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IS AMERICA THE NEW ROME?
The New Rome: The Fall of an Empire and the Fate of America, by Cullen Murphy, reviewed.
The debate about whether America is an empire seems to have been settled. The majority concensus is that it is. Now with its finances and influence in what looks like terminal decline, and its mighty military bogged down in a quagmire involving a relatively small number of "insurgents" in Iraq, the natural question is whether it is destined to go the way all empires have gone. Is it destined to "decline and fall", as Edward Gibbon so famously characterized the Roman Empire's fate. Or will it go the way of the British Empire, a shell of its former self but maintaining a semblance of old appearances?
Writer Cullen Murphy has yet another entry into this prognostication business, and judging by this review sees some interesting, if not wholely convincing, connections between Rome and America. And, of course, the intellectual debate may be interesting and informative. But the more pressing issue is: How does one deal with whatever it is that is happening to America, technically an empire or not? This, in essence, is what W.I.L. is here to help you do.
The American edition of this book, which came out a few months ago, bore the title Are We Rome?. Apparently that was the sort of question for which ancient Romans would have used the word "nonne", expecting the answer "yes"; for the British edition is baldly entitled The New Rome. Sidney and Beatrice Webb did something similar when they dropped the question mark from their Soviet Communism: A New Civilisation? -- but at least they waited a couple of years before they did so.
Cullen Murphy, an author of stylish think-pieces in Atlantic Monthly and Vanity Fair, has become obsessed with the resemblances between the present-day U.S. and ancient Rome. The big similarity, of course, is in geopolitics: at its height, the Roman Empire was a military superpower which dominated much of what is tendentiously called "the known world" (known by whom? -- answer: by people in the Roman Empire).
Rome's imprint on that large part of the world was not just military. The material culture of Roman life -- art and architecture, clothes and food, even including the Romans' disgusting fermented fish sauce -- had an overwhelming allure for almost everyone who became part of the empire, or was in regular contact with it. And for those brought into the empire, Roman law and Roman moral values were powerful influences, often superseding the value-systems they had lived by before. For fish sauce, read McDonald's; for Roman values, liberal democracy (or neo-con dogma, according to taste).
Most of these broad-brush comparisons are obvious and familiar; they are the bread and butter of highbrow op-ed pieces about the "imperial" status of America today. But Cullen Murphy goes further, using his Roman analogy to make points both about the blinkered mentality of the imperial elite, and about the short-sighted way in which it is now undermining the foundations of its own power.
Where the elite is concerned, he has fun comparing the huge traveling circus of officials that accompanies the American President with the similar entourage of a Roman emperor. Both surround a leader so coddled and cocooned that he has little real contact with the outside world. And just as Rome was said to contain the omphalos or navel of the world, so the Washington elite are inclined to suppose that everything revolves around them.
Murphy's most original comparison, however, is between the policies of modern American governments and the fatal errors made by Roman emperors in the Empire's final period. Previously, in the good old days, barbarian tribes that moved into the Empire were accommodated on the basis that they turned themselves into ordinary Roman subjects or citizens. The fatal mistake was to let them settle as blocs, maintaining their separate identities in great chunks of Gaul, Spain or Africa. These were the alien bodies that became the embryos of non-Roman breakaway states.
At first, you might guess that this comparison would be used to warn the U.S. about the dangers of letting southern California become a Spanish-speaking enclave. Cullen Murphy does have some things to say about mass immigration into America, and the Rio Grande border is the main counterpart he offers to the Roman limes or frontier -- a frontier which, he emphasises, was always a porous membrane, not an impenetrable barrier. But instead he turns the comparison in a very different direction.
Fixated on the dangers of privatization, he says that the real equivalents to the Visigoths and Ostrogoths of the late Roman Empire are the giant corporations such as Halliburton, which are taking over key government services. Like the Roman emperors, it seems, the American government now depends on alien armies which it cannot control.
This argument seems more rhetorical than historical. Halliburton is unlikely to sack and pillage Washington, however great the reconstruction contracts that might follow such a development. Nor will it turn Texas into the Kingdom of Halliburtonia. Of course it has aims of its own; but its primary aim is to make money for its directors, shareholders and employees. And most of those are American citizens, who will pay taxes on that money, and remain subject to American laws.
Many of Murphy's arguments work only in a rhetorical way ... If there is an American "empire" today, it is the empire that has been acquired by a particular state -- the United States of America, of which Washington happens to be the capital. But the Roman Empire was not acquired by an Italian state, which happened to have its capital in Rome. This distinction matters in all sorts of obvious ways.
For instance, America is a state with its own constitution. Democratic politics within that state can alter the policies of the state abroad. The kind of empire-beyond-the-borders which American power now enjoys is quite different from the empire-within-the-borders of ancient Rome. Etc, etc.
While the grand thesis of this book fails to convince, however, there are many incidental pleasures to be had along the way. Murphy is a beguiling writer with a good eye for detail, who has read widely among both ancient writers and modern historians of Rome.
