Foreign policy: reasons to be cheerful?

Well, that’s probably pushing it. Obama’s announcement that he is sending nearly fifty percent more troops to Afghanistan could easily go either way. We might, in a few years, have pictures of US troop withdrawals that mirror these memorable images of the Red Army retreating from the same hills. Critics, especially on the left, are worrying that this might turn into a gruelling counterinsurgency and make Iraq seem lightweight. More than a couple of times in the past week, news reports have made reference to the dreaded ‘J word’: implying that Obama’s domestic reform agenda might get bogged down by a divisive and costly war on the other side of the planet, just as Johnson’s Great Society was destroyed by Vietnam. This is particularly worrying as the centrality of a surge in Afghanistan to Obama’s foreign policy credentials means that a lot of presidential credibility is on the line.

But whilst the region is undoubtedly still hanging in the balance, I think this kind of prediction is too precipitous. Indeed, in the Mid East and Central/South Asia region there are actually a few reasons to be cautiously optimistic about the future, reasons which should be set alongside any reasonable concerns about the region:

1. No, I don’t think a surge will work in Afghanistan. But it didn’t work in Iraq, either. At least not alone. The success of the Iraq surge was contingent upon a political shift amongst the US generals towards negotiating with militant groups who were strongly religious, nationalist and anti-American, but not necessarily supportive of al-Qaeda. There’s no reason to suppose that similar strategic realignments are impossible in Afghanistan, either. Probably the best we can hope for is pinning back the recidivist insurgency to Helmand province and bumping up spending on the rest of the country – not so much to ‘reconstruct’ Afghanistan as to construct a nation that wasn’t there in the first place. If this produces jobs and material benefits for Afghanis, and especially if it is channelled through institutions which empower local elites and reduce the foreign presence in safer regions, there’s no reason to suppose it won’t have a degree of success. It’s not perfect, it certainly doesn’t meet the absurd expectations raised in the Bush era, but perhaps constructing a functioning Afghani central state and limiting the insurgency to a single region may turn out to be enough to reduce the feasibility of international terrorist attacks.

2. Raising the troop numbers must give a better chance of disrupting uncontrolled Pakistan-Afghan movements. This may help to undermine the insurgency in Afghanistan. But, more importantly, it may provide a breathing space for the Pakistani government to try and get out of the terrible fix it’s in at the moment. History suggests that taming borderlands is a notoriously fruitless enterprise. If the goal is of a genuinely secure border, think again (if the border from the United States to Mexico can’t be managed, what hope would one have for this one?) 100 percent success is an unrealistic expectation, then, but some progress is better than nothing.

3. News today that Egypt has released long-time dissident Ayman Nour. The subtext of this story is clear: real US pressure towards democratic opening can have an impact, as long as the president has real power. So this can be chalked up as another thing that the Obama administration has achieved in a month that the Bush administration failed to achieve in eight years. Liberalisation in Egypt is likely to produce some brown trousers times in the near term, as there is clearly a great deal of frustration from below that has been boiling for decades, and it will be important to manage any process of opening very carefully. (Witness Iran in 1979.) But in the long term, it has to be welcomed as a positive development in the region. More than that, it's unavoidable - and later rather than sooner just means more dangerous for everyone.

4. The fact that Netanyahu is winning in Israel doesn’t necessarily seem to be great news (at least to me). But the truth is that he will have a stronger mandate for meaningful negotiations than Olmert, whose politics was entirely driven by aggressive attempts (in Lebanon and Gaza) to assert his nationalist credentials to a suspicious public against just this kind of challenge from the right. If the US can ever get the Israelis and Palestinians to the table, they will only be able to secure a deal that their leaders can get accepted at home. That was the unbridgeable gap with Ehud Barak. So things here lie in the balance: a wider war arguably as likely as a meaningful breakthrough. But in a certain sense, at least a hard-line victory will let the US be able to talk to people who really matter.

5. Meanwhile, President Assad is making extremely unsubtle noises about a positive response from Syria to any potential overtures from the Obama administration. The path to Hamas and Hizbollah lies through Damascus and Tehran, and the great chance for a major strategic realignment in the region will come with an overture there that parallels Nixon’s visit to China. Who knows, perhaps even Ahmadinejad might lose the forthcoming elections in Iran? With stronger ties on the Arab / Persian side, then, Obama would have a greater ability to offer security reassurances to the Israelis. This in turn would allow him to make more demands from them in terms of territorial concessions. It’s very hard to see any possibility for progress given the horror of Gaza earlier this year. But perhaps in time we might see Gaza not as the beginning of a terrible era in the region's history, but the end of a failed phase in US and Israeli military strategy.

