or a group of anonymous hackers breaking the security of the banking system, events of the past week reveal that such threats are vastly overstated. If anything, the current debacle demonstrates just how tightly controlled the net remains in its current form, as well as just what would have to be done to create the sort of peer-to-peer network capable of upending corporate and government power over mass communication and society itself. While in the short term, WikiLeaks managed to create a public platform for a massive number of classified cables, the site itself was rather handily snuffed out by the people actually in charge of the internet. That’s because however decentralized the net might feel when we are posting to our blogs, it was actually designed around highly centralized indexes called domain name servers. Every time we instruct our browsers to find a web page, they ping one of these authorized master lists in order to know where to go. Removing WikiLeaks or any other site, group, top-level domain or entire nation is as easy as deleting it from that list.

The durability of WikiLeaks’ disclosures rests less in the willingness of many rogue websites to attempt to host them in WikiLeaks’ stead than in the sanctity of traditional news outlets such as The New York Times and Guardian of London, which were also sent the complete package of classified documents and can’t be turned off with the online equivalent of a light switch. Likewise, the server space on which our websites appear is owned by corporations that have the power — if not the true right — to cut anyone off for any reason they choose. It’s private property, after all. Similarly, our means of funding WikiLeaks is limited to companies such as Visa and PayPal, which immediately granted government requests to freeze payments and donations to WikiLeaks. It’s the same way a rogue nation’s assets can be frozen by the banks holding them.

Hackers, angered at this affront to the supposed openness of the internet, then went on the attack. They used their own computers — as well as servers they had been able to commandeer — to wage “denial of service” attacks on the websites of the offending companies. Most of those companies, already armed with defensive capabilities designed to fend off intrusions from the likes of the Russian mob or the Red Army, survived unscathed. Only MasterCard was noticeably, if only temporarily, disrupted. Meanwhile, Facebook and Twitter quickly disabled accounts traced to those using the services to organize their minions.
And all this tamping down occurred on today’s purportedly “net neutral” internet, which offers no real advantage to one corporate-owned server over any other. We can only imagine the effect of these events on those who will decide on whether to maintain net neutrality or give in to the corporations that argue the internet’s distributive capabilities should be reserved for those who can pay for such distribution, by the byte. No, the real lesson of the WikiLeaks affair and subsequent cyberattacks is not how unwieldy the net has become, but rather how its current architecture renders it so susceptible to control from above.

It was in one of the leaked cables that China’s State Council Information office delivered its confident assessment that thanks to “increased controls and surveillance, like real-name registration … The Web is fundamentally controllable.” The internet’s failings as a truly decentralized network, however, merely point the way toward what a decentralized network might actually look like. Instead of being administrated by central servers, it would operate through computers that pinged one another, instead of corporate-owned server farms, and deliver web pages from anywhere, even our own computers. The FCC and other governing bodies may attempt to defang the threat of the original internet by ending net neutrality. But if they did, such a new network — a second, “people’s internet” — would almost certainly rise in its place. In the meantime, the internet we know, love and occasionally fear today is more of a beta version of modeling platform than a revolutionary force. And like any new model, it changes the way we think of the way things work right now. What the internet lacks today indicates the possibilities for what can only be understood as a new operating system: a 21st century, decentralized way of conducting political, commercial and human affairs.

This new operating system, even in its current form, is slowly becoming incompatible with the great, highly centralized institutions of the 20th century, such as central banking and nation states, which still depend on top-down control and artificial monopolies on power to maintain their authority over business and governance. The ease with which PayPal or Visa can cut off the intended recipient of our funds, for example, points the way to peer-to-peer transactions and even currencies that allow for the creation and transmission of value outside the traditional banking system. The ease with which a senator’s phone call can shut down a web site leads network architects to evaluate new methods of information distribution that don’t depend on corporate or government domain management for their effectiveness.
Until then, at the very least, the institutions still wielding power over the way our networks work and don’t work have to exercise their power under a new constraint: They must do so in the light of day.

INSIDE the WIKILEAKS BUNKER
http://cryptome.org/0002/ja-conspiracies.pdf
http://blogs.nature.com/news/thegreatbeyond/2010/12/us_government_wikileaks_respon.html
http://www.bbc.co.uk/news/world-europe-11968386
Going underground at the Wikileaks nerve centre
by Stephen Evans / 10 December 2010

To enter the old nuclear bunker in Stockholm where the Wikileaks secrets are stored is like passing into another surreal world, half way between planet Earth and cyberspace. The entrance on the street is non-descript. It is just a door in a face of rock. Steam billows from pipes alongside into the bitterly cold Swedish air. If you press the bell and get invited in, glass doors open and you walk into a James Bond world of soft lighting. There is the high security of doors which only open when the door behind you has closed, and which need special passes for every few steps of the journey into the inner cavern. But there is also falling water in fountains and pot plants, because people work here, watching monitors from a control room. One of the carpets has the surface of the moon on it to give an added surreal effect.

And then there are the computer servers in a cave, with bare rock walls underneath the wooden houses of Stockholm. In the inner cavern are rows and rows of computer storage cases. And on one of them are the files of Wikileaks, only a fraction of which have so far been made public to the immense embarrassment of politicians who once said something indiscreet to an American diplomat, never dreaming the words would bite back in public. The data centre is owned by a company called Bahnhof, and its founder, Jon Karlung, gave the BBC a tour. Mr Karlung took over the remnant from the Cold War in 2007 and had to dynamite out a further 4,000 cubic metres of rock to make it big enough. It is ultra-secure and needs submarine turbines – just inside the entrance – to generate enough power to maintain a moderate temperature even in the vicious Swedish winter.

But the threat to data is not from physical theft – not from robbers with guns – though they would have a hard job – but from cyber attack. Mr Karlung said they monitored the traffic into and out of the centre. But he said he would be naive to think that people would not try so they had given Wikileaks a separate channel in – its own pipe for data as it were. Does he fear the wrath of the United States because his facility stores such embarrassing information? “Our role must be to keep this service up. We are in Sweden and this service is legal in Sweden and therefore we must stand up for our client,” he said. “We must do everything in our power to keep the service up. I believe in the freedom of speech”. He said his data centre was like the postal service. You do not blame the postman for the content of the letter – nor do you open the letter if you are a postal delivery person. So it is with servers, he thinks: “We should be able to help Wikileaks operate their servers as long as they are not violating any laws. “That principle is the most important thing to stand for”.

“At the moment, for example, we are sitting on 5GB from Bank of America, one of the executive’s hard drives…”

U.S. BANKERS NEXT?
http://www.computerworld.com/s/article/9139180/Wikileaks_plans_to_make_the_Web_a_leakier_place
http://news.cnet.com/8301-27080_3-10450552-245.html
http://news.cnet.com/8301-31921_3-20011106-281.html
http://www.wired.com/threatlevel/2010/09/wikileaks-revolt/
http://www.digitaltrends.com/computing/wikileaks-defectors-form-openleaks-org/
http://www.guardian.co.uk/world/blog/2010/dec/03/julian-assange-wikileaks
http://blogs.forbes.com/andygreenberg/2010/11/29/an-interview-with-wikileaks-julian-assange/
An Interview With WikiLeaks’ Julian Assange
by Andy Greenberg / Nov. 29 2010

Admire him or revile him, WikiLeaks’ Julian Assange is the prophet of a coming age of involuntary transparency, the leader of an organization devoted to divulging the world’s secrets using technology unimagined a generation ago. Over the last year his information insurgency has dumped 76,000 secret Afghan war documents and another trove of 392,000 files from the Iraq war into the public domain–the largest classified military security breaches in history. Sunday, WikiLeaks made the first of 250,000 classified U.S. State Department cables public, offering an unprecedented view of how America’s top diplomats view enemies and friends alike. But, as Assange explained to me earlier this month, the Pentagon and State Department leaks are just the start.

Forbes: To start, is it true you’re sitting on trove of unpublished documents?
Julian Assange: Sure. That’s usually the case. As we’ve gotten more successful, there’s a gap between the speed of our publishing pipeline and the speed of our receiving submissions pipeline. Our pipeline of leaks has been increasing exponentially as our profile rises, and our ability to publish is increasing linearly.

Q. You mean as your personal profile rises?
A. Yeah, the rising profile of the organization and my rising profile also. And there’s a network effect for anything to do with trust. Once something starts going around and being considered trustworthy in a particular arena, and you meet someone and they say “I heard this is trustworthy,” then all of a sudden it reconfirms your suspicion that the thing is trustworthy. So that’s why brand is so important, just as it is with anything you have to trust.

Q. And this gap between your publishing resources and your submissions is why the site’s submission function has been down since October?
A. We have too much.

Q. Before you turned off submissions, how many leaks were you getting a day?
A. As I said, it was increasing exponentially. When we get lots of press, we can get a spike of hundreds or thousands. The quality is sometimes not as high. If the front page of the Pirate Bay links to us, as they have done on occasion, we can get a lot of submissions, but the quality is not as high.

Q. How much of this trove of documents that you’re sitting on is related to the private sector?
A. About fifty percent.

Q. You’ve been focused on the U.S. military mostly in the last year. Does that mean you have private sector-focused leaks in the works?
A. Yes. If you think about it, we have a publishing pipeline that’s increasing linearly, and an exponential number of leaks, so we’re in a position where we have to prioritize our resources so that the biggest impact stuff gets released first.

Q. So do you have very high impact corporate stuff to release then?
A. Yes, but maybe not as high impact… I mean, it could take down a bank or two.

Q. That sounds like high impact.
A. But not as big an impact as the history of a whole war. But it depends on how you measure these things.

Q. When will WikiLeaks return to its older model of more frequent leaks of smaller amounts of material?
A. If you look at the average number of documents we’re releasing, we’re vastly exceeding what we did last year. These are huge datasets. So it’s actually very efficient for us to do that. If you look at the number of packages, the number of packages has decreased. But if you look at the average number of documents, that’s tremendously increased.

Q. So will you return to the model of higher number of targets and sources?
A. Yes. Though I do actually think… [pauses] These big package releases. There should be a cute name for them.

Q. Megaleaks?
A. Megaleaks. That’s good. These megaleaks… They’re an important phenomenon, and they’re only going to increase. When there’s a tremendous dataset, covering a whole period of history or affecting a whole group of people, that’s worth specializing on and doing a unique production for each one, which is what we’ve done. We’re totally source dependent. We get what we get. As our profile rises in a certain area, we get more in a particular area. People say, why don’t you release more leaks from the Taliban. So I say hey, help us, tell more Taliban dissidents about us.

Q. These megaleaks, as you call them, we haven’t seen any of those from the private sector.
A. No, not at the same scale as for the military.

Q. Will we?
A. Yes. We have one related to a bank coming up, that’s a megaleak. It’s not as big a scale as the Iraq material, but it’s either tens or hundreds of thousands of documents depending on how you define it.

Q. Is it a U.S. bank?
A. Yes, it’s a U.S. bank.

Q. One that still exists?
A. Yes, a big U.S. bank.

Q. The biggest U.S. bank?
A. No comment.

Q. When will it happen?
A. Early next year. I won’t say more.

Q. What do you want to be the result of this release?
A. [Pauses] I’m not sure. It will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms, I presume. Usually when you get leaks at this level, it’s about one particular case or one particular violation. For this, there’s only one similar example. It’s like the Enron emails. Why were these so valuable? When Enron collapsed, through court processes, thousands and thousands of emails came out that were internal, and it provided a window into how the whole company was managed. It was all the little decisions that supported the flagrant violations. This will be like that. Yes, there will be some flagrant violations, unethical practices that will be revealed, but it will also be all the supporting decision-making structures and the internal executive ethos that cames out, and that’s tremendously valuable. Like the Iraq War Logs, yes there were mass casualty incidents that were very newsworthy, but the great value is seeing the full spectrum of the war. You could call it the ecosystem of corruption. But it’s also all the regular decision making that turns a blind eye to and supports unethical practices: the oversight that’s not done, the priorities of executives, how they think they’re fulfilling their own self-interest. The way they talk about it.

Q. How many dollars were at stake in this?
A. We’re still investigating. All I can say is it’s clear there were unethical practices, but it’s too early to suggest there’s criminality. We have to be careful about applying criminal labels to people until we’re very sure.

Q. Can you tell me anything about what kind of unethical behavior we’re talking about?
A. No.

Q. You once said to one of my colleagues that WikiLeaks has material on BP. What have you got?
A. We’ve got lots now, but we haven’t determined how much is original. There’s been a lot of press on the BP issue, and lawyers, and people are pulling out a lot of stuff. So I suspect the material we have on BP may not be that original. We’ll have to see whether our stuff is especially unique.

Q. The Russian press has reported that you plan to target Russian companies and politicians. I’ve heard from other WikiLeaks sources that this was blown out of proportion.
A. It was blown out of proportion when the FSB reportedly said not to worry, that they could take us down. But yes, we have material on many business and governments, including in Russia. It’s not right to say there’s going to be a particular focus on Russia.

Q. Let’s just walk through other industries. What about pharmaceutical companies?
A. Yes. To be clear, we have so much unprocessed stuff, I’m not even sure about all of it. These are just things I’ve briefly looked at or that one of our people have told me about.

Q. How much stuff do you have? How many gigs or terabytes?
A. I’m not sure. I haven’t had time to calculate.

Q. Continuing then: The tech industry?
A. We have some material on spying by a major government on the tech industry. Industrial espionage.

Q. U.S.? China?
A. The U.S. is one of the victims.

Q. What about the energy industry?
A. Yes.

Q. Aside from BP?
A. Yes.

Q. On environmental issues?
A. A whole range of issues.

Q. Can you give me some examples?
A. One example: It began with something we released last year, quite an interesting case that wasn’t really picked up by anyone. There’s a Texas Canadian oil company whose name escapes me. And they had these wells in Albania that had been blowing. Quite serious. We got this report from a consultant engineer into what was happening, saying vans were turning up in the middle of the night doing something to them. They were being sabotaged. The Albanian government was involved with another company; There were two rival producers and one was government-owned and the other was privately owned. So when we got this report; It didn’t have a header. It didn’t say the name of the firm, or even who the wells belonged to.

Q. So it wasn’t picked up because it was missing key data.
A. At the time, yeah. So I said, what the hell do we do with this thing? It’s impossible to verify if we don’t even know who it came from. It could have been one company trying to frame the other one. So we did something very unusual, and published it and said “We’ve got this thing, looks like it could have been written by a rival company aiming to defame the other, but we can’t verify it. We want more information.” Whether it’s a fake document or real one, something was going on. Either one company is trying to frame the other, which is interesting, or it’s true, which is also very interesting. That’s where the matter sat until we got a letter of inquiry from an engineering consulting company asking how to get rid of it. We demanded that they first prove that they were the owner.

Q. It sounds like when Apple confirmed that the lost iPhone 4 was real, by demanding that Gizmodo return it.
A. Yes, like Apple and the iPhone. They sent us a screen capture with the missing header and other information.

Q. What were they thinking?
A. I don’t know.

Q. So the full publication is coming up?
A. Yes.

Q. Do you have more on finance?
A. We have a lot of finance related things. Of the commercial sectors we’ve covered, finance is the most significant. Before the banks went bust in Dubai, we put out a number of leaks showing they were unhealthy. They threatened to send us to prison in Dubai, which is a little serious, if we went there.

Q. Just to review, what would you say are the biggest five private sector leaks in WikiLeaks’ history?
A. It depends on the importance of the material vs. the impact. Kaupthing was one of the most important, because of the chain of effects it set off, the scrutiny in Iceland and the rest of Scandinvia. The Bank Julius Baer case was also important. The Kaupthing leak was a very good leak. The loanbook described in very frank terms the credit worthiness of all these big companies and billionaires and borrowers, not just internal to the bank, but a broad spectrum all over the world, an assessment of a whole bunch of businesses around the world. It was quite an interesting leak. It didn’t just expose Kaupthing, it exposed many companies. The bank Julius Baer exposed high net worth individuals hiding assets in the Cayman Islands, and we went on to do a series that exposed bank Julius Baer’s own internal tax structure. It’s interesting that Swiss banks also hide their assets from the Swiss by using offshore bank structuring. We had some quite good stuff in there. It set off a chain of regulatory investigations, possibly resulting in some changes. It triggered a lot of interesting scrutiny.

Q. Regulation: Is that what you’re after?
A. I’m not a big fan of regulation: anyone who likes freedom of the press can’t be. But there are some abuses that should be regulated, and this is one. With regard to these corporate leaks, I should say: There’s an overlap between corporate and government leaks. When we released the Kroll report on three to four billion smuggled out by the former Kenyan president Daniel arap Moi and his cronies, where did the money go? There’s no megacorruption–as they call it in Africa, it’s a bit sensational but you’re talking about billions–without support from Western banks and companies. That money went into London properties, Swiss banks, property in New York, companies that had been set up to move this money. We had another interesting one from the pharmaceutical industry: It was quite self-referential. The lobbyists had been getting leaks from the WHO. They were getting their own internal intelligence report affecting investment regulation. We were leaked a copy. It was a meta-leak. That was quite influential, though it was a relatively small leak–it was published in Nature and other pharma journals.

Q. What do you think WikiLeaks mean for business? How do businesses need to adjust to a world where WikiLeaks exists?
A. WikiLeaks means it’s easier to run a good business and harder to run a bad business, and all CEOs should be encouraged by this. I think about the case in China where milk powder companies started cutting the protein in milk powder with plastics. That happened at a number of separate manufacturers. Let’s say you want to run a good company. It’s nice to have an ethical workplace. Your employees are much less likely to screw you over if they’re not screwing other people over. Then one company starts cutting their milk powder with melamine, and becomes more profitable. You can follow suit, or slowly go bankrupt and the one that’s cutting its milk powder will take you over. That’s the worst of all possible outcomes. The other possibility is that the first one to cut its milk powder is exposed. Then you don’t have to cut your milk powder. There’s a threat of regulation that produces self-regulation. It just means that it’s easier for honest CEOs to run an honest business, if the dishonest businesses are more effected negatively by leaks than honest businesses. That’s the whole idea. In the struggle between open and honest companies and dishonest and closed companies, we’re creating a tremendous reputational tax on the unethical companies. No one wants to have their own things leaked. It pains us when we have internal leaks. But across any given industry, it is both good for the whole industry to have those leaks and it’s especially good for the good players.

Q. But aside from the market as a whole, how should companies change their behavior understanding that leaks will increase?
A. Do things to encourage leaks from dishonest competitors. Be as open and honest as possible. Treat your employees well. I think it’s extremely positive. You end up with a situation where honest companies producing quality products are more competitive than dishonest companies producing bad products. And companies that treat their employees well do better than those that treat them badly.

Q. Would you call yourself a free market proponent?
A. Absolutely. I have mixed attitudes towards capitalism, but I love markets. Having lived and worked in many countries, I can see the tremendous vibrancy in, say, the Malaysian telecom sector compared to U.S. sector. In the U.S. everything is vertically integrated and sewn up, so you don’t have a free market. In Malaysia, you have a broad spectrum of players, and you can see the benefits for all as a result.

Q. How do your leaks fit into that?
A. To put it simply, in order for there to be a market, there has to be information. A perfect market requires perfect information. There’s the famous lemon example in the used car market. It’s hard for buyers to tell lemons from good cars, and sellers can’t get a good price, even when they have a good car. By making it easier to see where the problems are inside of companies, we identify the lemons. That means there’s a better market for good companies. For a market to be free, people have to know who they’re dealing with.

Q. You’ve developed a reputation as anti-establishment and anti-institution.
A. Not at all. Creating a well-run establishment is a difficult thing to do, and I’ve been in countries where institutions are in a state of collapse, so I understand the difficulty of running a company. Institutions don’t come from nowhere. It’s not correct to put me in any one philosophical or economic camp, because I’ve learned from many. But one is American libertarianism, market libertarianism. So as far as markets are concerned I’m a libertarian, but I have enough expertise in politics and history to understand that a free market ends up as monopoly unless you force them to be free. WikiLeaks is designed to make capitalism more free and ethical.

Q. But in the meantime, there could be a lot of pain from these scandals, obviously.
A. Pain for the guilty.

Q. Do you derive pleasure from these scandals that you expose and the companies you shame?
A. It’s tremendously satisfying work to see reforms being engaged in and stimulating those reforms. To see opportunists and abusers brought to account.

Q. You were a traditional computer hacker. How did you find this new model of getting information out of companies?
A. It’s a bit annoying, actually. Because I cowrote a book about [being a hacker], there are documentaries about that, people talk about that a lot. They can cut and paste. But that was 20 years ago. It’s very annoying to see modern day articles calling me a computer hacker. I’m not ashamed of it, I’m quite proud of it. But I understand the reason they suggest I’m a computer hacker now. There’s a very specific reason. I started one of the first ISPs in Australia, known as Suburbia, in 1993. Since that time, I’ve been a publisher, and at various moments a journalist. There’s a deliberate attempt to redefine what we’re doing not as publishing, which is protected in many countries, or the journalist activities, which is protected in other ways, as something which doesn’t have a protection, like computer hacking, and to therefore split us off from the rest of the press and from these legal protections. It’s done quite deliberately by some of our opponents. It’s also done because of fear, from publishers like The New York Times that they’ll be regulated and investigated if they include our activities in publishing and journalism.

Q. I’m not arguing you’re a hacker now. But if we say that both what you were doing then and now are both about gaining access to information, when did you change your strategy from going in and getting it to simply asking for it?
A. That hacker mindset was very valuable to me. But the insiders know where the bodies are. It’s much more efficient to have insiders. They know the problems, they understand how to expose them.

Q. How did you start to approach your leak strategy?
A. When we started Suburbia in 1993, I knew that bringing information to the people was very important. We facilitated many groups: We were the electronic printer if you like for many companies and individuals who were using us to publish information. They were bringing us information, and some of them were activist groups, lawyers. And some bringing forth information about companies, like Telstra, the Australian telecommunications giant. We published information on them. That’s something I was doing in the 1990s. We were the free speech ISP in Australia. An Australian Anti-church of Scientology website was hounded out of Victoria University by legal threats from California, and hounded out of a lot of places. Eventually they came to us. People were fleeing from ISPs that would fold under legal threats, even from a cult in the U.S. That’s something I saw early on, without realizing it: potentiating people to reveal their information, creating a conduit. Without having any other robust publisher in the market, people came to us.

Q. I wanted to ask you about [Peiter Zatko, a legendary hacker and security researcher who also goes by] “Mudge.”
A. Yeah, I know Mudge. He’s a very sharp guy.

Q. Mudge is now leading a project at the Pentagon’s Defense Advanced Research Projects Agency to find a technology that can stop leaks, which seems pretty relative to your organization. Can you tell me about your past relationship with Mudge?
A. Well, I…no comment.

Q. Were you part of the same scene of hackers? When you were a computer hacker, you must have known him well.
A. We were in the same milieu. I spoke with everyone in that milieu.

