Month: December 2008

by Eric Martin

In response to the recent shoe-throwing incident in Iraq, many Iraq war supporters – and the President himself – will attempt to dismiss the thrower, Muntazer al-Zaidi, as an outlier, an exception, an "attention" seeker (to paraphrase Bush), with the rule being a generally grateful Iraqi populace.  Jonah Goldberg called al-Zaidi, an "unsavory Muslim or Arab." 

Kathryn Jean Lopez quotes Michael Totten, who sought to set the record straight: "I have briefly met many Iraqi journalists in Baghdad. They seem like decent people, for the most part, and are not as shifty as many other civilians I encounter."  What effusive praise.  Iraq journalists: not as shifty as most Iraqi civilians.  With the exception of Zaidi, of course.

However, as news reports confirm that al-Zaidi has become a cause celebre in Iraq – and the wider Muslim world – by virtue of his defiance of Bush, it will be harder and harder to paint him as some lone slinger.  At that point, the mood in Iraq war/Bush booster circles will most likely shift to Andy McCarthy-type outrage at the lack of appreciation for all that Bush has done to help the Iraqi people.  Already, there is a popular meme cropping up that al-Zaidi only enjoyed the freedom to hurl his shoe by virtue of America’s invasion, and that under Saddam al-Zaidi would have been executed for this act.

This bit of gloss on America’s neo-imperial endeavor is little more than a thinly applied sheen on an otherwise grotesque affair.  The sentimentalists insisting that US policy in Iraq has been guided by some altruistic democratization impulses should cease the self-delusion or, if they be more cynical, the attempt to delude others about the driving forces of our foreign policy.  Rather, it is essential to the crafting of future policy that we make an honest, full reckoning of our past policies vis-a-vis Iraq. In this way, we can begin to appreciate the sentiment behind al-Zaidi’s act, his act’s popularity and the continuing resentment of all those "ingrates" in Iraq.  And elsewhere.  And how to begin the long process of attempting to repair the damage. 

First, we must appreciate why it is we are in Iraq, and what led us there.  Alan Greenspan summed it up rather succinctly in a rare moment of honesty, stating "the Iraq War is largely about oil."  Oil and, importantly, the ability to establish a large and "enduring" (not permanent!) American military presence in the middle of the largest oil producing region in the world (and the relocation of certain military assets outside of Saudi Arabia).  Ted Koppel appealed to a brand of common sense that conflicts with romanticized notions of American excetionalism:

Keeping oil flowing out of the Persian Gulf and through the Strait of Hormuz has been bedrock American foreign policy for more than a half-century. […]

If those considerations did not enter into the Bush administration’s calculations when the president ordered the invasion of Iraq in 2003, it would have been the first time in more than 50 years that the uninterrupted flow of Persian Gulf oil was not a central element of American foreign policy. 

For some, also, there was the need to show the world after 9/11 that we were still a force to be reckoned with.  Jonah Goldberg termed it the "Ledeen Doctrine":

Every ten years or so, the United States needs to pick up some small crappy little country and throw it against the wall, just to show the world we mean business. 

Or as Thomas Friedman put it, the need to attack some Muslim country (Iraq mostly because it was easiest) in order to tell the Muslim world to "Suck. On. This."  For others still, removing Saddam was seen as an important step in ensuring Israel’s security for decades to come (a long held goal for the PNAC crowd that only morphed into concern about WMD and al-Qaeda after 9/11). 

While there was a conscious decision to use the vague term "WMD" (backed up with blatant "mushroom cloud" and al-Qaeda links duplicity), as the means to sell the war to the public, the record shows that the Bush administration showed far less interest in gauging Iraq’s actual WMD capacity or ties to al-Qaeda as it did in hyping what little evidence there was.  The decision to invade was made early on, regardless of the potential findings of inspectors on the ground in Iraq. Upon finding no WMD in Iraq despite following every lead provided by the US government, those inspectors were removed from the theater to clear the way for shock and awe.

Those that supported the Iraq war for democratization purposes were certainly the minority in the Bush administration, and even many of the supposed proponents conceived of democracy very narrowly: government by US viceroy for many years, followed by – or in conjunction with – the installation of US friendly clients such as Ahmad Chalabi.  Even to this day, declarations by the democratically elected, and ostensibly "sovereign" Iraqi government, are dismissed cavaliarly by many in the democratization set.

Whether or not the flypaper theory was part of the calculus before the invasion, or just a convenient ex post facto rationalization, war supporters from the President and Vice President down have repeated the argument that by virtue of the invasion, and maintenance of troops in Iraq, we can attract al-Qaeda and other extremists to Iraq and "fight them there so we don’t have to fight them here."  Just today Bush reiterated this point:

Bush: There have been no attacks since I have been president, since 9/11. One of the major theaters against al Qaeda turns out to have been Iraq. This is where al Qaeda said they were going to take their stand. This is where al Qaeda was hoping to take …

Raddatz: But not until after the U.S. invaded.

Bush: Yeah, that’s right. So what?

So what?  Really?  I imagine some Iraqis might, you know, care that their country was turned into bait to lure combatants.  Maybe anger at this was part of what led al-Zaidi to make his protest, the same way such anger led this Iraqi to vent at one of Bush’s earlier recitations of this rationle:

There was one sentence in what [Bush] said that really provoked me and made me feel disgusted. I was about to throw the ash tray at the TV when he said "to win the war on terror we must take the fight to the enemy." how dare he say that? He brought these enemies to our country and now he wants to fight them there? to keep Americans safe?!! Is it on the expense of innocent people?! Is it on the expense of destroying and dividing an entire country to make Americans safe?! I consider every American supporting him in that is selfish and mean and blood thirsty. Think of the bread you are eating and compare it to the blood-mixed bread Iraqis are eating. Think of the children crying when they hear an explosion. Think of the pregnant who lost their babies because they were unable to reach the hospital. Think of those deprived from their education. All of this is happening because his majesty believes in "taking the fight to the enemy" so that you become safe and we become the bait in which he could catch "terrorists" with.