Don’t get me wrong: the Middle East remains arguably the most dangerous part of the world. There are a hundred ways things could go wrong. Iraq remains a concern of the first order (especially if, as is a possibility, the process of strengthening the military against the insurgents raises the possibility of a coup from that direction). Saudi Arabia is in an intractable bind, since a liberal path here will likely produce a collapse in a regime that has virtually no legitimacy beyond the sword. The Persian Gulf region is likely to be hit badly by the collapsing world economy. But all that said, there are opportunities here for constructive action if the Obama administration acts judiciously.

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Remember the Maine

On this day, February 15, one hundred and eleven years ago, the American battleship USS Maine exploded in Havana harbour when five tons of gunpowder on board detonated, destroying the bow of the ship and sinking the rest of it to the bottom of the harbour within minutes, to the loss of 274 American lives. Widely reported in the press at the time as caused by a mine planted in the harbour by the perfidious Spanish, fury over the attack on US citizens and soldiers quickly provided the catalyst for US intervention in the ongoing conflict between Spain and Cuba, which in turn led to the US occupation of the Philippines, the independence of the last of imperial Spain’s American possessions, Cuba (qualified by the US imposed Platt Amendment, which effectively turned Cuba into something approaching a US principality) and Puerto Rico, and the subsequent occupation of Guantánamo Bay in 1903.

Since this time the reasons for the explosion have remained hotly debated: with some holding to the dominant view at the time, that the Spanish had caused the powder to explode by mining the harbour; and others arguing that the coal on board (needed to fuel the ship) had spontaneously ignited, and this fire had caused the explosion (a not unheard-of problem at the time). The debate over the cause of the sinking was particularly contentious because of the dramatic role the explosion had in justifying the movement toward the interventionist foreign policies followed fairly consistently by the United States during the twentieth century. These marked a real change from the era of continental expansion that had dominated the nineteenth. The sinking of the Maine was the point when it became possible for the United States to claim that intervention abroad was a matter of ‘national security’: the vital words which permitted military action by a world power deeply ambivalent about imperial justifications for intervention, then as now.

It’s not surprising that the explosion on board the Maine retains its resonance, and not just for Cubans. The debate has more than a little whiff of ‘weapons of mass destruction’ about it; where cynics tend to see the dramatic events as a cover for deeper, economic reasons for intervention. They point out that the sinking of the Maine was only possible because the Maine was in Havana harbour in the first place; and it was there because the United States had been busy building itself a powerful new navy for a decade leading up to the crisis. In this argument, the reasons for war go deeper than just the event that began it. By contrast, defenders of the intervention stick to the traditional view: that the United States was, as a post-imperial power, motivated by the desire to aid Cuba in its struggle for independence from European domination, but in the end was only willing to act when a more direct threat to its national security was proven. In this model, the United States government was not only righteous, it was restrained.

This argument is particularly important because of our modern variation on the old ‘just war’ thesis. We reject the idea that wars should be fought for national or imperial glory, or that great powers can ignore the sovereignty of weaker ones. Instead, we argue that it is legitimate for a country to fight another only as long as it is required on overriding ethical or defensive grounds. This common sense proposition may make sense in certain situations when there is clearly one aggressor and one victim. But in truth, most conflicts are murky affairs where the path to conflict follows from a series of events – and blame is spread across multiple actors.

Moreover, the problem with saying that it’s legitimate to go to war to defend national security is that it diverts debate away from other reasons for war and towards an argument over what constitutes national security. Was American national security threatened by a Nazi invasion of France? And if it wasn’t, does that necessarily mean America should not have intervened in the Second World War? Is American national security threatened by Iran getting weapons of mass destruction? Indeed is, as is increasingly common, is it possible to argue that a rival power showing an intention to obtain powerful new weapons is itself a threat to national security?

According to Thomas M. Nichols in a provocative new book, Eve of Destruction: The Coming Age of Preventive War, the twentieth century witnessed the gradual erosion of two central elements of the old system of warfare: respecting the sovereignty of nation states and rejecting the legitimacy of preventative warfare. We are entering, he argues, a new age of preventative warfare.

Arguing over national security plays a crucial role here, as it is its flexible meaning which has allowed more expansive reasons for going to war to sneak in by the back door. But of course, this is not a straightforward moral observation: it is a description of a changing reality with ambiguous moral consequences. It doesn’t follow that an age of preventative warfare produces wars that are more or less just than in the past. And certainly, it’s not something that can be blamed solely on aggressive, war-hungry neocons, since the liberal instinct and internationalist tradition were in many ways the primary drivers of the change to preventative war in the twentieth century. How many of us today would reject the argument that powerful nations should have intervened in Rwanda to stop the genocide, even without a clear threat to national security?

In fact, a new age of preventative warfare is troubling as much because of what it doesn’t say as what it does, then. On this anniversary of the sinking of the Maine, it warrants our consideration.