Q. What do you think of his current work to prevent digital leaks inside of organizations, a project called Cyber Insider Threat or Cinder?
A. I know nothing about it.

Q. But what do you of the potential of any technology designed to prevent leaks?
A. Marginal.

Q. What do you mean?
A. New formats and new ways of communicating are constantly cropping up. Stopping leaks is a new form of censorship. And in the same manner that very significant resources spent on China’s firewall, the result is that anyone who’s motivated can work around it. Not just the small fraction of users, but anyone who really wants to can work around it. Censorship circumvention tools [like the program Tor] also focus on leaks. They facilitate leaking. Airgapped networks are different. Where there’s literally no connection between the network and the internet. You may need a human being to carry something. But they don’t have to intentionally carry it. It could be a virus on a USB stick, as the Stuxnet worm showed, though it went in the other direction. You could pass the information out via someone who doesn’t know they’re a mule.

Q. Back to Mudge and Cinder: Do you think, knowing his intelligence personally, that he can solve the problem of leaks?
A. No, but that doesn’t mean that the difficulty can’t be increased. But I think it’s a very difficult case, and the reason I suggest it’s an impossible case to solve completely is that most people do not leak. And the various threats and penalties already mean they have to be highly motivated to deal with those threats and penalties. These are highly motivated people. Censoring might work for the average person, but not for highly motivated people. And our people are highly motivated. Mudge is a clever guy, and he’s also highly ethical. I suspect he would have concerns about creating a system to conceal genuine abuses.

Q. But his goal of preventing leaks doesn’t differentiate among different types of content. It would stop whistleblowers just as much as it stops exfiltration of data by foreign hackers.
A. I’m sure he’ll tell you China spies on the U.S., Russia, France. There are genuine concerns about those powers exfiltrating data. And it’s possibly ethical to combat that process. But spying is also stabilizing to relationships. Your fears about where a country is or is not are always worse than the reality. If you only have a black box, you can put all your fears into it, particularly opportunists in government or private industry who want to address a problem that may not exist. If you know what a government is doing, that can reduce tensions.

Q. There have been reports that Daniel Domscheit-Berg, a German who used to work with WikiLeaks, has left to create his own WikiLeaks-type organization. The Wall Street Journal described him as a “competitor” to WikiLeaks. Do you see him as competition?
A. The supply of leaks is very large. It’s helpful for us to have more people in this industry. It’s protective to us.

Q. What do you think of the idea of WikiLeaks copycats and spinoffs?
A. There have been a few over time, and they’ve been very dangerous. It’s not something that’s easy to do right. That’s the problem. Recently we saw a Chinese WikiLeaks. We encouraged them to come to us to work with us. It would be nice to have more Chinese speakers working with us in a dedicated way. But what they’d set up had no meaningful security. They have no reputation you can trust. It’s very easy and very dangerous to do it wrong.

Q. Do you think that the Icelandic Modern Media Initiative [a series of bills to make Iceland the most free-speech and whistleblower-protective country in the world] would make it easier to do this right if it passes?
A. Not at the highest level. We deal with organizations that do not obey the rule of law. So laws don’t matter. Intelligence agencies keep things secret because they often violate the rule of law or of good behavior.

Q. What about corporate leaks?
A. For corporate leaks, yes, free speech laws could make things easier. Not for military contractors, because they’re in bed with intelligence agencies. If a spy agency’s involved, IMMI won’t help you. Except it may increase the diplomatic cost a little, if they’re caught. That’s why our primary defense isn’t law, but technology.

Q. Are there any other leaking organizations that you do endorse?
A. No, there are none.

Q. Do you hope that IMMI will foster a new generation of WikiLeaks-type organizations?
A. More than WikiLeaks: general publishing. We’re the canary in the coalmine. We’re at the vanguard. But the attacks against publishers in general are severe.

Q. If you had a wishlist of what industries or governments, what are you looking for from leakers?
A. All governments, all industries. We accept all material of diplomatic, historical or ethical significance that hasn’t been released before and is under active suppression. There’s a question about which industries have the greatest potential for reform. Those may be the ones we haven’t heard about yet. So what’s the big thing around the corner? The real answer is I don’t know. No one in the public knows. But someone on the inside does know.

Q. But there are also industries that just have more secrecy, so you must know there are things you want that you haven’t gotten.
A. That’s right. Within the intelligence industry is one example. They have a higher level of secrecy. And that’s also true of the banking industry. Other industries that are extremely well paid, say Goldman Sachs, might have higher incentives not to lose their jobs. So it’s only the obvious things that we want: Things concerning intelligence and war, and mass financial fraud. Because they affect so many people so severely.

Q. And they’re harder leaks to get.
A. Intelligence particularly, because the penalties are so severe. Although very few people have been caught, it’s worth noting. The penalties may be severe, but nearly everyone gets away with it. To keep people in control, you only need to make them scared. The CIA is not scared as an institution of people leaking. It’s scared that people will know that people are leaking and getting away with it. If that happens, the management loses control.

Q. And WikiLeaks has the opposite strategy?
A. That’s right. It’s summed up by the phrase “courage is contagious.” If you demonstrate that individuals can leak something and go on to live a good life, it’s tremendously incentivizing to people.

REGARDING
www.apple-CF.com
http://www.flickr.com/photos/escapehelicopter/5183811836/
http://www.flickr.com/photos/escapehelicopter/sets/72157625282975715/show/
http://religionandtechnology.com/2010/11/16/iphone-4cf-conflict-free-iphone/
http://religionandtechnology.com/2010/08/25/notes-on-technology-cyberactivism-and-social-justice/
http://www.govtrack.us/congress/bill.xpd?bill=s109-2125
http://ccij.ca/media/news-releases/2010/index.php?WEBYEP_DI=6
http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=4532548
http://www.anglogold.co.za/default.htm

PREVIOUSLY on SPECTRE : I DON’T CARE I WANT ONE
https://spectregroup.wordpress.com/2008/11/18/i-dont-care-i-want-one/

Begin forwarded message:

From: Apple Press Relations
Date: November 16, 2010 9:36:39 PM EST
To: cindy-wetlands-preserve.org
Subject: Alert: Fraudulent Conflict-Free iPhone Hoax Originating from Apple Address
Reply-To: press@apple-cf.com

FOR IMMEDIATE RELEASE

Contact: Caroline Hemmerskjold, Apple
Tel. (408) 676-7923
Email: caroline@apple-cf.com

CONFLICT-FREE IPHONE HOAX TOUTS FALSE, FACILE CONSUMER-BASED “SOLUTION”
Nov. 16, 2010

Apple wishes to inform the public that the so-called “conflict-free” iPhone, promoted today outside the Apple Store at Fifth Avenue in New York City, featured on the non-Apple website http://www.apple-CF.com, and noted in a spoofed media advisory to numerous New York City reporters, is fraudulent and fictitious, and entirely the imagination of the group of pranksters who created it.

To be perfectly clear, this product does not exist, and Apple has no connection to the group that promoted it. Furthermore, although Apple does have plans to certify its materials as conflict-free, this will by no means be any sort of solution to the situation of conflict in the Congo, nor in any way help bring an end to that conflict. Rather, the solution must be based in diplomacy.

In this regard, there is a law on the books – the “Democratic Republic of the Congo Relief, Security, and Democracy Promotion Act,” Public Law 109-456, introduced by then-Senator Obama in 2005 – that demands, among other things, the appointment of a special envoy to the Great Lakes region. As of now, four years later, this has still not happened, and the Congolese continue to die by the tens of thousands.

There are various possible solutions to this problem, but it is up to you, not Apple, to accomplish them. Here are some things you can do:

Report the violation of Public Law 109-456 to the FBI. Visit tips.fbi.gov to do so, or call 1-800-CALLFBI (225-5324). Culpable parties involve not only the President and the White House, but the Secretary of State, who is in charge of enforcing that portion of this law that demands the withholding of aid to destabilizing nations.

You might consider performing a citizen’s arrest against the above parties. Any citizen can arrest someone committing a crime, if the crime is sufficiently grave. Millions of deaths in the Congo are, Apple believes, a very grave crime.

You might also consider performing a citizen’s arrest against shareholders and officers of the mining companies that have been implicated in pillaging the resources of the Congo and fueling the conflict in the Congo over the past 14 years. Why not start with John Paulson, the majority shareholder of AngloGold Ashanti, the mining company most responsible for financially supporting rebel groups and furthering the Congo conflict. His office is located at 1251 Avenue Of The Americas (at 50th Street), Floor 50.

We at Apple have acknowledged in the past that the conflict in the Congo, which has claimed many millions of lives, is fuelled in part by the provision of minerals that go into consumer electronic products, and not only Apple’s. However, so-called “conflict-free” certification is not a real solution, merely a very tiny part of a real solution. Regardless of whether Apple or other companies produce “conflict-free” products, the Congo conflict will not end until the U.S. government chooses to enforce its own laws.

http://givingpledge.org/
http://onlythesuperrich.org/

EARLIEST-KNOWN RICH PEOPLE
http://dwardmac.pitzer.edu/Anarchist_Archives/kropotkin/mutaidch3.html
by Peter Kropotkin / 1902

“Eskimo life is based upon communism. What is obtained by hunting and fishing belongs to the clan. But in several tribes, especially in the West, under the influence of the Danes, private property penetrates into their institutions. However, they have an original means for obviating the inconveniences arising from a personal accumulation of wealth which would soon destroy their tribal unity. When a man has grown rich, he convokes the folk of his clan to a great festival, and, after much eating, distributes among them all his fortune. On the Yukon river, Dall saw an Aleonte family distributing in this way ten guns, ten full fur dresses, 200 strings of beads, numerous blankets, ten wolf furs, 200 beavers, and 500 zibelines. After that they took off their festival dresses, gave them away, and, putting on old ragged furs, addressed a few words to their kinsfolk, saying that though they are now poorer than any one of them, they have won their friendship. Like distributions of wealth appear to be a regular habit with the Eskimos, and to take place at a certain season, after an exhibition of all that has been obtained during the year.(30) In my opinion these distributions reveal a very old institution, contemporaneous with the first apparition of personal wealth; they must have been a means for re-establishing equality among the members of the clan, after it had been disturbed by the enrichment of the few. The periodical redistribution of land and the periodical abandonment of all debts which took place in historical times with so many different races (Semites, Aryans, etc.), must have been a survival of that old custom. And the habit of either burying with the dead, or destroying upon his grave, all that belonged to him personally — a habit which we find among all primitive races — must have had the same origin. In fact, while everything that belongs personally to the dead is burnt or broken upon his grave, nothing is destroyed of what belonged to him in common with the tribe, such as boats, or the communal implements of fishing. The destruction bears upon personal property alone. At a later epoch this habit becomes a religious ceremony. It receives a mystical interpretation, and is imposed by religion, when public opinion alone proves incapable of enforcing its general observance. And, finally, it is substituted by either burning simple models of the dead man’s property (as in China), or by simply carrying his property to the grave and taking it back to his house after the burial ceremony is over — a habit which still prevails with the Europeans as regards swords, crosses, and other marks of public distinction.(31)”

30. Dall saw it in Alaska, Jacobsen at Ignitok in the vicinity of the Bering Strait. Gilbert Sproat mentions it among the Vancouver indians; and Dr. Rink, who describes the periodical exhibitions just mentioned, adds: “The principal use of the accumulation of personal wealth is for periodically distributing it.” He also mentions (loc. cit. p. 31) “the destruction of property for the same purpose,’ (of maintaining equality).

31. In a remarkable work, The Religious Systems of China, published in 1892-97 by J. M. de Groot at Leyden, we find the confirmation of this idea. There was in China (as elsewhere) a time when all personal belongings of a dead person were destroyed on his tomb — his mobiliary goods, his chattels, his slaves, and even friends and vassals, and of course his widow. It required a strong reaction against this custom on behalf of the moralists to put an end to it. With the gipsies in England the custom of destroying all chattels on the grave has survived up to the present day. All the personal property of the gipsy queen who died a few years ago was destroyed on her grave. Several newspapers mentioned it at that time.

AND NOW
http://www.guardian.co.uk/world/2010/jul/12/bill-and-melinda-gates-foundation
Inside the Bill and Melinda Gates Foundation
by Andy Beckett / 12 July 2010

The headquarters of probably the most powerful charity in the world, and one of the most quietly influential international organisations of any sort, currently stand between a derelict restaurant and a row of elderly car repair businesses. Gentrification has yet to fully colonise this section of the Seattle waterfront, and even the actual premises of the Bill & Melinda Gates Foundation, which, appropriately perhaps, used to be a cheque-processing plant, retain a certain workaday drabness. Only four storeys high, with long rows of windows but no hint of corporate gloss, its beige and grey box sits anonymously in the drizzly northern Pacific light.

There is no sign outside the building. There is not even an entrance from the street. Instead, visitors must take a side road, stop at a separate gatehouse, also unmarked, and introduce themselves to a security guard, of the eerily polite and low-key kind employed by ex-heads of state and the extremely rich. Once admitted, you cross a car park full of modest vehicles and, if you are lucky, glimpse one of the world-renowned health or poverty specialists working for the foundation, dressed in the confidently casual Seattle office uniform of chinos and rainproofs. Then you reach the reception: finally, there is a small foundation logo on the wall, and beside it a few lyrical photographs of children and farmers in much dustier and less prosperous places than Seattle. Only past the reception, almost hidden away on a landing, is there a reminder of the foundation’s status and contacts: a vivid shirt in a glass case, presented during a visit by Nelson Mandela.

The low-lit corridors beyond have little of the scruffiness and bustle you often find at charities. The fast- expanding foundation staff (presently around 850 employees) are in increasing demand around the world: meeting governments, attending summits and conferences, and above all “in the field”, as foundation people put it, checking on the progress of the hundreds of projects – from drought-tolerant seeds to malaria vaccines to telephone banking for the developing world – to which the organisation has given grants since it was founded in 1994.

In Seattle, maps of Africa and southern Asia, the foundation’s main areas of activity outside America, are pinned up in the often empty, sparsely decorated offices and cubicles. There are also cuttings about the foundation’s work from the Economist and the Wall Street Journal, not publications you might have previously associated with a big interest in global disease and poverty. And lying on the foundation’s standard-issue, utilitarian desks, there are its confidently written and comprehensively illustrated reports: Ghana: An Overall Success Story is the title of one left in the unoccupied office I have been lent between interviews. The foundation, in short, feels like a combination of a leftish thinktank, an elite management consultancy and a hastily expanding internet start-up. Is it the sort of institution that can really help the world’s poorest people?

For 14 of the last 16 years Bill Gates has been the richest person on earth. More than a decade ago, he decided to start handing over the “large majority” of his wealth – currently £36bn – for the foundation to distribute, so that “the people with the most urgent needs and the fewest champions” in the world, as he and his wife Melinda put it on the foundation website, “grow up healthier, get a better education, and gain the power to lift themselves out of poverty”. In 2006, Warren Buffett, currently the third richest person in the world, announced that he too would give a large proportion of his assets to the foundation. Its latest accounts show an endowment of £24bn, making it the world’s largest private foundation. It is committed to spending the entire endowment within 50 years of Bill and Melinda Gates’s deaths. Last year it awarded grants totalling £2bn.

As well as its money, it is the organisation’s optimism and the fame of its main funder – in 2008 Bill Gates stopped working full-time for his computer giant Microsoft to concentrate on the foundation – that has given it momentum. Last May an editorial in the revered medical journal the Lancet praised it for giving “a massive boost to global health funding . . . The Foundation has challenged the world to think big and to be more ambitious about what can be done to save lives in low-income settings. The Foundation has added renewed dynamism, credibility, and attractiveness to global health [as a cause].”

Precise effects of big charity projects can be hard to measure, especially over a relatively short period. But already two bodies that the foundation funds heavily, the Global Alliance for Vaccines and Immunisation (Gavi) and the Global Fund to Fight HIV/Aids, Tuberculosis and Malaria, have, according to the foundation, delivered vaccines to more than 250 million children in poor countries and prevented more than an estimated five million deaths. “The foundation has brought a new vigour,” says Michael Edwards, a veteran charity commentator and usually a critic of billionaire philanthropists. “The charity sector can almost disempower itself; be too gloomy about things . . . Gates offers more of a positive story. He is a role model for other philanthropists, and he is the biggest.”

“Everyone follows the Gates foundation’s lead,” says someone at a longer-established charity who prefers not to be named. “It feels like they’re everywhere. Every conference I go to, they’re there. Every study that comes out, they’re part of. They have the ear of any [national] leadership they want to speak to. Politicians attach themselves to Gates to get PR. Everyone loves to have a meeting with Gates. No institution would refuse.”

The foundation has branch offices in Washington DC, Delhi and Beijing. This year, it opened an office in London, not in one of the scruffy inner suburbs usually inhabited by charities, but close to the Houses of Parliament. Seth Berkley, head of the International Aids Vaccine Initiative [IAVI], says: “The foundation has the advantage of speed and flexibility. When they want to, they can move quickly, unlike many other large bureaucracies. Most of the other private foundations in the US don’t work globally. Others are more staid than Gates. I used to work at the Rockefeller Foundation [an older American charity] and dole out grants in small amounts. The Gates foundation gave us at IAVI a grant of $1.5m (£1m), then $25m. Then they gave us a line of credit – which is extremely unusual in grant-making – of $100m, to give us assets to be able to negotiate with pharmaceutical companies and initiate vaccine development programmes. Using that $100m, we were able to leverage lots more funding – $800m in total. What Gates allowed us to do was go out and search for new ideas and move quickly on them. The old way was to find the new ideas, and then look for a donor to back them.”

Besides its dizzying grants, the foundation is also becoming a magnet for talented staff and collaborators. “We probably get more than our fair share of great external expertise and insight,” says chief executive Jeff Raikes. foundation staff can have a certain self-assurance. When the history of global health is written, says Katherine Kreiss, the foundation officer overseeing its nutrition projects, “the start of the Gates foundation will absolutely be a seminal moment.”

Some have reservations about this power and the use made of it. Mindful of the foundation’s ubiquity, few in the charity world are prepared to criticise it on the record. But last May the Lancet published two authored articles on the foundation. “Grant-making by the Gates foundation,” concluded one, “seems to be largely managed through an informal system of personal networks and relationships rather than by a more transparent process based on independent and technical peer review.” The other article found that, “The research funding of the Foundation is heavily weighted towards the development of new vaccines and drugs, much of it high risk and even if successful likely to take at least the 20 years which Gates has targeted for halving child mortality.”

In a forthcoming article for the Journal of Law, Medicine & Ethics, Devi Sridhar, a global health specialist at Oxford University, describes as a “particularly serious problem” the “loss of health workers from the public sector to better funded NGOs offering better remuneration”. She also suggests that the foundation, like other health organisations based in rich countries but active in the poor southern hemisphere, “[has] tended to fund . . . a large and costly global health bureaucracy and technocracy based in the north”. The foundation responds, “Much of our grant-making goes to large intermediary partners that in turn provide funding and support to those doing the work in the field, often to developing country institutions. We’re not able to provide a simple funding breakdown.”

The rise of the foundation has been part of a larger revival of interest in the west in the problems of poor countries. This phenomenon has encompassed increased government aid budgets, initiatives by the World Health Organisation and World Bank, celebrity-led events and campaigns such as Live8, image-conscious corporate schemes, and countless private ventures, from the sober and long-term to the reactive, adventure-seeking, self-styled “extreme humanitarianism” currently being practised in Haiti by freelance American volunteers and breathlessly described in the July issue of Vanity Fair.

It is hard to see this explosion of activity as a wholly bad thing. But it does have political implications. “It’s kind of [creating] a post-UN world,” says someone close to the Gates foundation. “People have gotten interested in fast results.” The UN, he says, is too slow and bureaucratic – you could say democratic – to achieve them. Critics of the new, more entrepreneurial aid industry such as the Dutch journalist Linda Polman, in her recent book War Games: The Story of Aid and War in Modern Times, see empire-building and wasteful competition as well as worthwhile altruism. “Everyone in global health is talking about poor coordination,” says someone at a charity in that field. “The Gates foundation is contributing to the fragmentation and duplication.”

And finally, a suspicion lingers, slowly fading but still there, that the foundation’s activities are some sort of penance for Gates’s world-dominating behaviour at Microsoft – or a continuation of that world domination by other means. Both Raikes and his predecessor as foundation chief executive were at Microsoft; Raikes from 1981 to 2008, during which time he was the company’s key figure after Gates and his co-founder Paul Allen.

As Raikes sits in his office, a little messy-haired, dressed in a zip-up jumper, fidgety in his chair and brisk in his answers, he even seems a bit like Gates. “There are some real cultural differences between the Gates foundation and Microsoft,” he says. “Some of that’s good and some of that’s not so good. The foundation is in a stage of . . . maturation. In philanthropy there is kind of a culture of, [he puts on a slightly airy-fairy voice] ‘You and I are here to help the world, and so we can’t disagree.’ At Microsoft, people would really throw themselves into the fray. I’m trying to encourage that here.” He offers only limited reassurance to those who consider the foundation too powerful. “We’re not replacing the UN,” he says. “But some people would say we’re a new form of multilateral organisation.” Is the foundation too ubiquitous? He smiles: “There are many people who want us to be much more involved than we want.”

Since Raikes joined the foundation in 2008, it has nevertheless broadened its activities. “Today we focus in on 25 key areas,” he says, then starts ticking them off on his strong fingers: “Eradicate polio. Reduce the burden of HIV, tuberculosis, diarrhoea, pneumonia . . .” Why not concentrate on fewer of these huge tasks? “You might say it’s a little bit of a business way of doing things. There are limits to the amount of money we could invest in any given area.” The foundation has so much money, it worries about saturating particular areas of need with grants and so achieving diminishing returns. Instead, says Raikes, “We think dollars-per-Daly in a big way.”

Daly is an acronym for disability-adjusted life year, an increasingly common term in international aid and global health circles, which measures the number of years of healthy life lost to either severe illness or disability or premature death in a given population. The idea that suffering and its alleviation can be measured with some precision is characteristic of the foundation’s technocratic, optimistic thinking.

The charity also seeks to maximise its impact though partnerships. It does not, for example, conduct medical research or distribute vaccines itself; instead it gives grants to those it considers the best specialists: “We think of ourselves as catalytic philanthropists,” says Raikes. He confirms the widely held view – sometimes meant as a criticism – that the health solutions the foundation favours are usually technical: “The foundation is really oriented towards the science and technology way of thinking. We’re not really the organisation that’s involved in bed-nets for malaria. We’re much more involved in finding a vaccine.”

