Month: May 2010 Page 1 of 4

Holy Sweet Lord, Turkey has announced they will send another flotilla to Gaza—escorted by the Turkish Navy!

Wow.

Does Israel want a war with Turkey? They can’t win it, short of using nukes, and Turkey is a NATO member, if Israel attacks NATO ships, Turkey can invoke Article V (in fact, they can invoke it already, since the ships were attacked by a non NATO power on the high seas.) If Turkey does so, of course NATO nations will refuse, but doing so will break NATO.

This is high stakes.

Update: I might add that in the case of a war between Turkey and Israel, if Turkey is serious, unless Israel uses nukes, my money is on the Turks. They have a huge armored corp, and the nations between Israel and Turkey aren’t going to say no if Turkey asks for access (because if they do, Turkey will just roll right through them.) Also if Turkey and Israel goes to war, it’s at least 50/50 the Egypt jumps in as well.

Israel is really playing with fire on this one.

Update 2: See Sean-Paul’s comments on the domestic reasons of Turkey’s reaction, and what the death of the Israeli/Turkish Entente means.

Update 3: See this analysis (h/t Pogge) for the legalities. Short of it is that if the act wasn’t rogue, then this was an act of war, not an act of piracy.

Israel’s Three Endgames

By Ian Welsh

On May 31, 2010

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As news comes in that Israeli commandos, boarding a relief flotilla for Gaza, have killed 10 to 16 peace activists, it’s worth reviewing the situation Israel finds itself in.

First, Israel is a state about half of whose population, the Palestinians, have restricted economic and political rights. This is true both of muslim citizens and those Palestinians who live in the West Bank and Gaza. I count them as under Israeli rule because when Israel controls their ability to exit or enter the country, bulldozes their houses at will, decides if they can import food and medicine, arrests “cabinet members” at will, determines where and when Palestinians can go, what the curfews are, and so on, it is clear that Israel rules them.

This makes West Bank communities (which are divided from themselves) and Gaza effectively South African bantustans, where non-citizen residents are forced to reside. And that means that Israel, is, yes, effectively an apartheid state, different from South Africa in the eighties only in that a smaller proportion of the population are second class citizens confined to ghettos.

Population is, of course, the key to understanding the Israeli situation. Not only are Palestinians outbreeding Israelis, so that they will soon be the majority of the population, but within the Israeli population proper, right wing religious Jews are outbreeding their more secular brethren. This is leading to a hardening within the voting population, and a higher tolerance for violence and crackdowns, at the same time as the Jewish population feels itself more and more beleagured.

Population is also at the core of the resource problem, or, to be more specific, the water problem. There is a limited amount of water in Palestine, and as the population increases, there are fears that there isn’t enough. A viable Palestinian state would require more water than Israel wants to give up, for very good reasons.

Another important demographic issue is that given how young their population is almost every living Palestinian has never known anything but Israeli occupation. This is less true of Israelis, but still, any Israeli who isn’t closing in on 50 probably doesn’t remember a time when Israel wasn’t occupying a hostile population.

Demographic realities lead to one conclusion: if things keep going on as they are now, in two generations Israel will e so clearly an apartheid state, with the vast majority of the population powerless Palestinians without a vote, that no one will be able to pretend otherwise, either inside or outside the country.

Since Israel’s identity is as a specifically Jewish state, that is, one based on religious and ethnic identity (many Jews don’t recognize converts) that will mean that Jews will rule over a population mainly made up of non Jews.

This is, in a sense, a modern Sparta, an outnumbered ethnicity ruling over numerous Helots. It is unlikely the rest of the world will tolerate it, and it is an unstable state for a nation with democratic aspirations.

The status quo thus ends, most likely, in a single state solution. The Palestinians are given the vote, as the blacks were in South Africa, and the state of Israel as a Jewish state, ends. Those who find the idea of one ethnicity or religion ruling over others may not find this end particularly tragic.

