Not only has the United States secured its man as Interim Prime Minister of The New Iraq^TM. Now the US is bound and determined to bag the ceremonial position of Interim President as well.

Talks on naming an interim president for Iraq were deadlocked yesterday as a rift between US occupation officials and the Iraqi leadership they appointed threatens to undermine American plans to hand over sovereignty to an interim Iraqi government on 30 June.

The US-appointed Iraqi Governing Council wants to appoint its current leader, Sheikh Ghazi al-Yawar, who has spoken out against the failure of the occupation, but the US occupation governor, Paul Bremer, is insisting that they choose instead Adnan al-Pachachi, an 81-year-old former diplomat, who has said he believes American troops need to stay in Iraq until the security situation improves.

It emerged yesterday that Mr Bremer warned the council during talks on Sunday not to put the decision to the vote, saying that if it elected Sheikh Yawar, he would veto the decision. Further talks scheduled for yesterday were postponed at America's request until today, meaning that the deadline to name the interim government by the end of May was missed. . . .

America's reasons for preferring Mr Pachachi over Sheikh Yawar are obvious. Both are in fact popular choices with the Iraqi street - although the US attempts to arm-twist the Governing Council have dented Mr Pachachi's standing badly. Both are Sunnis, to balance the fact that Mr Allawi is a Shia, and both are members of the Governing Council.

But Sheikh Yawar, the head of one of the country's most powerful tribes, has recently criticised the US occupation. "We blame the United States 100 per cent for the security in Iraq," he said. "They occupied the country, disbanded the security agencies and for 10 months left Iraq's borders open for anyone to come in without a visa or even a passport." Mr Pachachi, by contrast, has said he believes that only the US forces can restore security.

It is stunning how both Paul Bremer and the Iraqi Governing Council have completely and utterly routed UN envoy Lakhdar Brahimi. Brahimi openly confessed that he was looking for technocrats who were neither from the exile community nor on the IGC to staff the new positions in the "sovereign" interim administration. Instead, Allawi, Pachachi and Yawar are all IGC members, and Allawi and Pachaci are from the exile community. So much for those plans! And still Bush expects the UN Security Council to rubber stamp his new resolution?

The choice of Ayad Allawi as the new Iraqi interim prime minister shows that the Bush administration is far, far away from simply handing over key decisions regarding the Iraq colony to -- in the words of Richard Holbrooke, a John Kerry foreign policy advisor, "Lakhdar Brahimi, a U.N. official, an Algerian Sunni Muslim . . . we don't know what he's going to come up with or when he's going to come up with it or whether it serves America's national interests."

Considering Allawi is from the Iraqi exile community, long-time CIA and MI6 darling, and a member of the US-established Iraqi Governing Council with relatives and supporters running the Iraqi defense and interior ministries, I think the guy serves "America's national interests" to a freakin' T!

Is Holbrooke happy now?

After grilling some burgers and feasting on the first good canteloupe of the season, the General is back to blogging. This was the first article that caught my eye tonight:

Iraqi crude oil sales since last year's U.S.-led invasion have hit more than $10 billion, the U.S.-led authority governing Iraq said on Monday.

The Coalition Provisional Authority had deposited a total of $10.004 billion in its Development Fund for Iraq as of last Thursday, it said in an Internet posting.

This bit of news brings to light once again the importance of the Development Fund for Iraq (sic) in the future wrangling over a new UN Security Council resolution for Iraq.

Recall that the Development Fund for Iraq was set up by UNSC Resolution 1483 (2003) which largely replaced the UN Oil for Food Program, itself discontinued in November. The DFI is designed to be the Treasury of The New Iraq^TM, concentrating in it not only all of Iraq's oil and natural gas revenues, but also all revenues frozen by Western governments after 1990, US Congressional grants, and the like. According to 1483, the aim of the Fund is to provide for

the humanitarian needs of the Iraqi people, for the economic reconstruction and repair of Iraq�s infrastructure, for the continued disarmament of Iraq, and for the costs of Iraqi civilian administration, and for other purposes benefiting the people of Iraq

It's a multibillion dollar pot of gold well worth having your hands on.

From the text of the latest draft resolution cooked up in Washington and London, it appears the same masters are going to be running the show regardless of any details about "sovereignty".

The Security Council . . . Notes that upon dissolution of the Coalition Provisional Authority that funds in the Development Fund for Iraq shall be disbursed at the direction of the Interim Government of Iraq and its successors, and decides that the Development Fond for Iraq shall be utilized in a transparent manner and through the Iraqi budget including to satisfy outstanding obligations against the Development Fund for Iraq, that the arrangements for depositing of proceeds from export sales of petroleum, petroleum products, and natural gas and its products established in paragraph 20 of resolution 1483 (2003) shall continue to apply, that the International Advisory and Monitoring Board referred to in resolution 1483 (2003) shall continue its activities in monitoring the Development Fund for Iraq and shall include as an additional member a duly qualified representative of the sovereign government of Iraq and that the provisions above shall be reviewed no later than 12 months from the date of this resolution or at the request of the Transitional Government of Iraq, and that appropriate arrangements shall be made for the continuation of deposits of the proceeds referred to in paragraph 21 of resolution 1483 (2003);

Clearly the draft US/UK resolution continues to dramatically limit the sovereignty of the new post-June 30 "sovereign" Iraqi government by continuing to internationalize the country's treasury including all the revenue from the only viable export sector the country has. Counterpunch has called the DFI "The Corporate Slush Fund for Iraq", and Christian Aid dubbed it "a financial black hole". While DFI funds will be disbursed by the new interim government after June 30, they will still be disbursed to (primarily US) corporations reconstructing Iraq. They are supposed to be disbursed under the watchful eye of the extant International Advisory and Monitoring Board -- led by the IMF and the World Bank -- but that may not be terribly reassuring. Finally, the DFI will continue to be the means by which Iraqi oil money is funneled to Kuwait in the form of "reparations" dating back to the 1990-91 Gulf War; that is what "paragraph 21 of resolution 1483" is all about.

Formally we all know that after June 30 the interim Iraqi government will be sovereign; if they ask US and UK troops to leave, we are told they will leave. If you believe that one, you'll probably believe the interim Iraqi government also has control over the Iraqi treasury, too. And by the way, I have this bridge in Brooklyn . . .

You've heard of of the G7. Now meet the G5.

Luiz Inacio Lula da Silva, the president of Brazil, led a delegation of eight cabinet ministers, six state governors and 450 business leaders to China in a push to foster closer ties in Asia's fastest growing economy.

The range and dimension of the commercial deals demonstrated a degree of economic synergy rarely seen between two developing countries. . . .

President Da Silva was able to use the visit to further his own diplomatic agenda of forging developing nation trade blocs to counter the dominance of Europe and the US in world trade and diplomatic forums.

He urged China to consider joining the embryonic G3 alliance consisting of Brazil, India and South Africa. "We dream that in the near future it will be a G5 with Russia and China," Mr Da Silva said. "We want to build a political force capable of convincing rich nations ... that they can ease their protectionist policies and give access to the so-called developing world."

According to certifiable nutjob Victor Davis Hanson, the United States need not worry about an extra 40,000 troops for empire. There are more, shall we say, "efficient" ways of pacifying The New Iraq^TM.

In short, I think our sole serious mistake in this war is that we have forgotten the lessons of history, the essence of human nature, and what constitutes real morality. Small armies, whether those of Caesar, Alexander, or Hernan Cort�s can defeat enormous enemies and hold vast amounts of territory � but only if they are used audaciously and establish the immediate reputation that they are lethal and dangerous to confront. Deterrence, not numbers, creates tranquility and the two are not always synonymous.

A thousand Marines shooting the first 500 gunmen they saw, broadcast on al Jazeera, would be worth the deterrence of another armored division. Taking Fallujah and killing Baathist killers while putting victorious Iraqi coalitionists on television would have been the equivalent of calling up another 40,000 reservists.

This is truly "bourgeois man" in his full flower. As Hannah Arendt writes concerning the philosophy of Thomas Hobbes (you know, Mr. "solitary, poor, nasty, brutish and short"):

Hobbes liberates those who are excluded from society -- the unsuccessful, the unfortunate, the criminal -- . . . They may give free rein to their desire for power and are told to take advantage of their elemental ability to kill, thus restoring that natural equality which society conceals only for the sake of expediency. Hobbes foresees and justifies the social outcasts' organization into a gang of murderers as a logical outcome of the bourgeoisie's moral philosophy.

Everyone is going ga-ga over the April personal income report released today.

The increase reported by the Commerce Department on Friday came after a brisk 0.5 percent advance in March and suggested that consumers continued to do their part to support the economy.

Americans' incomes, meanwhile, rose by a strong 0.6 percent in April, marking the largest gain since January 2001. The growth in income last month, which followed a 0.4 percent rise in March, was especially encouraging because that is the fuel for spending in the future.

The income and spending figures are not adjusted for price changes.

Well, let's look at these numbers in real terms instead, then.

While nominal personal income rose 0.57%, real personal income ticked up a lower 0.44%. The all-important wages and salaries increased 0.53% in nominal terms but 0.40% in real terms. These numbers are indeed positive for those looking for a sustainable recovery, but not robustly so. In real terms for the period of the last seven months, these April figures are slightly better than average.

Real employee compensation growth for the last three months is at 4.0% in annualized terms, and real wage and salary growth is up 3.1%. Of all the numbers, these seem the most welcome for the sustainable recovery crowd.

Chickenhawk wingnuts fought the law, and the law won?

The General has blogged previously on the dangerous game the far-right-wing of the Republican Party is playing by directly attacking the US national security state: the military, the CIA and the Congressional oversight structure -- especially the Armed Services and Foreign Relations committees in the Senate. Not only is the national security state a cornerstone of any Republican political bloc, but it also has a good deal of autonomous power which it can wield against any who attack it.

In the face of strong resistance from pinheads like Sen. James Inhofe, Sen. John Cornyn, House Armed Services Committee Chairman Duncan Hunter and Donald Rumsfeld among a host of others, national security state rock Sen. John Warner (R-VA) is standing his ground.

The silver-haired Virginian with courtly manners is a throwback to a forgotten era of congressional comity. But as he leads the Senate's inquiry into abuse of Iraqi prisoners, Armed Services Committee Chairman John W. Warner (R-Va.) also shows another side: a penchant for bucking his party, taking heat and surviving.

Warner says his committee has a "solemn responsibility" to discover what went wrong and to "make sure it never, never happens again."

. . . Warner -- a sailor in World War II, a Marine during the Korean War and secretary of the Navy before he came to the Senate in 1979 -- is motivated by a strong belief that the reputations of both the military and the Senate are at stake unless they get to the bottom of the scandal. "To do otherwise would be contradictory to everything he has experienced in his professional life," said committee member John McCain (R-Ariz.). Besides, McCain added, "it would be incredibly stupid politically."

. . . "Senator Warner is a military guy through and through. He volunteered twice, served in the armed forces twice -- that's twice more than a lot of members," said Rep. Thomas M. Davis III (R-Va.). . . .

Some see Warner's intervention against [Oliver] North and his outrage over the prisoner abuse as dual reflections of his devotion to the military.

Warner puts it in more personal terms. He went through both undergraduate and law school under the G.I. Bill of Rights and feels he owes the military for everything he has become. "I have a tremendous obligation to the military," he said.

There is no doubt that Warner is a dyed-in-the-wool member of the national security state, and he is defending its authority and legitimacy in the face of those interested in destroying it as an autonomous force within Republican politics.

Who ever thought somebody on the left could be cheering for the representatives of the national security state to win?

The revised GDP figures for 2004:I are out today. You can get the broad outline anywhere, but here's an angle you might have missed.

Folks over at Angry Bear have been debating this week whether George W. Bush is the worst President of all time. While that may be true, there seems no doubt that the Boy King has been among the best Presidents of all time for corporate profits. When Bush came into office in 2001, corporate America was in crisis. After peaking in 1997:III at $817bn (all figures are in constant 2000 dollars), corporate profits sank over the next four years to $555bn in 2001:III -- a real 32% decline. Dubya set about quickly reversing course. In a single quarter real corporate profits jumped 16%; in three quarters, 32%. By 2003:I real corporate profits had skyrocketed to $740bn, all in the midst of a nationwide recession and sluggish recovery. And that was just the beginning.

According to the revised 2004:I GDP figures, real corporate profits stood at $969.4bn. In just one year, they rose an amazing 31%. Real after-tax profits rose even more, from $537bn in 2003:I to $741bn in 2004:I -- a stunning 38% ascent in a single year. Since Bush first took office, real corporate profits have jumped 62% while real after-tax corporate profits have ascended an amazing 94%.

The worst president in history? Not for capital -- not by a long shot.

John Kerry launced his big eleven day campaign focus on national security today in Seattle. If you missed it, don't worry. You didn't miss much. As the Associated Press wisely discerned,

Although Kerry's advisers promoted the speech as a major policy address, the Democrat did not stake new ground as he outlined positions he has taken on the campaign trail in recent months. He said he will provide details in the coming days.

If you've been following the General's series on the liberal hawk manifesto "Progressive Internationalism" then you know what the Kerry plan is and how the General feels about it. Kerry staked no new ground in Seattle but merely continued to agree with Bush strategy, critique Bush tactics, and claim that somehow someway a Kerry presidency can "launch and lead a new era of alliances for the post 9-11 world".

Kerry is giving two more big national security speeches, one in West Palm Beach, FL on June 1, and a second in Independence, MO on June 3. We wait for something new until then.

This just shows you how much of a plutocracy the United States really is.

Treasury Secretary John W. Snow, who has helped lead Bush administration efforts to tighten regulation of Fannie Mae and Freddie Mac, unwittingly held more than $10 million worth of securities of those and other government-sponsored housing finance companies until recently, a Treasury spokesman said last night.

Snow's bond holdings were discovered by the Treasury Department this month during preparation of his annual financial disclosure form, and Snow quickly sold them for about $10.4 million, taking a loss of $477,467, said spokesman Rob Nichols.

Snow had orally instructed a financial adviser to invest the money in Treasury securities, but "because of a misunderstanding or miscommunication," Nichols said, the money was instead invested in bonds of Fannie, Freddie and the Federal Home Loan Banks. The secretary's "clear intent was somehow lost in translation."

The holdings were listed on periodic brokerage statements that Snow received but did not read, Nichols said. "Probably four or five were sent to his home and he simply did not look at them," he said.

Snow is so amazingly rich that he had a $10 million investment position that he was not only totally unaware of but also totally unintereted in! Man, when $10 million is pocket change, no wonder the guy is completely unperturbed by a $500bn budget deficit.

More evidence is in on how Greenspan is nothing more than a Republican shill.

Since the 1950s, when the Fed's independence was firmly established, its chairmen have generally taken pains to maintain their distance from the executive branch. The Fed's ability to conduct monetary policy without regard to political fallout is thought to be key to its credibility in financial markets.

Greenspan has always maintained public contact with administration officials. But the Fed was seen as so independent early in his 17-year tenure as chairman that some in the first Bush White House blamed him for contributing to their 1992 election loss to Bill Clinton. . . .

Greenspan's frequent contacts with the Bush administration do raise questions for Kenneth H. Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania. "There's the appearance that [Greenspan] might not just be affected by economic winds, but possibly by political winds," said Thomas, who obtained records of Greenspan's appointments back to 1996 through the Freedom of Information Act, and who published his findings in an article in the American Banker last month. . . .

Greenspan's meetings do mark "a huge and historic shift," said Donald Kettl, a professor of political science at the University of Wisconsin at Madison and author of a book about political influence on the Fed.

While the "experts" warn that Greenspan has to maintain the Fed's distance from the executive branch so as to maintain the Fed's power and credibility, it hasn't seemed to have hurt the central bank yet. Perhaps Alan learned the lesson of the US Supreme Court in 2000, which demonstrated that you can baldfacedly play the role of political hack and still maintain your power and authority with no damage to the institution itself.

The Bank of England has boosted UK interest rates three times since November. Housing markets just don't care.

Britain's largest building society said the average house price rose by 1.9 per cent this month to �149,020. This put the annual rate of house price inflation at 19.5 per cent, accelerating from April's 18.9 per cent to the fastest rate in a year.

But Nationwide warned that the longer the house price surge goes on, the more serious the result of a downturn was likely to be.

Lenders and the Bank of England alike have been predicting house price inflation would slow dramatically after last year's 25 per cent gains but this has so far failed to materialise.

"The likelihood of a potentially drawn out period of house price inflation is rising," said Alex Bannister, Nationwide's group economist.

Just last month the IMF warned yet again of the likelihood of popping housing bubbles in much of the Anglosphere (UK, Australia, Ireland, US) along with a few other countries (Netherlands, Spain). In the UK, rising real interest rates haven't put off homebuyers, and the gap between British annual real housing price growth (10.4%) and annual real disposable income growth (3.16%) is the largest of the 11 countries studies by the IMF.

The ever-swelling housing bubble in the UK suggests that a gradualist interest rate hike approach to tackling inflation may not be the best approach -- a lesson that Alan Greenspan and Co. might want to consider as they continue putting off raising interest rates in the US, now perhaps as late as August.

Lest we think that all is well in the British sector of Iraq.

The Defence Secretary Geoff Hoon today announced a further 370 British troops are to be sent to Iraq.

He said the 1st Battalion the Black Watch, trained in operating out of Warrior personnel carriers, would replace the 1 Argyll and Sutherland Highlanders who were due to return to the UK.

That would mean a net increase of 200 troops, responding to the "continuing threat from violent groups in the area around Al Amarah", Mr Hoon told MPs in a Commons statement.

In addition, after mortar and rocket attacks targeted at British forces around Al Amarah, 69 Squadron from 36 Regiment Royal Engineers - 170 troops - will be sent to Iraq.

Mr Hoon said they would "carry out force protection work, including the construction of additional physical defences in British bases to reduce the threat posed by the kind of attacks we have seen in recent weeks".

The Financial Times called the troop deployment "a modest increase," and while it is in an absolute sense, in a relative sense Blair is upping the British forces in Iraq by over 2%. Of course, that's a far cry from John Kerry's call to boost US troop presence by 30%.

Ilya Shapiro at Tech Central Station thinks he's discovered something profound: Purple America.

I am a cosmopolitan conservative, residing in that nebulous region distrusted by both coastal elites and the populist sages of the heartland, Purple America.

Purple America is not so much a place as an idea, or more precisely a confluence of values from Red America with tastes from Blue America. It believes in personal responsibility, discipline, civil society, spontaneous order, ordered liberty, and that the best thing government can do is not get in the way. Yet it craves independent films, fine cigars, Belgian ales, and South American f�tbol -- along with a good baseball game (preferably without the designated hitter).

Hmm, didn't David Brooks discover these people four years ago and dub them "bourgeois bohemians"?

In his column today John Kay of the Financial Times (subscription only) cuts through all the crap about the stock market and gets down to bare bones.

The level of the stock market is a measure of national self-congratulation. It tells you how much you think your children and grandchildren owe you. . . .

As the myth of the new economy has dissolved, however, two new illusions have emerged: not only are the businesses we have created worth more to future generations than we had previously supposed, the houses we have built are also worth far more. Better still, the beneficial effects of tax cuts on productivity and growth are so large that not only are George W. Bush's friends better off today but everyone, including the federal government itself, will be better off in future.

The American "baby boom" generation astride the world is not only running an empire on its own behalf today; it's colonizing the future as well. Whether government debt, current account deficits, climate change, or ecological unsustainability, I fear the baby boomers are the most profligate bunch of bums, cheats and wastrels the world has ever known.

Yes, I know, spoken like a true thankless member of Generation X.

Congratulations to the Calgary Flames, who not only won Game 1 of the Stanley Cup Championship last night but are also the first Canadian team in the NHL finals in ten years. C'est chocolat!

Even the evil Bill Safire cannot see the daylight shine between Bush and Kerry on Iraq.

Four weeks ago, at Westminster College in Fulton, Mo.,, Kerry laid out three basic options: (1) "continue to do this largely by ourselves" (would never work); (2) "pull out and hope against hope that the worst won't happen" (worst would happen); or (3) "get the Iraqi people and the world's major powers invested with us in building Iraq's future" (that's it!).

In his address the other night, President Bush agreed with Kerry's unassailable Option 3 by recounting his own five-step plan:

(1) Turn over sovereignty as promised in a month, the date O.K.'d by Kerry; (2) help establish security (like Kerry, Bush is ready to send over more troops if our generals ask, and they'd better not ask); (3) "rebuilding that nation's infrastructure," echoing Kerry's call for "tangible benefits of reconstruction in the form of jobs, infrastructure and services"; (4) "Next month at the NATO summit in Istanbul," Bush promised to "discuss NATO's role in helping Iraq build and secure its democracy." As Kerry said last month: "He must also convince NATO as an organization that Iraq should be a NATO mission."