The foundation’s health strategy is undergoing an internal review led by Girindre Beeharry, a pin-sharp youngish man from Mauritius who studied economics at the Sorbonne and Oxford. “The iconic story we all tell about the foundation,” he says, “is, if you had been in polio [medicine] 50 years ago, and your only instrument [to combat it] had been the iron lung, the orthodox approach would have been, ‘How can we distribute iron lungs to Africa?’ Or you could have spent some of your dollars on developing a polio vaccine – which is how we think.”

Ignacio Mas, another fast-talking foundation man who did his economics at Harvard and specialises in financial services for the poor, adds: “If you have this mindset of finding big solutions for big problems, that means technology, in practical terms. Because that is really the only thing that can transform.”

Aware of how much they have already changed the world through their businesses, computer tycoons can turn into impatient broader reformers. Google co-founder Sergey Brin is currently funding an attempt to revolutionise the search for a cure for Parkinson’s disease. Gates himself grew up in a charity-conscious environment: his mother Mary, a teacher, and his father William H Gates Sr, a well-connected Seattle lawyer, were both active in United Way, the international community service organisation. The Gates family were prosperous, and lived in the hushed and idyllic suburb of Laurelhurst, but Seattle is an outward-looking, conscientious place: in the 1980s Mary led a successful campaign to persuade the local university to withdraw its investments from apartheid South Africa.

By the early 90s, Bill Gates had started giving money to local schools and charities. But the donations were small compared to the billions he was earning, and he was too focused on Microsoft to pay much attention to the growing number of begging letters that his wealth and fame attracted. His parents, privately, and Seattle journalists, publicly, began to suggest that he should be more civic-minded. Then in 1995 he published The Road Ahead, a book he had co-written about the future of computing. Its sometimes bland corporate prose, Microsoft’s domineering reputation and Gates’ then unloved public persona meant that it received mixed reviews. Yet, read now, with the subsequent establishment of the foundation in mind, the book contains striking digressions about the world’s “sociological problems” and “the gap between the have and have-not nations”. There is a sense of Gates becoming curious about the world’s non-software needs and how he might help address them.

In 1994 he and his father had set up the William H Gates Foundation. Gates Sr ran it from his basement. Gates Jr wrote the cheques. The causes he backed were broader than before: birth control and reproductive health. As the foundation expanded, he and Melinda, whom he had met at Microsoft, both found themselves becoming more and more interested in the wider world. “I started to learn about poor countries and health, and got drawn in,” Gates told students at Berkeley during a speaking tour this spring. “I saw the childhood death statistics. I said, ‘Boy, is this terrible!'”

Gates has a tendency to talk about the horrors and injustices of the developing world just as he talks about the computer business: in blunt, jerky sentences, his nasal voice flat or leaping, his manner without much natural warmth or charm. He sounds like a clever man in a hurry thinking out loud – which is exactly what he is. Starting in the late 90s, he began to hungrily chew through the expert literature on global disease and nutrition and poverty. “He is a giant sponge,” says an epidemiologist who specialises in HIV. “I had dinner with him a couple of weeks ago. The man is extraordinary. I’ve been in the field 15 years, and his grasp of the technical details is just astounding. His weird brain allows him to ask questions.”

In 1999 the William H Gates Foundation and a separate charity Bill Gates had established to improve computer access in American libraries were combined into the Bill & Melinda Gates Foundation. As the couple grew richer through Microsoft, so they started making intermittent donations to a trust (from 2006 known as the Bill & Melinda Gates Foundation Asset Trust), which invested the accumulating assets. Those in turn were donated to the foundation. “In the early days, it was crazy,” says Katharine Kreiss, who joined from the American foreign service in 2002 and is refreshingly less on-message than more recent recruits. “There were so few people. I was one of 17 in total covering global health. By law in the US, as a charity you have to spend 5% of your endowment [annually], so you’re always trying to meet this number. When I started, we gave out about $1.5bn, the same as my department had when I was in the government, where I think we had a staff of 4,000! When I came into the foundation, I had 172 grants I was working on. There weren’t the people to do the rigour. We have so changed since. Now I have eight grants and I’m overwhelmed. I’m working on them in a much more detailed way.”

Gates is also much more involved. Since 2008 he and Melinda have begun regularly visiting the foreign projects it supports. “About 18 to 24 months in advance, they’re thinking about what trips they might go on,” says Kreiss. “Then they winnow down the options. We send them briefing notes. It’s really like working with a high-level principal in the government. If it’s your project, you will probably do an advance trip or two. Bill and Melinda will send their own advance team to look at logistics.” Then, sometimes accompanied by one or two carefully chosen journalists, the world’s second richest couple will visit homes or clinics in some of the world’s most blighted regions. “I’ve never actually been on a trip with Bill and Melinda,” says Kreiss. “But there are many questions. I’ve heard it’s just nonstop questions. There’s no downtime. Not a minute. It’s not a vacation.”

When they are back in Seattle, where they still live, Bill and Melinda have the use of offices at the foundation on a secluded top-floor corridor, along with Raikes and Gates Sr. This part of the building is slightly plusher – there are lights concealed in pillars and one corridor wall is an expensive-looking gold colour – but it is hardly palatial. Bill Gates’s status is denoted by something subtler: the sudden care with which foundation staff from Raikes downwards start choosing their words when the subject of Gates and his wife comes up. “The foundation is their vision, their mission,” says Kreiss. Roy Steiner, the foundation’s deputy director for agriculture (Harvard, ex-management consultant), tells me: “Bill has just recently spent a night in an Indian village. He slept in a hut in a village. How many chairs of philanthropic organisations have done that? But he’s a business guy – he wants to understand the customer.”

Outsiders who work with the foundation are sometimes less enthusiastic about his role. “Everyone in that organisation spends their whole time second-guessing what Bill will say,” says one. “They’ve got very smart people, but they’re always waiting for Bill.” According to the foundation, Gates and his wife “review” only its grants that exceed $50m, but Bill Gates’s influence can also be felt in much smaller foundation matters. Recently, an academic paper covering an area in which the charity is highly active, written by someone Gates knew quite well, was held back from him by foundation staff. “We can’t show it to him,” the author of the paper was told. “We think he won’t like it. The problem is the title of the paper. It includes a word Bill is allergic to.”

Yet sometimes, the author continues, Gates is more open-minded than his subordinates anticipate: “If you can capture his imagination, he will listen to any idea. He’s willing to say, ‘Let’s look at this.'” This year, alongside the foundation’s slick official website, a quirkier and more personal one began appearing called the Gates Notes, with sections called “What I’m Thinking About”, “What I’m Learning” and “My Travels”, and musings and recommendations on green technology, the financial crisis and the computer business as well as on the foundation’s existing activities. There is a sense of Gates, still only 54 and liberated from his round-the-clock Microsoft duties, constantly roaming beyond his charity’s already vast boundaries. The internet, the modern power of celebrity, and the ease of travel to virtually anywhere in the world enjoyed by the super-rich, has made it possible for the more thoughtful, socially conscious of them – such as Gates and the financier George Soros – to become autodidacts and philosopher-kings more potent even than the last generation of famous philanthropists, such as Andrew Carnegie and John D Rockefeller.

Last May, Gates, Soros, Buffett and David Rockefeller Jr, Rockefeller’s great-grandson, held a long private meeting in New York, not far from the UN, along with an assortment of media potentates such as Ted Turner, Oprah Winfrey and Michael Bloomberg. It was reported that Gates had been involved in summoning them all together; and that the Good Club, as it supposedly called itself, discussed the world’s economic, environmental and health problems, the dangers of over-population, and how rich people could better help poor people. The Sunday Times quoted an unnamed participant at the meeting, who said that without anything “as crude as a vote” the gathering had agreed that the world’s problems “need big-brain answers . . . independent of government”.

For the internet’s many Gates-watchers and conspiracy-spotters, it was all irresistibly sinister. Last month an apparently more benign explanation appeared. A friend of Gates and Buffett, Carol Loomis, wrote in the tycoon-watchers’ magazine Fortune that the gathering had been part of a behind-the-scenes campaign by the two men and Melinda Gates, which was now ready to go public, to persuade the rest of America’s billionaires to pledge at least 50% of their wealth to charity.

Like the Gates foundation, the initiative seems laudable and refreshing in many ways – especially given the discarding of any sense of social responsibility by so many of the rich in recent decades. Several of America’s wealthiest families have already signed the pledge. And yet, some authorities on philanthropy fear the consequences of this giving boom, and dislike the faint air of playing god that hangs over its creations such as the Gates foundation. Edwards says: “The world isn’t a giant experiment. The foundation affects real people in real places. Why should Bill decide which sort of vaccines get developed? “If you read the early reports of the Rockefeller and Carnegie foundations,” Edwards goes on, “those organisations have almost exactly the same character as the Gates foundation: top-down, technocratic, applying the language of engineering to social problems.” Edwards has worked in the charity sector since 1978, through good times and bad, and he also warns: “You can have boom and bust in this kind of ‘philanthrocapitalism’ as in capitalism itself.” Put crudely, the super-rich need to stay super-rich for their charitable enterprises to function.

The value of the Gates foundation’s endowment fell by a fifth during the 2008 banking crisis, although Raikes says the foundation did not cut its grant-making during the downturn, and its finances have recovered since. The ethical basis of the foundation’s finances has also been questioned. In 2007 an extensive investigation by the Los Angeles Times found that the charity, via its trust, invests in “companies that contribute to the human suffering in health, housing and social welfare that the foundation is trying to alleviate”. The foundation did not challenge the thrust of the articles, which included allegations that it invested in an oil company responsible for causing health problems by burning off its unwanted gas, in an African country in which the foundation was active in trying to improve the population’s health. But the charity decided after a brief review not to change its investment policy. Raikes’s predecessor Patty Stonesifer wrote to the newspaper: “The stories you told of people who are suffering touched us all. But it is naive to suggest that an individual stockholder can stop that suffering. Changes in our investment practices would have little or no impact on these issues.”

The Bill & Melinda Gates Foundation Asset Trust has always refused to invest in tobacco firms; otherwise, the outside investment managers the trust employs are instructed to seek the maximum return on its endowment, so that the foundation can be as generous as possible. It is a moral trade-off; but then uncomfortable compromises, like unequal power relationships, run through most charitable work. Many of the Gates foundation’s critics concede that the organisation is, as Edwards puts it, “closer to the best than the worst” on the spectrum of private charitable foundations: more expertly staffed, more focused on the problems where charity is most needed, more professional – there have so far been no obviously disastrous foundation-funded projects – and more prepared to change as it grows.

Raikes’s desire for fiercer internal debates at the foundation may be an acknowledgement that Gates needs to be challenged more. And Gates may want to be challenged more: according to Beeharry, among Gates’s current reading is a 2005 group biography of president Abraham Lincoln’s inner circle, Team of Rivals by Doris Kearns Goodwin: “Bill think it’s the best book ever written. It’s about how you embrace dissent as a leader.” Lincoln’s “genius”, writes Goodwin, was “to form friendships with men who had previously opposed him; to repair injured feelings; to assume responsibility for the failures of subordinates; to share credit with ease; and to learn from mistakes.” Given his driven decades at Microsoft, it may be hard to imagine Gates being interested in such softer qualities; but then it was hard not so long ago to imagine him giving most of his money away.

Next year the foundation is scheduled to move into new premises. Instead of the present hidden-away headquarters, and two even blander buildings it uses a mile away – staff have to shuttle between them all by minibus – the foundation will occupy a much showier hilltop “campus” in central Seattle, all dark glass and golden stone, with office blocks like ocean liners, space for at least twice the current staff, and a visitor centre the size of a small supermarket for the public to learn about the foundation’s good works. On the windows of the unfinished visitor centre, there are quotes from selected thinkers. One is from the famous American anthropologist Margaret Mead: “Never doubt that a small group of thoughtful, committed individuals can change the world; indeed, it’s the only thing that ever has.”

The way Gates and his elite staff have chosen to try to do so is by running their charity as a kind of business. Edwards calls this approach – increasingly popular at private foundations funded by business-people – philanthrocapitalism; others call it “venture philanthropy”. Steiner explains: “Sitting here in Seattle, we’re not going to solve Africa’s problems. Africans are going to solve Africa’s problems. We’ve got to find the Africans.” Often, this means the foundation mounting competitions for grant applications, and giving money to the winners, which usually means the most “pioneering” (Steiner’s word) and those that promise to fulfil a need not met by other charities.

Foundation staff describe this process, and indeed all their work, in business-school language: achieving “leverage”, building the foundation “brand”, serving “markets” and “customers”. Or they use the language of management consultancy and computing: “Bill is about numbers,” says Steiner. “He wants to see the data. He values data more than ideology.” Like all the foundation staff I meet, Steiner is personable and thoughtful, sitting tieless in his modest office. And like the others, he is both intensely idealistic and close to disdainful about the older, less business-orientated charity models. In his field of agricultural aid, he says, “We need a lot of smarter ways of doing things. We can’t do things the same old way . . . The people who’ve been in the field for so long [for other charities] don’t embrace how much transformation can happen. You walk in there as clear-eyed as you can . . . And [you] are basically optimistic that people want to improve their lives. You enable them with technology and knowledge, and great and wonderful things can happen.”

He looks into the middle distance as the soft Seattle summer drizzle hangs outside his window. With his strong gaze and open-necked striped shirt, his shelves crammed with agriculture books and box files, his line of jars filled with brightly coloured seeds on a table against the wall, and his slightly impatient body language, as if just about to set off on another of his frequent trips to Africa or Asia, he seems a little like a high-minded Victorian explorer.

But Steiner and his colleagues are probably more aware of their limitations. There is a problem with the Gates foundation that its staff, for the time being, appear to grasp better than its critics. For all the charity’s resources and connections, for all the attendant risks of over-confidence and over-mightiness, on the ground in Africa or Asia the foundation’s immense-sounding grants are a miniscule fraction of what is required to create a fairer world. “In agriculture,” says Steiner, “the problem’s this big” – he throws out his long arms – “and our resources are this big” – he pinches an inch of air between a finger and thumb. With an ex-management consultant’s preciseness, he concludes: “We estimate we can probably be 3-5% of the overall solution.” Then he abruptly gets up from the meeting table, turns away from me without a goodbye handshake, and goes back to his desk and computer. At the Gates foundation, they are very keen that meetings do not overrun. There is much work to be done.

WEALTHIEST MONARCHS
http://en.rian.ru/photolents/20100713/159795483.html
“Forbes unveiled a list of the world’s wealthiest monarchs. 82-year-old Thai King Phumiphon Adunyadet tops the list with $30 billion in wealth. He is not only the wealthiest but also the “longest reigning.” He has sat on the Thai throne since 1946.”


The crowd at the inaugural event added up to a list that would make any charity – or any conspiracy theorist – swoon. Left to right: Bill Gates, Oprah Winfrey, Warren Buffett, Eli and Edythe Broad, Ted Turner, David Rockefeller, Chuck Feeney, Michael Bloomberg, George Soros, Julian Robertson, John and Tashia Morgridge, Pete Peterson

RALLYING BILLIONAIRES to PLEDGE 50% of NET WORTH
http://money.cnn.com/magazines/fortune/fortune_archive/1986/09/29/68098/index.htm
http://money.cnn.com/magazines/fortune/fortune_archive/2006/07/10/8380864/index.htm
http://www.cnnmoney.com/2010/06/15/news/newsmakers/Warren_Buffett_Pledge_Letter.fortune/index.htm
http://features.blogs.fortune.cnn.com/2010/06/16/gates-buffett-600-billion-dollar-philanthropy-challenge/
The $600 billion challenge
by Carol J. Loomis / June 16, 2010

Just over a year ago, in May 2009, word leaked to the press that the two richest men in America, Bill Gates and Warren Buffett, had organized and presided over a confidential dinner meeting of billionaires in New York City. David Rockefeller was said to have been a host, Mayor Michael Bloomberg and Oprah Winfrey to have been among those attending, and philanthropy to have been the main subject. Pushed by the press to explain, Buffett and Gates declined. But that certainly didn’t dim the media’s interest in reaching for descriptions of the meeting: The Chronicle of Philanthropy called it “unprecedented”; both ABC News and the Houston Chronicle went for “clandestine”; a New York magazine parody gleefully imagined George Soros to have been starstruck in the presence of Oprah. One radio broadcaster painted a dark picture: “Ladies and gentlemen, there’s mischief afoot and it does not bode well for the rest of us.” No, no, rebutted the former CEO of the Bill & Melinda Gates Foundation, Patty Stonesifer, who had been at the meeting and had reluctantly emerged to combat the rumors. The event, she told the Seattle Times, was simply a group of friends and colleagues “discussing ideas” about philanthropy.

And so it was. But that discussion — to be fully described for the first time in this article — has the potential to dramatically change the philanthropic behavior of Americans, inducing them to step up the amounts they give. With that dinner meeting, Gates and Buffett started what can be called the biggest fundraising drive in history. They’d welcome donors of any kind. But their direct target is billionaires, whom the two men wish to see greatly raise the amounts they give to charities, of any and all kinds. That wish was not mathematically framed at the time of the New York meeting. But as two other U.S. dinners were held (though not leaked), Buffett and Gates and his wife, Melinda, set the goal: They are driving to get the super-rich, starting with the Forbes list of the 400 wealthiest Americans, to pledge — literally pledge — at least 50% of their net worth to charity during their lifetimes or at death.

Without a doubt, that plan could create a colossal jump in the dollars going to philanthropy, though of what size is a puzzle we’ll get to. To begin with, a word about this article you are reading. It is the first public disclosure of what Buffett and Melinda and Bill Gates are trying to do. Over the past couple of months Fortune has interviewed the three principals as the project has unfolded, as well as a group of billionaires who have signed up to add their names to the Gates/Buffett campaign. In a sense this article is also an echo of two other Fortune stories, both featuring Buffett on the cover. The first, published in 1986, was “Should you leave it all to the children?” To that query, Buffett emphatically said no. The second article, “Warren Buffett gives it away,” which appeared in 2006, disclosed Buffett’s intention to gradually give away his Berkshire Hathaway (BRK.A) fortune to five foundations, chief among them the world’s largest, the Bill & Melinda Gates Foundation. (For Buffett’s thinking on the disposition of his wealth, see “My philanthropic pledge.”)

Since then, in four years of contributions, Buffett has given the foundation $6.4 billion, not counting the 2010 gift, to be made this summer. The foundation in turn has in that same period combined Buffett’s money and its immense gifts from the Gateses to raise its level of giving to about $3 billion a year, much of it for world health. One small example: the Medicines for Malaria Venture, heavily funded by the Gates Foundation, has worked with pharmaceutical company Novartis (NVS) to develop good-tasting malaria pills and distribute them to millions of children — the principal victims of the disease — in 24 countries. Another fact about the 2006 Buffett article is that it was written by yours truly, Carol Loomis, a senior editor-at-large of Fortune. Besides that, I am a longtime friend of Buffett’s and editor of his annual letter to Berkshire’s shareholders. Through him, my husband, John Loomis, and I have also come to know Melinda and Bill Gates socially. The Loomis team has even occasionally played bridge against Warren and Bill.

All that said, the question of what philanthropy might gain from the Gates/Buffett drive rests, at its outset, on a mystery: what the wealthiest Americans are giving now. Most of them aren’t telling, and outsiders can’t pierce the veil. For that matter, the Forbes 400 list, while a valiant try, is a best-guess estimate both as to the cast of characters and as to their net worth. (Buffett says he knows of two Berkshire shareholders who should be on the list but have been missed.) As Bill Gates sums it up, “The list is imprecise.” Those qualifiers noted, the magazine stated the 2009 net worth of the Forbes 400 to be around $1.2 trillion. So if those 400 were to give 50% of that net worth away during their lifetimes or at death, that would be $600 billion. You can think of that colossal amount as what the Buffett and Gates team is stalking — at a minimum.

Leaving aside the Forbes 400 and looking simply at Internal Revenue Service data for both annual giving and estate taxes, we can piece together a picture of how far the very rich might be from a figure like that $600 billion. Start with an admirable fact about Americans as a whole: The U.S. outdoes all other countries in philanthropic generosity, annually giving in the neighborhood of $300 billion. Some of that gets reported as charitable deductions on the tax filings made by individuals. But taxpayers at low income levels don’t tend to itemize, taking the standard deduction instead. At higher income levels, charitable gift data begin to mean something. To take one example for 2007 (the latest data available), the 18,394 individual taxpayers having adjusted gross income of $10 million or more reported charitable gifts equal to about $32.8 billion, or 5.84% of their $562 billion in income.

And billionaires? Here, the best picture — though it’s flawed — emerges from statistics that the IRS has for almost two decades been releasing on each year’s 400 largest individual taxpayers, a changing universe obviously. The decision of the government to track this particular number of citizens may or may not have been spurred by the annual publication of the Forbes list. In any case, the two 400 batches, though surely overlapping, cannot be identical — for one reason because the IRS data deal with income, not net worth. The IRS facts for 2007 show that the 400 biggest taxpayers had a total adjusted income of $138 billion, and just over $11 billion was taken as a charitable deduction, a proportion of about 8%. The amount deducted, we need quickly to add, must be adjusted upward because it would have been limited for certain gifts, among them very large ones such as Buffett’s $1.8 billion donation that year to the Gates Foundation. Even so, it is hard to imagine the $11 billion rising, by any means, to more than $15 billion. If we accept $15 billion as a reasonable estimate, that would mean that the 400 biggest taxpayers gave 11% of their income to charity — just a bit more than tithing.

Is it possible that annual giving misses the bigger picture? One could imagine that the very rich build their net worth during their lifetimes and then put large charitable bequests into their wills. Estate tax data, unfortunately, make hash of that scenario, as 2008 statistics show. The number of taxpayers making estate tax filings that year was 38,000, and these filers had gross estates totaling $229 billion. Four-fifths of those taxpayers made no charitable bequests at death. The 7,214 who did make bequests gave $28 billion. And that’s only 12% of the $229 billion gross estate value posted by the entire 38,000. All told, the data suggest that there is a huge gap between what the very rich are giving now and what the Gateses and Buffett would like to suggest is appropriate — that 50%, or better, of net worth. The question is how many people of wealth will buy their argument.

The seminal event in this campaign was that billionaires’ gathering in May 2009 — the First Supper, if you will. The Gateses credit Buffett with the basic idea: that a small group of dedicated philanthropists be somehow assembled to discuss strategies for spreading the gospel to others. The Gateses proceeded to arrange the event. Bill Gates says, with a grin, “If you had to depend on Warren to organize this dinner, it might never have happened.” In his office, meanwhile, Buffett scrawled out a name for a new file, “Great Givers.” The first item filed was a copy of a March 4 letter that Buffett and Gates sent to the patriarch of philanthropy, David Rockefeller, to ask that he host the meeting. Rockefeller, now 95, told Fortune that the request was “a surprise but a pleasure.” As a site for the event, he picked the elegant and very private President’s House at Rockefeller University in New York City, whose board he has been on for 70 years. He also tapped his son David Jr., 68, to go with him to the meeting.