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Fed announces plan to make us all rich

Obama came to power promising many things. Two of them at least related specifically to Washington. He promised to end the culture of partisanship; and he promised to treat those who disagreed with him with respect. As I've been arguing repeatedly on this blog, the first is an unrealisable goal based on a misunderstanding of the nature and origins of partisan conflict. However, the second is eminently achievable. In fact, properly respecting one's opponents may well reveal why bipartisanship is a myth.

Many liberal bloggers have been arguing this week that the basis for Republican opposition to the stimulus package is elite self-interest. Like the big bankers, they just want to keep their pay packets whilst the rest of the country goes down the toilet, we're told. So Paul D. Ryan's (Rep-WI) piece in the New York Times explaining his opposition to the ARRA bill is probably worth a read, even if you don't agree with him. It may seem strange to some to be worrying about inflation in a deflationary environment (even stranger to talk of stagflation), but in the long term these debts will have to be paid down some way or another. The classic illusion of the right is that inequality doesn't matter; the classic illusion of the left is that inflation doesn't matter. In practice, both beliefs are dangerous.

Why? Because in the end, whilst central banks can issue money, they can't issue wealth. If you build less than you buy, expect to end up in financial trouble whatever value your currency trades at. That's what got America where it is right now. So if stimulus bills are, right now, a defibrillator on the chest of a patient that's gone critical, debt-driven consumption is the disease that created the conditions for the heart attack in the first place. And even if the stimulus bill brings the patient back to consciousness, recovery will still be a long and painful process.

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More ranting about bonuses

I realise that this post isn’t going to do much to challenge my recently acquired reputation as unreformed leftie, but I suppose one might as well be hung for a sheep as a lamb...

Peter at Vukutu.com is pretty unimpressed with what he calls the Grand Populist Uspwelling of Outrage (“GPUO”) against the bonuses still being demanded by the world’s richest people. I think we’ll probably have to agree to differ on this one, Peter. But here are a few quick responses, intended to try to articulate why I feel popular anger about bonuses isn't necessarily as ridiculous or irrational as Peter implies. (I hope it doesn't come across too harshly, Peter ... but I know you can take it!)

Argument 1: To paraphrase, Bonuses that are contractually binding are contractually binding. You can’t rescind promises already made.

True – but this doesn’t apply if a company goes bankrupt. Lehman Bros bonuses won’t be paid this year, I suspect. And the only reason these banks we’re talking about are not bankrupt is because we’ve bailed them out. I think most angry people feel that legal procedure is being followed when it benefits the insiders (i.e. you must hold to an employment contract that guarantees a bonus) but not when it doesn't (i.e. these banks can't be allowed to go into receivership because they’re too big to fail). The result is that after they’re bailed out, people who stand to keep their jobs only because of the bail-out then argue that market contracts still apply as if no fundamental change had taken place. I don't think this is an entirely accurate take on things myself, but it's certainly no less reasonable than a defence of the 'bonus culture' on a narrowly legalistic basis which takes no account of the dramatically changed circumstances of de facto nationalisation.

In the end, the blurred borders between keeping credit alive for everyone's benefit and keeping rich people in jobs are real, and they pose a genuine political and social problem. They’re not just a media creation: in fact, I personally believe that the media, like the politicians, are actually a bit behind the curve on this one.

Argument 2: The bankers who didn’t lose huge amounts of money for their banks shouldn’t pay the price for those who did.

But surely as a corporate entity, different bits are related to each other? One risk-taking part of the bank impacts upon the security of all the other parts. It's not rational to say that the entire corporation is able to benefit from acting corporately when in the marketplace, but then isn't responsible as a corporate body when things go wrong.

I used to work for Arthur Andersen. I never met anyone who had had anything to do with Enron and I never witnessed the kind of shady practices that had gone on there. But I didn't think it unfair when the whole company collapsed because of one part of it behaved unethically and illegally. That’s the meaning of the word "corporation".

Argument 3: "The future is uncertain". Those people who bring in huge benefits for corporations deserve a share of the benefits. In short, high-finance bonuses are ultimately proportionate to the risks taken by bankers.

To me, the definition of riskiness which underpins the justification for these enormous rewards is utterly self-serving. Yes, bankers run the risk of losing their jobs if they lose money for their bank. But what does this really mean? It means that they risk losing some of the enormous rewards they might get in the future. A few risk an ulcer or a heart attack. And a very few risk being the subject of widespread opprobrium (for a few weeks).