Only on the fifth step can we find daylight between the two men's positions. The neomultilateral Bush boasted that "a United Nations team headed by Karina Pirelli is now in Iraq helping form an independent election commission that will oversee an orderly, accurate national election."

But Kerry prefers a "high commissioner . . . charged with overseeing elections . . . highly regarded by the international community." Sorry, Pirelli; step aside, Brahimi; we need a celebrated heavy hitter like Nelson Mandela or Jimmy Carter to order those so-called sovereign Iraqis around. (Who'd a-thunk it: Bush caving in to the U.N., while Kerry gives Kofi Annan's envoys the back of his hand.)

Aside from this minor divergence of views � which could be rectified the moment Bob Shrum reads this � the speeches of the two candidates show that they see eye to eye not only about staying the course, but about what course to pursue. "If the president will take the needed steps to share the burden," said Kerry, ". . . then I will support him on this issue." And the Bush five-step plan takes those steps.

Kerry's enthusiasm for some kind of High Commissioner to oversee Iraq is echoed very clearly by his foreign policy advisor Richard Holbrooke who couldn't help but point out twice on the NewsHour last week that Lakhdar Brahimi is a Muslim (wellll . . .), a Sunni (gasp!), an Algerian (what?!?) and a "U.N. official" (lynch him!).

I hate to sound like a broken record . . . broken record . . . broken record . . . but this stuff is just too spot-on to ignore.

When it comes to Iraq, it is getting harder every day to distinguish between President Bush's prescription and that of Senator John Kerry.

They still differ on some details, and Mr. Kerry continues to assert that Mr. Bush has lost so much credibility around the world that only a new president can rally other nations to provide the necessary assistance, a point he made Tuesday while campaigning in Oregon.

But as became evident with Mr. Bush's latest speech on Iraq on Monday night, which followed a detailed speech Mr. Kerry gave on Iraq's future one month ago, the broad outlines of their approaches are more alike than not.

. . . Mr. Kerry is left to argue that while both men have similar ideas about what to do, he has more credibility to do it, given the breakdown in relations between Mr. Bush and many world leaders over Iraq.

To be fair, there are one or two minor differences between Bush and Kerry.

Mr. Kerry has called for NATO to take a major role in Iraq, freeing up American troops and providing an opening to attract military support from non-NATO nations like India and Pakistan.

. . . Secretary of State Colin L. Powell said Tuesday that Iraq would be discussed at the NATO summit at the end of next month in Turkey, and that 16 of the 26 NATO member nations are already involved in Iraq in some way.

And then there is

Mr. Kerry has also called for the establishment of a United Nations high commissioner to oversee the political development of Iraq and the rebuilding efforts.

. . . Administration officials have been dismissive of Mr. Kerry's idea of putting a United Nations high commissioner in Iraq. They have argued that the Iraqis do not want the United Nations in power any more than they want the United States in power.

"This is not East Timor," one senior administration official said

While is is good fun to pile on top of Bush and kick him while he's down, it is more important to show how the broad -- and in some respects narrow -- elements of American imperialism will sail confidently ahead under a Kerry presidency. Talk of NATO and a UN High Commissioner is almost pure politicking, not a real strategic alternative to Mr. Bush's War.

Is there any doubt that the world-historic role of John Kerry is to have his most famous quote, "How do you ask a man to be the last man to die for a mistake?", thrown back at him?

FYI, I've added John Quiggin to the blogroll. Not only does he run a great site, but this quote about him is one of the best I've read in the blogosphere:

"I do not know how he is a professor, but anyway he purports to be an economist."

--Senator Richard Alston, Minister for Communications [Australia]

Hey, my very first comment on General Glut's Globblog! Thanks to baoutsi who wins the Big Globblog Prize -- to be clothed in eternal glory.

You write:

The point is that liberal empire is not about creating order. It is about creating order favorable to the interests of the empire.

I fully agree but I don't think the interventions of the North were successful. The multilateral approach (Bosnia, Kosovo) just froze the chaos and it didn't create a self-sustaining order. The semi-multilateral (Afghanistan) and the unilateral (Iraq) are even worse. In these cases the state couldn't be reconstituted.

I think that the great weapon of the countries of the North is economic sanctions. Military intervention is costly, fraught with dangers and doesn't seem to work.

As of April 2004, the US economy is down 1.6 million (non-farm) jobs overall under the Boy King, but down 2.3 million private sector jobs (one assumes Republicans won't be crowing over more government employment under Bush). Paul Krugman reminds us today that it's even worse than that, however.

The job forecast in the 2002 Economic Report of the President assumed that by 2004 the economy would have fully recovered from the 2001 recession. That recovery, according to the official projection, would lead to average payroll employment of 138 million this year � 7 million more than the actual number. So we have a gap of 7 million jobs to make up.

And employment is chasing a moving target: it must rise by about 140,000 a month just to keep up with a growing population. In April, the economy added 288,000 jobs. If you do the math, you discover that President Bush needs about four years of job growth at last month's rate to reach what his own economists consider full employment.

Well, I guess we've got the Republican campaign theme for 2008 already worked out!

Last Thursday the General weighed in on the lefty blog tussle between new middle class liberals (Yglesias, Drum, DeLong) and working class populists (Newman, General Glut). Nathan Newman has another great reply to Yglesias.

That Matt sees this stuff as tangential to "true" conservatism is exactly the point-- like a lot of liberals he's more obsessed with the culture war, while thinking the economic war can be managed once a few good technocrats are put into office under a nice liberal President.

While I'll defend Clinton relative to Reagan and the Bushes and want Kerry to win, Robert Rubin or the equivalent that Kerry will appoint is not going to confront head-on the economic warfare that working people are facing, at both the government level and by private sector corporate organizing. And the fact that liberals don't take the economic component of conservatism seriously enough is exactly why the rightwing can get away with it given the often deadening media silence.

Contemporary DLC Democrats (including John Kerry) as well as most "liberal" bloggers are little other than the reincarnation of liberal Republicans of a bygone age. Compare John Anderson of 1980 to any of these guys and try to measure the difference. Warning: bring your micrometer.

Niall Ferguson is busy shooting his mouth off today at The Atlantic webpage. If you've read any of his opinion pieces over the last two years, there is really very little that is new to be gleaned. I suspect it is really just part of Ferguson's grand strategy of getting published in every English-speaking periodical in the world (he's in the most recent issue of Mother Jones, of all places, too). The small bit that is new is that Ferguson is plugging his new book, Colossus: The Price of America's Empire. I admit that I haven't read it yet; I'll get around to it this summer. That being said, the interview in The Atlantic together with Mother Jones and even Ferguson's piece in today's Telegraph make me feel like I've already read the thing.

The long and short of Ferguson's claim is that the British did empire a hell of a lot better than the US did in the past or does now and thus the upstarts need to learn a lesson or two from the old master. What made the British so damned successful, apparently, is that they were all about "liberal empire".

there were self-proclaimed liberal imperialists in Britain, liberals who saw the British Empire as a means of spreading liberal values in terms of free markets, the rule of law, and ultimately representative government. There was an important and influential faction within the Liberal Party who saw empire as an instrument for globalizing the British liberal model.

This is to be contrasted to the "defective" US model.

it had been the model even before the Cold War, in the days of Hoover and Franklin Roosevelt�the "Our Son of a Bitch" model. And when you look at what happened in countries from Chile to Iran, I think it's obvious that the cost of that approach probably outweighed the benefits. The legitimacy of American foreign policy suffered serious long-term damage because support was given rather uncritically to some pretty lousy regimes. Indirect rule through petty dictators has the defect that you really have a problem controlling the bastards that you are notionally sponsoring.

Let's stop right there. What is the evidence of British "success" and US "failure"? That British imperialism created "successful" (i.e. rich, stable, representative) societies whereas American imperialism created "defective" (i.e. poor, unstable, autocratic) ones? Ferguson waxes eloquently on the British experience: Canada, New Zealand, Australia, India, Egypt, Iraq . . . huh??

First of all, no honest historian can count the so-called "white settler colonies" in the tally sheet of successful British imperialism. These are colonies in the proper sense of the term, appendages of Britain itself. The real proof in the pudding is places the British didn't colonize but simply conquered. And there the record is lousy. India can be placed in the "success" column on Ferguson's terms (of course, he ignores all the death and destruction, but at least the country has stable democratic institutions) and perhaps Sri Lanka (although stability seems wanting there). If I was being especially generous I might grant Malaysia. Where else can the British empire claim "success"? Sudan? Sierra Leone? Nigeria? Bangladesh? Pakistan? South Africa? Zimbabwe? Oman? Kuwait? Iraq? I think you get my drift.

Secondly, Ferguson is painfully naive and intentionally so when evaluating American imperialism, the goal of which was never to create liberal democracies but rather capitalist societies in which the rule of property could be carried out. In core countries like Germany and Japan post-WWII, the kind of capitalism created looked relatively benign. In the periphery of the Caribbean, Central America, the Philippines, Liberia, etc., it created a typically peripheral form of capitalism that was not designed to generate local wealth or representative government but stability toward the end of the enrichment of the core.

"Liberal empire" does indeed create the "rule of law," but it also undermines the "rule of law" at the same time. In the 19th century it destroyed one law (traditional) and replaced it with another (modern). Today it also destroys one law (national sovereignty) and replaces it with another (transnational globalization). Ferguson is incredibly sloppy on this point. He states boldly

So liberal empire has a discrete and distinct function to perform. It has to impose�and I stress impose�the rule of law.

Of course, that which liberal empire seeks to bring to an end is not always anarchy and chaos. Iraq in 2003 was hardly anarchic, and neither was Afghanistan in 2001. Clearly there were pretty nasty forms of order in both places, but the point is there was order. If liberal empire is all about replacing disorder with order, where is Ferguson on Sudan, DR Congo or West Africa?

The point is that liberal empire is not about creating order. It is about creating order favorable to the interests of the empire. Sometimes that is good for the imperialized (e.g. Germany, Japan) but usually it is not (e.g. Vietnam, Haiti, Nicaragua). Enough of this nonsense about "liberal empire" and global civil war as the only two options for the 21st century.

Important nuances you should know when following global oil prices:

Other analysts noted that the new oil that Saudi Arabia could pump quickly is high in sulfur content, while it is the low-sulfur "light sweet" crude that is in short supply. Refiners in the major consuming nations, including the United States and China, generally want only light sweet crude, and that is the type specified in widely quoted market prices.

The fact that Saudi Arabia has not been able to calm the energy markets with promises of more oil demonstrated just how high fears have been running about global shortages, oil industry officials and analysts said.

The Economist weighs in on OPEC, the G8 and oil prices.

At the next official meeting of OPEC, in Beirut on June 3rd, Saudi Arabia will be asked to demonstrate solidarity with its co-conspirators in the cartel. The bargain that holds OPEC together�each member shows restraint in production, so that all can enjoy higher prices�is at stake, they will say. But it is widely assumed that Saudi Arabia must also keep its side of a more fundamental bargain. It must be conscious of American petrol prices, especially in an election year, and, in return, the world�s only superpower will continue to offer the desert kingdom its protection. The other members of the G7 have rather less leverage, but they are promising to flex whatever diplomatic muscles they can find. Nicolas Sarkozy, France�s newish finance minister, in particular, is not one to sit still while others decide the fate of his economy. Those oil-producing nations with which France is most �easily in touch� will be hearing from him soon, he promised in New York.

Mr Sarkozy�s powers of persuasion and America�s promises of protection may be enough, for the moment, to keep the Saudis on side and the rest of OPEC quiescent. Oil prices of $50 per barrel no longer look an immediate prospect. But, by the same token, oil prices of $25 per barrel may, as the Venezuelans insist, belong to a bygone era. If the Chinese economy continues to grow and security fears continue to mount, there may be little anyone, in New Amsterdam or Old, can do.

The thing the General finds most odd in this passage is the assumption that the G8 has a great deal of weight to throw around regarding oil prices. They do not. Most of the smaller OPEC members are producing near or at full capacity, so shaking a stick at Venezuela (OPEC's #3 producer) or Libya (#7) won't do any good. With the West already in a complicated dance with Iran (OPEC's #2) to get the country to suspend its nuclear weapons program, piling demands for more oil on Iran (the most likely of the countries with which France is "easily in touch") as well is likely to backfire. That really leaves Saudi Arabia as the only significant player with enough spare capacity to throw into production in a pinch to make a real difference in the global market.

The Economist suggests the US has considerable leverage over the Saudis because of the "more fundamental bargain" between the two countries: oil for protection. Yet with the demise of Saddam, from whom exactly is the US now protecting the House of Sa'ud? From al-Qaeda? From its own subjects? I am unconvinced that the US can do much of anything to protect Crown Prince Abdullah and all his brothers, half-brothers, lackies, cronies and hangers-on from either.

In fact, higher oil prices are probably the best vehicle for the preservation of the House of Sa'ud in that it allows them to drown resistance and disaffection in a shower of petrodollars. Clearly the Saudis don't want to get too greedy and send the nascent recovery into a tailspin, but anything below $30/barrel seems increasingly unlikely.

Over at Political Animal, Kevin Drum is fond of blogging on Christianity. A good example is this post in which Drum links to a host of liberal sites commenting on the compatability or lack thereof between the secular left and the "progressive Christian left", i.e. religious people who also endorse the liberal cultural agenda (funny how very little of the arguing is over economics). What liberals like Drum fail to recognize, however, is that in the "progressive Christian left" they're not really dealing with Christianity, but with Christianity Lite.

Call it Christianity Lite. It's the assertion � no, the insistence � that you can be a Christian in good standing though you reject all or significant parts of the brand of Christianity to which you formally adhere. Even Jesus Christ � and who he was � is negotiable, not to mention traditional teachings on sex, abortion and divorce. Who's to tell you what to think and do as a Christian � or to judge you wanting? It's a heresy nowadays to accuse someone of heresy.

. . . the consumer mentality rules in the world of Christianity Lite: The notion that no one has the right to tell anyone how to practice his or her faith, or indeed what that faith should consist of. Individual choice, not the tradition handed down by parents or grandparents, increasingly governs belief, practice and denominational affiliation.

Christianity Lite is not Christianity. It is consumerism run amok, the perfect ideological orientation for post-modern capitalism. Even religion has become little more than a niche market which capital seeks to cultivate and control, with secular liberals helping to pave the way.

So grab those Tarot cards, pray that rosary and fill that Hummer. God's on your side!

John Quiggin at Crooked Timber is running down the so-called "Copenhagen Consensus" again today. The Copenhagen Consensus is a joint project between Bjorn Lomborg's Environmental Assessment Institute and the arch-liberal (in the European sense) magazine The Economist devoted to helping Northern governments and NGOs spend their aid money in the South via answering the question "Where, among all the projects that governments might undertake to make the world a better place, are the net returns to their efforts likely to be greatest?"

Quiggin has two major qualms: [1] a general ranking of problems to be tackled (e.g. disease, education, sanitation, armed conflict) cannot be achieved uniformly for every country; and [2] as Quiggin calls it "the joker in the pack, climate change," which of course is Lomborg's pet bugbear and which Quiggin suspects the entire project is in part simply a means of obfuscating.

Two important objections indeed, but how about a third much more fundamental objection?

In the words of The Economist, "a series of distinguished experts in each field was commissioned to write a review paper on each issue and on actions that might feasibly be taken in response, with due emphasis on costs and benefits." Each topic has one expert author and The Economist publishes short summaries of each.

Of the ten experts assembled by the Copenhagen Consensus, a full ten are from universities and think tanks in the Global North.

Now if you are interested in how best to help people in the Global South, wouldn't one want to, oh, I don't know . . . ask them? Unless of course the point is not to generate actual economic development but rather do charity work (worthy work but radically different from "development") and advance "the religion of modernity".

If John Kerry does not accept the Democratic Party's nomination for the presidency until five weeks after the party's national convention in Boston, what exactly is the point of the convention then? Not surprisingly, Boston Mayor Thomas Menino is asking the same question.

Menino has much on the line politically regarding the success of the convention, because he was instrumental in bringing it to Boston. Recent studies have predicted that the convention will be a net economic loss in Boston, because it is displacing other big events this summer and because shutdowns of major roadways for security needs will affect worker productivity.

The mayor may also need city taxpayers to chip in for the convention, because fund-raising has slowed in recent months and costs are threatening to increase. A convention without a formal nomination could take away from the event and make it harder for organizers to draw interest from television networks.

. . . the move could further sour relations with the host committee and the businesses that are supporting its efforts. Clayton Turnbull, vice president of the convention host committee, said Kerry should accept the nomination at the convention to make the point that the event "is about patriotism," and not simply part of a "business deal."

It's bad enough that party conventions in the US have become nothing more than live mega-commercials with a pro forma nominating ceremony at the end. Now apparently they're going to go as pure unadulterated commercials -- 100% "business deal" decked out in red, white and blue. Even reruns of Fear Factor could beat this out in the ratings.

It looks like Bush has really painted himself into a corner on the transfer of Iraqi "sovereignty".

But coalition partners and some of his closest officials are sceptical that events on the ground will permit even the best laid plans to run their course. They are also concerned that the White House has no back-up plan if Mr Brahimi fails to put together a caretaker government by June 30.

Mr Bush recently told Silvio Berlusconi, the Italian prime minister, that the UN envoy was doing a good job and would come up with a proposed list of names within two weeks. But one senior official, who gave Mr Brahimi only a "60-40" chance of success, said there was no "Plan B".

At least we can be pretty sure Ahmed Chalabi no longer has the inside track on running The New Iraq^TM.

The ceiling becomes the floor?

The big oil news over the weekend was the juxtaposed meetings of the oil consumers in New York and the oil producers in Amsterdam. The consumers made what the New York Times characterized as an "unusually blunt demand" of the producers to lower oil prices in the interests of "lasting economic prosperity and stability, particularly for developing countries" (considering the G8, the richest countries in the world, issued the statement, the concern for the fate of "developing countries" is a heartwarming touch). The producers -- but for one important exception -- were not swayed by the appeal, at least one stating in respone that "The market is already sufficiently supplied with oil". The one important exception, of course, is Saudi Arabia, which over the weekend unilaterally declared its intention to boost production by up to 11% to meet global demand.

So much for the news wrap-up. What does it all mean? The General already reported that many in the oil biz think up to $8/bar. of current prices are due to speculation and political instability in Iraq. Notably, three countries -- Libya, Venezuela and Iraq -- have publicly stated their confidence in this analysis and its conclusion that production shortfalls are not the current problem. Even if OPEC boosts production (i.e. Saudi Arabia goes to full production capacity), oil prices are unlikely to fall much in that many say OPEC is already exceeding its quotas and a formal pledge to boost official production levels will simply make the de facto situation de jure. And OPEC countries are wary of opening up the spigots for fear it will provoke another big fall in oil prices once speculation and instability are quelled, leaving them holding the bag while the consumers have fun, fun, fun 'till daddy takes the T-Bird away.

A pretty sure bet for the June 3 OPEC meeting in Beirut will be a formal increase in the OPEC price band. Currently at $22-28/barrel, countries such as Nigeria, Venezuela and Indonesia have in the recent past suggested a significant upward revision. Over the weekend both Qatar and Nigeria stated that $28/barrel should be the new price band minimum, effectively turning the old oil ceiling into the new oil floor. If $8/barrel is really froth on the top of supply and demand, a new OPEC price band of $28-32/barrel is entirely likely.

It's always nice to see that the best and the brightest are running the empire.

When the U.S. government went looking for people to help rebuild Iraq, they had responded to the call. They supported the war effort and President Bush. Many had strong Republican credentials. They were in their twenties or early thirties and had no foreign service experience. . . .

They had been hired to perform a low-level task: collecting and organizing statistics, surveys and wish lists from the Iraqi ministries for a report that would be presented to potential donors at the end of the month. But as suicide bombs and rocket attacks became almost daily occurrences, more and more senior staffers defected. In short order, six of the new young hires found themselves managing the country's $13 billion budget, making decisions affecting millions of Iraqis.

. . . none had ever worked in the Middle East, none spoke Arabic, and few could tell a balance sheet from an accounts receivable statement.

Note that the young Turk profiled in the article is one Simone Ledeen, daughter of rabid mad-dog neocon Michael Ledeen. Ledeen p�re is late of the Iran-Contra scandal and now of the neocon haven American Enterprise Institute. He is also the nut who admires what he calls "fascism-movement" and the revolutionary spirit of the Right (which apparently Mussolini failed in not going far enough!) and thinks the US should help overthrow the Islamic Republic in Iran as the next step of its calling to "creative destruction". Ledeen is one of the most important intellectual sources for the neocon devotion to the power of pure will over all (I was tempted to say �ber alles but I held off), which one cannot help but see realized in Bush speeches and government policy in Iraq. Somehow if we simply will it enough, it shall come to be. Thanks to his neocon advisors like Ledeen (who has bragged about his special access to Karl Rove's ear), Bush may be saying "Jesus Christ" but he is following Schopenhauer.

