Saturday, December 20, 2003

An Australian Dream Shattered too 

I've just been reading the Paul Krugman piece below about how US Government policies have shattered the American Dream.
The thing that has struck me particularly is that the Australian Dream - and no doubt the same sort of dream in other countries - have been shattered by the same sort of government policies.
Australia has followed the US with an extraordinarily "colonial" cast of mind ever since 1969. If it had cut the painter and, instead of electing to be a victim, it had elected to become - like the Asian Tigers - a beneficiary of the US policies, Australia would be an enormously stronger, wealthier, more egalitarian society today.
Education would be better and cheaper; health services would be better; investment would have led to an environment of entrepreneurship that could have strengthened Australia for generations.
Instead, having depended fecklessly on the selfishness of Britain until World War 2, we thrust ourselves into an even greater feckless dependence on the United States, especially after 1969.
Only a major world depression - a real prospect for 2004 - is likely to bring us and those who govern us, to our/their senses.

James Cumes

The Death of Horatio Alger
by Paul Krugman
Posted December 18, 2003

The other day I found myself reading a leftist rag that
made outrageous claims about America. It said that we
are becoming a society in which the poor tend to stay
poor, no matter how hard they work; in which sons are
much more likely to inherit the socioeconomic status of
their father than they were a generation ago.

The name of the leftist rag? Business Week, which
published an article titled "Waking Up From the American
Dream." The article summarizes recent research showing
that social mobility in the United States (which was
never as high as legend had it) has declined
considerably over the past few decades. If you put that
research together with other research that shows a
drastic increase in income and wealth inequality, you
reach an uncomfortable conclusion: America looks more
and more like a class-ridden society.

And guess what? Our political leaders are doing
everything they can to fortify class inequality, while
denouncing anyone who complains--or even points out what
is happening--as a practitioner of "class warfare."

Let's talk first about the facts on income distribution.
Thirty years ago we were a relatively middle-class
nation. It had not always been thus: Gilded Age America
was a highly unequal society, and it stayed that way
through the 1920s. During the 1930s and '40s, however,
America experienced what the economic historians Claudia
Goldin and Robert Margo have dubbed the Great
Compression: a drastic narrowing of income gaps,
probably as a result of New Deal policies. And the new
economic order persisted for more than a generation:
Strong unions; taxes on inherited wealth, corporate
profits and high incomes; close public scrutiny of
corporate management--all helped to keep income gaps
relatively small. The economy was hardly egalitarian,
but a generation ago the gross inequalities of the 1920s
seemed very distant.

Now they're back. According to estimates by the
economists Thomas Piketty and Emmanuel Saez--confirmed
by data from the Congressional Budget Office--between
1973 and 2000 the average real income of the bottom 90
percent of American taxpayers actually fell by 7
percent. Meanwhile, the income of the top 1 percent rose
by 148 percent, the income of the top 0.1 percent rose
by 343 percent and the income of the top 0.01 percent
rose 599 percent. (Those numbers exclude capital gains,
so they're not an artifact of the stock-market bubble.)
The distribution of income in the United States has gone
right back to Gilded Age levels of inequality.

Never mind, say the apologists, who churn out papers
with titles like that of a 2001 Heritage Foundation
piece, "Income Mobility and the Fallacy of Class-Warfare
Arguments." America, they say, isn't a caste society--
people with high incomes this year may have low incomes
next year and vice versa, and the route to wealth is
open to all. That's where those commies at Business Week
come in: As they point out (and as economists and
sociologists have been pointing out for some time),
America actually is more of a caste society than we like
to think. And the caste lines have lately become a lot
more rigid.

The myth of income mobility has always exceeded the
reality: As a general rule, once they've reached their
30s, people don't move up and down the income ladder
very much. Conservatives often cite studies like a 1992
report by Glenn Hubbard, a Treasury official under the
elder Bush who later became chief economic adviser to
the younger Bush, that purport to show large numbers of
Americans moving from low-wage to high-wage jobs during
their working lives. But what these studies measure, as
the economist Kevin Murphy put it, is mainly "the guy
who works in the college bookstore and has a real job by
his early 30s." Serious studies that exclude this sort
of pseudo-mobility show that inequality in average
incomes over long periods isn't much smaller than
inequality in annual incomes.