The event was scheduled for 3 p.m. on Tuesday, May 5 — a day urgently desired by Bill Gates, who wanted to fit the meeting into a short U.S. break he’d be taking from a three-month European stay with his family. Because Melinda elected to remain in Europe with their three children, she did not attend the first dinner, but lined herself up for any that followed. (The Gateses have considered this campaign to be a personal matter for them, not in any way a project of the Gates Foundation.) Melinda also insisted from the start that both husbands and wives be invited to the dinners, sure that both would be important to any discussion. Her reasoning: “Even if he’s the one that made the money, she’s going to be a real gatekeeper. And she’s got to go along with any philanthropic plan, because it affects her and it affects their kids.”

The letter of invitation, dated March 24, went to more people than could come. But the hosts and guests who arrived on May 5 certainly had enough economic tickets to be there: a combined net worth of maybe $130 billion and a serious history of having depleted that amount by giving money to charity. Leaving aside the semi-observers, Patty Stonesifer and David Rockefeller Jr., there were 14 people present, starting with the senior Rockefeller, Buffett, and Gates. The local guests included Mayor Bloomberg; three Wall Streeters, “Pete” Peterson, Julian Robertson, and George Soros; and Charles “Chuck” Feeney, who made his money as a major owner of Duty Free Shoppers and has so far given away $5 billion through his foundations, called Atlantic Philanthropies. When Feeney was dropped from the Forbes 400 in 1997, the magazine explained his departure in words not often hauled out for use: “Gave bulk of holdings to charity.” The out-of-towners included Oprah, Ted Turner, and two California couples, Los Angeles philanthropists Eli and Edythe Broad, and Silicon Valley’s John and Tashia Morgridge, whose fortune came from Cisco Systems (CSCO). Both the Broads and the Morgridges had equivocated over whether to accept the invitation, regarding the trip as an inconvenience. But there were the signatures at the bottom of the letter — from left to right, Rockefeller, Gates, Buffett. “Impressive,” Eli Broad thought.

So on the appointed day the Broads found themselves seated with everyone else around a big conference table, wondering what came next. They mainly got that message from Buffett, whose quick sense of humor left him playing, says David Rockefeller Jr., “the enlivener role.” He remembers Buffett as keeping the event from being “too somber” and “too self-congratulatory.” Buffett set the ball rolling by talking about philanthropy, describing the meeting as “exploratory,” and then asking each person, going around the table, to describe his or her philosophy of giving and how it had evolved. The result was 12 stories, each taking around 15 minutes, for a total of nearly three hours. But most participants whom Fortune has talked to found the stories riveting, even when they were familiar. David Rockefeller Sr. described learning philanthropy at the knees of his father and grandfather. Ted Turner repeated the oft-told tale of how he had made a spur-of-the-moment decision to give $1 billion to the United Nations. Some people talked about the emotional difficulty of making the leap from small giving to large. Others worried that their robust philanthropy might alienate their children. (Later, recalling the meeting, Buffett laughed that it had made him feel like a psychiatrist.)

The charitable causes discussed in those stories covered the spectrum: education, again and again; culture; hospitals and health; the environment; public policy; the poor generally. Bill Gates, who found the whole event “amazing,” regarded the range of causes as admirable: “The diversity of American giving,” he says, “is part of its beauty.” At the dinner that followed, the conversation turned specifically to how giving by the rich could be increased. The ideas advanced included national recognition of great philanthropists (presidential medals, for example), or a film, or a philanthropy guidebook, or a conference of the rich. There was no talk of a pledge. Of the dinner, the junior Rockefeller says, “The most important thing my dad and I came away with was that increasing giving would take work by many in that room — delicate, and probably prolonged, one-on-one work.”

The dinner, of course, had its unexpected coda: the leak. The leaker, with little doubt, was Chuck Feeney, and the leakee was his longtime friend Niall O’Dowd, the New York publisher behind the grandly unknown IrishCentral.com. (Fortune did not succeed in reaching Feeney; of our account, O’Dowd said, “I can’t confirm that.”) On May 18, two weeks after the meeting, IrishCentral.com posted an article of 14 short paragraphs headlined “Secret meeting of world’s richest people held in New York.”With that, the fame of the website spiked, as the rest of the press picked up the news and ran with it. The IrishCentral article exhibited some confusion about which Rockefeller starred at the dinner, or was even there, but otherwise provided the names of all the participants — with the notable exception of Feeney, who apparently didn’t realize he looked more conspicuous to the others by being left out. Feeney, however, appears to have been quoted anonymously in the piece, once as an “attendee” who thought Gates the most impressive speaker of the day, Turner the most outspoken (surprise!), and Buffett the most insistent on his agenda for change. In a second instance, Feeney was a good bet to have been the awed “participant” who extolled his fellow guests: “They were all there, the great and the good.”

The main effect of the leak was to place a “cone of silence” — that’s a description from the Gates camp — over everything that transpired in the giving campaign over the next year. But there was certainly action, including a few small dinners abroad. Bill and Melinda Gates hosted a dinner in London, and Bill held a few others in India and China. Raising the philanthropic bar in foreign countries is a special challenge: Dynastic wealth is widely taken for granted; tax laws do not commonly allow deductions for gifts to charity; a paucity of institutions and organizations ready for gifts makes knowing whom to give to just not that obvious. Nonetheless, were the Gateses and Buffett to succeed in their campaign in the U.S., they would probably take it overseas. But as last summer and fall progressed, Buffett and the Gateses did not even have a plan for how the campaign was to be structured. In this vacuum the idea of a pledge took hold and gained strength. It helped that more dinners were to be held. At them, says Melinda, the three principals would “float the pledge idea to see if it would fly.”

There then occurred the second and third U.S. dinners, most of whose guests have not been publicly outed because of the cone of silence. Secrecy, a Gates spokesman says, is partly a bow to moguls who have been exposed to the philanthropic sales pitch but would be embarrassed to have been identified in case they chose not to step up to the challenge. In any event, the names of some of the participants are known. The noted philanthropists at the second dinner, held at the New York Public Library in November last year, included New York investment banker Kenneth Langone and his wife, Elaine, and H.F. “Gerry” Lenfest and his wife, Marguerite, from Philadelphia. Lenfest got rich when he sold his Pennsylvania cable television company to Comcast (CMCSA) in 2000, netting $1.2 billion for himself and his family. He promptly vowed that he would give most of it to charity in his lifetime. Now 80, he has so far meted out $800 million, a good part of it to schools he attended (Columbia Law School, Washington and Lee, Mercersburg Academy).

Lenfest’s favorite moment at the November dinner was Buffett’s declaration that Marguerite Lenfest had put forward the best idea of the evening when she said that the rich should sit down, decide how much money they and their progeny need, and figure out what to do with the rest of it. Says Lenfest: “The value of Buffett and Gates is that they’re going to make people sit down and think these things through.” The Third Supper, held in December in Menlo Park, Calif., at the Rosewood Sand Hill hotel, is known as the Bay Area dinner but drew from all over the state, including its entertainment precincts. In attendance were some veteran philanthropists, including venture capitalist John Doerr of Kleiner Perkins and his wife, Ann, and the Morgridges, who had selected the meeting site. This dinner was somewhat different from the other two, says Melinda Gates, because a few people there were relatively new to huge wealth and were still forming their opinions about giving. Talk went on for hours, so long that the beef being prepared for dinner became somewhat overcooked. This is reported to have dismayed Rosewood’s management, which may have noticed that the crowd in the Dogwood room was worth having back.

The dinner also brought out some of the fears that people have about philanthropy. What does going public with big gifts do to the peace in your life? Won’t pleas from charities be unending? How do you deal with giving internationally, which too often seems like throwing money down a hole? These are valid concerns, say the Gateses, the kind raised by people who want to feel as smart about giving as they were about making their money. But the questions didn’t stop the two from plugging the satisfactions of philanthropy. At those dinners, says Bill, “no one ever said to me, ‘We gave more than we should have.'” Nor did the idea of a pledge get shot down at those dinners. It “floated” nicely, in other words. So as 2010 arrived, a pledge became the strategy. The idea of aiming for a 50% slice of net worth was pragmatically pulled from the sky, being less than the principals would have liked to ask for but perhaps as much, at least initially, as they can get. The pledges, meanwhile, were never envisioned as legal contracts but rather moral obligations to be both memorialized in writing and taken very seriously. They are in fact to be posted on a new website, givingpledge.org, whose construction Melinda Gates oversaw. The 99% pledge that Buffett is making is likely to be the No. 1 document on the website, if he is not beaten out by his Seattle friends.

Enthusiastic about leading the search for Great Givers, the Gateses and Buffett nonetheless have wanted a phalanx of strong supporters. Already committed to at least a 50% pledge are the Broads, the Doerrs, the Lenfests, and the Morgridges. With the online publication of this article, moreover, the three principals will send e-mails and make calls to other billionaires judged likely prospects. A bit later, all of the pledgers may join in sending a letter to a large number of other billionaires, asking them to join the growing crowd. In the fall there may even be a Great Givers conference. The definition of success in this venture may take years to figure out, but each of the principals has reflections about the matter. Buffett knows that everyone rich has thought about what to do with his or her money: “They may not have reached a decision about that, but they have for sure thought about it. The pledge that we’re asking them to make will put them to thinking about the whole issue again.” He warns, most of all, against the rich delaying the decision of what to do with their money: “If they wait until they’re making a final will in their nineties, the chance of their brainpower and willpower being better than they are today is nil.”

Bill Gates regards the 50% as a “low bar” encouraging high participation. People, he thinks, may be drawn in by that proportion and then surprise themselves and find they are giving at higher levels. “This is about moving to a different realm,” he thinks, and it will take time for everything to sort out. Melinda Gates separates the near-term from the far. There are so many reasons that rich people don’t give, she says: They don’t want to plan for their death; they worry that they’ll need to hire someone to help with the work; they just don’t want to take the time to think about it all. So the initial goal of the pledge campaign, she thinks, must be simply to cut through that and get them moving in the direction of giving. And eventually? “Three to five years down the road, we need to have a significant number of billionaires signed up. That would be success.” Society cannot help but be a beneficiary here, by virtue of at least some dollars and perhaps many. Nor will it be just the very rich who will perhaps bend their minds to what a pledge of this kind means. It could also be others with less to give but suddenly more reason to think about the rightness of what they do.

‘EXTEND and PRETEND’
http://online.wsj.com/article/SB10001424052748704764404575286882690834088.html
To Fix Sour Property Deals, Lenders ‘Extend and Pretend’
By CARRICK MOLLENKAMP And LINGLING WEI / JULY 7, 2010

Some banks have a special technique for dealing with business borrowers who can’t repay loans coming due: Give them more time, hoping things improve and they can repay later. Banks call it a wise strategy. Skeptics call it “extend and pretend.” Banks are applying it, in particular, to commercial real-estate lending, where, during the boom, optimistic borrowers got in over their heads to the tune of tens of billions of dollars. A big push by banks in recent months to modify such loans—by stretching out maturities or allowing below-market interest rates—has slowed a spike in defaults. It also has helped preserve banks’ capital, by keeping some dicey loans classified as “performing” and thus minimizing the amount of cash banks must set aside in reserves for future losses.

Restructurings of nonresidential loans stood at $23.9 billion at the end of the first quarter, more than three times the level a year earlier and seven times the level two years earlier. While not all were for commercial real estate, the total makes clear that large numbers of commercial-property borrowers got some leeway. But the practice is creating uncertainties about the health of both the commercial-property market and some banks. The concern is that rampant modification of souring loans masks the true scope of the commercial property market weakness, as well as the damage ultimately in store for bank balance sheets.

In Atlanta, Georgian Bank lent $13.5 million to a company in late 2007, some of it to buy land for a 53-story luxury Mandarin Oriental hotel and condo development. The loan came due in November 2008, but the bank extended its maturity date by a year. The bank extended it again to May 2010, with an option for a further extension to November 2010, according to court documents.

Georgia’s banking regulator shut down the bank last September. A subsequent U.S. regulatory review cited “lax” loan underwriting and “an aggressive growth strategy…that coincided with declining economic conditions in the Atlanta metropolitan area.” Some of Georgian Bank’s assets were assumed by First Citizens Bank and Trust Co. of Columbia, S.C., which began foreclosure proceedings on the still-unbuilt luxury development. The borrowers contested the move, and settlement talks are in progress.

Also in Atlanta, Bank of America Corp. has extended a loan twice for a high-end shopping and residential project. Three years after a developer launched the Streets of Buckhead project as a European-style shopping district, all there is to show for it is a covey of silent cranes and a fence. The developer, Ben Carter, says he is in final negotiations for an investor to come in and inject $200 million into the languishing development.

Regulators helped spur banks’ recent approach to commercial real estate by crafting new guidelines last October. They gave banks a variety of ways to restructure loans. And they allowed banks to record loans still operating under the original terms as “performing” even if the value of the underlying property had fallen below the loan amount—which is an ominous sign for ultimate repayment. Although regulators say banks shouldn’t take the guidelines as a signal to cut borrowers more slack, it appears some did.

Banks hold some $176 billion of souring commercial-real-estate loans, according to an estimate by research firm Foresight Analytics. About two-thirds of bank commercial real-estate loans maturing between now and 2014 are underwater, meaning the property is worth less than the loan on it, Foresight data show. U.S. commercial-real-estate values remain 42% below their October 2007 peak and only slightly above the low they hit in October 2009, according to Moody’s Investors Service. In the first quarter, 9.1% of commercial-property loans held by banks were delinquent, compared with 7% a year earlier and just 1.5% in the first quarter of 2007, according to Foresight.

Holding off on foreclosing is often good business, says Mark Tenhundfeld, senior vice president at the American Bankers Association. “It can be better for a bank to extend a loan and increase the chance that the bank will be repaid in full rather than call the loan due now and dump more property on an already-depressed market,” he says.

But continuing to extend loans and otherwise modify them, rather than foreclosing, amounts to a bet that the economy will rebound enough to enable clients to find new demand for the plethora of offices, hotels, condos and other property on which they borrowed. If it doesn’t work out this way, the banks will end up having to write off the loans anyway. At that point, if they haven’t been setting aside sufficient cash all along for potential losses on such loans, the banks will face a hit to their earnings.

Banks’ reluctance to bite the bullet on some deteriorating commercial real estate can have economic repercussions. The readiness to stretch out loans puts a floor under commercial real estate and keeps it from hitting bottom, which may be a precondition for a robust revival. More broadly, the failure to get the loans off banks’ books tends to deter new lending to others. It’s a pattern somewhat reminiscent, although on a lesser scale, of the way Japanese banks’ failure to write off souring loans in the 1990s contributed to years of stagnation.

It’s a Catch-22 for banks. As long as some of their capital is tied up in real-estate loans that are struggling—and as the banks see a pipeline of still-more sour real-estate debt that will mature soon—their lending is likely to remain constricted. But to wipe the slate clean by writing off many more loans would mean an even bigger hit to their capital. “It does not take much of a write-down to wipe out capital,” says Christopher Marinac, managing principal at FIG Partners LLC, a bank research and investment firm. Federal bank regulators tackled the issues in October with a 33-page set of guidelines. Bank regulators have said they were concerned about commercial-property losses and debts coming due on commercial property.

Another problem they sought to resolve was that banks and their examiners weren’t always on the same page. In some cases banks weren’t recognizing loan problems, while in other cases, tough bank examiners were forcing banks to downgrade loans the bankers believed were still good. The guidance was intended “to promote both prudent commercial real-estate loan workouts by banks and balanced and consistent reviews of these loans by the supervisory agencies,” said Elizabeth Duke, a Federal Reserve governor, in a March speech. The guidelines came from the Federal Financial Institutions Examination Council, which includes the Fed, the Federal Deposit Insurance Corp. and the Comptroller of the Currency.

Although one goal was greater consistency in the treatment of commercial real-estate loans, in practice, the guidelines appear to have fed confusion in the markets about how banks are dealing with commercial real-estate debt. “I just don’t believe that the standard is being applied consistently across the industry,” says Edward Wehmer, chief executive of Wintrust Financial Corp. in Lake Forest, Ill. In a May conference call with 1,400 bank executives, regulators sought to clear up confusion. “We don’t want banks to pretend and extend,” Sabeth Siddique, Federal Reserve assistant director of credit risk, said on the call. “We did hear from investors and some bankers interpreting this guidance as a form of forbearance, and let me assure you it’s not.”

Restructurings increased at some banks, like BB&T Corp. of Winston-Salem, N.C. Its total of one type of restructured commercial loan hit $969 million in recent months, the bank reported in April. That was a huge jump from six months earlier, when the figure was just $68 million. The increase was “basically a function of implementing the new regulatory guidance,” the bank’s finance chief, Daryl Bible, told investors in May. “We are working with our customers trying to keep them in the loans.”

BB&T’s report showed a significant number of cases where it was extending loan maturities and allowing interest rates not widely available in the market for loans of similar risk. Banks don’t have to disclose how terms on their loans have changed, making it hard to know whether they are setting aside enough cash for possible losses. In a large proportion of cases, modifying the terms of loans ultimately isn’t enough to save them. At the end of the first quarter, 44.5% of debt restructurings were 30 days or more delinquent or weren’t accruing interest, up from 28% the first quarter of 2008.

A case in Portland, Ore., shows how banks can keep treating a commercial loan as current, despite the difficulties of the underlying project. A client called Touchmark Living Centers Inc. in 2007 borrowed $15.9 million, in two loans, to buy land for a development. The borrower planned to retire the loans at the end of the year by obtaining construction financing to build the Touchmark Heights community for empty-nesters. Because the raw land produced no income, the lender, Umpqua Bank, had provided “interest reserves” with which the developer could cover interest payments while obtaining permits and preparing to build. The bank extended Touchmark a $350,000 interest reserve—in effect increasing what Touchmark owed by that amount.

In December 2007, the U.S. economy slipped into recession. When the loans came due that month, Touchmark didn’t pay them off. Umpqua extended the maturity to May 31, 2008. The bank also added $600,000 to the interest reserves. Though supplying interest reserves is common at the outset of a loan, when an unbuilt project can’t produce any income with which to pay debt service, replenishing interest reserves is frowned on by regulators. Asked to comment, a spokeswoman for the bank said, “Umpqua and Touchmark had determined that the project was still viable but not yet ready for development.” Touchmark said it didn’t pursue construction financing at that time because “it was not prudent to proceed with developing the property until the economy improves,” as a spokeswoman put it.

In 2008 the bank extended the loans again, to April 2009. During this time, Touchmark began paying interest on the loans out of its own pocket. Then in May 2009, Umpqua restructured the loans, lumping what was owed into one $15 million loan that required regular payments on both interest and principal. Touchmark paid down the principal a little and Umpqua set a new maturity date—May 5, 2012.

Meanwhile, the value of the land Touchmark had borrowed to purchase has been eroding. The bank says it was worth $23.5 million by the most recent independent appraisal, but that was in 2008. The county assessment and taxation department pegged the land’s value at about $20 million at the start of 2009. An appraiser for the department estimates raw-land values in the area fell by another 25% to 30% last year, Touchmark executives declined to estimate the land’s value. They said the property has retained “significant” value, partly because of its location, with a view of 11,240-foot Mount Hood. Umpqua Bank says the loan is accruing interest, and it expects the loan to be repaid.

DEFAULT
http://www.econlib.org/library/Columns/y2009/Hummeltbills.html
Why Default on U.S. Treasuries is Likely
by Jeffrey Rogers Hummel

“Buried within the October 3, 2008 bailout bill was a provision permitting the Fed to pay interest on bank reserves. Within days, the Fed implemented this new power, essentially converting bank reserves into more government debt. Now, any seigniorage that government gains from creating bank reserves will completely vanish or be greatly reduced.”

Almost everyone is aware that federal government spending in the United States is scheduled to skyrocket, primarily because of Social Security, Medicare, and Medicaid. Recent “stimulus” packages have accelerated the process. Only the naively optimistic actually believe that politicians will fully resolve this looming fiscal crisis with some judicious combination of tax hikes and program cuts. Many predict that, instead, the government will inflate its way out of this future bind, using Federal Reserve monetary expansion to fill the shortfall between outlays and receipts. But I believe, in contrast, that it is far more likely that the United States will be driven to an outright default on Treasury securities, openly reneging on the interest due on its formal debt and probably repudiating part of the principal.

To understand why, we must look at U.S. fiscal history. Economists refer to the revenue that government or its central bank generates through monetary expansion as seigniorage. Outside of America’s two hyperinflations (during the Revolution and under the Confederacy during the Civil War), seigniorage in this country peaked during World War II, when it covered nearly a quarter of the war’s cost and amounted to about 12 percent of Gross Domestic Product (GDP). By the Great Inflation of the 1970s, seigniorage was below two percent of federal expenditures or less than half a percent of GDP.1 This was partly a result of globalization, in which international competition disciplines central banks. And it also was the result of sophisticated financial systems, with fractional reserve banking, in which most of the money that people actually hold is created privately, by banks and other financial institutions, rather than by government. Consider how little of your own cash balances are in the form of government-issued Federal Reserve notes and Treasury coin, rather than in the form of privately created bank deposits and money market funds. Privately created money, even when its quantity expands, provides no income to government. Consequently, seigniorage has become a trivial source of revenue, not just in the United States, but also throughout the developed world. Only in poor countries, such as Zimbabwe, with their primitive financial sectors, does inflation remain lucrative for governments.

The current financial crisis, moreover, has reinforced the trend toward lower seigniorage. Buried within the October 3, 2008 bailout bill, which set up the Troubled Asset Relief Program (TARP), was a provision permitting the Fed to pay interest on bank reserves, something other major central banks were doing already. Within days, the Fed implemented this new power, essentially converting bank reserves into more government debt. Fiat money traditionally pays no interest and, therefore, allows the government to purchase real resources without incurring any future tax liability. Federal Reserve notes will, of course, continue to earn no interest. But now, any seigniorage that government gains from creating bank reserves will completely vanish or be greatly reduced, depending entirely on the differential between market interest rates on the remaining government debt and the interest rate on reserves. The lower is this differential, the less will be the seigniorage. Indeed, this new constraint on seigniorage becomes tighter as people replace the use of currency with bank debit cards and other forms of electronic fund transfers. In light of all these factors, even inflation well into the double digits can do little to alleviate the U.S. government’s potential bankruptcy.