Ah, but he wouldn’t have been able to write about such callousness in Saddam’s Iraq!

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by Eric Martin

The trouble with socialism is socialism. The trouble with capitalism is capitalists.

That quote is attributed to the late Austrian analyst Willi Schlamm, and its underlying truth is particularly relevant given the current economic crisis and the familiar path that has led us to it.  Mr. Schlamm’s argument comes down to the premise that the inherent weakness in capitalism is not the system, per se, but rather the greed of the actual capitalists operating within it. 

In this context, greed itself is often a short-sighted, impulsive and obsessive animal and rarely, if ever, does it consider posterity or even the next fiscal year. In other words, greed tends to create a system in which short term gain is valued over substantive, balanced and sustained growth. But since you cannot separate the capitalists from the system of capitalism, it becomes necessary to corral the inevitable greed, set parameters on its excesses and channel its incentivizing capacity into productive directions. As capitalist champion Milton Friedman said:

What kind of society isn’t structured on greed? The problem of social organization is how to set up an arrangement under which greed will do the least harm…

Unfortunately, those that most loudly proclaim their faith in capitalism fail to appreciate its basic nature, and are most dedicated to removing the structural regulations and oversight necessary to keep capitalism from bringing about its own demise. Such aversion to regulation has risen to take its place beside the cult of tax cuts and faith in free market solutions as one of the Modern GOP’s three sacrosanct economic principles (call it the "Strong Hayek" troika).  In each case, the faith based, categorical, oversimplified outlook has replaced empiricism, pragmatism and a nuanced appreciation of capitalism’s strenghts and weaknesses. 

According to Grover Norquist’s GOP, all tax cuts are good and all tax increases are bad – regardless of the context, underlying fiscal realities and other variables.  The free market is always more efficient than the public sector – regardless of the relative inefficiency and negative health outcomes resulting from a system of private health insurance (for example).  Similarly, all regulations are an evil impediment to free market dynamism – a market that, if left to its own devices, would self-regulate its way to optimal efficiency.

This isn’t just magical thinking, nor is it simply absolutist. It is an outlook based on a lack of appreciation for human nature that has led to repeated real-world calamities.  Matt Yglesias flags an article that discusses one of the most recent examples of how greed – unencumbered by regulations and unchecked by public sector involvement – undermines a well-functioning capitalist system:

Since the subprime mortgage troubles exploded into a full-blown financial crisis last year, the three top credit-rating agencies — Moody’s, Standard & Poor’s and Fitch Ratings — have faced a firestorm of criticism about whether their rosy ratings of mortgage securities generated billions of dollars in losses to investors who relied on them.

The agencies are supposed to help investors evaluate the risk of what they are buying. But some former employees and many investors say the agencies, which were paid far more to rate complicated mortgage-related securities than to assess more traditional debt, either underestimated the risk of mortgage debt or simply overlooked its danger so they could rake in large profits during the housing boom.

[For the self-regulation] scheme to work the rating agencies need to place a higher value on the long-term viability of their brand than on short-term profit opportunities. But of course we know that people are often short-sighted, and often heavily discount the future relative to the present. Relatedly, for the scheme to work we need the firms to be primarily concern with the long-term interests of the firms rather than the interests of the managers. But even if Moody’s, qua company, winds up taking a giant hit over this, it’s still not clear that Moody’s top executives won’t have come out ahead. […]

[I]t would make a lot of sense to try to develop a public agency that rates credit instruments. [This] wouldn’t stop anyone from relying on private sector ratings if they wanted to. Nor would it guarantee that the public agency would always get things right. But it would provide a check on some of the distortions that the current system produces.

This is a very similar dynamic to the investment banking lapses during the age of the Internet bubble, which I will attempt to explain in general terms (restated, in part, from a prior post).  Within the major investment banks, there are various divisions. One such division handles the underwriting duties, and another conducts market research on various companies on a sector by sector basis.  A quick and dirty definition of underwriting: In an IPO, or any subsequent offering of stock, companies usually seek out an investment bank to underwrite the offering (for a fee) pursuant to which the bank secures buyers for the stock (often times purchasing the stock itself for resale), distributes the stock through the markets and provides rekated services – in essence managing the process for the company looking to sell the shares.

In theory, and in practice for some time, the research and underwriting branches were separated by an internal firewall in order to prevent the imperatives of the underwriting side from contaminating the objective analysis of the research side.  This is important to the health and attractiveness of our financial markets. It is in the interest of investors, the markets, the companies themselves and our economy in general that there is a knowledgeable investor class that can rely on objective research and corporate transparency mandated by disclosures in filings made with the Securities and Exchange Commission.  Faith in that transparency spurs investment from Americans and abroad.

Thus, it is in the interest of the banks to maintain the firewall in order to preserve confidence in the US markets, and thus ensure the continued inflow of investment dollars.  But with the burgeoning number of stock offerings being undertaken during the expansion of the Internet bubble, the firewall began to crack. The underwriting divisions began pressuring the research divisions to issue inflated "buy" ratings on stocks and author favorable reports on the economic health of underwriting clients in order to acquire or maintain the banking business of those companies.  The goal of maintaining the long term viability of the markets was jettisoned in favor of the lure of short term profits.

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