We suggest that those who are interested check out the Wikipedia entry under "Decline of the Roman Empire", and also its offshoot entry, "Crisis of the Third Century". In the later entry, the discussion of the breakdown of trade -- in effect, the breakdown of the division of labor -- due to hyperinflation and the inability to hold off external threats is certainly suggestive.
THE GLOBE’S NEW STARS
Budding multinationals from booming emerging nations are gaining strength. Here are the best of the bunch.
Whether or not the U.S. is a declining and falling empire, the emergence of multinational powerhouse companies from emerging countries that effectively compete with multinationals based in the U.S. and Western Europe is an undeniable trend. Forbes sifts through the publicly traded companies in an effort to come up with the potential economic and investment stars.
Prototype multinational of the 19th century: Singer Sewing. This globe-straddling giant even had a plant in Russia. R.I.P.
Classic 20th-century multinational: Ford Motor. Henry Ford was early in setting up factories overseas and giving them a lot of autonomy. Company not doing so well at the moment.
Potential winner for the 21st century: Cemex (CX). Here is a powerhouse (sales: $21.7 billion) from Mexico, a nation with a backward, corrupt economy. It has taken over almost 30% of the world cement industry. The U.S. cement business used to belong to homegrown outfits like Lehigh Cement and Lone Star Industries. But now Cemex sales equal those of the largest 10 American cementmakers combined.
The day when U.S. and European corporations ruled the world is over. They are sharing power now with upstarts from India, China and Brazil. Third World producers have two things going for them: access to cheap labor and high growth in the home market. Output will expand 9.6% this year in China, more like 2% in Europe and North America. The World Bank projects that emerging nations' share of the global economy will grow to one-third by 2030 from 24% now.
The non-Western multinationals are battle-hardened. They survived the late-1990s Asian financial meltdowns. Also, they are used to squeezing profits out of the cheap prices they charge customers at home, where average incomes are lower than in the West. Some telecom concerns in China, India, Latin America and North Africa thrive selling pennies-a-minute phone packages. The Indian conglomerate Tata is offering a $2,500 car. China's Techtronic Industries peddles Ryobi power tools at bargain prices in Asia.
To pick the emerging stars, we started with a list of 100 selected by Boston Consulting Group from 3,000 companies in 12 developing economies, on the basis of stability and business prospects. Then we assessed them for earnings growth, return on equity and debt coverage.
The tables on this page list eight of these emerging growth companies. Four are available as American Depositary Receipts. The others are not. Here you have a choice between converting to a foreign currency and having your broker place an order on a foreign bourse, or trying to pick up some of the few shares trading the U.S. over-the-counter market. The former is going to cost you at least 1% in one-way transaction fees. The latter is not easy. An average of only 20,000 shares a day of Johnson Electric, for instance, trade in the U.S.
Infosys is the Indian software house founded by Narayana Murthy in 1981 with a handful of friends and today's equivalent of $600. This was the first Indian company to list on Nasdaq and one of the first foreign firms to meet the Sarbanes-Oxley requirements. Its sales have risen from $122 million in 1999 to $3.1 billion in fiscal 2007. North America accounts for 63% of revenue.
Infosys's rival on its home turf is Wipro (WIT). Morningstar researchers say Infosys leads Wipro in average contract size ($6.5 million to $4.8 million), although it still trails on revenue per employee ($42,800 to $64,000). For its December-ending quarter Infosys posted a 42% hike in net income. It has survived a rising rupee, making its services more expensive to dollar-based customers.
Taiwan Semiconductor Manufacturing, the first and largest contract chipmaker, is another standout. Founded by Morris Chang in 1987, Taiwan Semi does work for tech firms ranging from NXP to Broadcom. With revenue of $9.7 billion in the fiscal year that ended in December 2006, the company holds nearly 50% of the global market for outsourced chips. Analysts polled by Thomson Financial expect long-term profit growth of 20% a year. The stock yields 4.7%.
Long-term investors might consider, among the non-ADR choices, India's Ranbaxy Laboratories. This ambitious little company aims to be one of the world's largest makers of generic drugs. It has a way to go, with revenue of $1.4 billion, compared with $8.4 billion for Israel's Teva Pharmaceuticals. But Ranbaxy's top line is growing faster, with a 24% increase projected this year, to Teva's minus 5%.
EUROPEAN COMMISSION TO REVIEW TAX LAWS
The crocodile tears of angst continue to spill out of the E.U. over the "shocking" revelations of all the tax evasion that was revealed by data stolen from a Liechtenstein bank. Now the E.C. said it will, in effect, clamp down further on tax evasion. In the words of that great fictional private eye Jim Rockford, you can only kill someone once.
The European Commission said it will accelerate proposals on new tax laws to clamp down on tax evasion ... In the wake of a tax scandal that rocked Germany in February, the commission said it would produce a report in May and complete a formal review in June. ...
German Finance Minister, Peer Steinbruck called the scandal, that included the arrest of Deutsche Post head Klaus Zumwinkel on charges that he diverted large sums of money to a bank in Lichtenstein, "a spectacular tax fraud." More than 70 Germans have confessed to tax evasion.