What about increasing the proceeds from explicit taxes? Examine Graph 1, which depicts both federal outlays and receipts as a percent of GDP from 1940 to 2008. Two things stand out. First is the striking behavior of federal tax revenue since the Korean War. Displaying less volatility than expenditures, it has bumped up against 20 percent of GDP for well over half a century. That is quite an astonishing statistic when you think about all the changes in the tax code over the intervening years. Tax rates go up, tax rates go down, and the total bite out of the economy remains relatively constant. This suggests that 20 percent is some kind of structural-political limit for federal taxes in the United States. It also means that variations in the deficit resulted mainly from changes in spending rather than from changes in taxes. The second fact that stands out in the graph is that federal tax revenue at the height of World War II never quite reached 24 percent of GDP. That represents the all-time high in U.S. history, should even the 20-percent-of-GDP post-war barrier prove breachable.2

Compare these percentages with that of President Barack Obama’s first budget, which is slated to come in at above 28 percent of GDP. Although this spending surge is supposed to be significantly reversed when the recession is over, the administration’s own estimates have federal outlays never falling below 22 percent of GDP. And that is before the Social Security and Medicare increases really kick in. In its latest long-term budget scenarios, the Congressional Budget Office (CBO), not known for undue pessimism, projects that total federal spending will rise over the next 75 years to as much as 35 percent of GDP, not counting any interest on the accumulating debt, which critically varies with how fast tax revenues rise. However, the CBO’s highest projection for tax revenue over the same span reaches a mere 26 percent of GDP. Notice how even that “optimistic” projection assumes that Americans will put up with, on a regular peacetime basis, a higher level of federal taxation than they briefly endured during the widely perceived national emergency of the Second World War. Moreover, once you add in the interest on the growing debt because of the persistent deficits, federal expenditures in 2083, according to the CBO, could range anywhere between 44 and 75 percent of GDP.3

We all know that there is a limit to how much debt an individual or institution can pile on if future income is rigidly fixed. We have seen why federal tax revenues are probably capped between 20 and 25 percent of GDP; reliance on seigniorage is no longer a viable option; and public-choice dynamics tell us that politicians have almost no incentive to rein in Social Security, Medicare, and Medicaid. The prospects are, therefore, sobering. Although many governments around the world have experienced sovereign defaults, U.S. Treasury securities have long been considered risk-free. That may be changing already. Prominent economists have starting considering a possible Treasury default, while the business-news media and investment rating agencies have begun openly discussing a potential risk premium on the interest rate that the U.S. government pays. The CBO estimates that the total U.S. national debt will approach 100 percent of GDP within ten years, and when Japan’s national debt exceeded that level, the ratings of its government securities were downgraded.

The much (unfairly) maligned credit default swaps (CDS) in February 2009 were charging more for insurance against a default on U.S. Treasuries than for insurance against default of such major U.S. corporations as Pepsico, IBM, and McDonald’s. Because the premiums and payoffs of the CDS on U.S. Treasury securities are denominated in Euros, the annual premiums also reflect exchange-rate risk, which is probably why, with the subsequent modest decline in the dollar, CDS premiums for ten-year Treasuries fell from 100 basis points to almost 30.4 But you can make a plausible case that CDS underestimate the probability of a Treasury default since such a default could easily have far reaching financial repercussions, even hurting the counterparties providing the insurance and impinging on their ability to make good on their CDS. Surely the purchasers of the U.S. Treasury CDS have not overlooked this risk, which would be reflected in a lower annual premium for less-valuable insurance.

Predicting an ultimate Treasury default is somewhat empty unless I can also say something about its timing. The financial structure of the U.S. government currently has two nominal firewalls. The first, between Treasury debt and unfunded liabilities, is provided by the trust funds of Social Security, Medicare, and other, smaller federal insurance programs. These give investors the illusion that the shaky fiscal status of social insurance has no direct effect on the government’s formal debt. But according to the latest intermediate projections of the trustees, the Hospital Insurance (HI-Medicare Part A) trust fund will be out of money in 2017, whereas the Social Security (OASDI) trust funds will be empty by 2037.5 Although other parts of Medicare are already funded from general revenues, when HI and OASDI need to dip into general revenues, the first firewall is gone. If investors respond by requiring a risk premium on Treasuries, the unwinding could move very fast, much like the sudden collapse of the Soviet Union. Politicians will be unable to react. Obviously, this scenario is pure speculation, but I believe it offers some insight into the potential time frame.

The second financial firewall is between U.S. currency and government debt. It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government’s money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.

Admittedly, seigniorage is not the only way governments have benefited from inflation. Inflation also erodes the real value of government debt, and if the inflation is not fully anticipated, the interest the government pays will not fully compensate for the erosion. This happened during the Great Inflation of the 1970s, when investors in long-term Treasury securities earned negative real rates of return, generating for the government maybe one percent of GDP, or about twice as much implicit revenue as came from seigniorage. But today’s investors are far savvier and less likely to get caught off guard by anything less than hyperinflation. To be clear, I am not denying that a Treasury default might be accompanied by some inflation. Inflationary expectations, along with the fact that part of the monetary base is now de facto government debt, can link the fates of government debt and government money. This is all the more reason for the United States to try to break the link and maintain the second financial firewall. We still may end up with the worst of both worlds: outright Treasury default coupled with serious inflation. I am simply denying that such inflation will forestall default.

Still unconvinced that the Treasury will default? The Zimbabwe option illustrates that other potential outcomes, however unlikely, are equally unprecedented and dramatic. We cannot utterly rule out, for instance, the possibility that the U.S. Congress might repudiate a major portion of promised benefits rather than its debt. If it simply abolished Medicare outright, the unfunded liability of Social Security would become tractable. Indeed, one of the current arguments for the adoption of nationalized health care is that it can reduce Medicare costs. But this argument is based on looking at other welfare States such as Great Britain, where government-provided health care was rationed from the outset rather than subsidized with Medicare. Rationing can indeed drive down health-care costs, but after more than forty years of subsidized health care in the United States, how likely is it that the public will put up with severe rationing or that the politicians will attempt to impose it? And don’t kid yourself; the rationing will have to be quite severe to stave off a future fiscal crisis.

Other welfare States have higher taxes as a proportion of GDP, with Sweden and Denmark in the lead at nearly 50 percent.6 Can I really be confident that the United States will never follow their example? Let us ignore all the cultural, political, and economic differences between small, ethnically-unified European States and the United States. We still must factor in the take of state and local governments, which, together with the federal government, raises the current tax bite in the United States to 28 percent of GDP, only five percentage points below that of Canada. Recall that the CBO projects that federal spending alone for 2082 will reach almost 35 percent of GDP, excluding rising interest on the national debt. Thus, if taxes were to rise pari passu with spending, the United States might be able to forestall bankruptcy with a total tax burden, counting federal, state, and local, of around 45 percent of GDP—15 percentage points higher than the combined total at its World War II peak, higher than in the United Kingdom and Germany today, and nearly dead even with Norway and France. However, if there is any significant lag between expenditure and tax increases, the increased debt would cause the proportion to rise even more. Furthermore, this estimate relies on the CBO’s economic and demographic assumptions about the future, along with the assumption of absolutely no increase in state and local taxation as a percent of GDP. More-pessimistic assumptions also drive the percentage up.

Even conceding that federal taxes might rise rapidly enough to a level noticeably higher than during World War II overlooks an important consideration: All the social democracies are facing similar fiscal dilemmas at almost the same time. Pay-as-you go social insurance is just not sustainable over the long run, despite the higher tax rates in other welfare States. Even though the United States initiated social insurance later than most of these other welfare States, it has caught up with them because of the Medicare subsidy. In other words, the social-democratic welfare State will come to end, just as the socialist State came to an end. Socialism was doomed by the calculation problem identified by Ludwig Mises and Friedrich Hayek. Mises also argued that the mixed economy was unstable and that the dynamics of intervention would inevitably drive it towards socialism or laissez faire. But in this case, he was mistaken; a century of experience has taught us that the client-oriented, power-broker State is the gravity well toward which public choice drives both command and market economies. What will ultimately kill the welfare State is that its centerpiece, government-provided social insurance, is simultaneously above reproach and beyond salvation. Fully-funded systems could have survived, but politicians had little incentive to enact them, and much less incentive to impose the huge costs of converting from pay-as-you-go. Whether this inevitable collapse of social democracies will ultimately be a good or bad thing depends on what replaces them.

DEBT RELIEF, as in CONGO & LIBERIA
http://www.eurodad.org/whatsnew/reports.aspx?id=3946
http://jubileeusa.typepad.com/blog_the_debt/2010/07/liberias-debt-cancelled-29th-and-worlds-poorest-country-reaches-completion-point.html
http://www.jubileeusa.org/press/press-item/article/imf-takes-two-steps-forward-and-one-step-back-on-haiti.html

http://www.imf.org/external/pubs/ft/survey/so/2010/car062910a.htm
http://www.imf.org/external/np/exr/facts/hipc.htm
http://www.imf.org/external/np/sec/pr/2010/pr10267.htm
http://www.imf.org/external/np/sec/pr/2010/pr10274.htm
http://www.eurodad.org/whatsnew/articles.aspx?id=4198
Liberia and DRC debt relief sparks mixed reactions
by Øygunn Sundsbø Brynildsen / 15 July 2010

The World Bank and the IMF have granted debt relief to Liberia and the Democratic Republic of Congo (DRC). The debt relief – granted after the two countries fulfilled the conditions for completing the Highly Indebted Poor Countries Initiative (HIPC) – is essential for fighting poverty and increasing fiscal space in the two countries that rank as number 169 (Liberia) and 176 (DRC) out of the 182 countries on the UNDP 2010 Human Development Index. Despite debt relief for poor countries being much-needed and welcome, civil society regrets that the international creditors have not recognised their share of responsibility in what CSOs believe to be illegitimate debts contracted by dictatorial regimes without the consent of their peoples or their legitimate democratic representatives.

Liberia, the world’s highest debt burden
After almost two decades marked by warlords and civil war in the 1990s and early 2000s, according to the IMF Liberia had the highest debt to GDP ratio in the world . Due to the conflicts, there have been long periods when Liberia has not serviced its debt, resulting in enormous amounts of interest, sometimes many times higher than the original loan. When the government headed by Ellen Johnson-Sirleaf came to power in Liberia in 2006, Liberia resumed monthly payments of debt in arrears as a sign of good-will towards the international creditor community. However, arrears clearance detracted much needed resources for investment and infrastructure to ensure economic recovery of the war-torn country, and to provide essential services to 80 percent of Liberian citizens living below the poverty line.

The current debt relief of USD 4.6 billion reduces Liberia’s external debt stock by more than 90 percent. USD 1.5 billion is to be delivered by multilateral creditors and the remainder by bilateral and commercial creditors. Still, if all creditors live up to their commitments, the remaining debt of Liberia will amount to USD 150 million, which the country is scheduled to start servicing from the end of 2011.

International creditors turn a blind eye to reckless behaviour
Debt campaigners called for debt cancellation for Liberia and the DRC on the basis of the dubious legitimacy of these countries’ external debts. In the case of Liberia, autocrat Samuel Doe was lent money by the G8 in return for the nation’s support against Libya’s Momar Qaddafi in the 1980s. Charles Taylor was also loaned huge amounts despite the highly questionable democratic credentials of his regime. In the case of DRC, even the IMF itself warned against lending to the Mobuto regime. In 1978 Erwin Blumenthal, the IMF representative in Zaire made it clear that there was “no (repeat: no) prospect for Zaire’s creditors to get their money back in any foreseeable future”. Lenders, including the IMF and the World Bank, nevertheless continued to provide loans to the dictator regime.

The call for recognition of the illegitimacy of the DRC debt is echoed by many, including the Financial Times where William Wallis said that “The Democratic Republic of Congo’s debt burden was perhaps the most odious in Africa – a financial carbuncle from the cold war that should long since have been excised.” In this context of reckless behaviour by lenders, the decision to cancel DRC’s debt should have been an easy one. However, only after seven years of implementing reforms required by the IFIs has the DRC’s debt been alleviated. “For seven years the World Bank and IMF have been saying that the country is mismanaged. By maintaining this pressure they succeeded in heading off questions about why the debt was created in the first place and who signed off on the other side,” Michel Losembe, managing director of Citibank in Kinshasa, said to the Financial Times.

Business disputes delayed debt relief to DRC
Additional policy requirements have also come into play and delayed the long-awaited debt relief. DRC was originally scheduled for debt relief last year, but the process was put on hold because DRC considered making a mining agreement with China. This year, at Canada’s request, the World Bank postponed the decision to accept debt relief for DRC due to a dispute over mineral rights between the Canada based oil firm First Quantum and the government of DRC.

Biased judges and unfair rules
The long and bumpy road towards debt relief for DRC and Liberia demonstrates the need for an independent procedure for debt resolution and clear and binding rules for responsible lending and borrowing. Suggestions for such rules are outlined in the Eurodad Responsible Financing Charter and in the South North platform for sovereign, democratic and responsible financing. A first step towards greater justice in the sovereign debt domain is for indebted countries to undertake independent debt audits and repudiate illegitimate debts. Zimbabwe is likely to be one of the next countries to enter the HIPC initiative and hence undertake policy and economic reforms required to receive debt relief. The Zimbabwe Coalition on Debt and Development (ZIMCODD) has called for a comprehensive audit of Zimbabwe’s debt instead of entering into the HIPC initiative. In the absence of responsible lending and borrowing standards and of an independent and fair procedure for settling debt disputes, poor people in poor countries will continue to pay too high of a price for the reckless behaviour of irresponsible lenders and creditors.

DEBT JUBILEE
http://www.jubileeusa.org/
http://www.uiowa.edu/ifdebook/ebook2/biblio/biblio4.shtml
http://www.ft.com/cms/s/0/85432b32-cd32-11dd-9905-000077b07658.html
http://www.vanityfair.com/online/daily/2009/01/niall-ferguson-america-needs-to-cancel-its-debt.html
Niall Ferguson: America Needs to Cancel Its Debt
by Michael Hogan / January 20, 2009

As dedicated V.F. readers already know, Niall Ferguson “gets” the economic collapse. Now, the historian and bestselling author is sharing his insights with a new book, The Ascent of Money, and an accompanying TV special (which means regular people might actually absorb some of what he has to say). And what he has to say is rather terrifying, with profound implications for an Obama presidency and, beyond that, the future of the United States as a superpower. I tried putting my most basic questions about the economy to Ferguson, and here’s how it went:

Michael Hogan: First of all, this whole financial collapse is great timing for your book. Are you psyched?
Niall Ferguson: Well, I can say with a degree of self-satisfaction that it wasn’t luck. Two and a half years ago I decided to write this book, because I was sure that this financial crisis was going to happen, and the reason I was sure was because people kept coming up to me—whether it was investment bankers or hedge fund managers—telling me that volatility was dead that there would never be another recession. I just thought, “These people have completely disconnected from reality, and financial history is going to come back and bite them in the ass.”

MH: In the book, you identify the five stages of a bubble. What stage are we at now?
NF: We’re pretty much at the last stage, which is the Panic stage. If you remember roughly how it goes, you begin with some kind of Displacement or shift that changes the economic environment. I would say in this case, the displacement was really caused by the wall of Asian savings coming into the U.S. and keeping interest rates lower than would have normally been in the cycle. Then you get the Euphoria, which is when people say, “God, now prices can only go up, we should buy more. We should borrow more, because this is a one-way bet.” And then more and more people enter the market, first-time buyers, and that’s the classic run-up phase of the bubble. Then there’s this sort of irrational-exuberance Mania—which came at the end of ’06, when we still had property prices rising at an annualized rate of 20 percent. But then you get Distress. That’s when the insiders, the smart people, start to look at one another and say, “This is nuts, we should get out.” That’s when the John Paulsons start to short the market. And then you get the shift into downward movement of prices, which ultimately culminates in Panic, when everybody heads for the exit together. In this bubble, it happened in a strange kind of slow motion, because the game was really up in August 2007, but it wasn’t really a full-fledged panic—at least across the board—until Lehman Brothers, September 15, 2008, more than a year later. Wile E. Coyote ran off the cliff in August of ’07, but he didn’t really look down until over a year later.

MH: What do you think happens next to the stock market, to the real estate market, and to the banks?
NF: Well, they have further to fall, without doubt, because we’re going to get almost a third phase of the crisis. The third phase of the crisis is when rising unemployment starts to impact the real estate market and consumer spending generally. So, we go another leg down. Unemployment is rising at a very rapid rate. It could go as high as 10 percent, and it’s just going to keep going up in the next two quarters, maybe throughout the year, because this is bad. This is worse than the early 80s. This is as bad as it’s been since the 30s. And in those conditions, there’s going to be further negative movement of real estate prices, and further negative movement of stock prices. People are going to get horrible earnings reports, and when the earnings reports turn out to be worse than anybody expected, the prices of most corporations are going to head south. So, it’s certainly not over. Best case, the rate of decline begins to slow, so we’re not falling vertiginously. We start to fall more gradually.

MH: Is a $700 billion stimulus, like the one Obama is talking about, better than nothing?
NF: Well, it is better than nothing.
MH: Why?
NF: Well, I think we have to realize that nothing would be the Great Depression. So it will be a “success” if output only contracts by five or seven percent. It will be a “success” if unemployment only reaches 11 percent, because in the Great Depression output contracted 30 percent, and unemployment went to 25 percent. These measures that we’re taking at the moment are preventative measures. They’re really designed to prevent a complete implosion of the economy. That’s why I call this, the “Great Repression,” with an “R,” because we are repressing this problem. But, that’s not the same as a cure. And what we’re going to see will look very disappointing, because we’ll be comparing it to the recovery of the sort that we used to see. In a traditional post-war recession, there would be a shock; the Fed would cut rates; there would be some kind of fiscal stimulus; and the economy would quite quickly recover. The reason that won’t work this time, and this is the key point, is that the whole U.S. economy became excessively leveraged in the last ten years. The debt burden, as a proportion of G.D.P., is in the region of 355 percent. So, debt is three and a half times the output of the economy. That’s some kind of historic maximum, and those debts aren’t going away.

MH: So we’ve all been bingeing on money that we didn’t have.
NF: That we borrowed. And we borrowed it from abroad, ultimately. This has been financed by borrowing from petrol exporters, and borrowing from Asian central banks, and sovereign wealth funds. But yeah, whether it was the people who refinanced their mortgages and spent the money that they pocketed, or banks that juiced their returns by piling on the leverage, the whole system became excessively indebted. And notice: what is the policy response? You guessed it, more debt. And, now it’s federal debt. So you end up in a situation where you’re curing a debt problem with more debt. Is that going to bring about a sustained recovery? I find that hard to believe.

MH: So I guess the unanswerable question is, what could you do to solve this problem?
NF: Well I’ll tell you what you have to do—you actually have to cancel the debt. There are historical precedents for this. Excessive debt burdens in the past tended to be public sector debts. What we’ve got now is an exceptional level of private debt. There’s never been an economy in history that’s had so much private debt. Britain and America today lead the world in the indebtedness of the household sector and the banking sector and the corporate sector. But debt is debt; it doesn’t even matter if it’s household debt or government. Once it gets to a certain level, there is a problem. In the past, when excessive debt burdens were accumulated by government, they tended to do one of two things: either they defaulted—this is the Argentine solution—where you say, “Ah, I’m sorry, I’m afraid we’re not going to be able to meet the interest payments this month, and never again will we make the interest payments.” The other scenario is inflation, where the real debt burden is eroded because the money that it’s denominated in loses value. I don’t think we’re really going to be out of the woods here until something of that sort happens to the huge debt burdens of the U.S. economy. Either these debts will have to be fundamentally written off in some way, or inflation will have to reduce the real burden.

MH: Don’t either of those scenarios spell the end of America as the world’s unrivalled superpower?
NF: Well, it certainly will be extremely painful. And that is why we have to look very closely at the attitude of the foreign creditors, because the U.S. owes the rest of the world a lot of money. Half the federal debt is held by foreigners. And if the U.S. either defaults on debt or allows the dollar to depreciate, the rest of the world is going to say, “Wait a second, you just screwed us.” And that’s, I think, the moment at which the United States experiences the British experience—when, in the dark days of the 60s and 70s, Britain fundamentally lost its credibility and ceased to be a financial great power. The I.M.F. had to come in, and the pound plunged to unheard-of depths.

MH: And George Soros became a billionaire, right?
NF: George Soros and others made some serious money off the back of it, certainly. I mean, somebody can make an awful lot of money off a massive dollar sell-off this year.

MH: How badly could the Chinese screw us if they wanted to?
NF: Well, they would have a difficulty in that they would kind of be screwing themselves. This is their dilemma. There’s a sort of “death embrace” quality to this, I think that someone’s talked about mutually assured financial destruction. The Chinese have got, we know, reserves in the region of $1.9 trillion, and 70 percent [of it is] dollar denominated, probably. That’s a huge pile of treasury bonds, not to mention Fannie and Freddie debt that they’ve accumulated over the last decade, when they’ve been intervening to keep their currency weak, and earning these vast amounts of foreign currency by running these trade surpluses. Now, politically, it might be quite tempting for the Chinese to phone up and say, “We really disagree with you about, let’s say, Taiwan and Japan and North Korea. You’d better listen to us, because otherwise, People’s Bank of China starts selling ten-year treasuries, and then you guys are dead.”

MH: But then their investments become worthless.
NF: Then you lose about five percent of China’s GDP, and that’s a hard sell—even for an authoritarian regime. So, they have a dilemma, and they are discovering the ancient truth that, when the debt is big enough, it’s the debtor who has the power, not the creditor. But, then again, these things aren’t always the result of calculated policy, decisions. There’s a sense in which a catalyst elsewhere could force the hand of People’s Bank of China. It doesn’t need to be the Chinese who start the run of the dollar. It could be Middle Eastern investors.

MH: In which case the Chinese might just follow and cut their losses.
NF: Well, they might have no alternative. They might be facing the decision that, “If we hold on, you know, we’re left really holding the hot potato.” So, that is a big worry of theirs. I know it’s a big worry of theirs. They’re thinking, “Can we somehow sneak out of some of these decisions without anybody noticing?” That’s why they’re so secretive. One of the great problems for anybody trying to make a decision about currency is, where else do you go? Short-term, it seems to me that everybody is kind of stuck trying to avoid this dollar crisis because it would be so expensive for those people who are invested in the U.S. But you shouldn’t assume—you can’t assume—that this is a stable state of affairs. It’s anything but that. It’s very, very precarious.