They certainly don't risk the rewards they've already got, which – even without the bonuses – often are easily enough to help them weather the recession, get that expensive blood pressure drug, and wait for the next job to come along. If bankers weren't so busy spending all their money on yachts and watches and Porsches, they'd realise the stuff they risked losing was only stuff that they could possibly get in the first place because of their astonishingly privileged position in society. In fact, for me this storm in a teacup debate about bonuses is only important because it is a symptom of a much deeper and more serious problem: the incredible gap in perception between the sense of entitlement of the enormously privileged and the sense of anger of the underprivileged in the world today.

Right now, there are hundreds of thousands of people who are losing their jobs without having done anything wrong. These people are doing the really risky work, because if things go wrong for them they risk losing their homes, their ability to feed and clothe their families, their mental well-being. And unlike the bankers taking home half a million a year, they can't sit back for a few years and wait for the market to pick up again (living off the savings they accrued when things were going well). They can’t relocate to another country and pick up a replacement job there. If they lose their jobs, that could well be it: a slow decline into decrepitude on Jobseeker’s allowance and a miserable, early death from drinking too much because there’s nothing else to do with your life in a dead-end town.

But this kind of risk isn’t recognised as one by society, so it’s a risk that doesn’t come with any rewards.

If I was on £7,000 a year and had just been laid off after working hard for twenty years in a factory because of the impact of distant market forces, and half my family was in the same boat and none of them had done anything wrong either, I'd be furious right now. And I'd find a depiction of my anger as an irrational media-fed phenomenon to be pretty insulting.

Bottom line: people don’t get bonuses because they should, they get them because they can. It’s always been this way. “The strong do what they can and the weak suffer what they must.” Thucydides. (Another leftie, I presume.)

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The tightrope

So the stimulus bill has got through, smaller than what was needed but still the largest spending measure since World War II. Geithner’s bank bill is on its way, bringing to well over $2 trillion the total spending and investment by the US government since the crisis began a few short months ago. And we should see more spending on the public sector – education, health care, insurance – and environment in the next months, both to fulfil Obama’s ambitious agenda and as a method of further job creation by the back door.

The first casualty of this conflict was bipartisanship: a mythical phenomenon that has never really existed in Washington except as a political tactic (See my post from last September). Given the majority power that the Democrats now have across two of the three branches of government, it would have been inconceivable that they concede the substance of their political goals to make an unnecessary alliance with people who advocate policies they don’t believe in. To Democrat leaders it would have been a betrayal both of their principles and their supporters ... so it didn’t happen.

That said, this is a debate that’s doomed to an early death. No-one will be giving two hoots about bipartisanship within a few months. As the social consequences of unemployment continue to multiply, social polarisation based on public fury will take over, and bipartisanship will seem like a quaint concept from a bygone era. Prime Minister Brown gained early credit in his response to the banking crisis, and his bold and decisive action helped him reconstruct support that had almost completely evaporated in the preceding year, but a few months have passed and that is a thing of the past now. Now a significant majority of Britons believe that the government has spent too much time worrying about banks and not enough time worrying about jobs. The anger is palpable, building, and threatens in the medium term to split the Labour party: my only amazement is that no leaders have yet emerged to articulate and organise it. But with a million more people likely to lose their jobs this year, it won’t be long before that happens.

Obama’s battle with polarisation will be much more dangerous than the debates over bipartisanship precisely because it is based in social reality not the idealistic hopes we might have for a more civilized world of political debate. One phenomenon is about compromise in D.C. to get bills passed; the other is about a fragmenting society. If the jobless numbers grow at the rate most of us expect them to this year, if the ranks of long-term unemployed rise as dramatically as it appears they will, and if people continue to lose their houses, the anger at the ruling elites – which has so far only produced some fairly pointless public flagellation of bankers at congressional hearings – will boil into something much more than that, and Obama will be sitting right on top of it. I don’t think many of the politicians in Washington yet have any idea what this tiger of public anger will do when it gets its claws into them.

On the one hand, Obama believes that the path to recovery lies through ambitious yet fundamentally conservative policies: renewing faith in the banking sector, raising consumer confidence, and creating jobs for Americans (which, given the modern economic system, will entail big aid to big corporations, not just money to the little man). But in the context of a rising tide of populist anger, this runs the risk of seeing him associated too closely with these forces of privilege himself. That’s what’s happened in the UK, where the Labour party is now seen as little more than a stooge of the banking industry: an unfair accusation, arguably.

This was the tightrope FDR delicately had to walk in the 1930s: first wooing the big industrialists and allowing them to consolidate to keep prices up; then, in the mid-1930s moving dramatically leftwards to respond to the challenge from populist leaders like Charles Coughlin, Huey Long, and Frances Townsend; then, moving back to the fiscal centre (disastrously) with the spending cuts early in his second term; and finally reconstructing his political support by pronouncing the death of 'Dr. New Deal' and birth of ‘Dr. Win-the-war’.

That’s how you win four elections: and that will be the real test of Obama’s political skill.