However this end-state is anathema to most Israelis, who believe that Israel should be a state based on religious ethnicity. If they are unwilling to accept it, then there are two options available to them to avoid that fate.

First, they can try and come to a two-state solution. This has been the status quo preferred solution for a couple decades now, but it seems more and more unlikey. The number of settlers in the West Bank goes up every year, as does the continued ethnic cleansing of Jerusalem of undesirable Muslims. The facts on the ground say very clearly that the Israeli government does not want a two-state solution, and is not acting to achieve one. However, as the situation becomes more intolerable, they may come to see the situation otherwise.

Any Israeli Prime Minister who acts on this will take his life in his hands. Right wing settlers have already assassinated one Prime Minister, and there is no reason to believe they would hesitate to do it again. Furthermore the Israeli military has become infected by right wing religious Judaism, with right wing Rabbis, in the last incursion into Israel, telling soldiers that killing Palestinians was their religious duty. This influence is likely to only grow stronger the more time goes on, and by the time a Prime Minister feels he must make a deal, or else, the military may no longer be willing to obey orders.

The ability to make a two-state deal is thus likely to decline over time, even as the necessity to do so increases.

The third solution set is to simply remove all Palestinians from the occupied territories. This doesn’t mean genocide, this just means shoving them out into neighbouring nations, and letting them worry about the Palestinians. This will turn Israel into a pariah state, but it will give them control of a good portion of Greater Israel without having to worry about pesky Palestinians, and while the neighbouring nations won’t like it, Israel has nukes, so who cares what they think?

These seem to me to be the three most likely endgames for Israel – the end of the Jewish ethnic state in a one state solution, a two-state compromise, or the ethnic cleansing of Palestinians from Palestine and the creation of a Greater Israel which is Jewish, and a pariah state.

It’s hard to anticipate which solution will be chosen, but I think the single state or the cleansing of Palestinians are the most likely end-games at this point. The two-state solution is unlikely to occur, since making it occur would cost an Israeli PM his life and might not be allowed by the army.

One might object that a single-state is unlikely for the same reasons, but single-state is the long term solution. When population numbers become 80/20 Palestinian/Jewish you either have to ethnic cleanse or give up, the status quo will be intoldrable. The two-state solution is what occurs before then.

I don’t hold out a lot of hope for a pretty solution in Israel/Palestine, or a solution in the near term. Could be I’m wrong, and I hope I am, but it seems unlikely.

Massive Small Business Insurance Rate Hikes In California

By Ian Welsh

On May 30, 2010

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Twelve to twenty three percent increases are common, with increases as high as 76%. Needless to say, these increases are unsupportable by many businesses, who will drop coverage as a result.

Ok, excuse me, but is anyone surprised? Democrats had a chance to do real health care reform, and they balked, kludging together a mess which was guaranteed not to work.

Those of us with an actual track record of, y’know, getting policy consequences right, warned that Health Care Reform was an ineffective mess which wouldn’t control costs, but too many people wanted to be fooled, wanted to “hope”.

Hope’s all very nice, but it’s not a bloody plan, or a bloody policy, nor does it constitute good analysis.

What’s Life For?

By Ian Welsh

On May 29, 2010

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Working all the time? Even if you like your job, that’s not living…

(via Soc Prof, this comparative chart on vacation time.)

Comparative vacations from CEPR

Canada’s not so hot either. When I worked in the corporate world I got two weeks. Which I found, was about long enough so that I had de-stressed enough to do things, around about the time I ran out of time. And Lord help me years when I had to use that time to take care of some family crisis.

I could go on about the economics, but the bottom line is simpler: in a good society, work is only one part of your life, and we do it enough so we can live a good life, and no more.

(Post updated with properly labeled chart, albeit somewhat fuzzier.)