Several tens of millions of euros worth of evaded taxes are discovered -- via unethical and illegal means, but we digress. This is "spectacular". German state-owned banks investing in U.S. subprime mortgages -- which anyone could see was a spectacularly unwise place to invest bank funds -- lose tens of billions of German taxpayors' funds. How much outrage does this warrant from the German Finance Minister?
Luxembourg, Belgium and Austria, however, have indicated they will push to maintain the right not to disclose sums deposited by foreign investors, the report said. It took 14 years of sometimes contentious argument to come up with the current tax agreement that covers the Eurozone, plus Switzerland, Liechtenstein, San Marino, Monaco and Andorra and 10 former British and Dutch colonies.
There is a major level of pretense going on which puts the debate on a slightly surreal plane. The Germans and other high-taxers like to pretend they can bring the level of tax evasion down to zero. The tax havens do not find it diplomatic to explicitly admit that their financial companies owe a lot of their prosperity to helping fiscal refugees from the high-tax countries. And no one wants to call taxation what it transparently is: theft. So everyone ends up trafficking in outrage and denial, rather than facts. Makes for an entertaining spectacle.
The law was established in 2005, but critics remain. "Tax paradises in practice become tax parasites," said Anders Borg, the Swedish finance minister.
Governments that steal half the earnings of their citizens are, well, something other than parasites, evidently, while those countries that help said citizens protect some of their assets from the non-parasites are parasites. This makes about as much sense as an infectious bacterium labeling an antibiotic a "parasite".
“Ignoring the EU Is Not An Option”
Guernsey's tax practices are again coming under the microscope of the European Union. At its meeting in Brussels ... there was pressure from some quarters to widen the scope of the EU's 2005 savings tax directive to close any perceived loopholes in places such as the Channel Islands, Liechtenstein, Monaco and Andorra.
To change EU tax rules all 27 finance ministers must be unanimous and although there appears to be a lack of consensus at the moment, Ernst & Young partner Graham Parrott said it was important for the island to keep an eye on any decisions made by the EU. "While not part of the EU, we have still adopted aspects of its law, for example, the savings directive. Zero-10 is a direct consequence of another EU directive, the code of conduct on business taxation. Being so close to the UK has meant that we cannot simply ignore the EU."
SWISS BANKERS CONDEMN GERMAN GOVERNMENT IN TAX PROBE
Swiss bankers have rightly issued condemnations of the German government for the methods used to obtain confidential, illegally-obtained information from a Liechtenstein bank. Urs Roth, the Swiss Bankers Association's second highest official, says the country considers tax evasion as -- get this -- and "administrative" rather than a criminal offense.
Swiss bankers have condemned what they see as underhand tactics being used by German and other governments to obtain information about their own citizens' financial affairs, in the light of the still-unfolding international tax evasion scandal centered on Liechtenstein.
With Switzerland under renewed pressure from the OECD and European Union to change its banking and tax laws, Urs Roth, the Swiss Bankers Association's second highest official, defended Swiss legislation which classes tax evasion as an administrative rather than a criminal offense, meaning that Switzerland is not obliged to provide judicial assistance to other countries in such cases. "Tax evasion is no trifling offense, but it's not a capital crime either," Roth was quoted as observing.
Nothing like a little perspective, even if slightly self-serving.
According to the report, foreigners have deposited an estimated CHF1 trillion Swiss francs ($950 billion) in Swiss banks. But by eliminating the distinction between tax evasion and fraud -- which is a criminal offense in Switzerland -- and by diluting banking confidentiality laws, Roth and other Swiss bankers argue that the country's reputation as one of the best financial centers would be damaged, perhaps irreparably.
Given the stakes involved, it certainly behooves the Swiss and all other countries in the same position to assume the worst, i.e., that the damage would be irreparable.
One Swiss banker who has suggested that the current crackdown on banking secrecy and offshore tax evasion could change the face of the Swiss banking industry is HSBC Private Banking (Suisse) Chief Executive Peter Braunwalder, who last week announced that he would be retiring in October 2008.
"I think it's time to leave the industry ... when governments buy stolen goods to basically get their way through," he was quoted as observing by AFP, referring to the sale of a computer disc to the German intelligence service by an ex-employee of Liechtenstein bank LGT, containing names of clients of the bank's trust services business. "I see this industry becoming more and more difficult ... the German government is doing things that shock me." ...
Why should anyone be shocked by what a criminal organization does?
Another Swiss banker who has been fiercely critical of the German government's actions is Pierre Mirabaud, the head of the Swiss Bankers Association, who was forced to apologize after comparing the tactics used by the German authorities to obtain information for their tax evasion investigation to "methods worthy of the Gestapo" while speaking on Switzerland's French language broadcaster last month.
Typically these days, telling the truth and apologies seem to go together like hand and glove.
Mirabaud stated at the time that he did not expect the German tax evasion probe to be extended to Switzerland, although the AFP has reported that a former employee of Swiss private bank Julius Baer handed over confidential data on German clients to tax authorities in Germany as long ago as April 2007. Meanwhile, Swiss bank Vontobel has moved to fend off pressure from Germany to throw open its books, after rumors that its Liechtenstein client base had been leaked to the German authorities.