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House of Lords: "Let them eat cake"

Annoyed with Republican intransigence in Congress as the government tries to get an $800bn bill through? Angry with congresspeople more concerned about local earmarks than the big picture, more worried about tax breaks than job creation? Furious with Senators that seem detached from the lives of the 3.9 million people who have lost their jobs? Things could be worse, you know: you could have an upper house filled with Lords.

Today, the House of Lords chose to meet to discuss the performance of National Express - the company that last year acquired the operations on the east coast rail line that goes from London to Scotland. Costing about £1.4bn for the franchise rights, many Britons will know this as one of the many privatised lines that have been regularly increasing rail prices at above inflation rates since they were privatised a decade and a bit ago, with no appreciable change in service - except for the continued expansion of first class sections (and a steady growth in efforts to sell you stuff at exorbitant prices whilst you're stuck on the trains).

It turned out it was precisely the 'degradation' of the first class service that seemed particularly vexing to the Lords... Indeed, Baroness Harris of Richmond now considers the first class service to be "third rate". Meanwhile, Lord Walton of Detchant complained that, when travelling down from Berwick that morning, the dining car was closed entirely. "Even their snacks are not up to standard," he sighed. "I'm unable to get my usual tomato juice and tuna sandwiches any longer." The government spokesman cleverly undercut these complaints by producing a menu served on the train that day: which included a fine selection of Merlots and Chablis. Soothed murmurs of approval were heard from both sides of the house.

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End of Monroe, or end of democracy?

What are the implications of the global financial crisis for Latin America? The Great Depression and the stagflation era of the 1970s both saw massive shifts in the distribution of capital away from the south, and were accompanied by violence, massacres, coups d’etats and dictatorships.

The UN Development Programme estimates that poverty rates in Latin America could climb by 15% this year, including 2.4 million people losing their jobs. Oil-funded investment in Ecuador and Venezuela is likely to stop suddenly, and the pain of the crippling Chávez-era inflation rates is likely to start pinching. Despite Obama’s arrival, anti-Americanism is likely to rise, too, especially if US job creation programmes favour protectionism that cuts out Latin American nations. Only this weekend, Rafael Correa has expelled a senior US diplomat from Ecuador for apparently attempting to use aid budgets to influence the choice of appointments in the nation’s anti-drugs force. If true, the only surprise will be that Correa seems surprised; the US has been intervening in the choice of political appointments in Latin America as far back as 1912, when the US ambassador to Mexico, Henry Lane Wilson, helped General Victoriano Huerta unseat President Madero.

Benjamin Dangle at Alternet.org argues that the future is bright for Latin America, because

1. the United States is focusing elsewhere,
2. there are a rising set of Interamerican institutions free from US dominance, and
3. there is a newfound sense of political solidarity amongst Latin American leaders, will allow the continent to focus on internal unity as a method of dealing with the crisis, finally killing the Monroe Doctrine.

Let’s hope so. But apart from more than a century of history saying otherwise, there is other evidence to suggest that ending of dependency in Latin America lies at the end of a very long road.

First, the notion that Latin America is unified behind the left of center is a major misreading of a complex environment. Uribe remains one of the most powerful and popular presidents on the continent, for a start, and Mexico is led by a centre-right coalition under Calderon, albeit one challenged hard from the left. Perhaps equally importantly, powerful right wing forces remain influential within many Latin American nations that are notionally ruled from the left. Indeed, the right seems more unified and resurgent in Venezuela in recent years than it has been since the failed coup against Chávez. Similarly, Morales’ new constitution is a dramatic success, but he still faces a situation not far from open secession in Santa Cruz - and the inevitable ratcheting up of violence that will follow the implementation of the land reform and other programmes in process will put unwelcome attention on the military.

Moreover, the idea that Bachelet and Lula and Kirchner, and Morales and Correa and Chávez necessarily occupy the same territory is also questionable. It’s true that there are fundamental agreements that the continent of Latin America should escape its past of right-wing extremism and military dictatorships; but the methods of doing that are dramatically different. Support for US-led integration has not died altogether. Protection is a double-edged sword. Inflation will remain a fundamental dividing line for tax and spenders. And in the middle of all this, expect to see a massive flight of capital, rise in poverty rates, rise in cost of debt, fall in levels of development assistance, and fall in yields from primary exports.

Saying this is likely to be a bumpy ride is putting it mildly.

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Hold on to your hats

It’s probably inevitable that the shift from months of electoral politics to a new era of governance is a jarring one. During the ritual of democracy, day after day we are appealed to by politicians from the highest level to the lowest for our support. We are told that we are the ones who matter, that the politicians are less concerned about putting forward an agenda than listening to the public will, that bickering is a thing of the past and a new era will emerge when, if elected, we will be truly included in the process of running the country.