MH: Your book is about moments in history where there were innovations—the creation of money, the creation of credit, the creation of bonds, the stock market, and so on. And the people who were at the wheel during the run up to the bubble seemed convinced that they had overseen an innovation on this level. Now we’re seeing that maybe they didn’t. Fifty or 500 years from now, when someone writes a book like this one, do you think they’ll look back and see something valuable that came out of this?
NF: I’m sure they will. They’ll look back and they’ll say, “What an extraordinary proliferation of new financial instruments and business models there was between 1980 and 2006. And then the crisis came along, and it was like one of those events in natural history: asteroid hits the Earth, environment becomes a lot colder, only the strong survive. Some species will be extinct: investment banks are already extinct, and hedge funds will go extinct in six months. But they won’t all disappear, and the strong and well managed—and lucky!—will survive. The derivatives market will contract, but it won’t disappear, because those are useful things. They are simply insurance policies. Too many of them were sold at bad prices. It was clear that the models which were being used to price, say, credit default swaps were fundamentally unrealistic about the probability of defaults. That doesn’t mean that the underlying idea of being able to buy protection against default is a bad one. And that’s characteristic of financial history. If you go back to, say, the banking innovations of the 17th and 18th century, when new banks proliferated all over the English-speaking world, from Scotland to Massachusetts and beyond, banks were invented, and then along would come a financial crisis, and large numbers of them would go bust. But yeah, the ones that survived generally ended up being better banks, and I think that’s the cheerful news. This is an evolutionary system, there is an element of Darwinian, of the survival of the fittest, and although crises seem to be an integral part of the system, no crisis has been completely fatal to it.

‘MINSKY HALF-CENTURY’
http://www.debtdeflation.com/blogs/wp-content/uploads/papers/KeenAreWeItYetPaperFinal.pdf
http://www.smh.com.au/business/there-will-be-no-recovery-until-debt-tumour-is-excised-20090914-fnug.html
http://www.debtdeflation.com/blogs/research/
http://www.newyorker.com/talk/comment/2008/02/04/080204taco_talk_cassidy
http://www.boston.com/bostonglobe/ideas/articles/2009/09/13/why_capitalism_fails/
Why capitalism fails
by Stephen Mihm / September 13, 2009

Since the global financial system started unraveling in dramatic fashion two years ago, distinguished economists have suffered a crisis of their own. Ivy League professors who had trumpeted the dawn of a new era of stability have scrambled to explain how, exactly, the worst financial crisis since the Great Depression had ambushed their entire profession. Amid the hand-wringing and the self-flagellation, a few more cerebral commentators started to speak about the arrival of a “Minsky moment,” and a growing number of insiders began to warn of a coming “Minsky meltdown.”

“Minsky” was shorthand for Hyman Minsky, a hitherto obscure macroeconomist who died over a decade ago. Many economists had never heard of him when the crisis struck, and he remains a shadowy figure in the profession. But lately he has begun emerging as perhaps the most prescient big-picture thinker about what, exactly, we are going through. A contrarian amid the conformity of postwar America, an expert in the then-unfashionable subfields of finance and crisis, Minsky was one economist who saw what was coming. He predicted, decades ago, almost exactly the kind of meltdown that recently hammered the global economy.

In recent months Minsky’s star has only risen. Nobel Prize-winning economists talk about incorporating his insights, and copies of his books are back in print and selling well. He’s gone from being a nearly forgotten figure to a key player in the debate over how to fix the financial system. But if Minsky was as right as he seems to have been, the news is not exactly encouraging. He believed in capitalism, but also believed it had almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse. In other words, the one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. But with a growing number of economists eager to declare the recession over, and the crisis itself apparently behind us, these policies may prove as discomforting as the theories that prompted them in the first place. Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw. In an ideal world, a profession dedicated to the study of capitalism would be as freewheeling and innovative as its ostensible subject. But economics has often been subject to powerful orthodoxies, and never more so than when Minsky arrived on the scene.

That orthodoxy, born in the years after World War II, was known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing free market had selectively absorbed a few insights from John Maynard Keynes, the great economist of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment. Most economists still believed that free-market capitalism was a fundamentally stable basis for an economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances play a role in keeping the economy – and employment – on an even keel. Economists like Paul Samuelson became the public face of the new establishment; he and others at a handful of top universities became deeply influential in Washington. In theory, Minsky could have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter, as well as future Nobel laureate Wassily Leontief.

But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists. While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall Wray, a former student, a “character.” So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University. Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997 simply noted that his “work has not had a major influence in the macroeconomic discussions of the last thirty years.”

Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which despite its seeming importance had no place in the theories formulated by Samuelson and others. He also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” – where “it” was, like Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression. In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist of the 20th century. But where most economists drew a single, simplistic lesson from Keynes – that government could step in and micromanage the economy, smooth out the business cycle, and keep things on an even keel – Minsky had no interest in what he and a handful of other dissident economists came to call “bastard Keynesianism.”

Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt not only with the problem of unemployment, but with money and banking. Although Keynes had never stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a cliff. This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent more time thinking about destruction than creation. In doing so, he formulated an intriguing theory: not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability that would set the stage for monumental crises.

Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans are almost always paid on time, businesses generally succeed, and everyone does well. That success, however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.” As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers – what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment – what was later dubbed the “Minsky moment” – would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system.

From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this shift was already underway: postwar stability, financial innovation, and the receding memory of the Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem, not the solution. Moreover, the new dogma coincided with a remarkable era of stability. The period from the late 1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience among most major industrial economies. Things had never been more stable. The likelihood that “it” could happen again now seemed laughable.

Yet throughout this period, the financial system – not the economy, but finance as an industry – was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning of the dangers of securitization and other forms of financial innovation, but few economists listened. Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing use of leverage within the financial system. By the end of the 20th century, the financial system that Minsky had warned about had materialized, complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy, his predictions started to look a lot like a road map. “This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”

Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers that rereading Minsky’s 1986 “masterpiece” – “Stabilizing an Unstable Economy” – “helped clear my mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights – Paul Krugman and Brad DeLong – both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read Minsky.” Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another depression [won’t] cure.”

But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive and unstable – never mind that it produces inequality and unemployment, as Keynes had observed – now what? After spending his life warning of the perils of the complacency that comes with stability – and having it fall on deaf ears – Minsky was understandably pessimistic about the ability to short-circuit the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage. To prevent the Minsky moment from becoming a national calamity, part of his solution (which was shared with other economists) was to have the Federal Reserve – what he liked to call the “Big Bank” – step into the breach and act as a lender of last resort to firms under siege. By throwing lines of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial system. It failed to do so during the Great Depression, when it stood by and let a banking crisis spiral out of control. This time, under the leadership of Ben Bernanke – like Minsky, a scholar of the Depression – it took a very different approach, becoming a lender of last resort to everything from hedge funds to investment banks to money market funds.

Minsky’s other solution, however, was considerably more radical and less palatable politically. The preferred mainstream tactic for pulling the economy out of a crisis was – and is – based on the Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized labor – by building a new high-speed train line, for example. Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government – or what he liked to call “Big Government” – should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.

While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe to say that even liberal policymakers are still a long way from thinking about such an expanded role for the American government. If nothing else, an expensive full-employment program would veer far too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says Wray. “They would make capitalism better.” But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into a catchy phrase and carried on banners.” It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy. But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”

HISTORY of DEBT
http://www.eurozine.com/articles/2009-08-20-graeber-en.html
Debt: The first five thousand years
by David Graeber / 08.20.2009

What follows is a fragment of a much larger project of research on debt and debt money in human history. The first and overwhelming conclusion of this project is that in studying economic history, we tend to systematically ignore the role of violence, the absolutely central role of war and slavery in creating and shaping the basic institutions of what we now call “the economy”. What’s more, origins matter. The violence may be invisible, but it remains inscribed in the very logic of our economic common sense, in the apparently self-evident nature of institutions that simply would never and could never exist outside of the monopoly of violence – but also, the systematic threat of violence – maintained by the contemporary state.

Let me start with the institution of slavery, whose role, I think, is key. In most times and places, slavery is seen as a consequence of war. Sometimes most slaves actually are war captives, sometimes they are not, but almost invariably, war is seen as the foundation and justification of the institution. If you surrender in war, what you surrender is your life; your conqueror has the right to kill you, and often will. If he chooses not to, you literally owe your life to him; a debt conceived as absolute, infinite, irredeemable. He can in principle extract anything he wants, and all debts – obligations – you may owe to others (your friends, family, former political allegiances), or that others owe you, are seen as being absolutely negated. Your debt to your owner is all that now exists.

This sort of logic has at least two very interesting consequences, though they might be said to pull in rather contrary directions. First of all, as we all know, it is another typical – perhaps defining – feature of slavery that slaves can be bought or sold. In this case, absolute debt becomes (in another context, that of the market) no longer absolute. In fact, it can be precisely quantified. There is good reason to believe that it was just this operation that made it possible to create something like our contemporary form of money to begin with, since what anthropologists used to refer to as “primitive money”, the kind that one finds in stateless societies (Solomon Island feather money, Iroquois wampum), was mostly used to arrange marriages, resolve blood feuds, and fiddle with other sorts of relations between people, rather than to buy and sell commodities. For instance, if slavery is debt, then debt can lead to slavery. A Babylonian peasant might have paid a handy sum in silver to his wife’s parents to officialise the marriage, but he in no sense owned her. He certainly couldn’t buy or sell the mother of his children. But all that would change if he took out a loan. Were he to default, his creditors could first remove his sheep and furniture, then his house, fields and orchards, and finally take his wife, children, and even himself as debt peons until the matter was settled (which, as his resources vanished, of course became increasingly difficult to do). Debt was the hinge that made it possible to imagine money in anything like the modern sense, and therefore, also, to produce what we like to call the market: an arena where anything can be bought and sold, because all objects are (like slaves) disembedded from their former social relations and exist only in relation to money.

But at the same time the logic of debt as conquest can, as I mentioned, pull another way. Kings, throughout history, tend to be profoundly ambivalent towards allowing the logic of debt to get completely out of hand. This is not because they are hostile to markets. On the contrary, they normally encourage them, for the simple reason that governments find it inconvenient to levy everything they need (silks, chariot wheels, flamingo tongues, lapis lazuli) directly from their subject population; it’s much easier to encourage markets and then buy them. Early markets often followed armies or royal entourages, or formed near palaces or at the fringes of military posts. This actually helps explain the rather puzzling behaviour on the part of royal courts: after all, since kings usually controlled the gold and silver mines, what exactly was the point of stamping bits of the stuff with your face on it, dumping it on the civilian population, and then demanding they give it back to you again as taxes? It only makes sense if levying taxes was really a way to force everyone to acquire coins, so as to facilitate the rise of markets, since markets were convenient to have around. However, for our present purposes, the critical question is: how were these taxes justified? Why did subjects owe them, what debt were they discharging when they were paid? Here we return again to right of conquest. (Actually, in the ancient world, free citizens – whether in Mesopotamia, Greece, or Rome – often did not have to pay direct taxes for this very reason, but obviously I’m simplifying here.) If kings claimed to hold the power of life and death over their subjects by right of conquest, then their subjects’ debts were, also, ultimately infinite; and also, at least in that context, their relations to one another, what they owed to one another, was unimportant. All that really existed was their relation to the king. This in turn explains why kings and emperors invariably tried to regulate the powers that masters had over slaves, and creditors over debtors. At the very least they would always insist, if they had the power, that those prisoners who had already had their lives spared could no longer be killed by their masters. In fact, only rulers could have arbitrary power over life and death. One’s ultimate debt was to the state; it was the only one that was truly unlimited, that could make absolute, cosmic, claims.

The reason I stress this is because this logic is still with us. When we speak of a “society” (French society, Jamaican society) we are really speaking of people organised by a single nation state. That is the tacit model, anyway. “Societies” are really states, the logic of states is that of conquest, the logic of conquest is ultimately identical to that of slavery. True, in the hands of state apologists, this becomes transformed into a notion of a more benevolent “social debt”. Here there is a little story told, a kind of myth. We are all born with an infinite debt to the society that raised, nurtured, fed and clothed us, to those long dead who invented our language and traditions, to all those who made it possible for us to exist. In ancient times we thought we owed this to the gods (it was repaid in sacrifice, or, sacrifice was really just the payment of interest – ultimately, it was repaid by death). Later the debt was adopted by the state, itself a divine institution, with taxes substituted for sacrifice, and military service for one’s debt of life. Money is simply the concrete form of this social debt, the way that it is managed. Keynesians like this sort of logic. So do various strains of socialist, social democrats, even crypto-fascists like Auguste Comte (the first, as far as I am aware, to actually coin the phrase “social debt”). But the logic also runs through much of our common sense: consider for instance, the phrase, “to pay one’s debt to society”, or, “I felt I owed something to my country”, or, “I wanted to give something back.” Always, in such cases, mutual rights and obligations, mutual commitments – the kind of relations that genuinely free people could make with one another – tend to be subsumed into a conception of “society” where we are all equal only as absolute debtors before the (now invisible) figure of the king, who stands in for your mother, and by extension, humanity.

What I am suggesting, then, is that while the claims of the impersonal market and the claims of “society” are often juxtaposed – and certainly have had a tendency to jockey back and forth in all sorts of practical ways – they are both ultimately founded on a very similar logic of violence. Neither is this a mere matter of historical origins that can be brushed away as inconsequential: neither states nor markets can exist without the constant threat of force. One might ask, then, what is the alternative?

Towards a history of virtual money
Here I can return to my original point: that money did not originally appear in this cold, metal, impersonal form. It originally appears in the form of a measure, an abstraction, but also as a relation (of debt and obligation) between human beings. It is important to note that historically it is commodity money that has always been most directly linked to violence. As one historian put it, “bullion is the accessory of war, and not of peaceful trade.”[1] The reason is simple. Commodity money, particularly in the form of gold and silver, is distinguished from credit money most of all by one spectacular feature: it can be stolen. Since an ingot of gold or silver is an object without a pedigree, throughout much of history bullion has served the same role as the contemporary drug dealer’s suitcase full of dollar bills, as an object without a history that will be accepted in exchange for other valuables just about anywhere, with no questions asked. As a result, one can see the last 5 000 years of human history as the history of a kind of alternation. Credit systems seem to arise, and to become dominant, in periods of relative social peace, across networks of trust, whether created by states or, in most periods, transnational institutions, whilst precious metals replace them in periods characterised by widespread plunder. Predatory lending systems certainly exist at every period, but they seem to have had the most damaging effects in periods when money was most easily convertible into cash.

So as a starting point to any attempt to discern the great rhythms that define the current historical moment, let me propose the following breakdown of Eurasian history according to the alternation between periods of virtual and metal money:

I. Age of the First Agrarian Empires (3500-800 BCE). Dominant money form: Virtual credit money
Our best information on the origins of money goes back to ancient Mesopotamia, but there seems no particular reason to believe matters were radically different in Pharaonic Egypt, Bronze Age China, or the Indus Valley. The Mesopotamian economy was dominated by large public institutions (Temples and Palaces) whose bureaucratic administrators effectively created money of account by establishing a fixed equivalent between silver and the staple crop, barley. Debts were calculated in silver, but silver was rarely used in transactions. Instead, payments were made in barley or in anything else that happened to be handy and acceptable. Major debts were recorded on cuneiform tablets kept as sureties by both parties to the transaction.

Certainly, markets did exist. Prices of certain commodities that were not produced within Temple or Palace holdings, and thus not subject to administered price schedules, would tend to fluctuate according to the vagaries of supply and demand. But most actual acts of everyday buying and selling, particularly those that were not carried out between absolute strangers, appear to have been made on credit. “Ale women”, or local innkeepers, served beer, for example, and often rented rooms; customers ran up a tab; normally, the full sum was dispatched at harvest time. Market vendors presumably acted as they do in small-scale markets in Africa, or Central Asia, today, building up lists of trustworthy clients to whom they could extend credit. The habit of money at interest also originates in Sumer – it remained unknown, for example, in Egypt. Interest rates, fixed at 20 percent, remained stable for 2,000 years. (This was not a sign of government control of the market: at this stage, institutions like this were what made markets possible.) This, however, led to some serious social problems. In years with bad harvests especially, peasants would start becoming hopelessly indebted to the rich, and would have to surrender their farms and, ultimately, family members, in debt bondage. Gradually, this condition seems to have come to a social crisis – not so much leading to popular uprisings, but to common people abandoning the cities and settled territory entirely and becoming semi-nomadic “bandits” and raiders. It soon became traditional for each new ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or “freedom”, so that all bonded labourers could return to their families. (It is significant here that the first word for “freedom” known in any human language, the Sumerian amarga, literally means “return to mother”.) Biblical prophets instituted a similar custom, the Jubilee, whereby after seven years all debts were similarly cancelled. This is the direct ancestor of the New Testament notion of “redemption”. As economist Michael Hudson has pointed out, it seems one of the misfortunes of world history that the institution of lending money at interest disseminated out of Mesopotamia without, for the most part, being accompanied by its original checks and balances.

II. Axial Age (800 BCE – 600 CE). Dominant money form: Coinage and metal bullion
This was the age that saw the emergence of coinage, as well as the birth, in China, India and the Middle East, of all major world religions.[2] From the Warring States period in China, to fragmentation in India, and to the carnage and mass enslavement that accompanied the expansion (and later, dissolution) of the Roman Empire, it was a period of spectacular creativity throughout most of the world, but of almost equally spectacular violence. Coinage, which allowed for the actual use of gold and silver as a medium of exchange, also made possible the creation of markets in the now more familiar, impersonal sense of the term. Precious metals were also far more appropriate for an age of generalised warfare, for the obvious reason that they could be stolen. Coinage, certainly, was not invented to facilitate trade (the Phoenicians, consummate traders of the ancient world, were among the last to adopt it). It appears to have been first invented to pay soldiers, probably first of all by rulers of Lydia in Asia Minor to pay their Greek mercenaries. Carthage, another great trading nation, only started minting coins very late, and then explicitly to pay its foreign soldiers.

Throughout antiquity one can continue to speak of what Geoffrey Ingham has dubbed the “military-coinage complex”. He may have been better to call it a “military-coinage-slavery complex”, since the diffusion of new military technologies (Greek hoplites, Roman legions) was always closely tied to the capture and marketing of slaves. The other major source of slaves was debt: now that states no longer periodically wiped the slates clean, those not lucky enough to be citizens of the major military city-states – who were generally protected from predatory lenders – were fair game. The credit systems of the Near East did not crumble under commercial competition; they were destroyed by Alexander’s armies – armies that required half a ton of silver bullion per day in wages. The mines where the bullion was produced were generally worked by slaves. Military campaigns in turn ensured an endless flow of new slaves. Imperial tax systems, as noted, were largely designed to force their subjects to create markets, so that soldiers (and also, of course, government officials) would be able to use that bullion to buy anything they wanted. The kind of impersonal markets that once tended to spring up between societies, or at the fringes of military operations, now began to permeate society as a whole.

However tawdry their origins, the creation of new media of exchange – coinage appeared almost simultaneously in Greece, India, and China – appears to have had profound intellectual effects. Some have even gone so far as to argue that Greek philosophy was itself made possible by conceptual innovations introduced by coinage. The most remarkable pattern, though, is the emergence, in almost the exact times and places where one also sees the early spread of coinage, of what were to become modern world religions: prophetic Judaism, Christianity, Buddhism, Jainism, Confucianism, Taoism, and eventually, Islam. While the precise links are yet to be fully explored, in certain ways, these religions appear to have arisen in direct reaction to the logic of the market. To put the matter somewhat crudely: if one relegates a certain social space simply to the selfish acquisition of material things, it is almost inevitable that soon someone else will come to set aside another domain in which to preach that, from the perspective of ultimate values, material things are unimportant, and selfishness – or even the self – illusory.

III. The Middle Ages (600 CE – 1500 CE). The return to virtual credit money
If the Axial Age saw the emergence of complementary ideals of commodity markets and universal world religions, the Middle Ages[3] were the period in which those two institutions began to merge. Religions began to take over the market systems. Everything from international trade to the organisation of local fairs increasingly came to be carried out through social networks defined and regulated by religious authorities. This enabled, in turn, the return throughout Eurasia of various forms of virtual credit money.

In Europe, where all this took place under the aegis of Christendom, coinage was only sporadically, and unevenly, available. Prices after 800 AD were calculated largely in terms of an old Carolingian currency that no longer existed (it was actually referred to at the time as “imaginary money”), but ordinary day-to-day buying and selling was carried out mainly through other means. One common expedient, for example, was the use of tally-sticks, notched pieces of wood that were broken in two as records of debt, with half being kept by the creditor, half by the debtor. Such tally-sticks were still in common use in much of England well into the 16th century. Larger transactions were handled through bills of exchange, with the great commercial fairs serving as their clearing houses. The Church, meanwhile, provided a legal framework, enforcing strict controls on the lending of money at interest and prohibitions on debt bondage.

The real nerve centre of the Medieval world economy, though, was the Indian Ocean, which along with the Central Asia caravan routes connected the great civilisations of India, China, and the Middle East. Here, trade was conducted through the framework of Islam, which not only provided a legal structure highly conducive to mercantile activities (while absolutely forbidding the lending of money at interest), but allowed for peaceful relations between merchants over a remarkably large part of the globe, allowing the creation of a variety of sophisticated credit instruments. Actually, Western Europe was, as in so many things, a relative late-comer in this regard: most of the financial innovations that reached Italy and France in the 11th and 12th centuries had been in common use in Egypt or Iraq since the 8th or 9th centuries. The word “cheque”, for example, derives from the Arab sakk, and appeared in English only around 1220 AD.

The case of China is even more complicated: the Middle Ages there began with the rapid spread of Buddhism, which, while it was in no position to enact laws or regulate commerce, did quickly move against local usurers by its invention of the pawn shop – the first pawn shops being based in Buddhist temples as a way of offering poor farmers an alternative to the local usurer. Before long, though, the state reasserted itself, as the state always tends to do in China. But as it did so, it not only regulated interest rates and attempted to abolish debt peonage, it moved away from bullion entirely by inventing paper money. All this was accompanied by the development, again, of a variety of complex financial instruments.

All this is not to say that this period did not see its share of carnage and plunder (particularly during the great nomadic invasions) or that coinage was not, in many times and places, an important medium of exchange. Still, what really characterises the period appears to be a movement in the other direction. Most of the Medieval period saw money largely delinked from coercive institutions. Money changers, one might say, were invited back into the temples, where they could be monitored. The result was a flowering of institutions premised on a much higher degree of social trust.”

IV. Age of European Empires (1500-1971). The return of precious metals
With the advent of the great European empires – Iberian, then North Atlantic – the world saw both a reversion to mass enslavement, plunder, and wars of destruction, and the consequent rapid return of gold and silver bullion as the main form of currency. Historical investigation will probably end up demonstrating that the origins of these transformations were more complicated than we ordinarily assume. Some of this was beginning to happen even before the conquest of the New World. One of the main factors of the movement back to bullion, for example, was the emergence of popular movements during the early Ming dynasty, in the 15th and 16th centuries, that ultimately forced the government to abandon not only paper money but any attempt to impose its own currency. This led to the reversion of the vast Chinese market to an uncoined silver standard. Since taxes were also gradually commuted into silver, it soon became the more or less official Chinese policy to try to bring as much silver into the country as possible, so as to keep taxes low and prevent new outbreaks of social unrest. The sudden enormous demand for silver had effects across the globe. Most of the precious metals looted by the conquistadors and later extracted by the Spanish from the mines of Mexico and Potosi (at almost unimaginable cost in human lives) ended up in China. These global scale connections that eventually developed across the Atlantic, Pacific, and Indian Oceans have of course been documented in great detail. The crucial point is that the delinking of money from religious institutions, and its relinking with coercive ones (especially the state), was here accompanied by an ideological reversion to “metallism”.[4]

Credit, in this context, was on the whole an affair of states that were themselves run largely by deficit financing, a form of credit which was, in turn, invented to finance increasingly expensive wars. Internationally the British Empire was steadfast in maintaining the gold standard through the 19th and early 20th centuries, and great political battles were fought in the United States over whether the gold or silver standard should prevail.