Swiss Tax Evaders to Be Enticed in From the Cold
The Swiss join the list of countries offering a tax amnesty to their citizens. No hypocrites they, the Swiss consider their citizen tax scofflaws to be "infringers" rather than criminals -- bolstering their case against foreign governments asking the Swiss for information on their clients.
Repentant tax evaders will be able to return to legality more easily under a new law finally approved by parliament ... The long-debated amnesty, which gives people and businesses a one-off opportunity to regularize their situation penalty-free, has been inching its way through the political process for years.
Those who come forward to the authorities admitting to tax evasion will not face any sanctions. They will only have to pay a maximum of 10 years of back taxes and interest arrears. Should a taxpayer come forward a second time, he or she will face a lesser penalty than previously. In this case the fine will be cut from 100% to 1/5 of the unpaid tax.
The amnesty also applies to inheritance cases. Beneficiaries of estates who declare a tax liability on the part of the deceased will now only have to pay three years of back taxes and interest, instead of 10 years. In Switzerland, tax evasion is generally punished with a fine and is therefore considered an infringement, rather than a criminal offence under Swiss law
SCHEME TO SAVE U.K. TAXPAYERS MONEY THAT BECAME TAX AVOIDANCE SCHEME
Companies are using private finance initiatives as a means to reduce their bills.
Here is another example of the sophisticated use of offshore havens to save taxes, using the system's own rules.
City investors in private finance initiative schemes have found a more sophisticated way of avoiding tax, after the highly controversial transfer of the Inland Revenue's estate to Bermuda five years ago. This led to the Treasury banning departments from signing deals with companies using offshore tax havens.
By moving the vehicles established by British-based companies -- which were set up to run a 30- to 40-year Private-Finance Initiative -- into an offshore fund, they claim they can get a more tax-efficient return for investors, such as pension funds and banks. Effectively, companies avoid tax on most capital gains from refinancing the contract or on extra cash squeezed out of the government to pay for additional services.
The most dramatic example is the Home Office headquarters in Marsham Street, Westminster. This began as a £311 million PFI deal approved by John Gieve, the former permanent secretary who is now a deputy governor of the Bank of England, in 2005, with HSBC. The bank set up a UK company, Anne's Gate Property plc, with a 175-year lease on the building. In 2006, when the building was ready to be occupied, 80% of the company's ownership was transferred offshore to the Guernsey-based HSBC Infrastructure Company Ltd (HICL).
The Home Office deal is a 29-year concession to build, finance, operate and maintain a new headquarters building. Already the ministry has had to pay out another £300,000 to bring in 300 extra desks because it closed another building.
The Home Office insists that it does not breach any Treasury circular banning such deals, because at the time the deal was signed the company was wholly based in the UK. A spokesman for HSBC Infrastructure Company said that its company was listed on the Stock Exchange, so British (but not foreign) shareholders would pay tax. The UK company running the Home Office building would pay tax. However, since 80% has been transferred offshore, it would be paying out only on 20% of the business. Any investors in these PFI vehicles would not pay UK tax on their income and profits. ...
The HICL prospectus tells potential investors it will "seek to enhance the value of its investments" by "reducing costs" and "checking adherence to contractual structures". It also promises to extract "efficiencies from cross-portfolio economies and scale benefits" and raise more profits through "gearing, refinancing debt, raising and repurchasing equity". Under Guernsey law, its fund can free itself from tax obligations by paying an annual £600 registration fee "so it does not become tax resident in the UK ... or any other jurisdiction". ...
The 3i Infrastructure fund, based in Jersey, includes a 31% holding in the Treasury, the Docklands Light Railway extension to Lewisham, 50% of a project building new schools in the Highlands and a 26% stake in the Norwich and Norfolk hospital, which was the subject of a highly critical report from the National Audit Office.
The Treasury has issued guidelines to all departments warning "that the successful bidder will be prohibited from using particular tax arrangements, including offshore tax havens, provided such a restriction would not in fact be directly or indirectly discriminatory between European Community/Government Procurement Agreement bidders".
"The way these contracts are being handled ought to be investigated by the Commons Treasury committee," Prem Sikka, professor of accounting at Essex University, said yesterday. "The taxpayer is losing out. They are having to pay rent for these projects but the tax base is declining."
The private-finance initiative is the best known manifestation of public-private partnerships. Started under John Major's government in 1992, PFI projects were taken on and expanded by the Labour government from 1997 as a way to kick-start investment in new schools and hospitals without increases in tax or rise in the national debt because it kept large capital projects off the public balance sheet. The idea was to shift the risk onto the private sector and bring in efficiencies to eliminate the waste that had dogged infrastructure projects.
Under a PFI, a private contractor builds and operates, for example, a hospital for a period of 30 years. The public-sector body pays an annual fee to use the building and acquires it fully at the end of the period.
There are now PFI projects with a total capital value of £57 billion -- equivalent to 11% of total public debt of £536 billion -- and 10% of annual government spending. About another £5 billion of projects are to be signed this year.