Funny how the crack reporters at the Washington Post never got around to mentioning Simone's daddy. I'm sure this was an innocent oversight, of course.

Has Europe lost the ability to grow? That's the bold claim from Hamish McRae in The Independent.

My worry for core Europe is that the problems are really too deep to be solved by either the odd quarter per cent off interest rates or the extra half per cent on fiscal deficits. It is that the European economic and social model, for all its attractive features, has created a climate of non-growth. The underlying capacity of core Europe to grow may be only 1.5 per cent a year, and a lot of that growth has to be diverted into caring for the swelling army of elderly people. So young people entering the workforce may have a lower standard of living than their parents, which is liable to make them even more cautious about spending - particularly in Germany, maybe a bit less so in France. The problem for Europe is that Germany is the bigger economy. Until Germany comes right, even France will struggle.

If this is true, the world will be forced to depend more and more on the Anglosphere to drive global consumption and economic growth. France has had three good quarters in a row of over +2.4% annualized growth, but it is coming off three years of especially anemic economic expansion (2001, +2.1%; 2002, +1.2%; 2003, +0.5%). Over the last twenty-four years, French GDP has growth at or beyond a 3% clip just five times (1988-89, 1998-2000).

German growth was respectable in 2000 at +2.9% -- with three quarters of GDP growth over 3% back in 1999:IV to 2000:II -- but since then has been quite weak as this figure from the Statistische Bundesamt shows:



In fact, the German economy has been in the doldrums really since unification . If "core Europe" cannot hold itself up as an autonomous engine of global growth, East Asia truly is the only possible balance to the Anglosphere going deeper and deeper into debt, running larger and larger current account deficits and paying out greater and greater sums of net investment income -- the very definition of "unsustainable". The first quarter of 2004 looks barely promising on the re-balancing front as far as Japan and France go. But one quarter does not a balance make.

There is a great layman's introductory article on the global oil economy in the latest issue of National Geographic that I would recommend. It has some very cool maps like this one as well as enough information on tar sand to make the subject actually interesting.

The article also contains a great photo on pp. 82-83 (not on-line) of a Stow, OH family on their front lawn lost amidst all the stuff they own which is made from oil. In the picture I can pick out: footwear, athletic equipment, toys, sewing machine, booster seat, storage bins, food containers, furniture, clothing, electronics, household appliances, lawn tools, sunglasses, tires, the car . . . well, you get the picture. Another photo on pp. 98-99 of a 1250-lb. steer standing next to six big red 42-gal. oil barrels gets another important point across; the caption reads "a pound of beef takes three-quarters of a gallon of oil to produce".

All this underlines the point that oil is about a lot more than simply "energy".

In the U.S. about two-thirds of the oil goes to make fuel for cars, trucks, and planes. But the synthetic fabrics in our wardrobe and the plastics in just about everything we touch started out as oil too. We can also thank oil and its cousin, natural gas, for the cheap and plentiful food at the supermarket, grown with the help of hydrocarbon-based fertilizers and pesticides. As Daniel Yergin writes in his oil history The Prize, we live in "the Age of Hydrocarbon Man."

Factor in all the oil embodied in the goods and services the US imports via its $500bn annual trade deficit and you can't help but see that our entire civilization floats atop a sea of oil. $40/bar. is about far far more than the price at the pump.

Uh-oh. Talk of a "national unity government" under the banner of Kerry-McCain is now worthy enough to be awarded 750 words in the Washington Post today.

This is an election in which both sides need to give up things that matter to them, for the sake of a country that matters more.

In normal times, people would accept McCain's response to joining Kerry: "I have totally ruled it out." But these aren't normal times, and McCain's response is unworthy. Simply put, the country needs him. The logic of a Kerry-McCain ticket isn't to win an election but to provide leadership for a divided country at war.

This sounds frighteningly like the talk surrounding New York City Mayor Rudy Guliani in Fall 2001 when the guy was floating the idea of extending his term in order to "unite the city" in the wake of 9/11. Thankfully that extra-constitutional power grab was ruled out of line, and NYC survived just fine thank you very much without Guliani. When we have people running around barking mad about how these are not "normal times" and regular politics needs to be suspended, I get real uneasy. Does David Ignatius really think the US is facing a 1958 moment a la France, and McCain is an American De Gaulle needed to finish off the Fourth Republic for the good of the nation?

How about this for an alternative? Throw every neocon into the Potomac and start planning now on how to get the hell out of Iraq!

WITH FRIENDS LIKE THIS . . .

Part Five of a six-part series on 'Progressive Internationalism'

Nobody to the left of George W. Bush regarding the war in Iraq could be comforted by the appearance of former Ambassador Richard Holbrooke on the NewsHour with Jim Lehrer last night. Speaking on behalf of John Kerry, Holbrooke was completely unable to differentiate Kerry from Bush on future Iraq policy, replayed the tactical critique of Bush in lieu of a principled critique of Mr. Bush's War (characteristic of Progressive Internationalism), and suggested an even tougher line on Iraq than the Bush administration has yet voiced, especially vis-a-vis the United Nations. Nothing out of Holbrooke's mouth put even a single worry of the General's to rest.

The interview started poorly for Holbrooke. Although coming off as much more statesmanlike and intelligent than Kenneth Adelman (there to represent the Bush camp), Holbrooke used time in his opening statement to directly undermine the very institution that Kerry is claiming a unique capacity to work with to solve problems in Iraq: the United Nations.

How in God's name could the United States be prepared to turn over sovereignty without knowing who to a group that will be determined by Lakhdar Brahimi, a U.N. official, an Algerian Sunni Muslim [ed. - emphasis added], a very good guy in many ways. He's smart. I worked with him. But we don't know what he's going to come up with or when he's going to come up with it or whether it serves America's national interests.

This administration, which has undermined, demeaned, and under funded the U.N. for three years has now turned its fate and destiny in Iraq over to the U.N. while leaving 135,000 American men and women at risk.

Holbrooke made this insinuation not once but twice during the interview ("a U.N. official, a Muslim, Sunni, Algerian" -- why not mention his receding hairline and goofy tinted glasses, too?). Good Lord, Jesse Helms or Pat Buchanan could have said the same thing!

When Holbrooke was asked what the differences would be between Bush and Kerry for future Iraq policy, Holbrooke completely flubbed it.

MARGARET WARNER: All right. So you both disagree. What are the differences on where to go from here?

RICHARD HOLBROOKE: First of all, the president has not yet gotten to the point where Sen. Kerry has been for over a year. Secondly, the president's movement in the direction that Sen. Kerry and many other leading Democrats and many Republicans have advocated, ought to indicate to your viewers which of the two men has the better prospect of bringing America its national security objectives in Iraq.

MARGARET WARNER: Are there specific policy differences that you see between Sen. Kerry's approach and the president's approach at this moment?

RICHARD HOLBROOKE: Anyone who knows the two men, their background and what they've said, knows that they would have pursued Iraq differently and the challenge...

KENNETH ADELMAN: Let me answer your question. If Richard is not going to answer your question, I'll answer it.

When pressed for a substantive answer, all Holbrooke could offer was a criticism of Bush administration incompetence combined with [1] agreement with Bush on the principles of the war ("Now, on Iraq itself, Saddam Hussein was an extreme tyrant. Getting rid of him was a correct objective. Sen. Kerry supported the resolution in September of 2002, as did I, that authorized the president to take action against him."); and [2] praise for Kerry's big brain, big skills as a diplomat and big heroism in Vietnam ("Let me just say one other thing, Ken, he is a very experienced diplomat and a professional and an international expert, as well as his famous Vietnam service.")

In short, Holbrooke defended Kerry with one line: "Trust him."

Kerry's "alternative plan" amounts to

He has never stopped talking about the need to bring in an international cover for our presence through the U.N., of bringing in more forces, of building the kind of diplomatic coalitions which would have worked.

But as Adelman accurately points out,

KENNETH ADELMAN: That's the advantage of being an outsider and not an incumbent. You can promise everything. Are they really talking about the French, are they really talking about the French and the Russians are going to go along?

Listen, Margaret, the French and Russians wanted to keep Saddam Hussein in power. They wanted to do the opposite that Richard Holbrooke says he wanted to do, which was get rid of Saddam Hussein. They're not going to come along and cooperate.

A foundational and repeated assumption of Kerry and the whole crew around "progressive internationalism" is that the world would have cooperated with the US in overthrowing Saddam if only the administration would have been nicer about it all. Liberal hawks are either unwilling or unable to admit that the fundamental interests of the French, Germans, Russians and others were opposed to those of the US in this situation. It is an important intentional ignorance, however, for it allows them to fight Bush on tactical grounds while completely agreeing with him on principled and even strategic grounds.

Note that Kerry wants to do more, not less, in Iraq: more troops, more money, more of the political agenda consumed by Iraq.

RICHARD HOLBROOKE: . . . contrary to what Ken just said, there is no chance at all that Sen. Kerry would follow the advocacy of anyone who wants to cut and run. He is a strong national security Democrat from his three purple hearts, his silver star and his bronze star in Vietnam, all the way through to his principled stands on many foreign policy issues, including, I want to stress, his strong support for the Clinton administration in overthrowing Milosevic and cleaning up Bosnia and Kosovo.

"Cut and run" -- i.e. even thinking about an exit strategy -- is anathema to Kerry. Even the United Nations cannot be trusted thanks to that Sunni Muslim Algerian guy. Liberal hawks talk a lot about cooperation, but cooperation is not a fundamental value; US "national security interests" are. How is this any different from what Bush has already done or proposed doing?

Somehow Kerry is going to work his magic with the Europeans and the UN starting in January 2005, we are told, because the dispute between the US and the rest of the world is quite frankly one big misunderstanding caused by a crazed zealot in the White House; it has nothing at all to do with state interests or American empire. If you believe this, I suggest you sign up for the National Guard ASAP and trust Kerry to do the right thing.

PART FOUR: The Land of the Free Traders

PART THREE: Mo' Better Blues

PART TWO: Building a Better Bush

PART ONE: Kerry is So Very . .

A small tussle among liberal bloggers was engaged yesterday in responses to Matt Yglesias' claim that "conservatives" haven't really been all that successful in enacting their agenda since 1964. Kevin Drum chimed in with basic agreement ("Matt is right") and Brad DeLong seconded the motion ("It's twue! It's twue!").

Nathan Newman pointed out the big big hole in this liberal retort.

So arguably, the mainstream conservatives may have been defeated in some of their goals, but the corporate wing-- which funded Ronald Reagan's rise to power -- has been quite successful.

What Newman is too polite or coy to point out is that liberals like Yglesias, Drum and DeLong reflect the interests and ideology of the new middle class. Thus it's no surprise that things like union-smashing, deregulation, capital mobility, lower real wages, shifting tax burden, privatization, imperialism and free trade are all ignored by them, because these are working class issues. To liberals, getting bigger government, birth control, working mothers, abortion rights and gay marriage is far more significant than anything going on at the bottom rungs of the class struggle.

It is the case that the Goldwater agenda of small government has been soundly turned back, but capital was never really on board this project in the first place. Capital likes a big state if that state can and will do capital's bidding, and that is more or less what Republicans have accomplished since the days of Reagan. The "conservatives" in the US House ranting about the "guvment" would never give up management of a floating dollar, corporate welfare or defense contractor largesse, after all.

In response to this liberal tussle, the General can only quote Floyd B. Olson, the great Farmer-Labor Governor of Minnesota, who once said,

I am frank to say that I am not a liberal. I enjoy working on a common basis with liberals for their platforms, etc., but I am not a liberal. I am what I want to be -- I am a radical.

Yesterday the General blogged on how the US national security state has defected from the Bush coalition -- an amazing thing considering the military, the intelligence bureaucracy and Senators on the Armed Services and Foreign Relations committees are key members of any Republican bloc. Recent news suggests that the morons in the GOP who cut up the national security state interests just can't help continuing to rub salt in the wound they caused in the first place!

From today's Washington Post:

A two-month-old House-Senate standoff over the 2005 budget burst into public acrimony yesterday, when the GOP House speaker questioned Sen. John McCain's credentials as a Republican and suggested that the decorated Vietnam War veteran did not understand the meaning of sacrifice.

The battle over the budget has highlighted rising tensions between a House dominated by conservatives and a Senate where moderates still wield considerable influence, with President Bush's agenda caught in the crossfire.

House Speaker J. Dennis Hastert (Ill.) lectured McCain (Ariz.) -- an outspoken opponent of Bush's tax cuts -- over war sacrifices, drawing a blistering retort from McCain, who nearly died of war wounds in a North Vietnamese prison camp.

From today's CNN:

In a rare public swipe at a fellow Republican, House Speaker Dennis Hastert on Wednesday questioned the GOP credentials of John McCain, a U.S. senator who has often challenged party orthodoxy.

Talking to reporters, Hastert pretended not to know who McCain was when asked about a recent statement by the GOP senator from Arizona.

As other House GOP members stood behind him laughing, Hastert, R-Illinois, then expressed doubt that McCain was indeed a Republican.

And from Maureen Dowd today:

In a bracing display of old-fashioned public spiritedness, the courtly Virginian joined up with the crusty Arizonan, John McCain, to brush back Rummy and the partisan whippersnappers in Congress who are yelping that the Senate Armed Services Committee's public hearings into prison abuse by American soldiers are distracting our warriors from taking care of business in Iraq.

"I think the Senate has become mesmerized by cameras, and I think that's sad," said a California Republican, Representative Duncan Hunter.

Then Senator John Cornyn of Texas weighed in, suggesting that Mr. Warner, a Navy officer in World War II, a Marine lieutenant in the Korean War and a Navy secretary under Nixon, and Mr. McCain, who lived in a dirt suite at the Hanoi Hilton for five years, were not patriotic. Their "collective hand-wringing," Mr. Cornyn sniffed, could be "a distraction from fighting and winning the war."

The ideologues and true-believers among the Republican Party are truly playing with fire on this one. This is a very serious process of jockeying and struggling over position and power within the GOP. In the current US political climate, my money is on the war heroes to defeat the posers. But perhaps I should root for Hastert? A win by the wingnut set will surely burn the entire GOP to the ground this fall. The national security state will be leaking to Sy Hersh like a sieve.

Thanks to No More Mr. Nice Blog for the heads up.

The G8 is preparing to demand a dramatic increase in oil production from OPEC as both blocs conduct important meetings this weekend. However, the failure of two key G8 members (which will go unnamed) to establish security in Iraq may make any effort the Saudis take to be in vain.

Iraq's oil exports fell by nearly 1m barrels a day last week after its southern oil pipeline was bombed on May 8. The loss was substantially greater than the 400,000 b/d drop reported by Iraqi oil officials last week and is likely to drive already-high world oil prices higher yet. The loss was in part also due to technical problems at Iraq's northern export pipeline.

"This is way bigger than people had been expecting. It is not fully known in the market and is bullish in the medium term," said Neil McMahon, analyst at Sanford Bernstein.

"The reduction of 1m barrels a day in Iraqi exports effectively nearly wipes out any Opec increase we could get."

Internal OPEC politics are likely to make the big OPEC meeting on June 3 a real fight. The Saudis have the luxury of looking to the long term. They can afford lower prices are are keen to achieve them in order to appease the North while keeping it dependent on Middle Eastern oil. Other OPEC members like Indonesia are more worried about short-term problems which high prices will help address. For example, Indonesia became a net importer of crude oil for the first time earlier this year, and a long dearth of foreign investment into its oil fields means status as a net oil importer may be more than just a temporary bump in the road. High prices help the Indonesians boost their declining current revenues while at the same time help attract investment to its oil fields, thus ensuring future production. Combine this with statements from the likes of Indonesia, Nigeria and Venezuela that the famous $22-28/barrel price band needs to be dramatically revised upwards, and you get an OPEC which the Saudis cannot simply push around at will.

High global oil demand means the smaller OPEC members have a stronger hand to play than in a period of weak demand making serious restrictions of supply necessary. Surely the Saudis will push some quota increase through, either this weekend in Amsterdam or next weekend in Beirut. I doubt it will cast away the fears that are driving what some claim is an extra $8/barrel into global oil prices, however.

More news on everybody's dependence on ever-widening current account deficits in the Anglosphere.

Hinrich M�hlmann, chief executive, says overseas orders have risen powerfully since the beginning of 2004 and Putzmeister expects to increase its staff by 10 per cent this year to cope. "Germany stands for quality," he says. "As with German cars, people are prepared to pay premium prices." Overseas sales now account for 90 per cent of production, up from 60 per cent a decade ago.

Official statistics in recent days have confirmed that Mr M�hlmann is not alone in turning his back on a weak domestic economy to take advantage of markets in the US, Asia and elsewhere.

German exports in March were up almost 17 per cent compared with the same month a year before - one of the fastest growth rates since records began in 1950. For the three months to March, exports of goods were up almost 9 per cent while figures for the whole of 2003 showed Germany overtaking the US to regain its position as Exportweltmeister.

If due to reasons of health, citizenship or common sense you cannot join the United States Army, fear not. There is still room for you in the US reserve army of the unemployed!

In the week ending May 15, the advance figure for seasonally adjusted initial claims was 345,000, an increase of 12,000 from the previous week's revised figure of 333,000. The 4-week moving average was 333,500, a decrease of 2,750 from the previous week's revised average of 336,250.

For an economy supposedly in robust recovery mode, this uptick in jobless claims is surprising. The FT reports today that "Economists assume that any figure below 350,000 is consistent with an expanding jobs market." and thus try to asuage us that this news really isn't all that bad. But looking at the larger employment picture gives one little comfort.

Jobless claims first dipped below the magic 350,000 mark in late December 2003 but sustained a sub-350,000 level only by late February/early March 2004. Since that time, the lowest weekly seasonally adjusted jobless claims number has come in at 318,000 and spent two weeks in mid-April above the 350,000 line. Now the four-week moving average is 333,500; below the 'expanding jobs market' line, but only by a whisker.

The overall US jobs picture is still pretty bleak. This George W. Bush jobs recession is now at 38 months, the longest since the Great Depression and with no end in sight. For comparision, his father's lasted 37 months; under Reagan, 25 months; under Nixon/Ford, 23 months; under Nixon, 20 months; and under Carter, a mere 10 months. The US economy is still down 2.26 million private sector jobs from its February 2001 peak and at the most recent growth pace will fully recover only in 10 months time. And did I mention that real wages in the private sector have been stagnant for 18 months?

Is the jobs situation in the US "getting better"? Well, of course. Like every sick patient, you do one of two things: get better or die. But this is still the most drawn-out, languishing process of "getting better" since the 1930s.

I wanted to write a post like this one by Kash over at AngryBear on the tragedy of yet another four years of High Priest Greenspan wearing the triregnum, but he beat me to it. Thank, Kash, for doing my work for me!

The national security state seems to have finally had it with the Bush administration.

Even worse for Rumsfeld and his coterie of neo-conservative true believers who have run the Pentagon for the past 3� years, three major institutions in the Washington power structure have decided that after almost a full presidential term of being treated with contempt and abuse by them, it's payback time.

Those three institutions are: The United States Army, the Central Intelligence Agency and the old, relatively moderate but highly experienced Republican leadership in the United States Senate.

Clearly the Army and the CIA are constituent members of the national security state. The Senate Republicans in question are Sens. Lindsey Graham (R-SC), Orrin Hatch (R-UT), Richard Lugar (R-IN), Pat Roberts (R-KS) and John Warner (R-VA). Warner, Roberts and Graham are all on the Senate Armed Services Committee, with Warner being the Chair; Lugar is Chair of the Senate Foreign Relations Committee; and Hatch the Chair of the Senate Judiciary Committee. All but Hatch are clearly tied into the national security state by their positions in the Senate. Throw in McCain (R-AZ), also a member of the Senate Armed Services Committee, and you have a powerful element of the Bush bloc in outright revolt.

According to Jack Nelson-Pallmeyer,

The first characteristic of a National Security State is that the military is the highest authority. In a National Security State the military not only guarantees the security of the state against all internal and external enemies, it has enough power to determine the overall direction of the society. In a National Security State the military exerts important influence over political, economic, as well as military affairs.

Both through the Iraq war in general and the torture scandal in particular, the Bush administration has violated this cardinal principle of the national security state. First, the "military experts" -- uniformed officers and their non-uniformed supporters in Congress -- were screwed over by a rather small collection of neocon ideologues from outside the national security state. Second, the national security state is clearly enraged that the neocons besmirched their social prestige and honor by dealing with the Abu Ghraib scandal with such obvious political calculation. Now it's time to pay.