Then the elections are over and we discover that a new world isn't born so easily. Suddenly there’s too much to do in D.C. to worry so much about communing with the public all the time. The election returns show that the people are actually pretty divided about a whole lot of things. Vague promises start to turn into concrete agendas, some of which divide even the original supporters of the promises. Soon enough, the political bickering restarts: party politics, yes, but to be fair politics based on real divisions in belief and interest amongst the electorate. The politicians disappear from our streets and parks. We hear a lot less about listening, and a lot more about talking. And we’re left watching events unfolding and wondering what the outcome is going to be.

This is standard for any election, but with the scale of the changes being proposed now, and the huge amounts of money involved, the contrast between the rhetoric of inclusion and the reality of government is particularly marked. Not that I’m complaining, necessarily: politicians spending all their time on stumps is not something that should really be encouraged: there’s a certain fantasy about elections that the cold light of day is a welcome antidote to, and politicians talk too much anyway.

Moreover, in the midst of all that voting and moving from one administration to another, the economy was busy tanking and millions were losing their jobs. As the big man said in his recent hard-ball speech, the public made its will clear; now it’s time for action. But it’s still a feeling I have: suddenly millions of people who were actively and directly involved in the process of government – getting out their chequebooks, trudging the streets, handing out flyers and knocking on doors – find themselves watching on the sidelines, hoping that their side gets its way in the negotiations between a few dozen people huddled together in a few rooms in Washington. Suddenly we realise that we are just the fans at the football match.

So goes the stimulus negotiations. Deals led by a couple of floor-crossing senators, Susan Collins and Ben Nelson, seem to have got something in shape in the Senate that could pass the magic sixty next week, although the question of reconciliation with the Dem-dominated House remains. (A preliminary list of what’s been cut from the bill can be found on CNN.)

If it passes it will be a miraculous achievement, even with the cuts. As a marker of a new approach to governance, the scale of the spending being proposed is truly gob-smacking. Even if the tax breaks get expanded, the vast majority remain payroll tax based, so they’ll produce a rapid, effective and persistent improvement in average Americans’ take-home salaries. Sitting in the stands, I’m cheering: my side is running with the ball. But it’s still a long way to touchdown. (For the purposes of this metaphor, astute readers will note, I’m deferring to that strange, American form of football! He he.)

So, some reasons to be nervous:

First, the left wing economists, marshalled by Paul Krugman, say this bill isn’t enough. Krugman wants roughly twice the spending, though he accepts that a half-sized bill is better than no bill at all. If this bill doesn’t work as quickly or comprehensively as people hope, then the Republicans will say it’s because it was badly designed, partisan, and focused on spending rather than tax cuts. This may well make it harder for Obama to put through any second measure that might be necessary.

Second, we’re still going to need action on banking – on the toxic asset question and in regulatory reform – before the credit markets really unfreeze and people start to trust the financial sector again. And third, whilst there is some material in the bill to encourage people to buy houses sooner rather than later, this bill isn’t going to solve the housing crisis, so more money is going to have to go on that one. This spending spree is suddenly getting bigger and bigger...

Fourth, a lot of these major long-term investments, whilst long overdue, are going to take time to produce quantifiable improvements in the quality of life of average Americans, and because we’re going from famine to feast there’s going to be a lot of wastage, whether we like it or not. Since 1997, the Labour government in the UK massively increased national spending levels on health care, and it’s been incredibly difficult to turn this into improvements that can be demonstrated to the public: it’s taken more than a decade, and we’re still a long way behind where we should be. (Indeed, a huge amount of the new spending was eaten up almost immediately by pay settlements that only just began to adjust the low-level of salaries for public sector workers. Then another enormous chunk went on replacing the buildings that were falling down with new ones. And whilst that meant that patients saw slightly happier doctors in slightly newer buildings, waiting lists and drugs and a whole series of other things were not affected very much at all.)

You just can’t deal with decades of decay in a few years: it takes serious commitment for the long haul. Ideally, you keep spending at a reasonable but sustainable rate in the long haul by shifting the public perception of the norm, so these dramatic shifts from one era to another aren’t necessary in the first place.

Fifth, even if the tax cuts vaunted by Republicans were a more effective way of stimulating the economy than spending (debatable, but let's just accept the proposition for the moment), they are not going to produce the effect we might expect under different conditions. Right now, most people are realising painfully just how chronically indebted they are, and are furiously attempting to pay down their credit cards. Just as macroeconomic measures that normally would have dramatically improved bank lending practices have actually only had a marginal effect easing credit (because bankers lost the will to lend), so the public has lost the will to spend. Indeed, it’s fair to say that a lot of people probably think that returning to the era of debt-driven consumption is not really what they want to see, anyway.