Trades unions have been especially critical. They say that PFI undermines the public service ethos, ends up as worse value for money for taxpayers and produces poor buildings because construction companies build schools or hospitals as cheaply as possible. They also say legions of accountants and consultants are enriching themselves at the PFI table.
The irony is that the introduction of new international accounting standards this year may force Alistair Darling to bring £30 billion of PFI liabilities onto the public balance sheet. That may diminish the government's enthusiasm for PFI.
That would be an ironic coda to the whole episode. The whole idea was to hide spending behind accounting, even if the cost was real money from the government's perspective. Now they could end up without obfuscation but with the costs.
U.S. TELLS BARBADOS TO STEP UP FIGHT ON MONEY LAUNDERING
Barbados has responded to past U.S. pressure by enacting anti-money laudering laws that entail loss of privacy, arbitrary police powers, the presumption of guilt, etc. But apparently this is not enough for the U.S. The U.S. wants Barbados to make itself further into the image of a mini-U.S. by enacting asset forfeiture laws and -- we suspect -- expressing a willingness to do anything the U.S. demands, no questions asked. Never mind that no money laundering in Barbados has actually been found. We are talking cooperation here.
Barbados remains vulnerable to money laundering and needs to do more to prevent illicit financial activity. And, it is being urged to enact civil forfeiture and asset sharing legislation.
The demands came from the United States State Department in its annual assessment of drug control and money laundering efforts around the world. In its report to the U.S. Congress, Washington urged Barbados to continue its efforts to "strengthen its anti-money laundering and counter-terrorism financing legislation." In addition, the State Department urged Government to become "more aggressive in conducting examinations of the financial sector" as well as "maintaining strict control over vetting and licensing offshore entities."
In its review of Barbados' money laundering picture in 2007, the Bush Administration told the U.S. Congress that yes, Barbados was a "transit country for illicit narcotics," thus making it "vulnerable to money laundering, which primarily occurs in the formal banking system." It charged that domestically the money laundering occurring in the country could be traced to the "trafficking of cocaine and marijuana."
The State Department pointed out to the lawmakers on Capitol Hill that Barbados had already put several systems in place and enacted laws to deal with money laundering. Just last year, the Central Bank revised the anti-money laundering guidelines for financial institutions to keep them in line with international standards and to provide guidance when it came to financing terrorism, the report explained. Interestingly, government found no evidence last year that would indicate Barbados was being used as a conduit to finance terrorism.
Why let the facts get in the way of a good story?
Here then are some of the steps the State Department said Barbados had taken in recent years to prevent fraud and money laundering:
- Extended the money laundering laws to cover offenses other than those involving drugs.
- Forced financial institutions to report suspicious transactions that may involve criminal activities, such as terrorism.
- Enabled the police to pursue "all potential prosecutions" of money laundering.
- Placed the burden of proof on accused persons to demonstrate that property in their possession was "derived from a legitimate source". Failure to do so could lead to a presumption that it was acquired through illegal means.
U.S. Barclays in Money Laundering Probe
Barclays in being investigated by authorities in the U.S. following allegation that the bank has been conducting business with foreign states suspected of sponsoring terrorism. The U.S. Department of Justice and the New York district attorney are scrutinizing payments made in dollars through a New York branch of the bank.
They will seek to establish whether the payments have been made by individuals or companies based in countries that are on a U.S. blacklist because of links with terrorist organizations. The states include Cuba, Iran, North Korea, Sudan and Syria.
Banks in the U.S. are banned from carrying out transactions in dollars for clients based in certain countries, as a means of deterring funding directed to U.S. based terrorists. The Bush administration is now urging Europe put similar restrictions in place.
Ellen Zimiles, chief executive of Daylight, which advises firms on compliance with America's Office of Foreign Assets Control and other laws, says: "Non-U.S. institutions which operate in the U.S. have to make sure their people have proper training and understand what the issues are."
Meanwhile, Barclays is carrying out an internal review and is optimistic that enquiries by the U.S. authorities are unlikely to have "a material adverse effect" on its finances. However, in 2005, ABN Amro was fined $80 million for transactions through its New York office that failed to comply with regulations aimed at preventing money laundering.
SPITZER AND THE LAWS THAT BROUGHT HIM DOWN
What goes around, comes around.
Legal writer William L. Anderson notes the manifold ironies in the sudden collapse of the political fortunes of now ex-New York governor Eliot Spitzer. Sure, there is ambition, hubris, sex and furtive illegal behavior, as in any good political downfall. But for someone who made a career out of prosecuting people for non-crimes, Spitzer's ruin was particularly fitting.
Once in a while, an event occurs that even people who avoid the news cannot avoid, and it seems that New York's still-governor [now ex-] Eliot Spitzer has become the center of the world. Perhaps that is fitting, given that Spitzer is someone who seems to believe that the world revolves around him, and while that is not true, nonetheless he has managed to put himself in a position where the news about him is at the center of the news cycle.