This was also, obviously, the period of the rise of capitalism, the industrial revolution, representative democracy, and so on. What I am trying to do here is not to deny their importance, but to provide a framework for seeing such familiar events in a less familiar context. It makes it easier, for instance, to detect the ties between war, capitalism, and slavery. The institution of wage labour, for instance, has historically emerged from within that of slavery (the earliest wage contracts we know of, from Greece to the Malay city states, were actually slave rentals), and it has also tended, historically, to be intimately tied to various forms of debt peonage – as indeed it remains today. The fact that we have cast such institutions in a language of freedom does not mean that what we now think of as economic freedom does not ultimately rest on a logic that has for most of human history been considered the very essence of slavery.

Current Era (1971 onwards). The empire of debt
The current era might be said to have been initiated on 15 August 1971, when US President Richard Nixon officially suspended the convertibility of the dollar into gold and effectively created the current floating currency regimes. We have returned, at any rate, to an age of virtual money, in which consumer purchases in wealthy countries rarely involve even paper money, and national economies are driven largely by consumer debt. It’s in this context that we can talk about the “financialisation” of capital, whereby speculation in currencies and financial instruments becomes a domain unto itself, detached from any immediate relation with production or even commerce. This is of course the sector that has entered into crisis today.

What can we say for certain about this new era? So far, very, very little. Thirty or forty years is nothing in terms of the scale we have been dealing with. Clearly, this period has only just begun. Still, the foregoing analysis, however crude, does allow us to begin to make some informed suggestions. Historically, as we have seen, ages of virtual, credit money have also involved creating some sort of overarching institutions – Mesopotamian sacred kingship, Mosaic jubilees, Sharia or Canon Law – that place some sort of controls on the potentially catastrophic social consequences of debt. Almost invariably, they involve institutions (usually not strictly coincident to the state, usually larger) to protect debtors. So far the movement this time has been the other way around: starting with the ’80s we have begun to see the creation of the first effective planetary administrative system, operating through the IMF, World Bank, corporations and other financial institutions, largely in order to protect the interests of creditors. However, this apparatus was very quickly thrown into crisis, first by the very rapid development of global social movements (the alter-globalisation movement), which effectively destroyed the moral authority of institutions like the IMF and left many of them very close to bankrupt, and now by the current banking crisis and global economic collapse. While the new age of virtual money has only just begun and the long-term consequences are as yet entirely unclear, we can already say one or two things. The first is that a movement towards virtual money is not in itself, necessarily, an insidious effect of capitalism. In fact, it might well mean exactly the opposite. For much of human history, systems of virtual money were designed and regulated to ensure that nothing like capitalism could ever emerge to begin with – at least not as it appears in its present form, with most of the world’s population placed in a condition that would in many other periods of history be considered tantamount to slavery. The second point is to underline the absolutely crucial role of violence in defining the very terms by which we imagine both “society” and “markets” – in fact, many of our most elementary ideas of freedom. A world less entirely pervaded by violence would rapidly begin to develop other institutions. Finally, thinking about debt outside the twin intellectual straitjackets of state and market opens up exciting possibilities. For instance, we can ask: in a society in which that foundation of violence had finally been yanked away, what exactly would free men and women owe each other? What sort of promises and commitments should they make to each other? Let us hope that everyone will someday be in a position to start asking such questions. At times like this, you never know.

[1] Geoffrey W. Gardiner, “The Primacy of Trade Debts in the Development of Money”, in Randall Wray (ed.), Credit and State Theories of Money: The Contributions of A. Mitchell Innes, Cheltenham: Elgar, 2004, p.134.
[2] The phrase the “Axial Age” was originally coined by Karl Jaspers to describe the relatively brief period between 800 BCE – 200 BCE in which, he believed, just about all the main philosophical traditions we are familiar with today arose simultaneously in China, India, and the Eastern Mediterranean. Here, I am using it in Lewis Mumford’s more expansive use of the term as the period that saw the birth of all existing world religions, stretching roughly from the time of Zoroaster to that of Mohammed.
[3] I am here relegating most of what is generally referred to as the “Dark Ages” in Europe into the earlier period, characterised by predatory militarism and the consequent importance of bullion: the Viking raids, and the famous extraction of danegeld from England in the 800s, might be seen as one the last manifestations of an age where predatory militarism went hand and hand with hoards of gold and silver bullion.
[4] The myth of barter and commodity theories of money was of course developed in this period.

16 YEAR OLD ASKS and ANSWERS
http://www.mnn.com/green-tech/research-innovations/blogs/boy-discovers-microbe-that-eats-plastic
Boy discovers microbe that eats plastic / Jun 12 2009

It’s not your average science fair when the 16-year-old winner manages to solve a global waste crisis. But such was the case at last May’s Canadian Science Fair in Waterloo, Ontario, where Daniel Burd, a high school student at Waterloo Collegiate Institute, presented his research on microorganisms that can rapidly biodegrade plastic.

NOTE: There are TWO high school students who discovered plastic-consuming microorganisms. The first was Daniel Burd. The second was Tseng I-Ching (last month), a high school student in Taiwan

Daniel had a thought it seems even the most esteemed PhDs hadn’t considered. Plastic, one of the most indestructible of manufactured materials, does in fact eventually decompose. It takes 1,000 years but decompose it does, which means there must be microorganisms out there to do the decomposing. Could those microorganisms be bred to do the job faster? That was Daniel’s question, and he put to the test with a very simple and clever process of immersing ground plastic in a yeast solution that encourages microbial growth, and then isolating the most productive organisms. The preliminary results were encouraging, so he kept at it, selecting out the most effective strains and interbreeding them. After several weeks of tweaking and optimizing temperatures Burd was achieved a 43 percent degradation of plastic in six weeks, an almost inconceivable accomplishment.

With 500 billion plastic bags manufactured each year and a Pacific Ocean Garbage Patchthat grows more expansive by the day, a low-cost and nontoxic method for degrading plastic is the stuff of environmentalists’ dreams and, I would hazard a guess, a pretty good start-up company as well.

NOTE to the comment below: Yes there are certainly methods for decomposing plastic, but most are chemical in nature not organic, requiring high temperatures and chemical additives to cause the plasticizers to vaporize, for instance this patent on PVC extraction. There have been several successful bacteria-based solutions developed at theDepartment of Biotechnology in Tottori, Japan as well as the Department of Microbiology at the National University of Ireland, but both apply only to styrene compounds.

It goes without saying that these discoveries need to be tested to ensure, for instance, that the byproducts of organic decomposition are not carcinogenic (as in the case with mammalian metabolism of styrene and benzene). The processing of plastics by these methods would also have to be contained in highly controlled environments. So, no, we’re not talking about a magic panacea or a plastic-free paradise, but the innovative application of microorganisms to break down our most troublesome waste products is nevertheless a major scientific breakthrough.

One of our readers pointed out a very interesting study in 2004 at the University of Wisconsin that isolated a fungus capable of biodegrading phenol-formaldehyde polymers previously thought to be non-biodegradable. Phenol polymers are produced at an annual rate of 2.2 million metric tons per year in the United States for many industrial and commercial applications including durable plastics.

Comments
This story has generated a flurry of feedback since it was posted on June 12. Here’s a compilation of the best and brightest comments.

photo: dhcp.tcgs.tc.edu.tw

STYROFOAM TOO?
http://www.mnn.com/green-tech/research-innovations/blogs/high-school-girl-discovers-styrofoam-eating-bacterium
High school girl discovers Styrofoam-eating bacterium / Jun 13 2009

I blogged about a Canadian student’s discovery of plastic-eating microorganisms last May. Just last month, another 16-year-old high school student (this time from Taiwan), Tseng I-Ching swept the world’s largest science fair in the Peoples Choice Category at the Intel International Science & Engineering Fair (ISEF) for her discovery of apolystyrene-decomposing bacterium derived from mealworm beetles. I-Ching vivisected more than 500 mealworm beetles to isolate the single bacterium that allows the mealworm to digest one of the most troublesome forms of waste on the planet — Styrofoam. For her discovery, I-Ching was awarded the top prize in the microbiology category along with four other prizes.

The girl, nicknamed “Frog,” says her main career objective is to become a microbiologist and “save the world.” To that end, she spent the better part of her school year skipping classes to develop her innovative project isolating the “red bacteria” with the support of two leading microbiology scholars in Taipei. Her hard work got her in trouble at school (at one point she almost stopped her research project due to pressure from her school teachers) but she carried on and is now grateful she stuck with her passion. As she says, “I love to observe and find wonder from nature. I love to solve questions. This is how I started my project.”

There have been two successful bacteria-based solutions for styrene decomposition developed at the Department of Biotechnology in Tottori, Japan, as well as the Department of Microbiology at the National University of Ireland. Both rely upon a patented soil organism called Pseudomonas putida.

Polystyrene is the bad boy of the petrochemical industry. In addition to the highly toxic chemicals required to manufacture polysterene products (namely benzene), expanded polystyrene foam requires ozone-depleting HCFC’s (CFC’s used to be used to make Styrofoam, but they have been banned for the most part). Then once disposed, it basically NEVER decomposes. It does however break apart into smaller granules, but because of its light weight, those particles quickly become both airborne and waterborne, where they wreck havoc on the ocean food chain. The U.S. disposes of about 25 billion Styrofoam cups every year and tons more extruded and expanded polystyrene packaging material. It’s a big, big problem. Biodegradable alternatives are now hitting the market, but hopefully Tseng I-Ching’s small discovery will help give to give existing Styrofoam waste a proper burial.

GARBAGE as LANDMASS
http://www.digitaluniverse.net/upcycling/articles/view/135971/
The World’s Largest “Landfill” is in the Middle of the Ocean
BY David Sokoll / February 23, 2009

“There is a large part of the central Pacific Ocean that no one ever visits and only a few ever pass through. Sailors avoid it like the plague for it lacks the wind they need to sail. Fisherman leave it alone because its lack of nutrients makes it an oceanic desert. This area includes the “horse latitudes,” where stock transporters in the age of sail got stuck, ran out of food and water and had to jettison their horses and other livestock. Surprisingly, this is the largest ocean realm on our planet, being about the size of Africa – over ten million square miles. A huge mountain of air, which has been heated at the equator, and then begins descending in a gentle clockwise rotation as it approaches the North Pole, creates this ocean realm. The circular winds produce circular ocean currents which spiral into a center where there is a slight down-welling. Scientists know this atmospheric phenomenon as the subtropical high, and the ocean current it creates as the north Pacific central or sub-tropical gyre.

Because of the stability of this gentle maelstrom, the largest uniform climatic feature on
earth is also an accumulator of the debris of civilization. Anything that floats, no matter
where it comes from on the north Pacific Rim or ocean, ends up here, sometimes after
drifting around the periphery for twelve years or more. Historically, this debris did not
accumulate because it was eventually broken down by microorganisms into carbon
dioxide and water. Now, however, in our battle to store goods against natural
deterioration, we have created a class of products that defeats even the most creative and
insidious bacteria. They are plastics. Plastics are now virtually everywhere in our
modern society. We drink out of them, eat off of them, sit on them, and even drive in
them. They’re durable, lightweight, cheap, and can be made into virtually anything. But
it is these useful properties of plastics, which make them so harmful when they end up in the environment. Plastics, like diamonds, are forever!

If plastic doesn’t biodegrade, what does it do? It “photo-degrades” – a process in which
it is broken down by sunlight into smaller and smaller pieces, all of which are still plastic
polymers, eventually becoming individual molecules of plastic, still too tough for
anything to digest. For the last fifty-odd years, every piece of plastic that has made it
from our shores to the Pacific Ocean, has been breaking down and accumulating in the
central Pacific gyre. Oceanographers like Curtis Ebbesmeyer, the world’s leading
flotsam expert, refer to it as the great Pacific Garbage Patch. The problem is that it is not
a patch, it’s the size of a continent, and it’s filling up with floating plastic waste. My
research has documented six pounds of plastic for every pound of plankton in this area. My latest 3-month round trip research voyage just completed in Santa Barbara this week, (our departure was covered by SBNP) got closer to the center of the Garbage Patch than before and found levels of plastic fragments that were far higher for hundreds of miles.
We spent weeks documenting the effects of what amounts to floating plastic sand of all
sizes on the creatures that inhabit this area. Our photographers captured images of
jellyfish hopelessly entangled in frayed line, and transparent filter feeding organisms with
colorful plastic fragments in their bellies.

As we drifted in the center of this system, doing underwater photography day and night,
we began to realize what was happening. A paper plate thrown overboard just stayed
with us, there was no wind or current to move it away. This is where all those things that
wash down rivers to the sea end up. On October 10, during our return trip to Santa
Barbara, we discovered something never before documented-a Langmuir Windrow of
plastic debris. Circular ocean currents with contrary rotation create long lines of
material, visible from above as streaks on the ocean. Normally these are formed by
planktonic organisms or foam, but we discovered one made of plastic. Everything from
huge hawsers to tiny fragments were formed into a miles long line. We picked up
hundreds of pounds of netting of all types bailed together in this system along with every
type and size of debris imaginable. Sometimes, windrows like this drift down over the
Hawaiian Islands. That is when Waimanalo Beach on Oahu gets coated with blue green
plastic sand, along with staggering amounts of larger debris. Farther to the northwest, at
the Northwestern Hawaiian Islands Coral Reef Ecosystem Reserve, monk seals, the most
endangered mammal species in the United States, get entangled in debris, especially
cheap plastic nets lost or discarded by the fishing industry. Ninety percent of Hawaiian
green sea turtles nest here and eat the debris, mistaking it for their natural food, as do
Laysan and Black Footed Albatross. Indeed, the stomach contents of Laysan Albatross
look like the cigarette lighter shelf at a convenience store they contain so many of them.

It’s not just entanglement and indigestion that are problems caused by plastic debris,
however. There is a darker side to pollution of the ocean by ubiquitous plastic fragments.
As these fragments float around , they accumulate the poisons we manufacture for
various purposes that are not water-soluble. It turns out that plastic polymers are sponges
for DDT, PCBs and nonylphenols -oily toxics that don’t dissolve in seawater. Plastic
pellets have been found to accumulate up to one million times the level of these poisons
that are floating in the water itself. These are not like heavy metal poisons which affect
the animal that ingests them directly. Rather, they are what might be called “second
generation “ toxics. Animals have evolved receptors for elaborate organic molecules
called hormones, which regulate brain activity and reproduction. Hormone receptors
cannot distinguish these toxics from the natural estrogenic hormone, estradiol, and when
the pollutants dock at these receptors instead of the natural hormone, they have been
shown to have a number of negative effects in everything from birds and fish to humans.
The whole issue of hormone disruption is becoming one of, if not the biggest
environmental issue of the 21st Century. Hormone disruption has been implicated in
lower sperm counts and higher ratios of females to males in both humans and animals.
Unchecked, this trend is a dead end for any species.

A trillion trillion vectors for our worst pollutants are being ingested by the most efficient natural vacuum cleaners nature ever invented, the mucus web feeding jellies and salps (chordate jellies that are the fastest growing multicellular organisms on the planet) out in the middle of the ocean. These organisms are in turn eaten by fish and then, certainly in many cases, by humans. We can grow pesticide free organic produce, but can nature still produce a pesticide free organic fish? After what I have witnessed first hand in the Pacific, I have my doubts.

I am often asked why we can’t vacuum up the particles. In fact, it would be more difficult than vacuuming up every square inch of the entire United States, it’s larger and the fragments are mixed below the surface down to at least 30 meters. Also, untold numbers of organisms would be destroyed in the process. Besides, there is no economic resource that would be directly benefited by this process. We have not yet learned how to factor the health of the environment into our economic paradigm. We need to get to work on this calculus quickly, for a stock market crash will pale by comparison to an ecological crash on an oceanic scale.

I know that when people think of the deep blue ocean, they see images of pure, clean, unpolluted water. After we sample the surface water in the central Pacific, I often dive over with a snorkel and a small aquarium net. I have yet to come back after a fifteen minute swim without plastic fragments for my collection. I can no longer see pristine images when I think of the briny deep. Neither can I imagine any “beach cleanup” type of solution. Only elimination of the source of the problem can result in an ocean nearly free from plastic, and the desired result will only be seen by citizens of the third millennium AD. The battle to change the way we produce and consume plastics has just begun, but I believe it is essential that it be fought now. The levels of plastic particulates in the Pacific have at least tripled in the last ten years and a tenfold increase in the next decade is not unreasonable. Then, sixty times more plastic than plankton will float on its surface.”

UPCYCLING
http://www.digitaluniverse.net/upcycling/
http://www.wiserearth.org/group/BerkanaExchange
http://www.newscientist.com/article/dn14764
Plastic-munching bugs turn waste bottles into cash
BY Colin Barras / 19 September 2008

Newly discovered bacterial alchemists could help save billions of plastic bottles from landfill. The Pseudomonas strains can convert the low-grade PET plastic used in drinks bottles into a more valuable and biodegradable plastic called PHA. PHA is already used in medical applications, from artery-supporting tubes called stents to wound dressings. The plastic can be processed to have a range of physical properties. However, one of the barriers to PHA reaching wider use is the absence of a way to make it in large quantities. The new bacteria-driven process – termed upcycling – could address that, and make recycling PET bottles more economically attractive.

PET bugs
Although billions of plastic bottles are made each year, few are ultimately recycled. Just 23.5% of US bottles were recycled in 2006. This is because the recycling process simply converts the low value PET bottles into more PET, says Kevin O’Connor at University College Dublin, Ireland. “We wanted to see if we could turn the plastic into something of higher value in an environmentally friendly way,” he says. O’Connor and colleagues knew that heating PET in the absence of oxygen – a process called pyrolysis – breaks it down into terephthalic acid (TA) and a small amount of oil and gas. They also knew that some bacteria can grow and thrive on TA, and that other bacteria produce a high-value plastic PHA when stressed. So they wondered whether any bacteria could both feed on TA and convert it into PHA.

Bacteria hunt
“It was a long shot to be honest,” says O’Connor. His team studied cultures from around the world known to grow on TA, but none produced PHA. So they decided to look for undiscovered strains, in environments that naturally contain TA. Analysing soil bacteria from a PET bottle processing plant, which are likely to be exposed to small quantities of TA, yielded 32 colonies that could survive in the lab using TA as their only energy source. After 48 hours they screened each culture for PHA. Three cultures, all similar to known strains of Pseudomonas, accumulated detectable quantities of the valuable plastic. The next step is to improve the efficiency of the process, says O’Connor. “A quarter to a third of each cell is filled with plastic – we want to increase that to 50 to 60%.”

Less landfill
Sudesh Kumar, a microbiologist at the University of Science, Malaysia, in Penang, is impressed with the study. “There are many other systems that are economically more viable to produce PHA with better material properties,” he says. “But Kevin’s work offers an interesting novel approach to solve the problem of PET accumulation in landfill dumps.” But it is still unlikely that using the new approach alone will appeal to industry, O’Connor says. “Working with this kind of environmental technology in isolation, the chances of success are reduced,” he says. The best approach, he continues, would be to use the new bacteria as just one part of a bio-refinery capable of upcycling an array of waste products in an environmentally friendly way. {Journal reference: Environmental Science and Technology (DOI: 10.1021/es801010e)}

CONTACT
Kevin O’Connor
http://www.ucd.ie/research/success/featuredacademics/drkevinoconnor/
http://www.ucd.ie/research/people/biomolecularbiomedscience/drkevinedwardoconnor/home/
email : kevin.oconnor [at] ucd [dot] ie

ORV ALGUITA
http://alguita.com/orv_alguita.html
http://alguita.com/research_papers.html
http://www.algalita.org/research.html
http://www.algalita.org/Maps_Home.html

DOWN THE RABBITHOLE
http://en.wikipedia.org/wiki/Polyethylene_terephthalate
http://en.wikipedia.org/wiki/Polyhydroxyalkanoates
http://en.wikipedia.org/wiki/Pseudomonas
http://en.wikipedia.org/wiki/Sphingomonas

HEY THANKS! CANADIAN TEEN DECOMPOSES PLASTIC BAG IN THREE MONTHS
http://blog.wired.com/wiredscience/2008/05/teen-decomposes.html
By Brandon Keim  /  May 23, 2008

“The Waterloo, Ontario high school junior figured that something must make plastic degrade, even if it does take millennia, and that something was probably bacteria. (Hey, at between one-half and 90 percent of Earth’s biomass, bacteria’s a pretty safe bet for any biological mystery.)

The Record reports that Burd mixed landfill dirt with yeast and tap water, then added ground plastic and let it stew. The plastic indeed decomposed more quickly than it would in nature; after experimenting with different temperatures and configurations, Burd isolated the microbial munchers. One came from the bacterial genus Pseudomonas, and the other from the genus Sphingomonas.

Burd says this should be easy on an industrial scale: all that’s needed is a fermenter, a growth medium and plastic, and the bacteria themselves provide most of the energy by producing heat as they eat. The only waste is water and a bit of carbon dioxide. Amazing stuff. I’ll try to get an interview with this young man who may have managed to solve one of the most intractable environmental dilemmas of our time. And I can’t help but wonder whether his high school already had its prom. If he doesn’t get to be king, there’s no justice in this world.”

AGREED:  DANIEL BURD FOR PROM KING
http://apps.ysf-fsj.ca/virtualcwsf/projectdetails.php?id=1390

“My name is Daniel Burd, a grade 11 student at Waterloo Collegiate Institute. I performed my first “science” experiment involving planting and observing growth of different types of tomato seeds on the balcony of our apartment in Waterloo eleven years ago. Since that time, the ideas and concepts behind the way things work have constantly aroused my interest and have posed numerous questions for me to consider. At school, I am on ABCD Student Council, Charity Controller, Environment club, a peer tutor, and Norse Star newspaper. When I was five years old, I started to play the piano and I have completed my grade 8 piano and grade 2 rudiments at the RCM. Currently, I am learning improvisation and jazz. My jazz music role model is Oscar Peterson. I am a member of Nordic Skiing club, ROW swimming club and Waterloo Tennis Club where I am training for tournaments. I am a volunteer at K-W Science and Technology Children’s Museum. I help organize heritage events in K-W area and I run a charity dog-walking business in my neighborhood for people with disabilities. I fluently speak English, French and Russian and I enjoy spending free time with my friends.”