As the Euro and the Pound come under pressure bend over and kiss Europe’s economy goodbye

By Ian Welsh

On May 24, 2010

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The catch-22 continues. First, the Euro under pressure:

Global Markets Overview: A sudden drop in the single currency reverses an early tentative advance for stocks as traders once again frett about the fragility of the eurozone economy

Second, the Pound under pressure:

Speculators extended their short positions in sterling to record levels after the recent UK election as worries escalated over the government’s finances

Third, a usterity in Britain:

Britain will be a “leading voice for fiscal responsibility” within Europe as it embarks on a sustained programme of cutting public spending, chancellor George Osborne said on Monday.

Announcing an initial £6.2bn of cuts for the current financial year, Mr Osborne said it was important to cut the deficit urgently so that debt repayments did not “spiral out of control.”

Fourth, a bank in Spain goes under:

The euro came under renewed attack on Monday as concerns over Europe’s fiscal problems intensified after Spain’s central bank took control of a savings bank.

CajaSur, a 146-year-old lender owned by the Catholic Church, was taken over by the Bank of Spain in the latest move by the central bank to restructure the country’s troubled mutually owned banks, or “cajas”.

Here’s the catch-22. Investors are worried about deficits, so they get out of bonds or demand higher rates and attack currencies. The response to that by governments is to slash spending: austerity. But austerity will crash out the economy, which will hurt the stock market and weaken the state’s ability to repay bonds.

As long as governments feel they are at the mercy of the hot money, and as long as the hot money insists that governments both be fiscally austere and have good economies, there is no way out.

Notice, that while China has significant issues, it does not have this issue because it does not rely on hot money. No smart government should. Currency flows are far too fast, not only should there be a tax on all currency flows but every smart country should make it essentially impossible to move large amounts of money in and out of its economy quickly without taking a huge haircut. Flighty money is more trouble than it’s worth. Money that wants to come, and stay, and really invest in the economy should be welcome, but fast money should be heavily discouraged. The harm done by such money is far larger than the good.

Likewise the hot money needs to be taught a lesson. Such “investors” seem to think that they deserve higher than market returns in exchange for lending money. The people borrowing money are expected to bear all the risk, and expected to get less than market returns (since they’re giving the surplus to the hot money). Would you borrow money under such circumstances? Of course not, which is why no one who doesn’t have a sure thing does, which is why the economy doesn’t grow, because the idle money thinks it deserves most of the returns and none of the risk, and entrepreneurs aren’t interested in that deal.

The Gulf Oil Spill Shows What America Has Become

By Ian Welsh

On May 23, 2010

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Peter Daou wants to know if this is the best the US can do (h/t Digby):

A calamity is unfolding before our eyes – the greatest oil spill in history – and America’s response is little more than a big yawn.

The vast, sprawling coastal marshes of Louisiana, where the Mississippi River drains into the gulf, are among the finest natural resources to be found anywhere in the world. And they are a positively crucial resource for America. The response of the Obama administration and the general public to this latest outrage at the hands of a giant, politically connected corporation has been embarrassingly tepid. … This is the bitter reality of the American present, a period in which big business has cemented an unholy alliance with big government against the interests of ordinary Americans, who, of course, are the great majority of Americans. The great majority of Americans no longer matter. America is selling its soul for oil. – Bob Herbert

Where is the outrage? Where are the millions marching in the streets, where is the round-the-clock roadblock coverage tracking every moment of the crisis, every effort to plug the leak, every desperate attempt to mitigate the damage?

Where is the White House? Where are Republicans? Where are Democrats? Where is the left? Where is the right? Where is the “fierce urgency of now?”

Prominent oceanographers [are] accusing the government of failing to conduct an adequate scientific analysis of the damage and of allowing BP to obscure the spill’s true scope. The scientists assert that the National Oceanic and Atmospheric Administration and other agencies have been slow to investigate the magnitude of the spill and the damage it is causing in the deep ocean. – NYT

In the movies, pretend heroes like Bruce Willis and Will Smith save the planet while the whole world watches with breath and belief suspended. In real life, a global catastrophe is treated like a mere annoyance, mismanaged by a rapacious oil company, while drill-baby-drillers double down on their folly and the White House puts out defensive fact sheets about how they were on it from “day one.”