It is true, however, that America was once a place of
substantial intergenerational mobility: Sons often did
much better than their fathers. A classic 1978 survey
found that among adult men whose fathers were in the
bottom 25 percent of the population as ranked by social
and economic status, 23 percent had made it into the top
25 percent. In other words, during the first thirty
years or so after World War II, the American dream of
upward mobility was a real experience for many people.

Now for the shocker: The Business Week piece cites a new
survey of today's adult men, which finds that this
number has dropped to only 10 percent. That is, over the
past generation upward mobility has fallen drastically.
Very few children of the lower class are making their
way to even moderate affluence. This goes along with
other studies indicating that rags-to-riches stories
have become vanishingly rare, and that the correlation
between fathers' and sons' incomes has risen in recent
decades. In modern America, it seems, you're quite
likely to stay in the social and economic class into
which you were born.

Business Week attributes this to the "Wal-Martization"
of the economy, the proliferation of dead-end, low-wage
jobs and the disappearance of jobs that provide entry to
the middle class. That's surely part of the explanation.
But public policy plays a role--and will, if present
trends continue, play an even bigger role in the future.

Put it this way: Suppose that you actually liked a caste
society, and you were seeking ways to use your control
of the government to further entrench the advantages of
the haves against the have-nots. What would you do?

One thing you would definitely do is get rid of the
estate tax, so that large fortunes can be passed on to
the next generation. More broadly, you would seek to
reduce tax rates both on corporate profits and on
unearned income such as dividends and capital gains, so
that those with large accumulated or inherited wealth
could more easily accumulate even more. You'd also try
to create tax shelters mainly useful for the rich. And
more broadly still, you'd try to reduce tax rates on
people with high incomes, shifting the burden to the
payroll tax and other revenue sources that bear most
heavily on people with lower incomes.

Meanwhile, on the spending side, you'd cut back on
healthcare for the poor, on the quality of public
education and on state aid for higher education. This
would make it more difficult for people with low incomes
to climb out of their difficulties and acquire the
education essential to upward mobility in the modern

And just to close off as many routes to upward mobility
as possible, you'd do everything possible to break the
power of unions, and you'd privatize government
functions so that well-paid civil servants could be
replaced with poorly paid private employees.

It all sounds sort of familiar, doesn't it?

Where is this taking us? Thomas Piketty, whose work with
Saez has transformed our understanding of income
distribution, warns that current policies will
eventually create "a class of rentiers in the U.S.,
whereby a small group of wealthy but untalented children
controls vast segments of the US economy and penniless,
talented children simply can't compete." If he's right--
and I fear that he is--we will end up suffering not only
from injustice, but from a vast waste of human

Goodbye, Horatio Alger. And goodbye, American Dream.

Sunday, December 14, 2003

Operation Equalizer 

I have recently written a book in which a group of private militarists belonging to SPODE - Sophisticated Programming and Operations of Defence Engineering - take over one of the many "failed states" around the world and challenge the hyper-, super-, and other great powers, one and all.
The book is called Operation Equalizer. It is - or was - fiction; but it is coming closer to a crucially dangerous truth daily.
For those interested, the book can be ordered at -


The Guardian article below says -

"By definition these companies are frequently operating in "failed states" where national law is notional. The risk is the employees can literally get away with murder.....
"There are other formidable problems surfacing in what is uncharted territory - issues of loyalty, accountability, ideology, and national interest. By definition, a private military company is in Iraq or Bosnia not to pursue US, UN, or EU policy, but to make money.

"The growing clout of the military services corporations raises questions about an insidious, longer-term impact on governments' planning, strategy and decision-taking.

"Mr Singer argues that for the first time in the history of the modern nation state, governments are surrendering one of the essential and defining attributes of statehood, the state's monopoly on the legitimate use of force."

In other words, we now have a form of militarism that may threaten not only individuals or states but that may put at risk the survival of the human species itself. That is the central theme of Operation Equalizer.