Democrats going ga-ga over a Kerry-McCain ticket need to look before they leap. While McCain and the others are clearly serving the short-term interests of anybody interesting in taking Bush down a few dozen pegs, one cannot forget that these Senate Republicans are all core members of the national security state and thus devoted to militarism, secrecy and the power of capital. They may look good enough to flirt with across the room, but do you really want to wake up in the morning next to them?

What's driving Japanese growth? Takehiro Sato and Osamu Tanaka at Morgan Stanley gives us the straight dope.

Components that drove growth were personal consumption (+1.0% QoQ), capex (+2.4%), private-sector inventory (a contribution of +0.2ppt QoQ), and exports (+3.9%).

Note that Japanese exports grew faster than any other component of the recent growth profile.

After hiking interest rates 25 basis points in May, the Bank of England looks set for another go 'round in the near future, perhaps as early as July.

Bank minutes show the MPC voted 9-0 in favour of raising rates by 25 points to 4.25 per cent. Alongside the revelation that the committee discussed a hike twice this size, the minutes were more hawkish than expected, boosting sterling.

"It points to further rate rises ahead and it looks increasingly likely that they [the MPC] may not wait until the next inflation report to raise rates, making July the most likely time for a hike given inflation is likely to have crept higher by then," said James Knightley at ING Financial Markets.

Combine this with new beliefs that the Fed is in no hurry to begin raising US interest rates above their 1% level, and you get another big boost to the speculators running the dollar "mother of all carry trades".

The blog run by The American Prospect has an important posting today regarding the chances of a US military draft. Here's the whole thing:

IT'S DRAFTY IN HERE. A friend of mine who is currently an inactive Army reservist forwarded me some memos he received regarding future mobilizations [Ed. -- Kevin Drum has excerpts from the memos] -- memos that indicate that we are not far from some kind of conscription in the next few years. According to my friend, recruiters are telling inactive reservists that they're going to be called up one way or another eventually, so they might as well sign up now and get into non-Iraq-deploying units while they still can. There's also a "warning order" -- i.e., a heads-up -- from the Army's personnel command that talks about the involuntary transfer of inactive reservists to the active reserves, and thus into units that are on deck for the next few Iraq rotations.

My understanding of how reserve call-ups work is imperfect, but if memory serves, the inactive reservists -- known as the Individual Ready Reserve -- are people who have already fulfilled their term of enlistment but can be called up as individuals if the military needs their particular skills or specialty badly enough. In other words, after a couple of years of dipping into the main reserves -- essentially chewing through them to sustain post-9/11 deployments, the Afghanistan occupation, and then the Iraq invasion -- we're now dipping into the inactive reserves. And if we still need more manpower after that -- well, then we start drafting.

There is no question we do not have enough manpower (among other things) in the active-duty military to sustain our current "operations tempo," as the military wonks call it. And there are many good arguments to be made for reinstating the draft, albeit one that would look very different from the corrupt and unfair Vietnam-era draft. It's worth thinking now about what kind of draft we'd like to see if the need for one becomes inavoidable.

--Nick Confessore

A couple of comments.

First, it is just downright scary how many liberals are completely on-board a universal draft to fight Mr. Bush's War. Both TAP and Washington Monthly are supportive, and the General has already blogged on the enthusiasm of the liberal hawks associated with "progressive internationalism" for both the war and for 'service and sacrifice' from the American people for it.

Second, beginning today up to 23,000 inactive reservists are eligible for becoming active; these are truly the last drops from the domestic coffee cup. The next step would likely be wholesale redeployments out of Germany, Italy, Korea and Japan for Iraq, plus more onerous active duty for the National Guard. If even this was not enough, a military draft becomes not only possible but necessary. It looks like Bush is determined to wait the war out for another six months before making any serious decisions.

Third, most states are seeing at least one-third of their National Guardsmen sent to Iraq and some a lot more than that (Idaho 81%; Maine 60%; Louisiana 59%; New Jersey 59%; New Hampshire 56%; Washington 55%; Tennessee 54%; Montana 53%). Today's high-tech US military doesn't need grunts carrying guns a la Vietnam; it needs particular skills. I can very easily envision a universal registration for military service combined with a limited military draft in 2005 designed to replenish the ranks of the National Guard both for service in Iraq as well as at home to respond to natural disasters and civil emergencies.

And that's under Kerry as well as Bush.

Iraq's Grand Ayatollah Ali Sistani must have one incredible case of cabin fever.

The home and office of Grand Ayatollah Ali Sistani, Iraq's highest Shiite Muslim authority, was targeted by gunfire in the holy city of Najaf, a spokesman for the religious leader said.

"The home has been targeted by fire this morning," the spokesman told AFP on condition of anonymity, but declined to say if US-led forces or militiamen of radical Shiite cleric Moqtada Sadr were responsible.

"Bullets broke some window panes of the home," he said, without reporting any injuries. . . .

Sistani, 73, has not left his home for seven years since a failed attempt on his life during Saddam Hussein's regime.

Maybe George Bush isn't interested in a new UN Security Council resolution on Iraq because somebody might decide that the cozy little arrangment between "the Authority" (i.e. the US and UK as "occupying powers under unified command") and the "Development Fund for Iraq" established by Resolution 1483 last year needs to be changed?

As the occupation of Iraq dissolves further into bloody chaos, the colonial overseers in Baghdad are keeping their eyes fixed on what is really important: Iraq's money and how to keep it. Whatever apology for a "sovereign" Iraqi government is permitted to take office after June 30 -- and U.N. envoy Lakhdar Brahimi admits in private that he "has to do" whatever the Americans tell him to do -- the United States is making sure that the Iraqis do not get their hands on their country's oil revenues. . . .

Queried on this crucial topic, the CPA has stated that it will continue to control the revenues beyond June 30 "until such time as an internationally recognized, representative government of Iraq is properly constituted." Whatever entity is unveiled for June 30, it apparently will not fit these requirements, so the hand-over date is, essentially, meaningless.

Resolution 1483 eliminated the oil-for-food program under UN authority and replaced it with the Development Fund for Iraq under US/UK control. Through the DFI all of Iraq's finances are controlled by levers at the New York Fed.

When the US invaded the Dominican Republic or Britain took control of Egypt in ages past, the imperial powers were always careful to seize the customs house first to ensure that Southern countries would not reneg on their debts and Northern creditors got repaid in full. In today's globalized financial world there is no need to physically seize a building to accomplish more or less the same thing -- funneling money from Southern countries (e.g. Iraq) to Northern investors (e.g. Halliburton).

Good luck on this one, Jack -- you'll need it!

Britain has urged the United States to join urgent efforts to combat global warming even though President George W. Bush has rejected cooperation under the U.N.'s Kyoto protocol.

Foreign Secretary Jack Straw reiterated that Britain reckoned that global climate change, largely blamed on emissions from burning oil, gas and coal, was "the most important long-term issue which we face as a global community".

"I know that Europe and the U.S. have not taken identical approaches to this challenge," he said in a speech at Howard University in Washington on Thursday night.

"But, as a friend of the United States, I hope you will allow me to argue that urgent international action is needed. It is critically important that we address the issue of climate change now, and together," he said.

While a Kerry presidency will certainly change the US government's tone on global climate change, the Republican Congress will ensure that nothing actually gets done.

Worker remittances to Mexico are a bigger share of national GDP than is tourism; in countries such as Nicaragua and El Salvador remittances total an amazing 13% of GDP. That's why this news is particularly noteworthy.

Caribbean and Latin American immigrants across the country, in states like Wisconsin and Kentucky as well as Texas and California, are expected to send a record $30 billion this year to their families and friends back home, according to a study released on Monday.

Those remittances by immigrants, who are often holding down two jobs and earning less than $20,000 a year, have become a hot topic when the subject of development is discussed at the highest levels of government. It will be an important issue at the summit meeting of seven of the world's largest economies, plus Russia, in Sea Island, Ga., next month.

At a time when the world's wealthy nations give just $52 billion in foreign aid to the poorer countries, the $30 billion sent home by immigrants in increments of $200 to $300 is substantial. It is more money than these countries receive from foreign aid and in foreign investment.

The Global North gets the best of both worlds from Southern immigrant workers. They get cheap labor and a self-financing foreign aid program!

According to the World Bank, remittances from North to South totaled some $93bn in 2003, making them the second most important source of capital in the South after FDI (foreign direct investment) and nearly double the amount of ODA (official development assistance).

Yah, let the poor meet the Millennium Goals with their own damned money!

Two bits of data out today suggest that the global recovery is still trying to get its sea legs.

First, from Germany:

German economic sentiment dipped for the fifth month running in May because of weak domestic demand, heightened geopolitical risk and rising oil prices, the research institute ZEW said on Tuesday.

The Mannheim-based institute said its monthly economic expectations index, compiled from a survey of analysts and institutional investors, fell to 46.4 this month from 49.7 in April.

The bigger than expected drop in the ZEW index, which has a good track record as a leading indicator of output trends, cast doubt over the strength of the recovery in the eurozone's biggest economy.

"A change in mood among financial analysts has failed to materialise - no good omen for the economic recovery," said Wolfgang Franz, ZEW president.

The decline in the index, which is now at its lowest level since July 2003, comes just a day after the Bundesbank warned the upturn was still too dependent on exports to be sustainable.

Second, from Japan:

The growth in the Japanese economy surpassed all expectations for the first quarter as a largely export-driven recovery broadened to include a pickup in consumer spending, government figures showed on Tuesday.

Japan's gross domestic product rose at an annual rate of 5.6 percent, after vigorous growth in the fourth quarter of 2003, when the economy increased at a 6.4 percent annual pace, the fastest in 13 years. . . .

The government said Monday that Japan's current account surplus - a broad measure of trade in goods, services, tourism and investment - rose in March for the ninth consecutive month, expanding 13 percent from the month a year earlier to 1.83 trillion yen ($16 billion). Rising exports to Asia, especially to China, were the main reason for the increase.

Now it is true that the Japanese recovery is being fawned over in the press today thanks to a jump in household spending, per the Financial Times "the largest portion of GDP expansion". The continuing reliance on exports, however -- demonstrated by the nine-month swell of the current account surplus in Japan as well as the symbiotic relationship between Japan and China -- suggests the Japanese recovery is far from self-sustaining. If the promised Chinese slowdown ever comes to fruition, we will really be able to gauge the reality of the Japanese recovery.

Moreover, the rise in household consumption in Japan has not been matched by concomitant rises in household income.

a sustained rebound in consumer spending is far from a sure thing. Although spending has been ticking higher, there has so far been no corresponding increase in incomes. And economists warn that the spending recovery will fade unless wages begin to rise.

So it appears that both Japan and the US -- the two largest economies in the world -- are relying inordinately on "toxic" forms of income (e.g. debt) to boost consumption.

The General decided to go strolling across the Field of Econoblogs this evening -- also known as "checking up on the competition". I stumbled across this definitive list of econoblogs at Marginal Revolution and decided to investigate them. Here's what I came up with.

Of the four "dominant oligopolists in the market," two are right-wing/libertarian (EconLog and The Knowledge Problem), one mildly liberal in the political sense (Brad DeLong) and one the economist's answer to Tom Friedman (Dynamist Blog).

Of the sixteen blogs in the second tier (plus the host), we have three virtually nonfunctioning (A Random Walk, Law and Economics, The Idea Shop) one mildly liberal (Asymmetrical Information), eight right-wing/libertarian (AtlanticBlog, Cold Spring Shops, Deinonychus antirrhopus, EconoPundit, Jacqueline Passey, Marginal Revolution, The Proximal Tubule, The Sports Economist), three standard mainstream (Angry Economist, Carnival of the Capitalists, Truck and Barter), one not noticeably about economics (Agoraphilia), and one non-ideological and thus not terribly interesting (Ben Muse).

Eight right-wingers/libertarians and not a single listed econoblog to the left of Brad DeLong! Now aren't you glad you have General Glut to make the world of economics more interesting?

Say goodbye to that US services trade surplus -- and hello to a current account deficit at 6% of GDP?

Jobs in the service industry are moving overseas to India, China and other countries at a faster than expected pace, according to a study released Monday.

Forrester Research reported that the number of U.S. service jobs moving offshore will grow to 830,000 by the end of 2005, compared to its original projection of 588,000 -- a whopping 40 percent jump.

Throughout the 1990s the US services balance was routinely +0.8-1.2% of GDP, reaching its peak of +1.26% in 1996:IV. Ever since then, however, the US edge in global services has been steadily eroding, so much so that in 2003 the services balance was barely over +0.5% of GDP. According to Dan Drezner, however, none of this matters; he didn't even hint at it in his overblogged Foreign Affairs piece on outsourcing. While Drezner advances the standard liberal mantra that we all benefit from free trade, it is much less contested that free trade always generates big US trade deficits. Thus more services trade will almost surely generate a big services deficit to mirror the US goods trade deficit.

Stephen Roach or Dan Drezner? Against my usual judgement, I'll take the real economist on this one.

Amazingly, it looks like Mr. Bush's War really is creating jobs for Americans -- in Iraq.

Many of the KBR [Kellogg, Brown & Root, subsidiary of Halliburton] recruits, like Petty, are working poor. They are willing to dare the hardship of 12- to 14-hour days seven days a week, and the risk of kidnapping or worse, given the beheading of Nicholas Berg, to bring back $80,000 or $100,000 in a year.

KBR has 24,000 workers in Iraq now, about half of them from the United States. The workers have gone to drive trucks, cook meals, and build and operate base camps as part of a contract with the Army to provide logistical support to the troops. The company has used 51 recruiters and 30 job fairs this year to find people to fill the positions.

And even with the continuing violence, the applications keep coming in, the company says, mostly from southern states or the East Coast. KBR has thousands of r�sum�s on file and is processing 400 to 500 workers a week to go to Iraq.

The April 9 convoy attack changed little, said John Watson, a KBR recruiting supervisor. "For some, it was a reality check and they decided they didn't want to go. We also saw a huge level of patriotism, so it leveled out," he said.

Clifford Dunning, 28, an Army veteran who is now a barge worker from Kentucky and single father of a 2-year-old, headed to Iraq this month to be a logistics coordinator for KBR. The main motivation, he said: "Look, everyone here, it's about the income."

. . . salaries, like those of other Americans working abroad, are tax-free up to $80,000. And the company offers medical insurance coverage for employees and their families, plus $25,000 worth of life insurance, as part of a government requirement covering workplace injuries.

Empire always engages the working class most in a material sense. This time around they're not being drafted into the high-tech professional military which has no use for them, so they get to the colonies via private contractors instead. Plus, when you can't get a decent real wage or health insurance at home, why not head to the colonies to make your fortune?

Hannah Arendt, in her study of imperialism embedded in The Origins of Totalitarianism, observes

another by-product of capitalist production: the human debris that every crisis, following invariably upon each period of industrial growth, eliminated permanently from producing society. . . .

Imperialism, the product of superfluous money and superfluous men

Following in the illustrious footsteps of Cecil Rhodes.

The backbenchers are getting increasingly restless. From today's Independent (sub. only):

The ground of Tony Blair's being was never in the Labour Party (Gordon Brown's is). The marriage between Mr Blair and Labour had little to do with passion; it was much more leg-up than leg-over. He needed a political party; the Labourites were desperate for a winner. But Tony Blair never trusted the party he led. He felt that he could rely on very few of his colleagues; hence the regime of constant monitoring and chivvying from No 10. But this was always a strained, unreal method of running a party and a government. Even without Iraq, it would have disintegrated at some stage, though Iraq has been a double catalyst. It has not only dramatised Mr Blair's lack of rapport with his party. It was the PM's distrust of his parliamentary colleagues which led him to deceive the public about his reasons for going to war. . . .

a lot of Labour MPs now want what they regard as a proper Labour government. They did not go into politics to stand shoulder to shoulder with an American president whom many of them regard as evil incarnate. As their discontent grows, it communicates itself to the voters, who never respect divided parties.

Tony Blair has told friends that Iraq could bring him down. His prospects depend on the benevolence of events - a hazardous business. But there is one particular malevolent event which he may now be less able to cope with. If - when - there is a major terrorist outrage in the UK, will Mr Blair succeed in rallying the country, or will a lot of people say: "Now the 45 minutes has come true, and it is all your fault"?

I believe that the latter reaction will be much more widespread than it would have been even a few weeks ago. This is a Prime Minister whose moral standing is crumbling beyond repair.

The most interesting thing to my mind in this article is how the Iraq war has simply been a "catalyst" toward the breakup between Blair and Labour; this was never more than a marriage of convenience, and Iraq simply drove what everyone's already knew boldly out into the open.

The ballyhooed 'Third Way' is proving a dead end in Britain; oh, when in the US??

Some dark sinister conspiracy theory regarding oil prices is being spun over at The Independent (London). Considering how poorly Bush's Saudi rescue strategy is looking, I wouldn't simply shrug this one off.

The US has a Strategic Oil Reserve, which it builds up to protect America against potential shocks, such as the strikes in Venezuela 18 months ago. Since November 2001 the Department of Energy has been buying up 200,000 barrels a day on the open market, while the Federal Reserve is also bolstered by payments in oil which the US receives through certain trade deals.

According to Mr Tinker, the Reserve currently holds 659 million barrels and is contracted to receive another 18 million. At current purchasing rates the Reserve will reach its limit of 700 million barrels by October.

Given that Brent crude was touching $39 a barrel last week and West Texas Intermediate sold at over $41 a barrel, might it be a good idea for Dubya to tell his Energy Secretary, Spencer Abraham, to stop slurping up all this oil? He shows no sign of doing so.

The cynic in me wonders whether the Republican strategists are waiting for a moment to release some of the reserve. Back in 1991, at the start of the first Gulf War, the President's father, who was then in the White House himself, engineered a near-halving of the oil price by stating he was going to sell 2.5 million barrels a day from the strategic reserve. A similar move could create a pre-election boom and send John Kerry packing.

Indeed, Poppy Bush did arrange to drop some 33 million barrels of strategic reserve oil on the market in January 1991, the first time there was ever an "emergency" oil release from the reserve. In the end only some 17 million barrels were sold, but that was enough to drop prices by over one-third almost immediately.

Now the first Gulf War was a bit more believable an "emergency" than $2/gal. gasoline, but a 42% approval rating is likely the only relevant definition of "emergency" to the current Bush administration.

It looks as though transnational capital is continuing to have a rough go at healing over the US-EU rift. From Friday's FT (subscription only):

The US House of Representatives is threatening to restrict the sale of US military equipment and technologies to European allies if the European Union decides to lift its arms embargo on China.

The House armed services committee late on Wednesday approved legislation that would slap new export restrictions on sales of US defence and sensitive commercial technologies to any country that sells arms to China.

In addition, the committee adopted an amendment that would bar the Pentagon for five years from doing any business with a company that sells arms to China, a prohibitive penalty for any of the European defence companies.

US officials said the bill was a "shot across the bows" that is aimed at strongly discouraging the EU from lifting its ban on arms sales to China.

But I thought the best way to reform the Chinese was to engage them in trade, not retreat back into "economic isolationism" as our esteemed USTR Robert Zoellick warns! Or as our illustrious Treasury Secretary John Snow repeatedly advises, maintaining "persistent engagement" with China is the best policy. Isn't it?

You knew this was coming sooner or later.

Washington wants to move some of the 37,000 U.S. troops stationed in South Korea to Iraq, South Korean officials said Monday. "The U.S. government has told us that it needs to select some U.S. troops in South Korea and send them to Iraq to cope with the worsening situation in Iraq," said Kim Sook, head of the South Korean Foreign Ministry's North American Bureau. . . .

The official, who spoke on condition of anonymity, said the shift was not imminent but would be part of the next rotation of American troops in Iraq, which is scheduled to begin late this summer.

Chalmers Johnson has recently dubbed the Pax [sic?] Americana an "empire of bases"; certainly all the new bases secured in Central Asia via the 'war on terror' shores up this evaluation. One expects to see the forces in Germany moving eastwards with the expansion of NATO as well. The removal of troops from Korea to Iraq has at least one interesting implication. By cutting its presence in a tribute-paying zone (Korea, which in the words of the Department of Defense "absorb a significant proportion of the local support costs of U.S. forces") to expand its presence in a non-tribute paying zone (Iraq, thus far a bottomless pit of empire-expanding expenditures), the empire of bases just got a little more expensive.

The nascent global recovery is taking repeated beatings from those who think there is far less than meets the eye in Japan's recovery. On Monday the Nikkei was down over 3%; watch the wave.