In some parts of the country, the sight of oil drifting toward the Louisiana coast, oozing into the fragile marshlands and bringing large parts of the state’s economy to a halt, has prompted calls to stop offshore drilling indefinitely, if not altogether. Here, in the middle of things, those calls are few. Here, in fact, the unfolding disaster is not even prompting a reconsideration of the 75th annual Louisiana Shrimp and Petroleum Festival. “All systems are go,” said Lee Delaune, the festival’s director, sitting in his cluttered office in a historic house known as Cypress Manor. “We will honor the two industries as we always do,” Mr. Delaune said. “More so probably in grand style, because it’s our diamond jubilee.” – NYT

Is this really the best we can do?

Yes, it pretty much is, Peter. First, this shows the fundamental continuity between Bush and Obama. The reaction to this is fundamentally the same as the reaction to Katrina and New Orleans: do the least possible, and sweep it under the rug as best you can. Does anyone imagine the Bush administration’s response to this disaster would have been fundamentally different from Obama’s? Or rather, does anyone think that Obama has treated this more seriously than Bush would have?

But Daou’s point is broader than this, he blames everyone. The left, the right, both parties, the public. The outrage over this doesn’t seem to be there, the demands for action are tepid.

I think this comes back to something about Americans I’ve witnessed over and over again. Many Americans, if something doesn’t directly affect them, think it doesn’t matter enough to get worked up over. There is this weird sense of “we’ll be fine and who cares about what’s happening to someone I don’t know?” Americans can’t really imagine disaster, or catastrophe, unless it happens to them or someone they’re close to. Otherwise, it’s all just “something on TV”, and fundamentally unreal to them.

So they don’t connect the dots. They don’t get what wiping out all this sea life, destroying beaches and marshlands, is going to do to them. (Among other things, dying wetlands means more likelihood of Katrina style disasters). Of course some of them do care and do connect the dots, but believe that there’s nothing they can do. After all, millions protested the Iraq war and it didn’t matter. Americans voted in Democrats in 2006 to end the Iraq war, and it didn’t happen. Americans called 19/1 against TARP and it passed. Americans voted in Obama to get real change, and he decided to be Bush #2.

I think it’s probably a bit of both: some folks just don’t see how it affects them and don’t care about things that affect other Americans, while other folks care or understand, but feel that there’s nothing they can do about it, since government is almost entirely unresponsive to their concerns, so why waste time getting worked up?

This is America, Peter. The best suffer from learned helplessness, the worst just don’t care unless they’re the ones being hurt.

What Left?

By Ian Welsh

On May 22, 2010

Comments

David Sirota nails it:

Behold, for instance, major environmental groups’ attitude toward the Gulf oil spill.

We know that before the disaster, President Obama recklessly pushed to expand offshore drilling. We also know that his Interior Department gave British Petroleum’s rig a “categorical exclusion” from environmental scrutiny and, according to the New York Times, “gave permission to BP and dozens of other oil companies to drill in the Gulf without first getting required [environmental] permits.” Worse, we know that after the spill, the same Interior Department kept issuing “categorical exclusions” for new Gulf oil operations, and Interior Secretary Ken Salazar still refuses “to rule out continued use of categorical exclusions,” as the Denver Post reported (heckuva job, Kenny!).

Undoubtedly, had this been the behavior of a Republican administration, “the left’s” big environmental organizations would be scheduling D.C. protests and calling for firings, if not criminal charges. Yet, somehow, there are no protests. Somehow, there have been almost no calls for the resignation of Salazar, who oversaw this disaster and who, before that, took $323,000 in campaign contributions from energy interests and backed more offshore drilling as a U.S. senator. Somehow, facing environmental apocalypse, there has been mostly silence from “the left.”

So true. On virtually everything. Principles which change depending on who is in power are not principles.

But don’t think this gets donors and readers off the hook. I can’t tell you the number of times I have been told “we can’t run with that, our readers won’t tolerate it. They /want/ to believe in Obama. They need to believe in Obama.” (Well, actually, who knows if it gets them off the hook or not. I never believed it. I believe you can tell people the goddamn truth and still get traffic.)