James Cumes


The privatisation of war

· $30bn goes to private military
· Fears over 'hired guns' policy
· British firms get big slice of contracts
· Deals in Baghdad, Kabul and Balkans

Ian Traynor
Wednesday December 10, 2003
The Guardian

Private corporations have penetrated western warfare so deeply that they are now the second biggest contributor to coalition forces in Iraq after the Pentagon, a Guardian investigation has established.
While the official coalition figures list the British as the second largest contingent with around 9,900 troops, they are narrowly outnumbered by the 10,000 private military contractors now on the ground.

The investigation has also discovered that the proportion of contracted security personnel in the firing line is 10 times greater than during the first Gulf war. In 1991, for every private contractor, there were about 100 servicemen and women; now there are 10.

The private sector is so firmly embedded in combat, occupation and peacekeeping duties that the phenomenon may have reached the point of no return: the US military would struggle to wage war without it.

While reliable figures are difficult to come by and governmental accounting and monitoring of the contracts are notoriously shoddy, the US army estimates that of the $87bn (£50.2bn) earmarked this year for the broader Iraqi campaign, including central Asia and Afghanistan, one third of that, nearly $30bn, will be spent on contracts to private companies.

The myriad military and security companies thriving on this largesse are at the sharp end of a revolution in military affairs that is taking us into unknown territory - the partial privatisation of war.

"This is a trend that is growing and Iraq is the high point of the trend," said Peter Singer, a security analyst at Washington's Brookings Institution. "This is a sea change in the way we prosecute warfare. There are historical parallels, but we haven't seen them for 250 years."

When America launched its invasion in March, the battleships in the Gulf were manned by US navy personnel. But alongside them sat civilians from four companies operating some of the world's most sophisticated weapons systems.

When the unmanned Predator drones, the Global Hawks, and the B-2 stealth bombers went into action, their weapons systems, too, were operated and maintained by non-military personnel working for private companies.

The private sector is even more deeply involved in the war's aftermath. A US company has the lucrative contracts to train the new Iraqi army, another to recruit and train an Iraqi police force.

But this is a field in which British companies dominate, with nearly half of the dozen or so private firms in Iraq coming from the UK.

The big British player in Iraq is Global Risk International, based in Hampton, Middlesex. It is supplying hired Gurkhas, Fijian paramilitaries and, it is believed, ex-SAS veterans, to guard the Baghdad headquarters of Paul Bremer, the US overlord, according to analysts.

It is a trend that has been growing worldwide since the end of the cold war, a booming business which entails replacing soldiers wherever possible with highly paid civilians and hired guns not subject to standard military disciplinary procedures.

The biggest US military base built since Vietnam, Camp Bondsteel in Kosovo, was constructed and continues to be serviced by private contractors. At Tuzla in northern Bosnia, headquarters for US peacekeepers, everything that can be farmed out to private businesses has been. The bill so far runs to more than $5bn. The contracts include those to the US company ITT, which supplies the armed guards, overwhelmingly US private citizens, at US installations.

In Israel, a US company supplies the security for American diplomats, a very risky business. In Colombia, a US company flies the planes destroying the coca plantations and the helicopter gunships protecting them, in what some would characterise as a small undeclared war.

In Kabul, a US company provides the bodyguards to try to save President Hamid Karzai from assassination, raising questions over whether they are combatants in a deepening conflict with emboldened Taliban insurgents.

And in the small town of Hadzici west of Sarajevo, a military compound houses the latest computer technology, the war games simulations challenging the Bosnian army's brightest young officers.

Crucial to transforming what was an improvised militia desperately fighting for survival into a modern army fit eventually to join Nato, the army computer centre was established by US officers who structured, trained, and armed the Bosnian military. The Americans accomplished a similar mission in Croatia and are carrying out the same job in Macedonia.

The input from the US military has been so important that the US experts can credibly claim to have tipped the military balance in a region ravaged by four wars in a decade. But the American officers, including several four-star generals, are retired, not serving. They work, at least directly, not for the US government, but for a private company, Military Professional Resources Inc.