P.S.: Don't let the financial press tell you today's US sell-off is in response to oil jitters provoked by the assassination of IGC chief Salim. Tokyo was tanking long before that. For once re the stock market, the General is actually arguing there really is a "there" there!

The United States constitution grants Congress the right to declare war. At the same time, it grants the President status as Commander-in-Chief. As the United States has moved more an more into an imperial mode, fighting Max Boot's "savage wars of peace," the role of Congress has been overshadowed by that of the President in matters of war.

Of course, the textbooks say that even if wars are no longer declared by the United States, thus removing Congress' primary power over questions of war and peace, it still retains an important and effective instrument to assert its own voice against that of the executive: the power of the purse. The President can order troops to war, but if the Congress refused to appropriate the funds, no war will last long.

And yet, are there really checks and balances between the branches of government in any meaningful sense when it comes to the use of military force?

A major test of how Democrats feel will come during the next few weeks, as Congress prepares to debate an imminent White House request for an extra $25 billion to fund the occupation. The last time congressional Democrats were forced to stand and be counted on Iraq was last fall, when President Bush asked Congress for $87 billion to pay for Iraq. Back then, twelve Democrats in the Senate and more than 100 in the House opposed the funding. This time, despite a recent downward spiral of events, Democrats are expected to be more united around the extra money. "I think there are damn few Democrats who are going to oppose appropriating more money for the troops," says Dave Helfert, a spokesman for House Appropriations Committee Democrats. Notably, Kerry, who voted against the $87 billion last year, signaled that he plans to vote for the new $25 billion. . . .

Their grounds for opposing the $87 billion last fall--a lack of body armor for troops, unseemly Halliburton profits, and general administration mismanagement of the war--never penetrated, and Republicans have since attacked them for failing to "support the troops." (Witness the Bush campaign's ads pummeling Kerry's "no" vote.) This time Democrats are determined not to be cast as reckless doves. House Democrats are already planning to outbid the White House's spending request, upping Bush's $25 billion to as much as $50 billion or even $75 billion.

So now the only way to oppose Bush on the war is to out-Bush Bush himself! Golden.

"Welcome to Texas. Enjoy the ride. It's like Astroworld."

When the depraved prisoner abuse scandal at Abu Ghraib broke into the media, I suggested that this was nothing out of the ordinary. In fact, it is quite typical of the way Americans treat prisoners right here at home. Now there's yet more support, this time from The New Republic:

The footage is not easy to watch: In one clip, a prisoner screams as an attack dog mauls his leg; in another, a prisoner with a broken ankle gets zapped in the buttocks with a stun gun because he's not crawling along the floor quickly enough. These aren't the infamous video from Iraq's Abu Ghraib prison. They were taken in 1996, at the Brazoria County Detention Center outside of Houston. "Welcome to Texas," one guard announces as he literally drags a prisoner across the floor. "Enjoy the ride. It's like Astroworld." . . .

The episode was not unusual. Just last month, another videotape of apparent abuse became public; in this one, two inmates at a California youth prison lie seemingly defenseless on the floor while guards assault them, first with fists and later with chemical sprays (the guards claimed they acted in self-defense). . . .

What makes all these trends possible, of course, is vast public indifference: For all the legitimate concern over the abuses in Iraq, neither elected officials nor the public seem particularly worried that similar abuses happen all the time right here at home.

If Bush didn't care about rampant prison rape in Texas when he was governor, why should we be surprised that he wasn't all that interested in the use of rape to "soften up" prisoners for interrogation in Iraq?

I have long been convinced that transnational capital will sooner or later weigh in decisively on Mr. Bush's War, and that decision will spell the long-term success or failure of the neocon dream of fundamentally transforming the Middle East. A great many costs have been incurred through the Iraq war, not the least of which has been political hostility between the US and the EU which from time to time threatens to spill over into the trade agenda and economic issues in general. The informal and spontaneous US boycott of many French imports in 2003 as well as the offical and considered US ban on Iraq rebuilding contracts for France and Germany (among others) was only the first volley in quite a different war that has always had the potential of getting out of hand and seriously damaging the power of transnational capital itself.

Compensation for this economic tussle would have to come in the form of dramatic gains in profitable opportunities in a new liberalized and marketized (and democratized if necessary, but really neither here nor there) Iraq -- with the promise of the entire Middle East to come. Capital's avant garde was to be reconstruction firms such as Halliburton and Bechtel. They were to be followed by transnational oil and agribusiness, since it was clear that US administrators envisioned an Iraq standing on its own two feet quite soon off of its oil wealth and a reinvigoration of its status as an agricultural exporter to the region. Thus Dan Amstutz, former Cargill vice-president and US negotiator of the WTO's Agreement on Agriculture, was quickly dispatched to Iraq to "reconstruct" Iraqi agriculture.

Well, that second wave never really made it ashore, and the third wave seems to be waiting indefinitely to deploy.

Postwar Iraq was supposed to be a bonanza for American companies. The Commerce Department hosted a series of conferences attended by thousands who dreamed of investment opportunities promised by a free Iraq. The administration characterized the more than $21 billion Congress allocated to the reconstruction as a down payment, an initial investment that would spark the economy and bring riches to the Iraqi people as well as American entrepreneurs.

The reality a year after President Bush declared the end of major combat is far different.

Though many dozens of U.S. corporations have government contracts to help rebuild the country, relatively few American companies have invested their own capital. . . .

The result is that Arab, Asian and European firms with more experience working in the region -- and more stomach for dealing with the uncertainties -- have taken the lead in the country's emerging markets.

While the Arabs, Asians and Europeans slog it out amidst the truck bombs and helicopter strikes, US firms are hanging out in Amman, Kuwait City and Dubai waiting to, as the Washington Post characterizes it, "pounce" on the country. If and when they do, it seems unlikely much in the way of profits will come from Iraq anytime soon, lending to the belief that transnational capital will be quite keen to keep US-EU rivalry as much under wraps as it possibly can.

This is my favorite line from the entire article: "You don't have Toys R Us. McDonald's is not opening any time soon." Ah, yes, making the world safe for clowns and talking giraffes.

You might not think so, but this is big news (from the WSJ, subscription only).

At least four governors have pulled out of an agreement with U.S. trade officials committing their states to abide by trade pacts that would bar giving preferences to local businesses or restricting outsourcing. Governors including Iowa's Tom Vilsack, Missouri's Bob Holden, Pennsylvania's Edward Rendell and Minnesota's Tim Pawlenty -- three Democrats and a Republican -- have informed the office of the U.S. Trade Representative that they can't comply with the agreement, fearing it could make illegal certain practices that states use in awarding government contracts. Other states are considering a similar move, including Oregon.

All the WTO trade agreements deeply affect the ability of subnational governments to do all the things they are accustomed to doing: regulating banking, purchasing goods and services, zoning land use, etc. etc. In particular, when the US signed the plurilateral Government Procurement Agreement, it had to get the states to sign on board as well, many without any knowledge or idea of the implications of their acquiesence. About 2/3 of the states signed, but now we're seeing many second thoughts.

Subnational governments are a much neglected site of opposition to neoliberal forms of globalization. Use them or lose them!

New evidence suggests that Alan Greenspan will indeed raise interest rates at the next Fed meeting.

WASHINGTON, DC�Investors have been staking out Federal Reserve Chairman Alan Greenspan's home in an effort to gather any clues that Greenspan will institute an increase in the interest rate, neighborhood sources reported Tuesday. "Right now, Mr. Greenspan is applying a second coat of Turtle Wax to his Lexus," mutual-fund investor Ted Iger said, as he squatted behind an oak tree. "Maybe he plans to sell the car before raising lending rates." Iger said a major household purchase would corroborate theories he has about the microwave box Greenspan's wife carried to the curb Sunday.

Stephen Roach once again wrings his hands over the failure of the global economy to show any signs of re-balancing.

Based on revised IMF data, it now appears that the United States accounted for fully 98% of the cumulative growth in world GDP over the seven-year period, 1995 to 2002 (the prior data put that share at 96%). America�s growth contribution over that interval was more than three times its 30% share in the global economy. Conversely, this calculation also means that the remainder of the world economy � some 70% of global output � collectively accounted for only 2% of the cumulative increase in world GDP over the 1995 to 2002 time frame. This is a truly astonishing result. Never before has the modern-day world economy experienced such a protracted period of unbalanced growth.

Roach recognizes that the underlying causes of this profound imbalance are [1] faster than average GDP growth in the US; and [2] a rising USD throughout the period. As Roach tells it,

America�s 98% contribution to the cumulative increase in world GDP growth over the 1995 to 2002 period can be broken down as follows: About two-thirds of it appears to reflect growth disparities, and about one third is traceable to currency shifts.

While Roach glances at the gargantuan US current account deficit which grew exponentially during this period (and after; 2003:I-II and 2004:I show the CA deficit as a percentage of GDP at over 5%), he fails to link it firmly to the imbalancing. The failure is crucial because there is one underlying factor that is at the root of all three phenomena: the unprecedented influx of global capital to the United States.

In order to float ever-growing current account deficits, the US needed to run ever-growing capital account surpluses. Capital investment thus supported US bond markets as well as direct production, and to a lesser extent stocks, helping to both generate inordinate growth in the US while reduce the possibility of growth elsewhere. Remarkably, investors weren't bringing capital to the US to make big profits; although the net investment position of the US in 2003 was approximately -30% of GDP, net capital income flows into the US remain positive. Foreign investments are remarkably more profitable than US investments.

The US benefitted during the East Asian financial crisis (and the aftershocks in Russia and Brazil) as global capital's 'safe haven', and it is after the 1997-98 crisis that the imbalances really begin to balloon. Capital flows to the US, lowering interest rates in the US and raising them elsewhere, fueling greater growth in the US and less elsewhere, fueling a growing current account deficit and a rising dollar, fueling more capital influx, and the cycle continued.

In short, the system has a negative feedback loop. Imbalance feeds off imbalance until you get a -$542bn current account balance and a rising dollar all at once.

Happy balancing!

Up, up, up with a fish!

US crude oil futures hit another all-time intraday high on Friday at $41.50 a barrel, before falling back again.

This extends the life-time high reached late in the New York trading session on Thursday.

The oil price has been pushed to record levels this week due to growing concerns that the US is facing a very tight gasoline market during the busy summer driving season. While persistent fears about further attacks on oil infrastructure in the Middle East, particulary in Saudi Arabia, which holds the majority of the world's spare oil production capacity, and Iraq.

An angle on the inflation story you don't hear much is the end of import price deflation. Since October 2003 non-petroleum import prices have surged at a 4.5% annualized rate. Compare this to the six months prior to that during which annualized non-petroleum import prices grew a scant 0.2%. Non-petroleum import price inflation was nonexistent throughout all of 2002 as well, and 2001 saw dramatic deflation to the tune of -5.4%. Is global overproduction finished? Or will the end of the era of cheap money return us to the status quo ante? Being a deflationista at heart, the General is inclined to the latter interpretation, but I'm willing to entertain other scenarios.

The CPI data out today shows that inflation is most definitely back in the US of A.

During the first four months of 2004, the CPI-U rose at a 4.4 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 1.9 percent for all of 2003. The index for energy, which increased 6.9 percent in 2003, increased at a 28.3 percent SAAR in the first four months of 2004. Petroleum-based energy costs increased at a 55.8 percent annual rate and charges for energy services rose at a 4.8 percent annual rate. The food index has increased at a 1.5 percent SAAR thus far this year, following a 3.6 percent rise for all of 2003. Excluding food and energy, the CPI-U advanced at a 3.0 percent SAAR in the first four months, following a 1.1 percent rise in all of 2003.

Of course, a picture tells a thousand words.
As you can see, annualized core inflation has taken off in the last two months after a long steady decline. I have a feeling, however, that this is more a temporary bump in the road. Overproduction is still the name of the game in the global economy. China is having great trouble cooling down its economy and the US consumer cannot live off toxic forms of income forever.

THE LAND OF THE FREE TRADERS

Part Four of a six-part series on 'Progressive Internationalism'

The liberal hawks who composed the foreign policy manifesto �Progressive Internationalism: A Democratic National Security Strategy� are not just interested in the bold exercise of American military power. They are quite keen on the bold exercise of American economic power as well. While war takes pride of place, free trade is an important secondary plank in the �progressive internationalism� (PI) platform.

PI is animated by four �core principles that have long defined the Democratic Party�s tradition of tough-minded internationalism�. One of those principles is dubbed �Free enterprise� which PI defines as �vibrant, entrepreneurial markets, open trade, and active governance to ensure honest competition�. PI is even brazen enough to equate �free enterprise� with �economic freedom,� a phrasing which every libertarian can happily embrace. This fits together snugly with John Kerry�s recent proclamation that he is an �entrepreneurial Democrat� who loves nothing more than to berate the dangerous radical left wing proletariat of the Democratic Party (namely . . . namely . . . is there a left wing proletariat anymore?) which apparently �loves jobs but hates the people that create them�. �I am not a redistributionist Democrat,� Kerry said to the DLC recently. �Fear not.� Phew! You had me going there for a second, John.

PI is so devoted to the ideology of free trade that it cannot help but interpret even US military capabilities through the language of David Ricardo:

The U.S. military is doing a brilliant job, but . . . is often asked to undertake missions for which it does not have a comparative advantage

Under PI, America and the world are promised more free trade than Bush ever delivered. The breakdown of both the WTO and the FTAA talks are pinned on the failure of �US economic leadership� which Democrats will magically resurrect. The resurrection will be relatively painless as well thanks to Clintonesque competitiveness and economic growth at home �which made the American people more willing to bear the costs of international engagement� during those halcyon 1990s. Funny, but I thought Clinton failed in securing fast track authority in 1997 and 1998 precisely because Americans were not willing to bear more costs of free trade. I also have this strange memory that tens of thousands of Americans went to Seattle in November 1999 and Washington in April 2000 precisely to protest the way Clinton was managing his neoliberal form of �international engagement�. PI also praises the manner in which Clinton �craft[ed] effective responses to financial crises in Mexico in Asia� whereas I remember a giant bailout of US investors and a disastrous heavy IMF hand sending East Asia into deeper depressions. It waxes poetic over �the creation of 21 million jobs and unprecedented economic growth at home� without acknowledging either the New Economy bubble which conveniently popped at the end of Clinton�s term nor the now structural quality of the US �jobless recoveries�. Surely a different package of tax cuts would have stimulated the US economy more fairly and efficiently over the last three years, but is anyone naive enough to believe that no jobless recovery would have occurred on Al Gore�s watch?

PI gives a welcome nod to �tackl[ing] corruption and poverty more vigorously, lifting labor and environmental standards around the world, and raising the US profile in the fight against child labor and the subordination of women.� All good things indeed � but how is PI going to achieve them? While there are multiple promises of the �bold exercise of American power� in Iraq and Afghanistan, when it comes to labor standards in the WTO, participation in the Kyoto Protocol or embracing the Cartagena Protocol on Biosafety, suddenly the specifics are nowhere to be found. While PI demands more US government action on fighting HIV/AIDS and developing hydrogen fuel cell technology, this is nothing more than what George Bush himself has laid out for his own agenda.

The big free trade showcase held out by PI is preferential trade relations with Arab countries and a Middle East free trade zone. The logic behind it is straight out of Tom Friedman or Robert Zoellick:

The combination of rising population and vanishing opportunity creates a vast pool of angry, directionless young people: a natural audience for radicals, anti-Americans, and fundamentalists. A new trade preference program for the Muslim world . . . followed by a concerted effort to deepen the region�s economic integration more broadly, can help restore growth and confidence to the region.

This is precisely an idea which Bush himself trotted out in May 2003. And let�s not fool ourselves; the US and Jordan have had a free trade agreement for over three years now, and I don�t hear anyone holding this pact up as a signature blow against terror.

As with the war in Iraq, John Kerry is having a difficult time finding any traction on trade and globalization precisely because he and Bush share virtually identical positions. If anything, Kerry � who never saw a free trade agreement he didn�t like � promises more FTAs and a more aggressive �trade� policy. As the Washington Post noted last month,

Sen. John F. Kerry may favor cooperating with other countries on most international issues, but on the subject of trade, the Democratic presidential candidate yesterday accused the Bush administration of failing to be confrontational enough. . . .

The trouble is, Bush also proclaims himself to be a free-trader who enforces U.S. trade laws vigorously -- the stance the president took, for example, when he slapped tariffs on imported steel in 2002. So Kerry's position, in essence, is that he would be more effective and aggressive.

More evidence of PI as more or less a �good government� version of the status quo.

PART THREE: Mo' Better Blues

PART TWO: Building a Better Bush

PART ONE: Kerry is So Very . .

I think that the chief economist at Bank of America has been stealing my lines.

The United States' trade deficit jumped sharply to a record $46 billion in March, propelled by a surge in oil imports and oil prices as well as strong demand for imported consumer goods, the Commerce Department reported on Wednesday. . . .

"Why should we be surprised at these trade imbalances?" asked Mickey D. Levy, chief economist at Bank of America. "They are a perfect reflection of what is going on."

While the big heads at Bank of America have been reading the Globblog, clearly the rest of the country's economists haven't.

Many forecasters had been predicting that the March deficit would rise to $43 billion from $42.1 billion in February. Instead, it climbed to $46 billion as imports surged from China and Europe as well as from the big oil-exporting nations.

They could have simply read my post last month and been a hell of a lot closer on their estimate. Or bothered to look at the GDP report for 2004:I.

Gerard Baker notices in the FT today that, despite the unending string of bad news for Bush, Kerry just can't gain any traction.

Mr Kerry seems trapped - he wants to attack the president but does not want to be accused of undermining national unity at a time of crisis. Moreover, it is not really clear how he could conduct Iraq policy any differently, even if he wanted to.

Of course, the General's point all along has been that Kerry in fact doesn't want to do anything different -- only the same thing more competently. Kerry isn't contesting this election on ideas or visions for the future. He is looking like a Dukakis replica offering himself as the best technocrat on the market. The frightening thing is, maybe competency is all one can hope for at this point.

When the voices of transnational capital (read: The Financial Times) feel they have to trot out all their bona fides as dyed-in-the-wool Republican-lovers on the way to offering scathing criticism of George W. Bush's foreign policy, you know the Boy King is in deep, deep trouble. As Martin Wolf said in yesterday's FT (subscription only), "If I feel Tony Blair has allied the UK too closely, then sympathy for this alliance must be perilously low."

For the coup de grace, Wolf offers the following send-off. The real question now is whether transnational capital will abandon the perks of cronyism and jump ship to the business-friendly "entrepreneurial democrat" waiting in the wings.

Crafting a foreign policy for a new era is hard. The last time this had to be done was in the time of Franklin Delano Roosevelt and Harry Truman more than half a century ago. The institutions they established and the values they upheld were the foundation of the successful US foreign policy of the postwar era. Now, a task even more complex has fallen on this president. He is not up to the job. This is not a moral judgment, but a practical one. The world is too complex and dangerous for the pious simplicities and arrogant unilateralism of George W. Bush.

MO� BETTER BLUES

Part Three of a six-part series on 'Progressive Internationalism'

The foreign policy manifesto which animates �liberal hawk� thinking on the subject of American imperialism as well as John Kerry�s campaign, "Progressive Internationalism: A Democratic National Security Strategy", promises to occupy �the vital center between the neo-imperial right and the non-interventionist left�. Yet contrary to positioning itself against what it calls �neo-imperial� policies associated with the Bush administration, �progressive internationalism� (PI) offers its own form of imperial practice different in style but not in substance from what the Bushies offer in Iraq, the greater Middle East and the world. PI is best understood as �mo� better imperialism� � a plan to overcome Bush�s incompetency and make empire work. For the anti-imperialist camp, this so-called �alternative� does little more than give one the blues.

The key claim of PI which reveals this fact is the following:

While some complain that the Bush administration has been too radical in recasting America�s national security strategy, we believe it has not been ambitious or imaginative enough.

As the authors argue in this very quote, PI is not Anti-Bush, nor is it Bush Lite. It is Bush Plus. Indeed, PI wants to do more, not less, imperialism, and a John Kerry presidency promises nothing more than a sanitized Bushism abroad.

Note first and foremost that PI embraces the invasion and occupation of Iraq on precisely the same basis as that provided by the Bush administration.

We also backed the goal of ousting Saddam Hussein�s malignant regime in Iraq, because the previous policy of containment was failing, because Saddam posed a grave danger to America as well as his own brutalized people, and because his blatant defiance of more than a decade�s worth of United Nations Security Council resolutions was undermining both collective security and international law.

Colin Powell said as much before the United Nations.