None of this means we should attack the bill. In fact, it all makes it more necessary than ever. But, to switch my metaphors at the last minute, it does mean that the roller-coaster ride is just beginning. Hold on to your hats!

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On why we should listen to old, beardy revolutionaries

The bonus culture that's emerged in the last thirty years is offensive, as well as being a primary contributor to the growing inequality in our societies. It has contributed directly to the current financial crisis in two ways. First, in some instances, the scale of bonuses have meant that the losses being posted by major institutions would have been substantially removed, if not eliminated entirely, were they not paid out. In this sense they amount to little more than theft, since the point of a bonus is to reward performance, not produce failure. Second, by linking bonuses and options to short-term movements in share prices, they also indirectly encouraged individuals to take excessive risks, which produced the bubbles that popped in our faces this past year or so.

So far nothing surprising. Ridiculous bonuses are proving both damaging to society and damaging to the economy. But this is, unfortunately, about as far as the argument goes before things start getting complicated.

One: who is to say what is a reasonable salary for a private sector job if we don't trust the market to do it? If we impose more restrictive bonus offerings across the board, then businesses will simply raise salaries instead. Some of us in this world are willing to get paid less because we believe our jobs have a social value to them. But most people aren’t so lucky: they do stuff they’d rather not do because it gives them the money to live. This current crisis may have been fuelled by greed, but – I’m sorry – that’s capitalism. Most jobs aren’t rewarding enough that people would do them for free. And if you were offered twice your salary to do the same job in the office two blocks along, would you really say no?

Two: what can we do to stop this problem? Yes, we can probably fix bonuses in state-owned or state-controlled banks, and fix them a lot lower than this $500,000 number that Obama has mentioned. Given that no banker in the current market is likely to quit their job in the expectation of finding a new one, we might even have a decent impact as a result. But if things return to the status quo ante when the economy picks up again, the only lesson bankers will learn is that it pays to get stock options turned into cash offshore even more quickly than they have done in the past. Without meaningful structural changes, bankers will, entirely rationally, conclude that a periodic dressing down in front of senators (relieved no doubt afterwards with a martini in a personal limousine taking them to the spa at the weekend country mansion) is a price worth paying for $300 million a year. I’d take that deal!

At risk of appearing provocative, this brings me to a certain fellow who has been mentioned surprisingly rarely during this latest crisis, certainly in comparison to past crises of a similar type: a chap you may have heard of by the name of Karl Marx.

Marx argued that the ‘true’ value of a product was generated by the labour put into its creation, but that this did not necessarily accord with the market value that the product could be sold for. By organizing well, by generating economies of scope and scale, by controlling a particular niche in the supply chain, a little bit of money could be shaved off the price of a product or a little bit extra charged for it: and as you sell more and more product, this little margin starts to add up to a lot of profit for the company doing the shaving.

The genius of the system, Marx believed, was that a big capitalist could skim a couple of pennies from each of his workers or cadge a couple extra from each of his customers, and none of them would likely notice the difference. Meanwhile, he’d end up with a fortune. (Bet you didn’t realise that Richard Pryor in the Superman movie was following in such a hallowed tradition of political economy!) In the Marxist model, the system was supposed to collapse when the competitive pressures to increase margins generated a class of overworked, alienated, revolutionary-minded proletarians who then took the big nobs out and strung them up from the lampposts.

Of course, Marx’s prediction didn’t turn out too well, and the people who claimed to be following in his name didn’t produce much of an alternative (to say the least!) Instead, democratic governments intervened in the economy in ways that sought to limit the most extreme inequalities produced through capitalist self-interest, effectively helping capitalists survive against their own self-destructive urges, you might say. We know these legacies as: unemployment insurance, health care, pensions, public education, and even central banks. So the revolution didn’t come.

Still, the question Marx's theory raises about identifying the 'true' value of a product or service continues to have a powerful resonance. After all, it was the breakdown of the link between 'real' values of houses (whatever they are) and their market prices that arguably got us into this mess. Moreover, the bonus culture is a perfect manifestation of the principle of surplus value raised to the nth degree. It’s been particularly pervasive, in my view, in the banking sector precisely because this is the most globalised part of the world economy and therefore arguably the bit that’s least subject to the restraints imposed by national governments, and the most free to the play of pure market forces.

All of which leads me to conclude that the only restraints on today’s international capitalists that are likely to be effective will be based on comprehensive, global agreements. Either that or it's lamppost time down at Goldman Sachs!

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Between security and ideals

A statement regularly made by political scientists of a certain disposition is that one singular benefit of democracy lies in its mutuality. Democracies align together, they co-operate in all sorts of wars, and they don’t wage war on each. But in truth this correlation between mutual supportiveness and shared civic cultures is a continuum. Co-operation can be deeper or shallower depending on how closely two countries share values. And it can shift in both directions. Shared civic values can remove causes of friction that might otherwise damage relationships between peoples and nations. By contrast, points of divergence can cause conflicts, often in unpredictable and dangerous ways.