That has waned somewhat, but in early 2009 the number of things I wanted to say that I couldn’t either get published or front paged was rather extraordinary. What happens in such situations is that writers, even when not explicitly edited, start self editing. “Everyone knows” certain things, but hardly anyone says them, which is why you get the weird sight of people saying “everyone knew”, but then you look into the person’s archives and find they never said what “everyone knew”.

Of course, everyone didn’t know, but even before Obama took office, and especially in the month after, those of us whose jobs it was to watch closely say who he was appointing, and with a few exceptions, his appointments (or lack of appointments, as when he left Bush USA’s in office, something no other President had done) told the tale. At that point anyone whose need to believe wasn’t Hindenburg sized, knew that liberals were about to get royally screwed up by Obama.

Oh well.

Crunch Time: Two Economic Scenarios for the rest of the year

By Ian Welsh

On May 21, 2010

Comments

Ok, we’re in crunch time. Bernanke is pulling a strong dollar play and trying to unwind as much of what was done in 08 and 09 as he can. Meanwhile, across the Western world, we have a wave of Hooverism, everyone wants to cut, cut, cut spending. And China isn’t looking as healthy as it once did, which is bad, because basically China is keeping the actual (as opposed to financial) world economy afloat.

However, the good news is the drop in oil prices. High oil prices (and yes, $80 is high) had led to, essentially, only a few half decent months of job growth. Oil had to be gotten under control.

This is, in essence, the same play Bernanke tried to perform in 08. He crashed out oil prices, and took the world financial economy with it.

To understand why you need to understand the contradiction at the heart of the modern neoliberal world economy.

There is a lot of hot money in the world economy, more hot money than there are truly safe investments. The financial bubble and collapse could be summed up as “trying to get AAA security with higher than AAA returns”. The paper was almost all produced in an attempt to get better than Treasury bond returns while claiming to be as secure as Treasury bonds. Obviously, the paper wasn’t, and it all crashed out.

There is still too much hot money which wants AAA security, and better than AAA returns. They demand that governments find a way to give it to them. One way is for the Fed to give them free money, then borrow it back from them (we’ll lend to you at zero, you lend back to us at 3%. Free money!) But there are limits to these sorts of games.

Why? Well, that’s the contradiction. Because the hot money is both scared by the prospects of high deficits (government defaults) and by the economy itself crashing out because, well, there isn’t enough stimulus. If you’re scared of too much stimulus and you’re scared of too high deficits, well, you’re caught between the proverbial rock and a hard place.

Currently the pressure is mostly on the austerity side, with an IMF style crackdown in both Greece and Spain, with a healthcare bill in the US which “saves money” and so on.

The problem is that actual private income in the US, for example, is about 500 billion lower than it was pre-crisis.

The economy breathes fine, as long as we don’t unplug the life support.

And unplug the life support is what everyone except the Chinese seem to want to do.

The US dollar getting higher and commodities getting lower, if it doesn’t crash out the economy when added to global austerity, means that a relatively small amount of money can reorient the economy. This is the Rubin play, and when Rubin did it for Clinton, it worked. The thing is, back then, the internet boom was waiting to happen. I don’t see what Obama and Bernanke will reorient the US economy towards: I don’t see the next big boom (oh, I see some things it could be, but I don’t think they want any of those things.)

The next few months will tell the tale. Will global austerity throw the world into a second downleg of this depression? Or will global austerity and Bernanke’s strong dollar play crush commodity prices without crushing the real economy? And will investors freak out, caught between their twin fears of deficits (don’t want to be in bonds) and lack of stimulus (don’t want to be in stocks), and go on strike again, causing another financial contagion?

Who knows. I’m coming down on the downside right now, mainly because I believe that when you’re given a choice of betting for or against Bernanke, you should generally bet against. (Not directly or in the short run, though, he’s still the player with the biggest stack on the table.)