"In the Balkans MPRI are playing an incredibly critical role. The balance of power in the region was altered by a private company. That's one measure of the sea change," said Mr Singer, the author of a recent book on the subject, Corporate Warriors.

The surge in the use of private companies should not be confused with the traditional use of mercenaries in armed conflicts. The use of mercenaries is outlawed by the Geneva conventions, but no one is accusing the Pentagon, while awarding more than 3,000 contracts to private companies over the past decade, of violating the laws of war.

The Pentagon will "pursue additional opportunities to outsource and privatise", the US defence secretary, Donald Rumsfeld, pledged last year and military analysts expect him to try to cut a further 200,000 jobs in the armed forces.

It is this kind of "downsizing" that has fed the growth of the military private sector.

Since the end of the cold war it is reckoned that six million servicemen have been thrown on to the employment market with little to peddle but their fighting and military skills. The US military is 60% the size of a decade ago, the Soviet collapse wrecked the colossal Red Army, the East German military melted away, the end of apartheid destroyed the white officer class in South Africa. The British armed forces, notes Mr Singer, are at their smallest since the Napoleonic wars.

The booming private sector has soaked up much of this manpower and expertise.

It also enables the Americans, in particular, to wage wars by proxy and without the kind of congressional and media oversight to which conventional deployments are subject.

From the level of the street or the trenches to the rarefied corridors of strategic analysis and policy-making, however, the problems surfacing are immense and complex.

One senior British officer complains that his driver was recently approached and offered a fortune to move to a "rather dodgy outfit". Ex-SAS veterans in Iraq can charge up to $1,000 a day.

"There's an explosion of these companies attracting our servicemen financially," said Rear Admiral Hugh Edleston, a Royal Navy officer who is just completing three years as chief military adviser to the international administration running Bosnia.

He said that outside agencies were sometimes better placed to provide training and resources. "But you should never mix serving military with security operations. You need to be absolutely clear on the division between the military and the paramilitary."

"If these things weren't privatised, uniformed men would have to do it and that draws down your strength," said another senior retired officer engaged in the private sector. But he warned: "There is a slight risk that things can get out of hand and these companies become small armies themselves."

And in Baghdad or Bogota, Kabul or Tuzla, there are armed company employees effectively licensed to kill. On the job, say guarding a peacekeepers' compound in Tuzla, the civilian employees are subject to the same rules of engagement as foreign troops.

But if an American GI draws and uses his weapon in an off-duty bar brawl, he will be subject to the US judicial military code. If an American guard employed by the US company ITT in Tuzla does the same, he answers to Bosnian law. By definition these companies are frequently operating in "failed states" where national law is notional. The risk is the employees can literally get away with murder.

Or lesser, but appalling crimes. Dyncorp, for example, a Pentagon favourite, has the contract worth tens of millions of dollars to train an Iraqi police force. It also won the contracts to train the Bosnian police and was implicated in a grim sex slavery scandal, with its employees accused of rape and the buying and selling of girls as young as 12. A number of employees were fired, but never prosecuted. The only court cases to result involved the two whistleblowers who exposed the episode and were sacked.

"Dyncorp should never have been awarded the Iraqi police contract," said Madeleine Rees, the chief UN human rights officer in Sarajevo.

Of the two court cases, one US police officer working for Dyncorp in Bosnia, Kathryn Bolkovac, won her suit for wrongful dismissal. The other involving a mechanic, Ben Johnston, was settled out of court. Mr Johnston's suit against Dyncorp charged that he "witnessed co-workers and supervisors literally buying and selling women for their own personal enjoyment, and employees would brag about the various ages and talents of the individual slaves they had purchased".

There are other formidable problems surfacing in what is uncharted territory - issues of loyalty, accountability, ideology, and national interest. By definition, a private military company is in Iraq or Bosnia not to pursue US, UN, or EU policy, but to make money.

The growing clout of the military services corporations raises questions about an insidious, longer-term impact on governments' planning, strategy and decision-taking.

Mr Singer argues that for the first time in the history of the modern nation state, governments are surrendering one of the essential and defining attributes of statehood, the state's monopoly on the legitimate use of force.

But for those on the receiving end, there seems scant alternative.