So whilst the argument against the decision of the Bush administration to retreat from fundamental democratic tenets regarding the security of the person always began with ethics – an objection to ‘enhanced interrogation techniques’ for being, at root, just plain wrong – there can be no doubt that there were also many practical repercussions coming from the decision to torture as well. Even if you don’t give two hoots about the ethics of torture, it has harmed America’s relationship with its closest democratic allies in a very cold and stark manner.

A scandal unfolding in the UK tonight demonstrates this point quite powerfully. Earlier today, judges in the High Court issued a ruling in case regarding a former UK resident, Binyam Mohamed, who claims to have been tortured by the United States in Pakistan, Afghanistan and Morocco before being transferred to Guantánamo Bay. This ruling said that information relating to this case was going to be withheld because the judges had been told by the government that releasing the information could damage relations with the United States, even perhaps ending the sharing of intelligence between the two countries.

The subtext of this argument is that the information relating to Mohamed’s torture came from secret documents given to the British government by the CIA. Since there is always a mutual agreement between countries sharing information that neither will reveal the other’s secrets to third parties, the British government argue that releasing this information will gravely damage the trust that lies at the centre of the intelligence relationship. And this seems persuasive (though the complete ending of that intelligence-sharing agreement seems unlikely). If Britain starts releasing secret documents given them by the CIA, the CIA will stop giving out secret documents. Given the consequences of damaging that relationship for British national security, the government believes that protecting the relationship of trust takes precedence over the rights of the High Court to release information relating to a crime committed against a UK resident: hence the gagging order.

To make matters worse, this already messy state of affairs is being reported in the media as if the US government explicitly threatened the British that it would withhold cooperation if it did not obey its orders. In reality, this doesn’t appear to have happened: the British government was simply keeping to a mutual understanding long in place about respecting confidentiality.

Opponents, of course, allege that this is an attempt to cover up British involvement in said activities; and I suppose this is not impossible. But asked on Newsnight a moment ago whether the government was aware of torture taking place by the Americans, the Foreign Secretary David Miliband replied in a very interesting manner: stating that they “did not condone” torture – an evasion that makes it quite clear that they did know the US government was torturing people but they stood to one side disapprovingly when it happened.

For the sake of argument, let’s take the government’s word at face value: Britain did not engage in these Bush era crimes and privately it even urged the US government to stop when it became aware of them. In this situation the British government found itself with a friend confessing compulsive tendencies to break the law and hurt people: do you respect the fidelity of your bond and - in legal terms - become an accessory, or do you turn your friend in? Except, in this case, the danger is not just losing a friend, but potentially losing a crucial strategic ally. Personally, I feel that the government took the wrong choice – but who am I to judge? I don’t have to think about the safety of a nation.

In short, as soon as the Bush administration embarked on its misadvised course towards practices that its founding fathers rejected as unacceptable more than two centuries ago, it not only damaged its reputation around the world and acted in a way that offended decency. In an entirely cynical and amoral sense, it also created huge political difficulties for its closest allies elsewhere in the world, making it much harder for them to support the US government. By standing idly by with full knowledge of what was going on, the British government has made itself appear complicit in these crimes. But by coming clean about their extent and publicly attacking them, the government might have permanently destroyed the bond of trust between the defence forces of these two countries. Either option was a mess.

In this sense, keeping to shared values is always a practical as well as an ethical question. The Jack Bauer ‘ticking timebomb’ defence for torture fails to describe the really important choices that are made in international affairs. As soon as someone departs from the basic standards of acceptable behaviour, all their close relationships – ones built on a shared understanding of democratic practice – can to fracture as a result. A recent quotation you may be familiar with illustrates the point far better than I can: “We reject as false the choice between our safety and our ideals.”

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"I'm sorry" will cut it for a while... but consider this a warning

Commendable that Obama's owning up to a mistake on the Daschle thing, though for the life of me I can't quite see in this selection of clips what Obama is actually admitting to... since he explicitly says that picking Daschle wasn't the mistake.

Anyway, it takes a big man (and a man with sky-high poll ratings) to own up to a screw up, so well done. Better than fighting a perpetual defence. But this is not just about responsibility. The American people elected someone who presented himself as better organized, more efficient, generally all round more competent than his predecessor or his rival. So ... when did checking the tax records cease to be competent person's job number one for cabinet nominees? I've never run a government, yet I know it's the first thing you do. And, broader than that, why are we still in this nomination process in early February? I thought we were going to avoid repeating the mistakes of the Clinton administration!

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