PI also embraces the most ambitious (most would say most fanciful and utopian) definition of US goals in the Iraq War: �the transformation of the greater Middle East � the vast arc of turmoil stretching from Northern Africa to Afghanistan�. Because of such a grandiose end, PI can brook no waivering on the subject of building democracy in a unitary liberal Iraq, the demonstration project for the entire region �which could inspire and encourage democratic reformers elsewhere�. Not achieving this fundamental transformation of Iraq is the definition of failure � and �In this, we simply cannot afford to fail.� The logical deduction, therefore, is that

we will maintain a robust military presence in Iraq for as long as it takes to achieve security and stability

How long might such a �robust� presence last? PI co-author Kenneth Pollack has said recently in Foreign Affairs

the key question is whether the Bush Administration adapts its policy to the needs of reconstruction or instead opts to phase out its engagement in Iraq. There is enough good in Iraq and enough positive developments there that if the United States and its Coalition allies are willing to address the challenges listed above, there is every reason to believe that Iraq could be a stable, prosperous, and pluralist society within a period of 5-15 years.

PI also envisions �the bold exercise of American power� in Afghanistan to a much larger degree than the Bush administration. While current policy is dedicated to supporting the Karzai government (and through US ambassador/proconsul Zalmay Khalizad, a co-signatory to the infamous 1998 PNAC letter to Clinton urging the invasion of Iraq, running the capital), there is little effort to conquer the entire country. Karzai is left to bargain with local warlords in the time-honored way the Afghan �state� � which it clearly is not and has never been � is run.

PI rejects this approach as clearly not �ambitious� and �imaginative� enough. Since the US is �in danger of losing the peace� in Afghanistan, PI promises to �press for an expanded NATO peacekeeping mission in Afghanistan, to help extend the authority of the Afghan government throughout the country�. In fact, NATO itself is to be �enlarged and modernized� in order to take on many more Afghanistans in the future, for �the challenge of transforming the greater Middle East� should become the new focus of the alliance. Kautsky�s prediction of �ultraimperialism� may come true yet.

With a long-term occupation of Iraq, an expansion of the occupation of Afghanistan, and an enlarged NATO, clearly there has to be more troops and more money. This is where PI takes to its high horse and condemn Bush for practicing empire on the side and on the cheap. PI is not just imperialism, but �responsible� imperialism.

As a �responsible� alternative to Bush, PI is keen to roll back social spending and raise taxes in order to pay for imperialism in a sustainable manner. Clinton is repeatedly praised for his �commitment to fiscal discipline� and Bush condemned for failing to �adjust. . . our budget priorities� in light of the wars in Afghanistan and Iraq. The left is hammered for its �perennial complaint that America spends too much on the military. This is no time to cut the Pentagon�s budget.� So clearly somebody else�s budget will have to be cut � responsible imperialism requires it.

Ominously, PI also condemns Bush�s failure to carry the language of war abroad into the actions of war at home. It asks rhetorically, �if America is truly at war, why does the president refuse to put America on a wartime footing?� From an opponent of US imperialism, such a question is an act of rhetorical positioning. From a supporter, however, it is a plan for the future.

PI speaks readily of the need for �service and sacrifice� from the American public.

a patient public ready for sacrifice and service

the Bush administration has failed abysmally to summon Americans to sacrifice and service at a time of national emergency

the White House persists in the illusion that we can have it all . . . without any sacrifice from the public or adjustment of our budget priorities.

When PI speaks of �sacrifice� and �service,� it isn�t hard to connect the dots to �military draft�. Such a draft need not be anything like a Vietnam-era net catching up only the young, poor whites and minorities and sending them off to Indochina. It could be universal. It could be used to replete the ranks of the National Guard at home. It could be used to put half a million American troops in Iraq. As PI co-author Kenneth Pollack has recently stated,

The fall of Saddam has produced the same kind of power vacuum in Iraq that the death of Tito did in Yugoslavia. Not surprisingly, it has produced a similar state of lawlessness in Iraq. And the United States has not adequately filled that vacuum.

Part of that failure lies in the size of the U.S. force in Iraq. There are not enough American and Coalition troops in Iraq -- and particularly not enough infantry, civil affairs personnel, and military police -- to provide the kind of security that is needed. If Generals Abizaid and Sanchez were authorized tomorrow to begin patrolling the streets, they probably would not have the troops to do it.

Adequately providing security for a country of 25 million people is a massive task. Military analyst James T. Quinlivan of the RAND Corporation has demonstrated that stabilizing a country requires roughly 20 security personnel (troops and police) per thousand inhabitants. In his words, the objective "is not to destroy an enemy but to provide security for residents so that they have enough confidence to manage their daily affairs and to support a government authority of their own." For Iraq, with a population of nearly 25 million, that would require a total security force of nearly 500,000.

The alternatives are many. The long and the short of it is, however, that a military draft in one form or another is a distinct possibility under PI.

�Progressive internationalism� promises to carry out the post-New Deal role of the Democratic Party in the United States to a T: to rationalize the very society which destructive capitalist/right-wing interests have created. Consider Bill Clinton, who didn�t try to change the society which Reaganism had wrought but instead to smooth its rough edges as well as � most importantly � make it more stable by eliminating capital�s many myopic and destructive tendencies including corruption, market instability, and unsustainable forms of inequality. After all, managing and maintaining Reaganism is the very essence of the �third way� in the United States, the very movement which concocted PI.

Ironically, incompetent empire may be exactly what we want, at least in the short term, for incompetent empire is likely to fail whereas competent empire is likely to succeed. In the United States it is almost universally assumed that �staying the course� in Iraq is unequivocally the best strategy for all concerned; the only question is whether such a practice is viable � politically, economically, socially. This premise, however, should not remain unchallenged.

PART TWO: Building a Better Bush

PART ONE: Kerry is So Very . . .

More evidence that the big spending Anglosphere continues to fuel the global economy -- and exacerbate global imbalances.

The story in the United States since last week has been bigger than expected employment gains and higher than expected price rises. Now we see the very same thing in the UK. Not only is the unemployment rate in Britain down to 4.7%, the lowest since record-keeping began in 1984. Inflation fears (remember that in Britain anything above 2% is scary!) have also stoked expectations that the Bank of England will raise interest rates yet again. Currently at 4.25%, futures markets are pricing in official rates of around 5% by the end of the year.

Stephen Roach has been preaching re-balancing of the global economy for years. The poor guy must be pulling his hair out -- or what's left of it.

Rising oil prices are not simply a story of OPEC choking global supply; there is also the little matter of rapidly rising demand to contend with.

As Brent crude in London opened at a 13 year high of $37.46 a barrel, the International Energy Agency said global oil demand growth in 2004 is set to reach 2.5 per cent, the fastest rate since 1996. The increase in demand by volume will approach 2m barrels a day, the largest gain since 1988. . . .

Where last year it was Chinese demand that increased in leaps and bounds, the IEA said, "this time, OECD countries are responsible for a sharp upward revision" of 2004 demand growth. Of the upward revision of 660,000 b/d, some 580,000 b/d is accounted for by the industrialised countries for which the IEA is the energy watchdog.

In North America the driving force of the upward revision is higher jet fuel and liquid propane gas demand, while in Europe it is primarily distillates for transport fuel.

Unfortunately the IEA has not seen fit yet to put the May Oil Market Report online, so all the General has to go on is the FT's report. Hopefully the report will be online soon. Surely some tasty little morsels are hidden inside just waiting to be uncovered.

Another interesting tidbit from the newly released trade figures for March is the declining US services trade surplus. The services surplus fell by $650bn from 2003:IV to 2004:I, and although it is up 9% over this period last year, it is down 1.8% from the level of 2002:I. But it's all good; as Dan Drezner keeps telling us, outsourcing makes us all rich -- and the corollary (as Dick Cheney keeps telling us), deficits just don't matter anymore!

Why is this stuff surprising to anyone? If they only knew the General's prophecy has been fulfilled!

The trade deficit swelled to an all-time high of $46 billion in March as a stronger U.S. economy stoked Americans' appetite for foreign-made cars, TVs and other goods. . . .

The trade gap reported by the Commerce Department on Wednesday was 9.1 percent bigger than the $42.1 billion deficit posted in February.

Back in April I did a little math off the 2004:I GDP figures and estimated a March trade deficit of $44.5bn, which would have been a new record in itself. The actual March figure of $46.0bn simply smashes the old record dating all the way back to January.

So far the trade deficit for 2004 is outpacing 2003 by over 8%, and outpacing 2002 by an incredible 31.5%.

Quarter over quarter, imports are up 4.0% (or if you prefer the 'annualized' data, 16.1%) while exports are up by just 2.5% (10.2%).

And the current account deficit as a percentage of GDP continues to swell . . .

BUILDING A BETTER BUSH

Part Two of a six-part series on 'Progressive Internationalism'

A continuing source of frustration for Democrats this spring is how John Kerry has been completely unable to rise in the polls despite the seemingly unending cascade of bad news for the Bush administration. Some wishfully claim that the reason lies in the public simply not knowing Kerry well enough. Many news reporters have noticed over the past several weeks, however, that Kerry�s message may be more to blame.

The Washington Post noticed recently how �despite rhetoric, Kerry, Bush agree on many issues�. Over in the Financial Times, an op-ed writer sees how Kerry and the Bush of 2004 are much alike on issues of foreign policy. The San Francisco Chronicle observes that �what's more notable about the 2004 campaign is how much the two men appear to agree.� By failing to distinguish his foreign policy vision from that of present administration, Kerry is left with the thus far unconvicing claim that he is little more than a �competent� version of Bush.

A reading of the Progressive Policy Institute manifesto �Progressive Internationalism: A Democratic National Security Strategy� demonstrates how much common ground exists between the Democratic �alternative� and Bush�s neoconservatism.

The basic definition of the fundamental security situation of and threats against the United States is exactly the same as that of Bush. Progressive internationalism (PI) supports the war in Afghanistan and the invasion of Iraq. PI sees �keeping mass destruction weapons out of the hands of terrorists� as �by far the most urgent security task facing our nation�s leaders�. PI sees �the transformation of the greater Middle East� as the signature effort of the nation and the establishment of �a decent, representative government in Baghdad, which could inspire and encourage democratic reformers elsewhere in the region� as its most immediate and concrete expression. PI anchors its strategy to the belief that democracies don�t go to war with one another and therefore seeks �to shape a world in which the values of liberal democracy increasingly hold sway.� Every one of these themes lies at the core of the Bush foreign policy as well.

PI is bold enough to state flatly

While some complain that the Bush administration has been too radical in recasting America�s national security strategy, we believe it has not been ambitious or imaginative enough.

There are �too few troops� currently in Iraq; Bush�s fiscal recklessness has prevented him from a �more ambitious strategy to �drain the swamp� from which terrorism arises�; PI demands �dedicating more substantial resources� to the cause of fundamental reform of the Middle East which includes �an expanded NATO peacekeeping mission in Afghanistan� so as to occupy the entire country, not simply Kabul; the US needs more free trade than Bush has delivered, especially with the Middle East. As with the neocons at the Weekly Standard, the cardinal sin for PI is �cut and run�: �We will maintain a robust military presence in Iraq for as long as it takes to help that country achieve security and stability.�

PI�s real problem with George Bush is not on the level of principles or even strategy. It is an argument about tactics. PI condemns Bush for his �unilaterialism� and over-reliance on military force, promising instead a commitment to �a collective approach� and �soft power�. Be not mistaken however; PI believes at its core that its �guiding principle is �together when we can, alone when we must.�� which �sometimes require[s] us to act � if need be outside a sometimes ineffectual United Nations.� This is only a difference of degree from �coalitions of the willing�, not of kind. The beef with Bush comes down quite frankly to his incompetence more than anything else, which has prevented the Bush administration from achieving all the imperial goals on which both PI and the neocons agree. PI says it offers �a smarter approach", not a different approach. It is a condemnation of Bush�s diplomacy � �the White House has fallen short� � not his policies.

Consider Kerry�s defense of the Iraq war (he voted for it after all) combined with his critique of how Bush has fought it. Kerry and PI together promise a more effective American empire � �good government� meets the White Man�s Burden.

More inching toward a public endorsement of depraved torture appeared today. First it was regular folks in Cumberland, MD; then writers of op-eds; now United States Senators.

What the Saudis giveth, the Indonesians taketh away.

Indonesia's energy minister, Purnomo Yusgiantoro, warned yesterday that there was little the world's largest oil exporters could do to rein in oil prices.

In an interview with the FT Mr Yusgiantoro, who is the current president of the Organisation of Petroleum Exporting Countries, said that high crude oil prices could last through summer. But he blamed "very tight" gasoline stocks in the US due to new regulations there, the actions of speculators, and geopolitical issues including the unrest in Iraq.

"I don't like these kinds of prices. These kinds of prices will really hurt everybody," he said. "But this price level is not because Opec is playing. There is not much Opec can do."

Most importantly, the FT reports that getting oil prices back into the preferred OPEC band of $22-28/barrel is quite frankly off the table. According to Yusgiantoro, get ready for a wholesale upshift in the band itself -- and "soon".

While there were many underlying fundamental causes to the 1982 Latin American debt crisis, the immediate cause was the dramatic rise in US interest rates known as the "Volcker Shift" which pulled investment capital out of Mexico and into the US. Much the same thing happens to Mexico again in 1994; the peso crisis hits after the US Fed jacked up interest rates six times and 225 basis point in under a year.

As the Fed looks to hike US interest rates multiple times this year and as early as next month, it looks as if this ugly spectacle may be preparing itself for a command performance.

A jump in US interest rate expectations has dealt the heaviest blow to emerging market (EM) debt . . .

the downward spiral in emerging market bond prices had brought the focus on the market as investors in other fixed-income securities feared contagion.

"What worries them is that this isn't driven by emerging market-related factors but global interest rate expectations," he said.

Dominique Audin at Swiss-based Pictet said: "Emerging market bonds remain a very good early indicator of liquidity and risk-appetite. The market is worried about risk, and this concern will probably spread."

. . . cheap money fuelled a dramatic fall in investor risk-aversion, driving emerging market and high-yield corporate bond yields to new lows. But the prospect of higher borrowing costs has knocked the stuffing out of speculative investors, and the fear is spreading to longer-term investors, such as pension funds. . . .

Yields on bonds issued by Latin American governments such as Ecuador, Peru and Brazil have also risen sharply, although the selling has been marked by its breadth, involving even the highest rated issuers, such as Russia and Mexico.

When the US sneezes, the Global South catches cold -- and then some.

Remember that falling dollar? Well, fuggeddaboutit!



The big slide since February 2002 reversed sharply in January 2004. Since the USD's low (nominal broad dollar index) on January 9, the greenback has appreciated 5.2%. Rising interest rates and superior growth rates promise to push it ever higher.

Bring on those record current account deficits!

KERRY IS SO VERY . . .

Part One of a six-part series on 'Progressive Internationalism'

This is the first in a series of six postings on the theme of �progressive internationalism,� the foreign policy strategy offered by intellectuals associated with the Democratic Party as well as the party�s standard bearer in the 2004 election, Senator John Kerry. The goal of this series is to both make readers aware of what the strategy of �progressive internationalism� is as well as to demystify it. While Kerry and intellectuals associated with the Progressive Policy Institute, the prominent �third way� or �new Democrat� think thank in Washington, pretend that �progressive internationalism� is a robust alternative to the Bush administration�s Project for a New American Century of preemptive war, unilateralism and imperialism, the differences between PNAC and PPI on American empire are matters of degree and not of kind. The differences in fact are such that �progressive internationalism� is perhaps the most effective form of global Bushism possible.

In October 2003 a group of foreign policy intellectuals associated with the Democratic Party released a manifesto titled �Progressive Internationalism: A Democratic National Security Strategy�. Its authors included prominent �liberal hawks� such as Larry Diamond, Bob Kerry and Kenneth Pollack from centrist think tanks such as the Progressive Policy Institute, the Center for Strategic and International Studies, and the Brookings Institution. In short, the PPI sees �progressive internationalism� as the �vital center� between Bush and the �pacifist� left. It is about being �muscular,� �tough-minded,� and advancing �the bold exercise of American power,� a rather transparent attempt to �allay the doubts� of Americans who thinks Democrats don�t have the guts to blow people up. The effort to define the Democratic Party as essentially masculine (if not downright �manly�) and not feminine is obvious.

Long before PI was written, however, John Kerry began defining his foreign policy strategy as one of �progressive internationalism�. The lead quote on Kerry�s campaign web page devoted to foreign policy is an excerpt from a January 2003 speech at Georgetown University in which the senator used the term �progressive internationalism� five times as a label for his positive alternative to �the Bush administration�s erratic unilateralism and reluctant engagement.� Kerry has continue to use the phrase consistently throughout the campaign to depict a muscular �third way� between the recklessness of Bush and the reluctance of the left wing of the Democratic Party.

This is no surprise in that Kerry has long been a member of the Democratic Leadership Council, the standard-bearer for �third way� thinking in the party.

Although I have uncovered no clear evidence to suggest that the PPI manifesto was written for Kerry, the parallels between it and Kerry�s 2003 Georgetown University speech are striking. Take the following as instructive examples.

Kerry: �That vision is defined by looking to our best traditions � to the tough-minded strategy of international engagement and leadership forged by Wilson and Roosevelt in two world wars and championed by Truman and Kennedy in the Cold War.�

PI: �As Democrats, we are proud of our party�s tradition of tough-minded internationalism and strong record in defending America. Presidents Woodrow Wilson, Franklin D. Roosevelt and Harry Truman led the United States to victory in two world wars and designed the post-war international institutions that have been a cornerstone of global security and prosperity ever since.�

Kerry: �We must drain the swamp of terrorists�

PI: �thanks to the administration�s monumental fiscal mismanagement, the United States may not have the necessary resources to finish the job in Iraq or undertake a more ambitious strategy to �drain the swamp� from which terrorism arises.�

Kerry: �The transformation of the Middle East which can come from these efforts will determine much of our future�

PI: �For Democrats, the transformation of the greater Middle East . . . is a central challenge of our times.�

Kerry: �lead the world toward liberty and prosperity�

PI: �lead the world toward political and economic freedom�

�Progressive internationalism� is the idea that binds Kerry to the militarism and imperialism of �third way� Democrats and makes him a vigorous opponent of anti-imperialist Democrats such as Howard Dean and Dennis Kucinich. Rather than the liberal standard bearer depicted in the Bush commercials against Kerry, the Kerry of �progressive internationalism� is a man more than willing to wield military force and economic power towards the end of American empire. Through Kerry and PI, the �third way� continues to demonstrate its historical mission to be the transformation of the Democrats in the 2000s to liberal Republicans of the 1960s and 1970s. The enabling of the rightward shift in American politics at the hands of Democratic presidents � from Carter to Clinton to a possible Kerry � marches on.

The PI manifesto may in the near future serve much the same role for a Kerry presidency as the PNAC manifesto �Rebuilding America�s Defense� did for the Bush presidency. Knowing what �progressive internationalism� really is and how it embodies many fundamentally neoconservative orientations and principles thus becomes a critical task.

Wow, I never thought I'd hear the US economy in May 2004 described in the financial press as "overheating", but fears of multiple rate hikes for 2004 due to the strong employment data for April has brought the term out of the attic.

Today's column by Bill Safire is one of the first I have seen to baldfacedly introduce -- although tangentially -- the realist/conservative case for torture.

Torture is both unlawful and morally abhorrent. But what about gathering intelligence from suspected or proven terrorists by codified, regulated, manipulative interrogation? Information thus acquired can save thousands of lives. Will we now allow the pendulum to swing back to "name, rank, serial number," as if suspected terrorists planning the bombing of civilians were uniformed prisoners of war obeying the rules of war?

Safire embeds this paragraph within the larger argument of both [1] the immorality of punishing a "good man" (read: Rumsfeld) for the acts of the "depraved acts of others" (read: bad man); and [2] the strategic error of firing Rumsfeld which would only give comfort to "cut and run" Democrats and endanger the entire war on terror. He is also clearly stating that torture is "abhorrent" -- when it is 'uncodified' and 'unregulated'. As far as we can yet tell, however, the depravity at Abu Ghraib was indeed codified and regulated by military intelligence. This was not the work of depraved loose cannons; it was a well considered (even if poorly executed) strategy to extract information based techniques developed by the British.

Rumsfeld gave not one bit of suggestion in his prepared testimony before the Senate that he was interested in picking up this line of argument. However, a few others have been, and Safire is the most prominent yet to do so. Is this evidence of Cheney's success in rallying the troops? Is Safire sending up a trial balloon which, if successfully launced, Rumsfeld will be riding into November?

The posturing before the June OPEC meeting begins.