NEVER MIND SCHOLARSHIPS, GET HIM AN INVESTOR
–  The Manning Innovation Achievement Award – $500.00
–  Dalhousie University Faculty of Science Entrance Scholarship
Senior Gold Medallist – $4000 Entrance Scholarship
–  NSERC Undergraduate Student Research Award
Senior Gold Medallist – $5 625.00
–  UBC Science (Vancouver) Entrance Award
Senior Gold Medallist – $4000 Entrance Scholarship
–  University of Ottawa Entrance Scholarship
Senior Gold Medallist – $20,000 Entrance Scholarship
($5,000 each year for 4
years)
–  Senior Silver Medallist – $3000 Entrance Scholarship
–  The University of Western Ontario Scholarship
Gold Medallist – $2000 Entrance Scholarship
–  The University of Western Ontario Scholarship
Silver Medallist – $1500 Entrance Scholarship
–  Silver Medal – Environmental Innovation – $700.00
–  Gold Medal – Biotechnology & Pharmaceutical Sciences – $1 500.00
–  EnCana Platinum Award – Best Senior Project – $5 000.00
–  EnCana Best in Fair Award – $10 000.00

Total  $57 825.00

YEAST, TAP WATER, DIRT
http://news.therecord.com/article/354044
WCI student isolates microbe that lunches on plastic bags
BY Karen Kawawada

Getting ordinary plastic bags to rot away like banana peels would be an environmental dream come true. After all, we produce 500 billion a year worldwide and they take up to 1,000 years to decompose. They take up space in landfills, litter our streets and parks, pollute the oceans and kill the animals that eat them. Now a Waterloo teenager has found a way to make plastic bags degrade faster — in three months, he figures.

Daniel Burd’s project won the top prize at the Canada-Wide Science Fair in Ottawa. He came back with a long list of awards, including a $10,000 prize, a $20,000 scholarship, and recognition that he has found a practical way to help the environment. Daniel, a 16-year-old Grade 11 student at Waterloo Collegiate Institute, got the idea for his project from everyday life. “Almost every week I have to do chores and when I open the closet door, I have this avalanche of plastic bags falling on top of me,” he said. “One day, I got tired of it and I wanted to know what other people are doing with these plastic bags.” The answer: not much. So he decided to do something himself. He knew plastic does eventually degrade, and figured microorganisms must be behind it. His goal was to isolate the microorganisms that can break down plastic — not an easy task because they don’t exist in high numbers in nature.

First, he ground plastic bags into a powder. Next, he used ordinary household chemicals, yeast and tap water to create a solution that would encourage microbe growth. To that, he added the plastic powder and dirt. Then the solution sat in a shaker at 30 degrees. After three months of upping the concentration of plastic-eating microbes, Burd filtered out the remaining plastic powder and put his bacterial culture into three flasks with strips of plastic cut from grocery bags. As a control, he also added plastic to flasks containing boiled and therefore dead bacterial culture.

Six weeks later, he weighed the strips of plastic. The control strips were the same. But the ones that had been in the live bacterial culture weighed an average of 17 per cent less. That wasn’t good enough for Burd. To identify the bacteria in his culture, he let them grow on agar plates and found he had four types of microbes. He tested those on more plastic strips and found only the second was capable of significant plastic degradation.

Next, Burd tried mixing his most effective strain with the others. He found strains one and two together produced a 32 per cent weight loss in his plastic strips. His theory is strain one helps strain two reproduce. Tests to identify the strains found strain two was Sphingomonas bacteria and the helper was Pseudomonas. A researcher in Ireland has found Pseudomonas is capable of degrading polystyrene, but as far as Burd and his teacher Mark Menhennet know — and they’ve looked — Burd’s research on polyethelene plastic bags is a first. Next, Burd tested his strains’ effectiveness at different temperatures, concentrations and with the addition of sodium acetate as a ready source of carbon to help bacteria grow. At 37 degrees and optimal bacterial concentration, with a bit of sodium acetate thrown in, Burd achieved 43 per cent degradation within six weeks.

The plastic he fished out then was visibly clearer and more brittle, and Burd guesses after six more weeks, it would be gone. He hasn’t tried that yet. To see if his process would work on a larger scale, he tried it with five or six whole bags in a bucket with the bacterial culture. That worked too. Industrial application should be easy, said Burd. “All you need is a fermenter . . . your growth medium, your microbes and your plastic bags.” The inputs are cheap, maintaining the required temperature takes little energy because microbes produce heat as they work, and the only outputs are water and tiny levels of carbon dioxide — each microbe produces only 0.01 per cent of its own infinitesimal weight in carbon dioxide, said Burd. “This is a huge, huge step forward . . . We’re using nature to solve a man-made problem.”

Burd would like to take his project further and see it be used. He plans to study science at university, but in the meantime he’s busy with things such as student council, sports and music. “Dan is definitely a talented student all around and is poised to be a leading scientist in our community,” said Menhennet, who led the school’s science fair team but says he only helped Burd with paperwork.

STYROFOAM
http://portal.acs.org/portal/acs/corg/content?_nfpb=true&_pageLabel=PP_ARTICLEMAIN&node_id=222&content_id=CTP_003309&use_sec=true&sec_url_var=region1
Microbes convert ‘Styrofoam™’ into biodegradable plastic  /
02/23/2006

“Bacteria could help transform a key component of disposable cups, plates and utensils into a useful eco-friendly plastic, significantly reducing the environmental impact of this ubiquitous, but difficult-to- recycle waste stream, according to a study scheduled to appear in the April 1 issue of the American Chemical Society journal, Environmental Science & Technology.

The microbes, a special strain of the soil bacterium Pseudomonas putida, converted polystyrene foam — commonly known as Styrofoam™ — into a biodegradable plastic, according to Kevin O’Connor, Ph.D., of University College Dublin, the study’s corresponding author. The study is among the first to investigate the possibility of converting a petroleum-based plastic waste into a reusable biodegradable form.

O’Connor and his colleagues from Ireland and Germany, utilized pyrolysis, a process that transforms materials by heating them in the absence of oxygen, to convert polystyrene — the key component of many disposable products — into styrene oil. The researchers then supplied this oil to P. putida, a bacterium that can feed on styrene, which converted the oil into a biodegradable plastic known as PHA (polyhydroxyalkanoates). The process might also be used to convert other types of discarded plastics into PHA, according to O’Connor.

PHA has numerous uses in medicine and can be used to make plastic kitchenware, packaging film and other disposable items. The biodegradable plastic is resistant to hot liquids, greases and oils, and can have a long shelf life. But unlike polystyrene, it readily breaks down in soil, water, septic systems and backyard composts. Worldwide, more than 14 million metric tons of polystyrene are produced annually, according to the U.S. Environmental Protection Agency. Most of this ends up in landfills. Although polystyrene represents less than 1 percent of solid waste generated in the United States, at least 2.3 million tons of it is dumped in U.S. landfills each year. Only 1 percent of polystyrene waste is currently recycled, the authors note.”

SEE ALSO
Anthony J. Sinskey, Sc.D.
http://web.mit.edu/biology/www/facultyareas/facresearch/sinskey.html
http://hst.mit.edu/public/people/faculty/facultyBiosketch.jsp?key=Sinskey
e-mail : asinskey [at] mit [dot] edu

Oliver Peoples, Ph.D. / Founder / Chief Scientific Officer, Metabolix
http://metabolix.com/
http://www.metabolix.com/natures%20plastic/coretechnology.html
http://www.metabolix.com/biotechnology%20foundation/biotechnologyfoundation.html
http://www.metabolix.com/sustainable%20solutions/sustainablesolutions.html
http://metabolix.com/resources/researchlinks.html
e-mail : peoples [at] metabolix [dot] com

BIOPLAST
http://www.bioplast.com.tr/bioplast.html
http://www.bioplast.com.tr/bio-bozunur-plastics.html

PREVIOUSLY ON SPECTRE — BIODEGRADABLE PLASTICS
http://groups.google.com/group/spectre_event_horizon_group/browse_thread/thread/a806584fe743400a/84334f2f76d7a48c?lnk=gst&q=PLASTIC#84334f2f76d7a48c
DOMESTICATING BIOTECH
http://groups.google.com/group/spectre_event_horizon_group/browse_thread/thread/10b613466cdccd56/10dd98161e8247ec?lnk=gst&q=BACTERIA#10dd98161e8247ec
GROW YOUR OWN BACTERIAL SLAVE ARMY — SEA MONKEYS DONE FOR GOOD
http://groups.google.com/group/spectre_event_horizon_group/browse_thread/thread/338c3693773e818e/e27e7fa967783c03?lnk=gst&q=BACTERIA#e27e7fa967783c03

PSEUDOMONAS GENOME DATABASE
http://www.pseudomonas.com/

ALSO CAUSES SNOWFLAKES
http://www.efluxmedia.com/news_Bacteria_The_Main_Ingredient_in_Snowflakes_Scientists_Say_14620.html
Bacteria – The Main Ingredient in Snowflakes, Scientists Say
BY Max Brenn  /  February 29th 2008

One might rethink playing with snow or walking in the rain as a new study by scientists from the Louisiana State University revealed that snow and rain might form mostly on bacteria in the clouds. Scientists have long known that the ice crystals in clouds, which become rain or snow, need to cling to some kind of particle, called ice nucleators, in order to form in temperatures above minus 40 degrees Celsius.

Microbiologist Brent Christner at Louisiana State University sampled snow from Antarctica, France, and the Yukon and found that as much as 85 percent of the nuclei were bacteria, he said in a telephone interview with the Associated Press. “Every snow and ice sample we’ve looked at, we found biological ice nucleators. Here’s a component that has been completely ignored to date,” Christner said. The most common bacteria found was Psedomonas syringae, which can cause disease in several types of plants (tomatoes, green beams and other similar plants). The bacterium was found in 20 samples of snow from around the world and subsequent research has also found it in summer rainfall in Louisiana.

Scientists have sought ways to eliminate this bacterium in time. Now they wonder whether this elimination would result in less rain or snow, or would soot and dust be the major generators of precipitation. “The question is, are they a good guy or a bad guy. And I don’t have the answer to that,” Christner said, quoted by the same source. One thing is for sure. Bacteria that infect plants may multiply on the plants’ leaves and drift into the atmosphere. These bacteria could then cause precipitation and land on another plant, where the life cycle could continue, Christner said.

Virginia K.Walker, a biologist at Queen’s University in Kingston, Ontario, Canada said other studies have found bacteria serving as snow nuclei, but this is the first to identify it as Pseudomonas. “It’s one of those great bacteria…you can find them anywhere. They are really interesting,” Walker said. The study, supported by a Louisiana State University research grant and by the National Science Foundation and the Earth Institute at Columbia University, was published in today’s edition of the journal Science

CONTACT
Brent C. Christner
http://www.biology.lsu.edu/faculty_listings/fac_pages/bchristner.html
http://brent.xner.net/
email : xner [at] lsu [dot] edu

ABSTRACT
http://www.biology.lsu.edu/highlights/christner.html
Ubiquity of Biological Ice Nucleators in Snowfall
“Despite the integral role of ice nucleators (IN) in atmospheric processes leading to precipitation, their sources and distributions have not been well established. We examined IN in snowfall from mid- and high-latitude locations and found that the most active were biological in origin. Of the IN larger than 0.2 micrometer that were active at temperatures warmer than -7°C, 69 to 100% were biological, and a substantial fraction were bacteria. Our results indicate that the biosphere is a source of highly active IN and suggest that these biological particles may affect the precipitation cycle and/or their own precipitation during atmospheric transport”

ONE BILLION PER QUART
http://www.time.com/time/magazine/article/0,9171,894282,00.html
Bugs in the Reactor  /  Oct. 05, 1959

Los Alamos’ Omega West is a swimming-pool-type research reactor whose fuel rods are suspended under 25 ft. of water, which acts not only as coolant and moderator but also shields its human operators from radioactivity. In the spring of 1958, physicists peering down through it saw that the water was getting cloudy. They called Chemist-Bacteriologist Eric B. Fowler of the laboratory’s radioactive-waste disposal group, who found that it was swarming with microorganisms, about i billion per quart. The bugs turned out to be rod-shaped bacteria of the genus Pseudomonas, which were feeding on resin and felt in the water purifying system.

The fierce radiation in the reactor appeared to bother the bacteria hardly at all. When the reactor was shut down but still highly radioactive, they multiplied fast. Even when it was running full blast, they held their own. Since they normally divide every 20 minutes or so, this meant that radiation was killing only about as many as managed to live and divide. Just how much radiation the Pseudomonas got is hard to estimate, because the water circulates at varying distances from the core of the reactor, but Dr. Fowler thinks they may have absorbed more than 10 million rep (roentgen equivalent physical) in an eight-hour day, which is 10,000 times the dose that is fatal to man.

Many other microorganisms must have got into Omega West’s deadly water; only the Pseudomonas survived. Perhaps the Pseudomonas have natural resistance to radiation. More likely, under the bombardment of Omega’s radiation, normal Pseudomonas underwent mutation, producing a special strain capable of surviving in this atomic blast. This ability to transform themselves quickly to cope with new conditions is a specialty of humble bacteria, whose constitutions are relatively simple. It is an ability that higher animals cannot emulate, but may have reason to envy.

PSEUDOMONAS AND YOU
http://www.horizonpress.com/pseudo
http://www.horizonpress.com/gateway/pseudomonas.html

The Taxonomy of Pseudomonas
The studies on the taxonomy of this complicated genus groped their way
in the dark while following the classical procedures developed for the
description and identification of the organisms involved in sanitary
bacteriology during the first decades of the twentieth century. This
situation sharply changed with the proposal to introduce as the
central criterion the similarities in the composition and sequences of
macromolecules components of the ribosomal RNA. The new methodology
clearly showed that the genus Pseudomonas, as classical defined,
consisted in fact of a conglomerate of genera that could clearly be
separated into five so-called rRNA homology groups. Moreover, the
taxonomic studies suggested an approach that might proved useful in
taxonomic studies of all other prokaryotic groups. A few decades after
the proposal of the new genus Pseudomonas by Migula in 1894, the
accumulation of species names assigned to the genus reached alarming
proportions. At the present moment, the number of species in the
current list has contracted more than ten-fold. In fact, this
approximated reduction may be even more dramatic if one considers that
the present list contains many new names, i.e., relatively few names
of the original list survived in the process. The new methodology and
the inclusion of approaches based on the studies of conservative
macromolecules other than rRNA components, constitutes an effective
prescription that helped to reduce Pseudomonas nomenclatural
hypertrophy to a manageable size.

Genome Diversity of Pseudomonas aeruginosa
The G+C rich Pseudomonas aeruginosa chromosome consists of a conserved
core and a variable accessory part. The core genomes of P. aeruginosa
strains are largely collinear, exhibit a low rate of sequence
polymorphism and contain few loci of high sequence diversity, notably
the pyoverdine locus, the flagellar regulon, pilA and the O-antigen
biosynthesis locus. Variable segments are scattered throughout the
genome of which about one third are immediately adjacent to tRNA or
tmRNA genes. The three known hot spots of genomic diversity are caused
by the integration of genomic islands of the pKLC102 / PAGI-2 family
into tRNALys or tRNAGly genes. The individual islands differ in their
repertoire of metabolic genes, but share a set of syntenic genes that
confer their horizontal spread to other clones and species.
Colonization of atypical disease habitats predisposes to deletions,
genome rearrangements and accumulation of loss-of-function mutations
in the P. aeruginosa chromosome. The P. aeruginosa population is
characterized by a few dominant clones widespread in disease and
environmental habitats. The genome is made up of clone-typical
segments in core and accessory genome and of blocks in the core genome
with unrestricted gene flow in the population.

Oligonucleotide Usage Signatures of the Pseudomonas putida KT2440
Genome
Di- to pentanucleotide usage and the list of the most abundant octa-
to tetradecanucleotides are useful measures of the bacterial genomic
signature. The Pseudomonas putida KT2440 chromosome is characterized
by strand symmetry and intra-strand parity of complementary
oligonucleotides. Each tetranucleotide occurs with similar frequency
on the two strands. Tetranucleotide usage is biased by G+C content and
physicochemical constraints such as base stacking energy, dinucleotide
propeller twist angle or trinucleotide bendability. The 105 regions
with atypical oligonucleotide composition can be differentiated by
their patterns of oligonucleotide usage into categories of
horizontally acquired gene islands, multidomain genes or ancient
regions such as genes for ribosomal proteins and RNAs. A species-
specific extragenic palindromic sequence is the most common repeat in
the genome that can be exploited for the typing of P. putida strains.
In the coding sequence of P. putida LLL is the most abundant
tripeptide.

Genetic Tools for Pseudomonas
Genetic tools are required to take full advantage of the wealth of
information generated by genome sequencing efforts, and ensuing global
gene and protein expression analyses. Although the development of
genetic tools has generally not kept up with the sequencing pace,
substantial progress has been made in this arena. PCR- and
recombination-based strategies allowed construction of whole genome
expression and transposon insertion libraries. Similar strategies
combined with improved transformation protocols facilitate high-
throughput construction of deletion alleles and development of a broad-
host-range mini-Tn7 chromosome integration system. While to date most
of these tools and methods have been developed for and applied in P.
aeruginosa, they will most likely also be applicable to other
Pseudomonas with appropriate modifications.

Molecular Biology of Cell-Surface Polysaccharides in Pseudomonas
aeruginosa: From Gene to Protein Function
Cell-surface polysaccharides play diverse roles in the bacterial
“lifestyle”. They serve as a barrier between the cell wall and the
environment, mediate host-pathogen interactions, and form structural
components of biofilms. These polysaccharides are synthesized from
nucleotide-activated precursors and, in most cases, all the enzymes
necessary for biosynthesis, assembly and transport of the completed
polymer are encoded by genes organized in dedicated clusters within
the genome of the organism. Lipopolysaccharide is one of the most
important cell-surface polysaccharides, as it plays a key structural
role in outer membrane integrity, as well as being an important
mediator of host-pathogen interactions. The genetics for the
biosynthesis of the so-called A-band (homopolymeric) and B-band
(heteropolymeric) O antigens have been clearly defined, and a lot of
progress has been made toward understanding the biochemical pathways
of their biosynthesis. The exopolysaccharide alginate is a linear
copolymer of ß-1,4-linked D-mannuronic acid and L-guluronic acid
residues, and is responsible for the mucoid phenotype of late-stage
cystic fibrosis disease. The pel and psl loci are two recently
discovered gene clusters that also encode exopolysaccharides found to
be important for biofilm formation. Rhamnolipid is a biosurfactant
whose production is tightly regulated at the transcriptional level,
but the precise role that it plays in disease is not well understood
at present. Protein glycosylation, particularly of pilin and
flagellin, is a recent focus of research by several groups and it has
been shown to be important for adhesion and invasion during bacterial
infection.

Pseudomonas aeruginosa Virulence and Pathogenesis Issues
Regulation of gene expression can occur through cell-cell
communication or quorum sensing (QS) via the production of small
molecules called autoinducers. QS is known to control expression of a
number of virulence factors. Another form of gene regulation which
allows the bacteria to rapidly adapt to surrounding changes is through
environmental signaling. Recent studies have discovered that
anaerobiosis can significantly impact the major regulatory circuit of
QS. This important link between QS and anaerobiosis has a significant
impact on production of virulence factors of this organism.

Pseudomonas aeruginosa Biofilms: Impact of Small Colony Variants on
Chronic Persistent Infections
The achievements of medical care in industrialised societies are
markedly impaired due to chronic opportunistic infections that have
become increasingly apparent in immunocompromised patients and the
ageing population. Chronic infections remain a major challenge for the
medical profession and are of great economic relevance because
traditional antibiotic therapy is usually not sufficient to eradicate
these infections. One major reason for persistence seems to be the
capability of the bacteria to grow within biofilms that protects them
from adverse environmental factors. Pseudomonas aeruginosa is not only
an important opportunistic pathogen and causative agent of emerging
nosocomial infections but can also be considered a model organism for
the study of diverse bacterial mechanisms that contribute to bacterial
persistence. In this context the elucidation of the molecular
mechanisms responsible for the switch from planctonic growth to a
biofilm phenotype and the role of inter-bacterial communication in
persistent disease should provide new insights in P. aeruginosa
pathogenicity, contribute to a better clinical management of
chronically infected patients and should lead to the identification of
new drug targets for the development of alternative anti-infective
treatment strategies.

Antibiotic Resistance in Pseudomonas
Pseudomonas aeruginosa is a highly relevant opportunistic pathogen.
One of the most worrisome characteristics of P. aeruginosa consists in
its low antibiotic susceptibility. This low susceptibility is
attributable to a concerted action of multidrug efflux pumps with
chromosomally-encoded antibiotic resistance genes and the low
permeability of the bacterial cellular envelopes. Besides intrinsic
resistance, P. aeruginosa easily develop acquired resistance either by
mutation in chromosomally-encoded genes, either by the horizontal gene
transfer of antibiotic resistance determinants. Development of
multidrug resistance by P. aeruginosa isolates requires several
different genetic events that include acquisition of different
mutations and/or horizontal transfer of antibiotic resistance genes.
Hypermutation favours the selection of mutation-driven antibiotic
resistance in P. aeruginosa strains producing chronic infections,
whereas the clustering of several different antibiotic resistance
genes in integrons favours the concerted acquisition of antibiotic
resistance determinants. Some recent studies have shown that
phenotypic resistance associated to biofilm formation or to the
emergence of small-colony-variants may be important in the response of
P. aeruginosa populations to antibiotics treatment.

Iron uptake in Pseudomonas
Like all aerobic bacteria, pseudomonads need to take up iron via the
secretion of siderophores which complex iron (III) with high affinity.
Much progress has been made in the elucidation of siderophore-mediated
high-affinity iron uptake by Pseudomonas, especially in the case of
the opportunistic pathogen, P. aeruginosa. Fluorescent pseudomonads
produce the high-affinity peptidic siderophore pyoverdine, but also,
in many cases, a second siderophore of lesser affinity for iron. Some
of the genes for the biosynthesis and uptake of these siderophores
have been identified and the functions of the encoded proteins known.
Iron uptake via siderophores is regulated at several levels, via the
general iron-sensitive repressor Fur (Ferric Uptake Regulator), via
extracytoplasmic sigma factors/anti-sigma factors or via other
regulators. Since pseudomonads are ubiquitous microorganisms, it is
not surprising to find in their genome a large number of genes
encoding receptors for the uptake of heterologous ferrisiderophores or
heme reflecting their great adaptability to diverse iron sources.
Another exciting development is the recent evidence for a cross-talk
between the iron regulon and other regulatory networks, including the
diffusible signal molecule-mediated quorum sensing in P. aeruginosa.