A few years ago, a book publisher approached me to see if I was interested in writing a book about Spitzer, who at the time was preparing to launch a bid for the New York governorship from his post as New York's attorney general. The publisher knew that I despised Spitzer, knowing that I referred to him as "Mr. Evil," a moniker that he and I both thought to be fitting.
However, while I would have loved to have had an opportunity to go after Spitzer, I also knew I did not have the time and resources to devote to writing something credible. There also was another factor; fear for my own safety.
Eliot Spitzer is a bully, but more important, a bully with a badge, a man who has no scruples, no conscience, and not a shred of human decency. Here is a man who openly threatened journalists, used his position as a prosecutor to destroy other people, and had the press covering his backside. He would not have hesitated to go after me or members of my family, and a ruthless man like him who at that time did not have to stay within the bounds of the law would have done whatever it took, but he would have done it, had he perceived even the slightest threat to his own political ambitions.
In looking not only at the latest revelations about this sorry person, but also at his career, a number of patterns emerge, not only regarding him, but also the press and political establishment in general. Spitzer was popular with the press because he used his office to fight against "demon capitalism," and there seems to be no greater symbol of capitalism than Wall Street.
However, for all of the "cleaning up Wall Street" rhetoric that came from Spitzer and his main supporter, the New York Times, his actions were more about shaking down firms and forcing them to pay for legal protection than "saving capitalism from itself." For example, he fingered PayPal while the fledgling company was maneuvering to have an initial public offering (IPO) several years ago.
PayPal was permitting its payment mechanism to be used to pay for online gambling, which then was legal. However, Spitzer told the principals of the company that he would block their IPO and give them trouble unless they paid his office $150,000. Now, had he come in with a fedora and Sicilian accent, people might have understood he was running a protection racket. But, instead, the New York Times insisted he was "protecting the public integrity."
Not surprisingly, there usually was little substance to Spitzer's charges, although the press adored him in large part because he was fighting against Demon Capitalism. His tool was an obscure New York statute passed in 1921 called the Martin Act. This law, which was passed as a shortcut to putting an end to small-time scams and Ponzi schemes, turned out to be a prosecutor's dream. ...
Here was a prosecutor using a law that really was an end run around basic Constitutional protections -- and the press adored him. Yes, that "watchdog" press which tells us that it is keeping tabs on government abuses was the Greek Chorus for Spitzer's legal predations on Wall Street. ...
The irony is that Spitzer ultimately has been burned by federal laws that also were written as an end run around the Constitution, that being the Mann Act of 1910 and the various financial laws with criminal penalties that take money transfers and criminalize them. He especially is vulnerable on the law against "structuring" (or "smurfing," as it is called by prosecutors) which simply is withdrawing money from the bank to engage in lawbreaking, this being his dalliances with prostitutes. ...
That Eliot Spitzer is going down because of laws that really should never have been passed in the first place perhaps is the greatest irony of all. Spitzer became a rising star because as New York's attorney general he wielded a club using a law that never should have been passed or kept on the books, and a law that in a free society would never hold up in court.
To put it another way, his "crusades" were a fraud, and the fact that the New York Times and other New York-based journalistic outfits fawned over him because of that fraud tells us something about the state of modern U.S. journalism. But, as Spitzer goes down -- as he surely will -- we also can be sure that the next "savior" that the press finds to engage in group worship will also be a fraud.
Voltaire once wrote that the Bourbons of France "learned nothing and forgot nothing." Indeed, we can say that about our modern press and its state-adoring apparatus. Eliot Spitzer was a creation of this "statist quo," and he will not be the last.
And while we as libertarians can lament that the laws that we know should not be on the books have brought down yet another person, we also cannot help but see the irony here. The monster that Eliot Spitzer helped to create ultimately consumed him, and perhaps that is the best justice of all. Or, what one hedge fund manager on Wall Street told me after hearing of Spitzer's troubles, "What goes around, comes around."
BOOK REVIEW: HUMAN SMOKE BY NICHOLSON BAKER
An inside look at the inexorable march of Britain and the United States toward World War II.
A new book by Nicholson Baker contributes further to the revisionist history, and therefore the mythology debunking, of World War II. Whether that war was necessary or not, it almost certainly was not "good". And like all wars, it most certainly was a racket.
Nicholson Baker's Human Smoke is a meticulously researched and well-constructed book demonstrating that World War II was one of the biggest, most carefully plotted lies in modern history. According to the myth, British and American statesmen naively thought they could reason with such brutal fascists as Germany's Hitler and Japan's Tojo. Faced with this weakness, Hitler and Tojo tried to take over the world, and the United States and Britain were forced to use military might to stop them.
Because Baker is primarily a novelist, it might be expected that, having taken on this weighty subject, he would write about it with great flare and drama. Readers may initially be disappointed, yet one of this book's great strengths is that it avoids flourishes in favor of the kind of lean prose employed by journalists. Human Smoke is a series of well-written, brilliantly ordered snapshots, the length of news dispatches. Baker states that he wanted to raise these questions about World War II: "Was it a 'good war'? Did waging it help anyone who needed help?" His very effective style is to offer the facts and leave readers to draw their own conclusions.