Saudi oil minister Ali Naimi urged OPEC on Monday to raise its production ceiling by 1.5 million barrels a day when it meets on June 3. . . . Naimi's statement represents a shift in Saudi oil policy. Only in March the kingdom was reportedly the chief advocate of a decision by the Organization of Petroleum Exporting Countries to cut production in anticipation of a lower demand for oil during the spring and summer.

Some OPEC countries have publicly begun to question the cartel's traditional $22-28/bar. price band target, urging OPEC to raise the ceiling well into the $30s/bar. Just as clearly, the US wants oil prices back down into the $20s/bar. We shall see how well the Saudis play their assigned role as US interlocutor next month.

And remember the statement from Prince Bandar to Washington Post reporter Bob Woodward released last month and discussed by the two on Larry King in which the Prince and Woodward say

WOODWARD: That's not my story. What I say in the book is that the Saudis, and maybe you looked at this section of the book, Ambassador, that the Saudis hoped to keep oil prices low during the period for -- before the election, because of its impact on the economy. That's what I say.

BIN SULTAN: I think the way that Bob said it now is accurate. We hoped that the oil prices will stay low, because that's good for America's economy, but more important, it's good for our economy and the international economy, and this is not -- nothing unusual. President Clinton asked us to keep the prices down in the year 2000. In fact, I can go back to 1979, President Carter asked us to keep the prices down to avoid the malaise. So yes, it's in our interests and in America's interests to keep the prices down.

KING: Do you want President Bush...

BIN SULTAN: But that was not a deal.

KING: Do you want President Bush to be reelected?

BIN SULTAN: We always want any president who is in office to be reelected, Larry, but that is the American choice. This is not our call. This is the American people's call.

Looks like the Saudis are living up to their word -- starting to bring oil prices down in the third quarter, thus providing a more amenable economic context for Bush's re-election.

Sad but oh so true.

In speeches and ads, Bush and Kerry hammer each other relentlessly, leaving many voters with the impression that they agree on nothing. But stripping away the rhetoric often reveals a convergence of views on major issues. . . .

The Massachusetts Democrat supports a continued American leadership role in securing Iraq, enhanced authority for the United Nations and sending in more U.S. troops to complete the job if needed. So does Bush.

Bush endorsed Israeli Prime Minister Ariel Sharon's plan to unilaterally withdraw from Gaza and, in a controversial step to Arabs, said it should be expected that Israel could keep some settlement blocks in the West Bank as part of a final peace deal. So did Kerry. Both tout greater spending to fight terrorism.

Kerry sells himself as a pro-business, "free but fair" global trader and fan of Federal Reserve Chairman Alan Greenspan's monetary policies.

So, on matters of American empire, 'free' trade and monetary policy, Kerry agrees with Bush. The differences are stylistic, not substantive. In fact, the primary Kerry critique now seems to be that Kerry is the more competent and effective man to get Bush's agenda enacted in the world!

Is this just electioneering? Liberals think so; or rather, they are wishing so. Stay tuned for the first installment of my analysis of "Progressive Internationalism" later today on why those liberal hopes may be little more than pipe dreams.

The one vote that really matters?

U.S. Vice President Dick Cheney has come out in support of embattled Defense Secretary Donald Rumsfeld, calling him the best person the United States has had in the post.

"As a former secretary of defense, I think Donald Rumsfeld is the best secretary of defense the United States has ever had," the vice president said in a statement relayed to CNN through a spokesman Saturday.

"People ought to let him do his job".

Cheney made these comments in the midst of increasing Republican criticism of the Pentagon and of Rumsfeld. In particular it seems designed to head off any blowback from Rep. Steve Buyer who offered to go to Iraq last year and oversee the prisons but was rejected explicitly on the order of the Office of the Secretary of Defense. In effect, by calling Rumsfeld the "best secretary of defense the United States has ever had," Cheney is upping the ante against Republican critics. After all, how do you fire the best Secretary of Defense ever and retain even the pretence of credibility on matters of war and defense?

Cheney may even be playing a game of chicken with Republicans, daring them to swerve first in order to prevent the entire administration from crashing into internal condemnation and fatally damaging Bush and Cheney's chances in November.

UPDATE: I should have included senators sitting on the Armed Services Committee and the Intelligence Committee in the list of Republicans against whom Cheney is playing chicken: Graham (R-SC), McCain (R-AZ) and Warner (R-VA).

One of the contemporary subjects I am most interested in is American empire. Unfortunately, the 2004 election is unlikely to yield any measurable changes in US imperialism, and the Globblog will devote a series of daily postings next week to show you why.

The series will be based on an analysis of the foreign policy document titled "Progressive Internationalism: A Democratic National Security Strategy" put out by the Progressive Policy Institute, the "new Democrat" thinktank. Mark Hand, writing in Counterpunch earlier this year, called the document "Kerry's version of PNAC". You remember PNAC, don't you? The Project for a New American Century which hatched the Bush Administration's 2002 National Security Strategy and its 2003 invasion of Iraq?

If you want to know what President Kerry would do for American empire, follow the General's commentary every day next week, starting Monday.

Yesterday in his testimony before the US Senate, Donald Rumsfeld said,

It's important for the American people and the world to know that while these terrible acts were perpetrated by a small number of U.S. military, they were also brought to light by the honorable and responsible actions of other military personnel. There are many who did their duty professionally. . . .

Watch how Americans, watch how a democracy deals with wrongdoing and with scandal and the pain of acknowledging and correcting our own mistakes and our own weaknesses. And then, after they have seen America in action, then ask those who teach resentment and hatred of America if our behavior doesn't give the lie to the falsehood and the slander they speak about our people and about our way of life.

Presumedly the Secretary of Defense doesn't want the world to watch "America in action" in its domestic prisons. What does this say about our noble "way of life"??

Physical and sexual abuse of prisoners, similar to what has been uncovered in Iraq, takes place in American prisons with little public knowledge or concern, according to corrections officials, inmates and human rights advocates. . . .

In Pennsylvania and some other states, inmates are routinely stripped in front of other inmates before being moved to a new prison or a new unit within their prison. In Arizona, male inmates at the Maricopa County jail in Phoenix are made to wear women's pink underwear as a form of humiliation.

At Virginia's Wallens Ridge maximum security prison, new inmates have reported being forced to wear black hoods, in theory to keep them from spitting on guards, and said they were often beaten and cursed at by guards and made to crawl.

The corrections experts say that some of the worst abuses have occurred in Texas, whose prisons were under a federal consent decree during much of the time President Bush was governor because of crowding and violence by guards against inmates. Judge William Wayne Justice of Federal District Court imposed the decree after finding that guards were allowing inmate gang leaders to buy and sell other inmates as slaves for sex.

The experts also point out that the man who directed the reopening of the Abu Ghraib prison in Iraq last year and trained the guards there resigned under pressure as director of the Utah Department of Corrections in 1997 after an inmate died while shackled to a restraining chair for 16 hours. The inmate, who suffered from schizophrenia, was kept naked the whole time.

Abu Ghraib, Wallens Ridge, Marion, whatever.

Economic recovery in the eurozone looks to be in trouble again.

A big drop in German industrial production in March reported on Friday fuelled fears that the modest recovery in the eurozone's biggest economy may already be stalling.

Output tumbled 2.3 per cent on the month, the biggest decline since August and was down 0.7 per cent on the year, well short of the 0.5 per cent rise market economists had predicted.

The government rushed to calm market nerves by announcing that the data would be "revised up significantly" once extra working days in March had been fully taken into account. But economists warned that even with a substantial revision of more than one percentage point first-quarter GDP growth could still fall short of expectations.

With Germany faltering, China cooling and Japan's recovery built almost entirely on exports, global economic expansion depends even more on overconsumption and debt in the Anglosphere.

Do you think it possible that these two things are somehow related?

Exhibit A

In January 2003 Knight-Ridder conducted a public opinion survey in which the following question was asked of Americans: "As far as you know, how many of the Sept. 11 terrorist hijackers were Iraqi citizens?" Fifty percent of respondents said there was at least one Iraqi on board; only 17% of Americans got the right answer -- zero. If we factor out the 33% of respondents who answered "don't know" or refused to answer, a stunning 75% of Americans who thought they knew thought Iraqis participated in 9/11.

In April 2003 the Los Angeles Times conducted a national poll during which it asked "Do you think Saddam Hussein bears any responsibility for the September 11th attack on the World Trade Center and the Pentagon, or does he bear no responsibility?" Fifty-nine percent of respondents answered that Saddam bore "all", "most" or "some" responsibility. Twenty-two percent said "none". If one factors out the 16% who responded "don't know," a stunning 70% of Americans who thought they knew thought Saddam Hussein was at least partly responsible for 9/11.

Exhibit B

The sexual humiliation of Iraqi prisoners at Abu Ghraib prison was not an invention of maverick guards, but part of a system of ill-treatment and degradation used by special forces soldiers that is now being disseminated among ordinary troops and contractors who do not know what they are doing, according to British military sources.

The techniques devised in the system, called R2I -- resistance to interrogation -- match the crude exploitation and abuse of prisoners at the Abu Ghraib jail in Baghdad.

One former British special forces officer who returned last week from Iraq, said: "It was clear from discussions with US private contractors in Iraq that the prison guards were using R2I techniques, but they didn't know what they were doing." . . .

The British former officer said the dissemination of R2I techniques inside Iraq was all the more dangerous because of the general mood among American troops.

"The feeling among US soldiers I've spoken to in the last week is also that 'the gloves are off'. Many of them still think they are dealing with people responsible for 9/11".

Last month I stumbled across FT columnist Martin Wolf's helpful concept of the 'Anglosphere big spenders' whose inordinate consumption and debt loads keep the wheels of the global economy turning. Their overconsumption soaks up (for now) the overproduction of the rest of the world. Wolf isn't just pulling this out of his hat, of course. IMF data tell an interesting story.

In 2003, three members of the Anglosphere -- the United States, the United Kingdom and Australia -- ran the three largest current account deficits in the world, a combined US$615bn. The UK deficit was 2.4% of GDP; in the US, 4.9%; and in Australia, a whopping 6.0% of GDP. Canada, the fourth member of the Anglosphere, actually ran a current account surplus of US$18.4bn (2.1% of GDP), but all of that was thanks to the Big Vacuum to the South. Without running a goods trade surplus with the United States of 7.6% of GDP (!), we would see that Canada does its share of Anglosphere net consumption, too.

The top overproducers/creditors? Japan (US$136.4bn), Germany (US$57.5bn) and China/Hong Kong (US$47.0bn).

Boy, all that nice stuff I said on ANZAC Day and yet no Aussies will come and read the globblog?

Pushing back the deadlines continues with wanton abandon.

European foreign ministers meeting in Dublin this week said they were now resigned to a largely "symbolic" transfer of sovereignty to Iraqis at the end of June, and would be reluctant to block a United Nations resolution over the issue.

Several European Union governments now say the most important handover date in Iraq will be January 2005, the timetable set for elections which diplomats believe will be much more significant than June in terms of passing genuine legitimacy to an Iraqi government.

Jeremy Greenstock, Britain's envoy to Baghdad who has just finished his six-month stint, recently told Nato ambassadors during a visit to Brussels they should now regard next January, not June 30 as the more important date.

Maybe Niall Ferguson will get his wish after all!

At least somebody is starting to talk sense in the Bush administration. Of course, since they are talking sense, they must remain anonymous.

Iraq's deepening crisis has left the Bush administration with few options, and although the US has entrusted the United Nations with the task of finding a way towards political stability and elections, officials and analysts close to the White House admit that hopes of success are receding fast. . . .

How it will end few care to predict. But there is increasing talk -- some close to the administration call it "plan B" although it does not exist as such -- of engineering Iraq's division into three loosely-linked mini-states, perhaps a confederation.

Of course, this is anathema to the neocons for it soundly rejects their crusade to remake the entire Middle East. "Cut and run," the cardinal sin to these renegade Wilsonians, has become defined as anything short of a future "democratic" Iraq modeled on the United States, because admitting anything different (or in the minds of neocons, anything less) would expose their core belief in Fukuyama's 'End of History' thesis to be false. That is something the Weekly Standard simply cannot bear -- and our children will have to be sacrificed to Molech if that's what it takes to "stay the course".

Yesterday the General posed the all-important question "what does Dick Cheney think" about Rumsfeld's future? Well, there seems to be some data available now.

Vice President Dick Cheney, one of Mr. Rumsfeld's oldest and closest friends, was described by an administration official as fully supportive of Mr. Rumsfeld -- a view, Republicans said, that would hold much sway with Mr. Bush. Mr. Cheney has not said anything publicly about Mr. Rumsfeld, but the vice president was believed to have been in the Oval Office when Mr. Bush admonished Mr. Rumsfeld.

Not only is Cheney said to be "fully supportive" of Rumsfeld, but the Vice President was even in the room when Rummy got his dressing down. By his presence there, we can assume that Cheney now feels, as does Bush, that Rumsfeld has been sufficiently chastised and it is time for damage control and for rallying the troops around the Secretary of Defense.

Unexpectedly high jobs numbers from the April employment report out today.

Nonfarm payroll employment increased by 288,000 in April, and the unemployment rate was about unchanged at 5.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The April increase in payroll employment follows a gain of 337,000 in March, and job growth again was widespread. In April, employment rose substantially in several service-providing industries, construction continued to add jobs, and there was a noteworthy job gain in durable goods manufacturing.

If you recall, the consensus forecast was 165,000 -- over 100,000 jobs short of actual.

The jobs gains from the last two months is finally showing a real recovery from the longest jobs recession in post-Great Depression US history. Yet the jobs recession itself is nowhere near over. The US is still 2.26 million private sector jobs short of where it was in February 2001, and at 39 months and counting, the Bush II jobs recession is by far the longest lasting. Poppy Bush's ended at 39 months, and the next longest (under Reagan) ended at 27 months! At the rate of recovery seen in the past two months, the Dubya jobs recession should be over around March 2005.

Even with an extra 280,000 private sector jobs in April, this is still a "jobless recovery".

Some crazy talk at the John F. Kerry in 2004? blog today.

I think it would be suicidal to vote against the $25b request for Iraq and Afghanistan. First of all, the money is badly needed for body armor, etc. Second, the war in Afghanistan is underfunded as it is. Third, there's still a Homeland Defense Credibility gap to cross with swing undecided voters, and voting against this money gives all too easy a soundbite to the opposition (Tom Delay already invoked the Support Our Troops meme).

What Kerry has to do is demand more money - about $40b. Make the discrepancy large enough that it becomes a wedge between Bush and the fiscal conservatives. Kerry needs to emphasise that this war has been fought on the cheap with poor planning, and that the troops still don't have the body armor they need. Given that the Senate will grill Rumsfeld on the failures of training and discipline, Kerry's message that the troops are not being supported by the Administration will resonate.

Yet again, more evidence on the direction of a future Kerry presidency that gives the General great pause. First, the power of the purse is the only power the Congress has over decisions of war and empire. If this power is taken off the table for fear that the Congress will appear unpatriotic, then what is the Congressional power to declare war worth anymore?

Second, this kind of strategy positions Kerry to attack Bush on the war and empire from the right. In fact, this is precisely what Kerry is doing, which accounts for Nader's 5-6% in the polls.

Is Bush going to be the peace candidate in 2004 -- or the closest thing to one with a chance to win?? Frightening.

The sexually depraved acts of torture designed to "soften up" the prisoners at Abu Ghraib prison have been blogged endlessly, but I think there is a bit more to say on the matter of whether Don Rumsfeld will walk the plank on this one.

Kevin Drum notes that the cover of the current issue of The Economist is calling for Rumsfeld's resignation but makes the wry observation that The Economist demanding someone's head probably means a safe neck. Josh Marshall thinks it likely that "Don Rumsfeld is finished". DemFromCT from DailyKos notes that Bush is pointing the finger at Rumsfeld even though standing by his man.

What none of these guys has asked yet is the most important question: what does Dick Cheney think?

Josh Marshall makes the signal observation that people in Washington fall not so much because they're pushed by critics but because they're left unsupported by defenders who have deserted them. This need not take place completely in public, however. If Cheney says Rumsfeld must stay, can you imagine Bush overruling him?? I don't mean to say that Cheney makes all the decisions, but we all know this is at least a co-presidency and both members have veto power. Moreover, Cheney is especially immune to criticism. The man still thinks there are WMDs to be found in Iraq after all! Cheney doesn't give a damn about public opinion or even the opinions of Republicans who disagree with him.

I have yet to hear Cheney speak up about his old mentor. If and when he does, pay attention.

Now Greenspan starts to get worried? Where they hell was he during the last three years??

The head of the Federal Reserve voiced a note of concern today about the effects of America's soaring national budget deficit on the country's long-term economic stability.

"We in the United States have been incurring ever larger deficits," the Fed chairman, Alan Greenspan, said. He added that "we have lurched" from a budget surplus in 2000 to a deficit that is projected by the Congressional Budget Office to amount to 4.25 percent of gross domestic product this year, or about $500 billion.

The "yawning" budget deficit, he told a banking conference, was a bigger concern to him than the equally growing trade deficit or high household debt.

"Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces that stabilize other imbalances," Mr. Greenspan said.

It wasn't too long ago that Greenspan was playing the co-dependent enabler to Bush's dramatically ballooning budget deficits driven primarily by tax cuts. Now apparently the guy has seen the light -- especially after he suggested last month that cutting Social Security was the best way to tackle the problem.

But what about the High Priest's claim that the budget deficit -- around 5% of GDP -- is of concern but the current account deficit -- also around 5% of GDP -- is not? Because apparently the former is "not readily subject to correction by market forces" while the latter is. Huh?? Has Greenspan been paying any attention at all to the massive subsidization of the US dollar and US interest rates this past year by the Chinese and Japanese central banks (last time I checked, central banks were parts of governments)? Where exactly are the "market forces" correcting the ever-swelling US current account deficit? Oh, right, they're out there and they'll get us "eventually". I like Althusser's "in the last instance" a lot better.

Read the article: it's a broadside on Social Security disguised as concern over the deficit. This guy is a one-man weapon of mass destruction and must be decommissioned as soon as possible.

It looks like the spike in milk prices in the US is making organic milk and cheese look suddenly affordable.

"The price gap is narrowing," said Phil Lempert, a market researcher who runs the Web site supermarketguru.com. "Dairy products for organics are going to hover at about 10 percent more than non-organics, and when it becomes 10 percent more it's within reach of practically everybody." . . .

Milk prices are at their highest levels in years as production has fallen, mostly due to a halt in imports of Canadian dairy cattle after the discovery of mad cow disease in Canada a year ago. Increased slaughter of dairy cows due to strong demand for beef has also curtailed milk output, sending prices soaring.

Don't get too excited about Horizon Organic, however, the main topic of this story. First of all, it's owned by Dean Foods, the dairy processing giant that makes its living by screwing small dairy farmers. Michael Pollan has called Horizon "the Microsoft of organic milk" -- hardly a compliment. Second, big organic dairy is not all it's cracked up to be. It means no growth hormones and organic corn, granted. It also means confined animal feeding operations and "ultrapasteurization" which extends the shelf-life and reduces the nutritional value of the milk. It's necessary, however, in order for Horizon to ship the stuff all over the country. Organic milk from Horizon is the least fresh milk you can buy.

As Michael Pollan has aptly put it, Horizon Organic and those like it are part of an "organic-industrial complex" little different from the one that produces non-organic industrial food. If the rising cost of milk and cheese is making you change your buying habits, look to local producers instead of Big Organic. They're usually organic or very close to it, but don't want the hassle of getting government approval for the word. They also produce the freshest stuff you can buy from grass-fed cows who walked around on the actual dirt (increasingly uncommon for dairy cows nowadays). You'll be glad you did.

Americans have lost the capacity to defend their own economic interests.

many companies, including E-Loan and about half the Fortune 500, continue to move parts of their operations to low-cost areas around the world. Although public opinion polls show Americans are worried about this outsourcing of jobs, few people appear willing to back that up if it means spending more money or more time.

Even those who have lost jobs sometimes express more resignation than outrage. The lack of widespread passion on the subject, some say, helps explain why dozens of measures in Congress and state legislatures for limiting outsourcing have failed to gain much traction. . . .

"It was shocking to find a Democratic-controlled House in the liberal state of Washington could not pass a significant piece of legislation dealing with the offshore-outsourcing issue," said Marcus Courtney, president of the Washington Alliance of Technology Workers.

Much of this is due to the shift in self-identity from producer to consumer. A job is simply an 8- or 9- or 10-hour-a-day penance you pay to live it up on the weekend and have lots of cheap stuff from Wal-Mart piling up on your yard or porch. People are losing the ability to see that driving producers to the wall in order to get the low low price means eventually driving yourself to the wall as well. Real wages in the US are still below where they were in 1973! But even after being driven to the wall, Americans are more likely to see a layoff as a force of nature to be endured rather than a political-economic decision to be fought.