"I had some problems with some of the American generals," said Enes Becirbasic, a Bosnian military official who managed the Bosnian side of the MPRI projects to build and arm a Bosnian army. "It's a conflict of interest. I represent our national interest, but they're businessmen. I would have preferred direct cooperation with state organisations like Nato or the Organisation for Security and Cooperation in Europe. But we had no choice. We had to use MPRI."

James Cumes


Saturday, December 13, 2003

Labor Leader Matham: Forthright or Fraudulent? 

Overall, Latham is probably a "good thing" for Australian politics. Many people probably imagine they can express their anger through his aggressive articulation of the many economic, social and security/strategic problems that are out there.
If it's not the biggest problem, certainly the most persistently unresolved problem of the past thirty years is our economic policy - and, of course, the social issues that are associated with it.
At the moment, Latham seems like Bill Hayden in the 1970s. Both of them, I understand, did a little economics at university and, for both of them, that little learning was/is a dangerous thing.
We have had no Labor Party economic policy now for many years - and no effective social policy because that must be, in the end, dependent on an economic policy that can support it.
The great age for Labor, in terms of economic and social policy, was in the postwar period and, at the personal level was dominated by Ben Chifley, first as Treasurer from 1941 to 1945 and then as Prime Minister from 1945 to 1949.
The two documents that enshrined the essence of Labor policies at that time were the White Paper on Full Employment of 1945 and the Banking Act of 1944 (allied with the Commonwealth Bank Act of, as I recall, the same year). Chifley had been a prominent contributor to the proceedings of the Royal Commission on Money and Banking of 1936 or thereabouts - one of the more valuable documents in our economic and social archive.
As I understand Latham, he has "done" some economics at university and has swallowed whole the destructive notions that we in Australia have tragically imported from the United States, in some ways ever since Nixon and the Fed "damped down the economy" with fiscal measures and hikes in interest rates in 1969. We followed US policies with ever more vigour and determination to self-destruct, under Hawke and Keating in the 1980s and 1990s. Under Howard, need it be said, we are still firm believers in the "Washington Consensus" and, instead of sound domestic economic policies, we look to rely on tying ourselves ever more tightly, under a free-trade agreement, to the very economy from which we should have cut the painter decades ago.
Latham shows no sign that he understands any of this. If his aggressive articulation of issues leads him to the Prime Ministership, he can offer only acute disappointment to the millions of battlers - and indeed to millions of ordinary middle-income and upper-income voters - who know that we need new economic and social policies but who have so far been unable to articulate them, for themselves, in any detail. In other words, the great danger is that Latham's aggressive articulation is a front, behind which lies a void of real understanding, in this context, of economic policy imperatives and the social imperatives that go with them.
I'd like to see Mark Latham as Labor's Ben Chifley come to life again in the 21st century; but, sadly, I see few signs of that yet.


Posted by: James Cumes at December 12, 2003 06:25 PM

The Chill and Warmth of Winter 

Vienna, it's 12 days from Christmas and cold - not at its most bitter and no snow or ice, the air is still, so no "windchill factor."
Last night, a concert at the Altes Rathaus by a superbly talented young Macedonian pianiste. Tonight, an exhibition by the artist Ernst Fuchs. Tomorrow, we breakfast in style at the Cafe Landsmann, before crossing the Ring to the Christkindlmarkt, which seems to get bigger, more cheerful and more crowded each year. I love the warm punch and the marzipan, the way Heide, Kim and I all enjoy it together as a family.
The Emperor Franz Jozef died 87 years ago and the empire died with defeat in 1918; but much of the imperial character of the city survives; and, strangely, there's more warmth of Christmas here, in chilly Vienna in midwinetr, than in the part of the world to which I truly belong, warm-as-toast Queensland, in the middle of summer.
A world of contradictions.
A varied world to enjoy.
The contrasts remind me of Jozef Imrich's book COLD RIVER.
I'll be ordering more copies of COLD RIVER today. It's for sale at 35% with FictionWise less than $3 for members. It is an only this weekend deal...
A wonderful book, by a fine author, about a triumph and a tragedy in the one single adventure.

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