The facts are powerful. Baker shows, step by step, how an alliance dominated by leaders who were bigoted, far more opposed to communism than to fascism, obsessed with arms sales and itching for a fight coerced the world into war.
Anti-Semitism was rife among the Allies. Of Franklin Roosevelt, Baker notes that in 1922, when he was a New York attorney, he "noticed that Jews made up one-third of the freshman class at Harvard" and used his influence to establish a Jewish quota there. For years he obstructed help for European Jewry, and as late as 1939 he discouraged passage of the Wagner-Rogers bill, an attempt by Congress to save Jewish children. British Prime Minister Neville Chamberlain said in 1939 of German treatment of Jews that "no doubt Jews aren't a lovable people. I don't care about them myself." Once the war began, Winston Churchill wanted to imprison German Jewish refugees because they were Germans. ...
Churchill is a dominant figure in Human Smoke, depicted as a bloodthirsty warmonger who, in 1922, was still bemoaning the fact that World War I had not lasted a little longer so that Britain could have had its air force in place to bomb Berlin and "the heart of Germany." But no, he whined, it had to stop, "owing to our having run short of Germans and enemies."
Churchill was not driven by anti-fascism. In his 1937 book Great Contemporaries, he described Hitler as "a highly competent, cool, well-informed functionary with an agreeable manner." The same book savagely attacked Leon Trotsky. (What was wrong with Trotsky? "He was still a Jew. Nothing could get over that.") Churchill repeatedly praised Mussolini for his "gentle and simple bearing." In 1927, he told a Roman audience, "If I had been an Italian, I am sure that I should have been entirely with you from the beginning to the end of your victorious struggle against the bestial appetites and passions of Leninism." Churchill considered fascism "a necessary antidote to the Russian virus," Baker writes. In 1938, he remarked to the press that if England were ever defeated in war, he hoped "we should find a Hitler to lead us back to our rightful position among nations."
As Baker's book makes clear, between the two World Wars communism, not fascism, was the enemy. David Lloyd George, who had been Britain's prime minister during World War I, cautioned in 1933, the year Hitler came to power, that if the Allies managed to overthrow Nazism, "what would take its place? Extreme communism. Surely that cannot be our objective." But even more than the communists, Churchill's enemy No. 1 in the 1920s and early '30s was Mohandas Gandhi and his doctrine of nonviolence, which Churchill warned "will, sooner or later, have to be grappled with and finally crushed."
In the 1930s, U.S. industry was free to sell the Germans and the Japanese whatever they would buy, including weapons. Not to lose out, the British and French sold tanks and bombers to Hitler. Calls by Joseph Tenenbaum of the American Jewish Congress to boycott Germany were ignored. There was no attempt to contain, isolate, hinder or overthrow Hitler -- not because of naivete but because of commerce. It was the Depression. There were Germans trying to overthrow Hitler, but the U.S. and Britain and their industries were obstructing that effort.
Baker shows that the Japanese, as early as 1934, were complaining that Roosevelt was deliberately provoking them. In January 1941, Japan protested the U.S. military buildup in Hawaii. Joseph Grew, our ambassador to Japan, reported rumors that the Japanese response would be a surprise attack on Pearl Harbor. Yet according to World War II mythology, America was blissfully sleeping, unprepared for war, when caught by surprise by the dastardly "sneak attack." ... A year earlier, Baker shows, Roosevelt began planning the bombing of Japan -- which had invaded China, but with which we were not at war -- from Chinese air bases with American planes and, when necessary, American pilots. Pearl Harbor was a purely military target, but Roosevelt wanted to bomb Japanese cities with incendiary bombs; he'd been assured that their cities would burn fast, being made largely of wood and paper.
Roosevelt evinced no desire to negotiate. In fact, Baker writes, in October he "began leaking the news of his new war plan," with $100 billion earmarked for airplanes alone. Grew again warned Roosevelt that he was pushing Japan toward armed conflict with the U.S., but the president continued his war preparations. Finally, the night before the Japanese attack, Roosevelt sent a message to Emperor Hirohito calling for talks. He read it to the Chinese ambassador, remarking that he thought the message would "be fine for the record."
People are going to get really angry at Baker for criticizing their favorite war. But he has not fashioned his tale from gossip. It is documented, with copious notes and attributions. The grace of these well-ordered snapshots is that there is no diatribe; you are left to put things together yourself. Read Human Smoke. It may be one of the most important books you will ever read. It could help the world to understand that there is no Just War, there is just war -- and that wars are not caused by isolationists and peaceniks but by the promoters of warfare.
WHERE THE PEOPLE DON’T RULE
The always entertaining and informative Fred Reed explains the theatre that is the U.S. federal government in a short entertaining and informative essay.
Common delusions notwithstanding, the United States, I submit, is not a democracy -- by which is meant a system in which the will of the people prevails. Rather it is a curious mechanism artfully designed to circumvent the will of the people while appearing to be democratic. Several mechanisms accomplish this.
First, we have two identical parties which, when elected, do very much the same things. Thus the election determines not policy but only the division of spoils. Nothing really changes. The Democrats will never seriously reduce military spending, nor the Republicans, entitlements.