From 1947 to 1956 more than 1 million Americans were out on strike annually, demonstrating the power of their unions and winning concessions from capital and the state. Between 1947 and 1979 more than 1 million Americans were out on strike in 26 of those 33 years. Since 1979, guess how many years over 1 million Americans have struck? Zero. Incredible. In 2000 and 2001 there were under 100,000 Americans on strike annually, less than 10% of the level of the 1940s and 1950s.

When it comes to 1970s movies, Americans need to stop taking their cues from "Deliverance" and look to "Network" instead.

It just occurred to me: is Hillary Clinton the perfect pro-death candidate for 2008?

• pro-war
  
• pro-death penalty
  
• pro-choice
  

It's the trifecta!

Think you'll get a change in US imperialism with a Kerry presidency? Think again.

If he is elected president in November, John Kerry will have one great asset in seeking allies for the war in Iraq and the struggle against terrorism - the fact that he is not George W. Bush.

This will be a very considerable asset. Unfortunately, as things stand today, it also looks like being Mr Kerry's only asset. The senator has denounced Mr Bush's record and quite rightly. But, as an alternative, he has offered only platitudes about appealing to US allies and relying on the United Nations. Moreover, as a result of the unfolding debacle in Iraq, the Bush administration itself has in recent months adopted much of this language. Mr Kerry therefore sounds as if he is running against the Bush of 2001 to 2003, not the Bush of 2004.

Indeed, it is on Iraq, the Middle East and the war against terrorism that the Kerry team seems to be most bereft of new ideas. . . .

Sadly, when it comes to appealing to the Muslim world, Mr Kerry has already taken a disastrous step. By immediately and unconditionally approving Mr Bush's endorsement of Ariel Sharon's plans for Gaza and the West Bank, Mr Kerry has suggested that he is just as tied to the present Israeli government as is Mr Bush. This in turn suggests that he will be unable to resist Israeli pressures when it comes to seeking rapprochement with Muslim countries hostile to Israel. Moreover, Likud's rejection of Mr Sharon's plan for Gaza withdrawal, even after it was backed by Mr Bush, demonstrates the complete bankruptcy of the bipartisan US approach to Israel and the "peace process", and the inability of the US to influence Israel without applying much tougher forms of pressure than anyone in the US political elite is willing even to discuss.

In consequence, a Kerry administration would be no more able than a Bush administration to reduce wider Muslim hostility by pushing for a just and stable peace between Israel and the Palestinians. . . .

Mr Kerry has said that his foreign policy would reflect a spirit of "progressive internationalism". This phrase appears to have been taken from the name of a plan for Democrat security strategy drawn up late last year by a group of hawkish Democrat intellectuals who supported the Iraq war.

This document speaks of multilateralism, but several of its signatories have adopted positions on the use of force, on the democratisation of the Middle East, and on the need for a position of unrelenting hostility towards Iran, indistinguishable from the positions of the neoconservatives.

-- Anatol Lieven in today's Financial Times (subscription only)

UPDATE: Some additional material from yesterday's Jerusalem Post (subscription only):

At a moment when Bush is receiving praise from many in the American Jewish community for his stance on Israel, Kerry addressed the Anti-Defamation League's national leadership conference in Washington, hoping to persuade American Jewish voters that he would be an equally pro- Israel candidate.

"We will always work to provide the political and the military and the economic help for the fight against terror because it is our fight," Kerry said.

Need I say more?

I've seen two stories in the last two days suggesting that the economists had better hang up their cleats and let the psychologists run their discipline from now on since the former clearly don't know what the hell they're talking about.

Drivers Tend to Shrug Off High Gas Prices, for Now

Refinancing and home purchase applications rise, even as rates climb for eighth straight week

I love this line in particular:

Experts say that for a variety of reasons, they should be able to keep that up for a while - but not indefinitely.

And these are the same liberals ridiculing Marxists like Althusser for arguing that capital always determines "in the last instance"!

If prices have no clear necessary relationship to demand -- if it's more about psychology than rational utility maximization -- then the junior psychologists with the Econ Ph.D.'s had better move aside for the people who really know how the human psyche works. This seems to be the essential point that Paul Krugman made some years ago in discussing the "The confidence game" the IMF encourages countries to play with foreign investors, and I don't see any evidence since then to suggest he's wrong.

The famous (or infamous, take your pick) OPEC price band may be under revision.

OPEC's reference crude oil price rose to $34.13 a barrel Monday from Friday's $33.99, and Purnomo said on Tuesday the cartel was studying whether to raise the target band of $22-$28 to better reflect the strong market.

Venezuela is said to want it raised to $24-$30 and Nigeria has suggested it should be lifted to $25-$32.

Today is the birthday of Karl Marx. Happy 186th, old man!

A 1999 BBC Online poll ranked Marx the "greatest thinker of the millennium". Here is what Friedrich Engels said at his graveside in 1883:

Marx was before all else a revolutionist. His real mission in life was to contribute, in one way or another, to the overthrow of capitalist society and of the state institutions which it had brought into being, to contribute to the liberation of the modern proletariat, which he was the first to make conscious of its emancipation. Fighting was his element. And he fought with a passion, a tenacity and a success such as few could rival. His work on the first Rheinische Zeitung (1842), the Paris Vorw�rts (1844), the Deutsche Brusseler Zeitung (1847), the Neue Rheinische Zeitung (1848-49), the New York Tribune (1852-61), and, in addition to these, a host of militant pamphlets, work in organisations in Paris, Brussels and London, and finally, crowning all, the formation of the great International Working Men's Association -- this was indeed an achievement of which its founder might well have been proud even if he had done nothing else.

And, consequently, Marx was the best hated and most calumniated man of his time. Governments, both absolutist and republican, deported him from their territories. Bourgeois, whether conservative or ultra-democratic, vied with one another in heaping slanders upon him. All this he brushed aside as though it were a cobweb, ignoring it, answering only when extreme necessity compelled him. And he died beloved, revered and mourned by millions of revolutionary fellow workers -- from the mines of Siberia to California, in all parts of Europe and America -- and I make bold to say that, though he may have had many opponents, he had hardly one personal enemy.

His name will endure through the ages, and so also will his work.

Why not curl up on the couch tonight with a copy of The Manifesto of the Communist Party or The Eighteenth Brumaire of Louis Bonaparte and see for yourself exactly why Marx was a brilliant thinker, a brilliant writer and a brilliant revolutionary?

Find of the day, thanks to Suburban Guerrilla:

"I don't care whether utopians are Vladimir Lenin in a sealed train going to Moscow or Paul Wolfowitz. Utopians, I don't like. You're never going to bring utopia, and you're going to hurt a lot of people in the process of trying to do it."

-- Larry Wilkerson, Chief of Staff to Colin Powell

[Of course, Lenin wasn't going in the sealed train to Moscow but to Petrograd, which was the capital of Russia at the time. We won't dock Wilkerson points, however]

The man: George W. Bush, President of the United States of America

The place: Rose Garden, The White House, Washington, DC

The date: 30 April 2004

The quote: "There's a lot of people in the world who don't believe that people whose skin color may not be the same as ours can be free and self-govern. I reject that. I reject that strongly. I believe that people who practice the Muslim faith can self-govern. I believe that people whose skins aren't necessarily -- are a different color than white can self-govern."

Phew! Glad to hear America is still of, by and for white people!! Those right-wing Republicans telling me about all the welfare queens had me worried there for a minute . . .

Before we get too frothy over the United States' loss over its cotton subsidies in the WTO last month:

Most worrisome to U.S. trade officials: The WTO apparently rejected their argument that U.S. subsidies should be considered legal as long as they are intended for such purposes as land conservation, environmental protection, disaster relief, and so on. Brazil successfully argued that such aid allowed cotton farmers in the U.S. to cut prices 61% below the cost of production. As a result, Brazilian cotton growers lost $600 million in sales. "The U.S. was trying to get off on a technicality, but this ruling says that won't work," observes Ben Lilliston, an analyst with the Institute for Agriculture & Trade Policy.

While the left is rightly celebrating the major blow against one of the biggest corporate welfare programs in the Global North, at the same time they had damn well better be careful that they aren't eliminating every ability of Northern governments to regulate their rural and agricultural sectors at the same time. Subsidizing ADM to produce ethanol is certainly a raw deal, but do we want to surrender the entire Conservation Reserve Program, disaster relief programs, and any hope of multifunctionality in agriculture as well? In case you're wondering, the correct answer is "Hell no!".

With oil prices, its either pay now or pay later.

Higher oil prices have hurt the global economy and could further hamper growth, bolster inflation and increase unemployment over the next two years if prices stay at their current levels, according to a study by the International Energy Agency released on Monday.

"World G.D.P. growth may have been at least half a percentage point higher in the last two or three years," the study found, "had prices remained at mid-2001 levels."

If oil prices stay at their current level of more than $35 a barrel, more than $10 a barrel above their level of three years ago, "world G.D.P. would be at least half of 1 percent lower - equivalent to $255 billion - in the year following a $10 oil price increase."

Fair enough. But when oil prices are low -- whether you define that as within OPEC's $22-$28/barrel preferred band or even lower than that -- the world consumes oil like there's no tomorrow, contributing to global climate change (the costs of which are virtually unmeasurable) and retarding the growth of energy alternatives which can't find a place in the cheap oil market.

The IEA blames OPEC "supply management policies" while OPEC blames refining bottlenecks among other things. Then there are the nutty Republicans who blame clear air legislation. The data seems to support the IEA.



At the end of the day, however, either we pay now in the form of lower growth or we pay later in the form of lower growth (and other nasty things like asthma, drought, and Asian Brown Cloud). Although it contradicts my personal motto, isn't Ben Franklin right to never leave that till tomorrow which you can do today?

The consensus forecast is that High Priest Greenspan and his Magisterium will not raise interest rates today.

The economy is motoring ahead, although the labor market, while showing improvements, needs to catch up. That's why economists expect the Federal Reserve to hold short-term interest rates at ultra-low levels for a while longer. An announcement is expected this afternoon after the Federal Open Market Committee meeting.

Since the Bush administration has no jobs strategy for the country, it all falls on the shoulders of the Fed to stimulate job creation. But as we have seen these past three years, monetary policy is an extremely blunt hammer with which to pound jobs out of the economy. With some half the global economy tied to the US dollar either through pegs (e.g. China, Hong Kong) or dirty floating (e.g. Japan, Korea), the Fed is stimulating not just a US recovery but a global one. The 'leakage' of cheap US money into East Asia in particular is legendary. Thus it takes a hell of a lot of monetary stimulus to create a small amount of oomph in employment.

According to economists in the know, the US needs to add at least 150,000 jobs per month just to keep up with population growth. The consensus expectation for April job growth is a paltry 165,000. Even if Greenspan starts dropping money from helicopters, he's not going to create a jobs boom. When the April employment numbers come in at the end of the week, we'll discover that the G.W. Bush jobs recession is the longest in post-Great Depression American history and nowhere near being over.

But at least those ultra-low interest rates are fueling a nice housing and equity market bubble!

It seems that the good people who look after the P�re Lachaise cemetery in Paris are getting sick and tired of all the Doors fans coming to "pay their respects" (after a fashion) to Mr. Mojo Risin':

All are eclipsed by the necropolis's biggest draw, however: the gravestone of Jim Morrison. Christian Charlet, who is responsible for the cemetery and its 70,000 tombs, would happily do without the Doors frontman, who passed out in his bath (and into legend) in Paris in July 1971.

"We'd like to kick him out, because we don't want him, he causes too many problems," Mr Charlet said. "If we could get rid of him, we'd do it straight away." Unlike many of the tombs, Morrison's is on a perpetual lease.

P�re Lachaise has had to hire a security guard to watch over the singer's last resting place. Fans still queue to take a picture, mutter a few words or lay something - a flower, a note, a candle, a cigarette butt - on his tomb. Before the guard's appointment, they would converge to smoke pot and (it is whispered) have sex.

Well, I'm going to be in Paris next year for the first time, and I am definitely going to Le Cimeti�re du P�re-Lachaise and see Morrison's grave. It's second on my list, after visiting Marx at Highgate Cemetery in London.

It has nothing to do with globalization, but here's my favorite line from a Morrison poem:

The sniper's rifle is an extension of his eye. He
kills with injurious vision.

Time to share another good blog I've discovered since coming out of retirement: Globalize This!, now on the General's blogroll.

A nice introduction to Adam Hersh's blog is his post "Bush: Communist Chinese sympathizer?" Read it and weep!

Niall Ferguson spouts more of his imperialist nonsense in today's Washington Post.

There are no perfect correlations in history. But there is a suggestive relationship between the duration of American military presence and the success with which occupied countries have achieved economic growth and the transition to enduring democratic institutions. . . . America's patience should not be eternal when it comes to unilateral cease-fires with insurgents. But patience is precisely what the United States needs if it is to achieve long-term success in Iraq.

Ferguson is getting famous for urging the United States to stay in Iraq for the long haul. Just how long that is nobody knows, but the constant comparisons with Japan and Germany post-WWII suggests seven years (the length of the formal US military rule over Japan) as a bare minimum. Ferguson suggests as much by saying the US involvement in the Vietnam War lasted "a mere seven years". In today's Post, Ferguson favorably compares the US occupation of Iraq to that of Britain's in the early part of the last century (as he also did in the New York Times last month) and implies that 33 years might do the trick. If Ferguson's advice to follow the British example in Egypt is to be taken seriously (as proposed in his TNR piece "True lies"), 70 years might be more in order.

But don't worry. After all, empire is good for you -- both colonized and colonizer. And yet it is remarkable that Ferguson could write an entire op-ed on American military stick-to-it-iveness without once mentioning the Philippines. Remember the Philippines? That formal US colony held for nearly 50 years, unlike Hawaii or Guam never considered ripe for formal annexation and incorporation into the US proper. If the seven years in Vietnam, the eight in the Dominican Republic or the nineteen in Haiti didn't ensure "economic growth and the transition to enduring democratic institutions," surely the forty-eight in the Philippines should have done the trick, no?

And yet the Philippines is no more wealthy than anybody else in South-east Asia and had that nasty Ferdinand Marcos interregnum of over twenty years (!). Why didn't US imperialism set the Philippines on the road to inordinate success, apart from the likes of Thailand or Malaysia? Is it perhaps that Ferguson doesn't know what the hell he's talking about?

When the Israeli Likud Party makes Ariel Sharon look like a "man of peace" and a left-wing softie by overwhelmingly refusing his Gaza pullout (and West Bank land grab) strategy, maybe all those crazy fundies getting ready for the apocalypse are really on to something?

Kerry and Bush are identical on Iraq, and there's $600,000 and 6% of the voting public to prove it.

Democrats have been hoping that Nader, like Ross Perot, will fade in a second campaign or fail to get on the ballot in many states. But there is no sign that's happening. The campaign recently announced that it had raised $600,000 in its first two months, triple the amount Nader had at this time four years ago and enough to organize around the country. A spokesman told the Associated Press: "We're starting to establish ourselves as the only clear antiwar campaign."

It is surely folly for anyone in a competitive state this November to vote for Nader -- but if your #1 issue is imperialism, you can't help but be profoundly disappointed by John Kerry who promises not less empire but more, the difference with Bush being that a Kerry presidency will simply be more competent at administering the colonies and prosecuting the colonial wars.

What are the global implications of the incipient China slowdown? Stephen Roach sees two big consequences, one for capital goods exporters to China and the other for global commodity markets.

If you've been paying attention to Japan's recent "recovery," you will know that it is built upon external demand -- as usual. Exports both the US and to China have generated the country's biggest current account surplus in history earlier this year. While they're sending consumer electronics to the US, its capital goods to China. Other global engines such as Germany also rely heavily on capital exports, and thus a big China slow-down is likely to cut into both the Japanese recovery and Europe's anemic growth figures. Ditto for Korea and Taiwan.

The second consequence is a cool-down in global commodity markets. As Roach notes,

As growth in Chinese industrial output accelerated from 7% in late 2001 to 19% in early 2004, the Journal of Commerce composite index of spot industrial materials prices went from a deflationary -15% YoY comparison to an inflationary +30% YoY surge.

Roach comes out agreeing with the General. Inflationary fears are misplaced in light of the reins being pulled on the Chinese economy: "If you take away the major demand spark, pricing should follow -- possibly with a vengeance."

The abuse of Iraqi prisoners at Abu Ghraib has been blogged enough elsewhere so there is no reason to rehash the basics here. Let me say, however, that this string of incidents may have one salubrius outcome: the diminishment of the moral legitimacy of the military in the eyes of the US public.

After 9/11, a wave of patriotism and nationalism washed over the United States, perhaps most crassly expressed by country singer Toby Keith: "And you'll be sorry that you messed with / The U.S. of A. / 'Cause we'll put a boot in your ass / It's the American way". Particularly after the divisions of the 2000 election and the construction of 9/11 as an "Attack on America", people from all walks of life wanted to transcend their differences and feel a sense of unity as Americans. The flag was omnipresent; the ranks of groups like the American Legion swelled; victims of the World Trade Center collapse became national "heroes".

Since 9/11 the Bush administration and their supporters in civil society have fueled their imperial project with this high octane patriotism. In fact, the imperial project itself came to dominate the patriotic and nationalist impulse by crafting for it a permanent outlet. In turn (and this is my main point), the military became that national institution which best embodied the nation and its values. If the Presidency, the Congress, the Courts, the media were all corrupted by the filth of the world, the military stood above all taint to carry out la mission civilatrice in Afghanistan and especially Iraq.

Consider Hannah Arendt's observations in her classic The Origins of Totalitarianism of a similar phenomenon some 100 years ago:

only far from home could a citizen of England, Germany or France be nothing but an Englishman or German or Frenchman. In his own country he was so entanbled in economic interests or social loyalties that he felt closer to a member of his class in a foreign country than to a man of another class in his own. Expansion gave nationalism a new lease on life and therefore was accepted as an instrument of national politics. The members of the new colonial societies and imperialist leagues felt "far removed from the strife of parties," and the farther away they moved the stronger their belief that they "represented only a national purpose."

Now with the truth of Abu Ghraib revealed for the nation and the world -- in the words of a US military report, the "sadistic, blatant, and wanton criminal abuses" as well as their apparently systematic nature -- perhaps we can step back from constructing national unity on the foundation of imperialism?

One final note: we will be hard pressed to chalk this torture up to an excess of testosterone released in a war zone. Of the seven soldiers repremanded for their participation in the Abu Ghraib torture, three were women.

As usual, it was a quiet May Day in the US of A. But workers and their movements turned out in strength today in France, Venezuela, Sri Lanka, Mexico, South Africa and just about every other corner of the known universe.











"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if Labor had not first existed. Labor is superior to capital, and deserves much the higher consideration." Karl Marx? Nope. Abraham Lincoln.

Enjoy your May Day!

Social constructivism runs amok today in the pages of the New York Times. As it turns out, Americans are not in fact the fattest people in the history of the human race overconsuming the resources of the poor and the future. We're actually the target of a right-wing plot to make us all feel bad.

a growing group of historians and cultural critics who study fat say this obsession is based less on science than on morality. Insidious attitudes about politics, sex, race or class are at the heart of the frenzy over obesity, these scholars say, a frenzy they see as comparable to the Salem witch trials, McCarthyism and even the eugenics movement.

In good liberal fashion, academics such as Paul Campos claim that making somebody feel bad about themselves it the cardinal sin. Never mind that over 30% of Americans are obese today, up from just 13% in 1960. Trying to get Mr. Jones to slim down enough so he can fit into a restaurant chair is just too much to bear.

These insufferable post-moderns do have one point worth considering, however.

And while there are many causes for obesity � cheaper food, more aggressive marketing, bigger portions in restaurants and, of course, increasingly sedentary habits � Mr. Stearns says that gaining weight is still seen as a moral issue, "a sign you were lazy, lacked self-control."

This might be true, but there are many excellent studies and writers out there laying to rest this opinion -- and I don't mean Dr. Phil.

For the political economy of fat, pick up a copy of Greg Critser's Fat Land, Michael Pollan's review of Fat Land, and the work of University of Washington researcher Adam Drewnowski on "the very low cost of energy-dense foods".

I suspect obesity in America has a lot more to do with high-fructose corn syrup than with eugenics. But maybe that's just me.

I figured it was only a matter of time before Reuters caught up with the General.

Consumer spending, which has been a major prop for the stock market's gains, may fade in coming months, raising questions about where the economy and stocks will draw future strength. . . .

Consumer spending, which accounts for 70 percent of U.S. economic activity, has benefited from fiscal stimulus like tax cuts and from easy credit engineered by the Federal Reserve (news - web sites), but these stimulants have pretty much run their course, analysts said.