Second, the two parties determine on which questions we are allowed to vote. They simply refuse to engage the questions that matter most to many people. If you are against affirmative action, for whom do you vote? If you regard the schools as abominations? If you want to end the president's hobbyist wars?
Third, there is the effect of large jurisdictions. Suppose that you lived in a very small (and independent) school district and did not like the curriculum. You could buttonhole the head of the school board, whom you would probably know, and say, "Look, Jack, I really think ..." He would listen.
But suppose that you live in a suburban jurisdiction of 300,000. You as an individual mean nothing. To affect policy, you would have to form an organization, canvass for votes, solicit contributions, and place ads in newspapers. This is a fulltime job, prohibitively burdensome. The larger the jurisdiction, the harder it is to exert influence. Much policy today is set at the state level. Now you need a statewide campaign to change the curriculum. Practically speaking, it is not practical.
Fourth are impenetrable bureaucracies. A lot of policy is set by making regulations at some department or other, often federal. How do you call the Department of Education to protest a rule which is in fact a policy? The Department has thousands of telephones, few of them listed, all of which will brush you off. There is nothing the public can do to influence these goiterous, armored, unaccountable centers of power. Yes, you can write your senator, and get a letter written by computer, "I thank you for your valuable insights, and assure you that I am doing all ..."
Fifth is the invisible bureaucracy (which is also impenetrable). A few federal departments get at least a bit of attention from the press, chiefly State and Defense (sic). Most of the government gets no attention at all -- HUD, for example. Nobody knows who the Secretary of HUD is, or what the department is doing. Similarly, the textbook publishers have some committee whose name I do not remember (See? It works) that decides what words can be used in texts, how women and Indians must be portrayed, what can be said about them, and so on. Such a group amounts to an unelected ministry of propaganda and, almost certainly, you have never heard of it.
Sixth, there is the illusion of journalism. The newspapers and networks encourage us to think of them as a vast web of hard-hitting, no-holds-barred, chips-where-they-may inquisitors of government: You can run, but you can't hide. In fact federal malefactors do not have to run or hide. The press is not really looking.
Most of press coverage is only apparent. Television is not journalism, but a service that translates into video stories found in the Washington Post and New York Times (really). Few newspapers have bureaus in Washington; the rest follow the lead of a small number of major outlets. These do not really cover things either.
When I was reporting on the military, there were (if memory serves) many hundreds of reporters accredited to the Pentagon, or at least writing about the armed services. It sounds impressive: All those gimlet eyes. What invariably happened though was that some story would break -- a toilet seat alleged to cost too much, or the failure of this or that. All the reporters would chase the toilet seat, fearful that their competitors might get some detail they didn not. Thus you had one story covered 600 times. In any event the stories were often dishonest and almost always ignorant because reporters, apparently bound by some natural law, are obligate technical illiterates. This includes the reporters for the Post and the Times.
Seventh, and a bit more subtle, is the lack of centers of demographic power in competition with the official government. The Catholic Church, for example, once influentially represented a large part of the population. It has been brought to heel. We are left with government by lobby -- the weapons industry, big pharma, AIPAC [American Israel Public Affairs Committee], the teachers unions -- whose representatives pay Congress to do things against the public interest.
Eighth, we are ruled not by a government but by a class. Here the media are crucial. Unless you spend time outside of America, you may not realize to what extent the press is controlled. The press is largely free, yes, but it is also largely owned by a small number of corporations which, in turn, are run by people from the same pool from which are drawn high-level pols and their advisers. They are rich people who know each other and have the same interests. It is very nearly correct to say that these people are the government of the U.S., and that the federal apparatus merely a useful theatrical manifestation.
That looks like it pretty well encapsulates the way is to us.
Finally, though it may not be deliberate, the schools produce a pitiably ignorant population that cannot vote wisely. Just as trial lawyers do not want intelligent jurors, as they are harder to manipulate, so political parties do not want educated voters. The existence of a puzzled mass gaping at Oprah reduces elections to popularity contests modulated by the state of the economy. One party may win, yes, or the other. But a TV-besotted electorate does not meddle in matters important to its rulers. It has never heard of them.
To disguise all of this, elections provide the excitement and intellectual content of a football game, without the importance. They allow a sense of Participation. In bars across the land, in high-school gyms become forums, people become heated about what they imagine to be decisions of great import: This candidate or that? It keeps them from feeling left out while denying them power.
Bring to mind Goethe's classic and oft-cited quote: "There are none so enslaved as those who falsely believe they are free."
It is fraud. In a sense, the candidates do not even exist. A presidential candidate consists of two speechwriters, a makeup man, a gestures coach, ad agency, two pollsters and an interpreter of focus groups. Depending on his numbers, the handlers may suggest a more fixed stare to crank up his decisiveness quotient for male or Republican voters, or dial in a bit of compassion for a Democratic or female audience. The newspapers will report this calculated transformation. Yet it works. You can fool enough of the people enough of the time.
When people sense this and decline to vote, we cluck like disturbed hens and speak of apathy. Nope. Just common sense.
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