Pros and Cons of Income Inequality

 

Income inequality is a good thing but, as is proverbial, one can have too much.

We like having more and because working makes that possible, we’re motivated to work.  That’s a good thing because, although having more won’t necessarily make us happy, the way our society works requires us to work.

When there’s too much income inequality, however, when a tiny minority has most of the money, the others can’t keep buying enough and consumption drops.  Businesses start shedding workers, and money that would have been invested in production moves to secondary assets like stocks whose prices increase because of the new demand.

But enterprises underlying those secondary assets depend on the economy and because that is shrinking, those assets become increasingly over-valued.  When the discrepancy is recognized, the speculative bubble bursts.  Then all but the very rich are in trouble.

That happened in the Great Depression 80-odd years ago and, starting 8-ish years ago, it is happening again.  Our government contained the collapse more effectively this time although its effects continue, but we are now also experiencing a worsening systemic problem.

Our society depends on jobs to supply income, but jobs are disappearing.

What revived our economy from the Great Depression were economic policies that redistributed some of the wealth from the top.  Restoring buying power restored consumption, that restored investing in production, and that created more jobs — a virtuous spiral.   Those policies included Social Security, Medicare, high minimum wages, high marginal tax rates, and strong enforcement of financial regulations.  Eisenhower and Nixon supported and even extended parts of the system Roosevelt initiated that kept investment and consumption in balance.

Then economic policy reversed direction in the 1970s following dramatic cuts in the supply and corresponding increases in the price of oil.  The economy was wounded, according to the new theory, because there was not enough investment and too much consumption.  The indicated new policies included cutting the real value of the minimum wage, cutting welfare spending, cutting taxes on the wealthy, and deregulating the financial sector.  Inequality began to rise again.

That new policy direction was and still is embraced by both Democrats and Republican.  The political shift is detailed in this post but my aim here is to point not to a political but a fundamental change.

I included the leftmost chart below in my 2013 Economic Consequences of Inequality post.  We must also consider the one beside it from the World Wealth and Income Database.  Today’s income inequality and under-employment was brought to us by leaders of both political parties, none of which see that we are experiencing a second industrial revolution as momentous as the first.

Extreme Inequality

change-in-top-1-income-share-us-presidentsWhat has already happened is jobs previously done in America went where wages are lower.  What is happening at an increasing rate now is jobs done by humans are going to machines.

Economics researchers studying US Census Bureau data say half of current jobs (47%) can soon be done by machines and this study suggests 81% in the next few decades.  The schedule is arguable but the future of routine jobs is clear — they’re going away.

Routine vs Non-routine jobs

RobotsResearchers employing the quadrant chart tool I wrote about here assure us that non-routine jobs will remain beyond the reach of machines.

Watching our washing machine being repaired just now, I thought: “That’s something no machine could do. “  But the problem was diagnosed by phone, the part to be replaced was mailed here and washers could be designed to be serviced by robots.  In Japan where many are old enough to need assisted living, much of the care is already provided by smart machines.  Our physical, cognitive and emotional health care needs will increasingly be served by machines.  Robot waiters will attend us and security guards will protect us.  And so on.

Robots could even replace the guys on the freezing mud flats outside my window harvesting clams but it will probably not be worth the investment.  And there will always be jobs for thinking folks like us, right?  In fact, our lives will become ever easier as machines take over all our routine and physical tasks.

Work Sphere

Er… why do we imagine we can continue to out-think robots?   Could we not have told sagacious horses looking forward to similar benefits from the first industrial revolution that they never would learn to drive tractors?

Before that revolution 90% of Americans’ jobs were in agriculture, 3% now.  It didn’t happen suddenly.  Engines were used the same way as horses for fifty years before methods of farming changed at an increasing pace to exploit the new potential of engines.

We’re now in the second half of the second industrial revolution.  Computers began to be used for routine tasks more than seventy years ago and I was managing development of a communications grid based on the same technology as the Internet 45 years ago.  The great majority of jobs presently done by humans will again disappear.

What will happen when there are only jobs for a very few?  There must be a new foundation for the economy if there are too few new jobs for humans.  There will be no choice but to redistribute part of the profits from owners of machines to others so they can pay for the machines’ products and services.  There would otherwise be no profits.

Inevitable as it may be in the longer term, redistribution like that would, with good reason, be feared by the wealthy.  It could go too far.  The interim step, if the system dominated by “too big to fail” financial enterprises continues to collapse, will likely be a repeat of the Great Depression work programs.

We may at long last restore our transportation and other infrastructure on the way to an economic future whose structure we cannot yet discern.

The Pathetic Fallacy – Corporations

The term “pathetic fallacy” comes from Ruskin’s 19th century campaign against false emotion in poetry.   Pathetic then meant emotional, fallacy falseness.

A pathetic fallacy is based on personifying what is not a person.  If we say clouds are sullen or leaves dance, we mask their reality with an idea.  We do not see them as they are and we respond in ways that do not result from their reality.  Pathetic fallacies trigger false emotions from false perceptions.

We make this mistake today when we think of corporations as people.  We admire Apple, vilify Monsanto, and so on.

We also think of nations as if they have an existence separate from their people.  And politicians speak of Islam as if it was an entity.  I will explore those pathetic fallacies in future posts.

This post is about corporations viewed as people, a delusion that got a powerful boost in 2010 from the US Supreme Court.

In Citizens United v Federal Election Commission, which relied on an earlier decision that associations of individuals have First Amendment free speech rights, the Court ruled that corporations are associations of individuals and therefore also have those rights.

Justice Stevens pointed out the failure of logic.  Since legal entities are not “We the People” for whom the Constitution was established, they have no Constitutional rights of any kind.

It is the members of a corporation or any other association who have Constitutional rights, said Justice Stevens.  Corporations do not have an additional set.

Because Justice Stevens was in the minority, corporations, which are not individuals with a vote, now significantly influence voting.

We the People can try individually to persuade others to vote like us and if we are wealthy enough, we can buy media advertisements to amplify our voice.   To balance that power, associations of individuals who are less wealthy can pool their resources.

But spending from corporate treasuries is now amplifying spending by wealthy individuals.

And our delusion that personifies corporations leads us to imagine they decide what politicians to promote.  But corporations do not make decisions — their executives do.

Let me personalize that.  The core business of Dun & Bradstreet where I was a Senior Vice President assumes that payment history is the best indicator of credit worthiness.  That was true in 1841 when almost every US business was a sole proprietorship — but note the fallacy.

It is the proprietor who decides when a sole proprietorship pays its suppliers and that is true for every business enterprise, which means the best indicator of the credit worthiness of a business is the honesty of its executives.

There were no personal credit reports in 1841 but there are now, so the trustworthiness of any business can be judged by the presence or absence of negative financial behavior by its executives.

That must be the case because it is not businesses but the people who manage them that decide when and whether to pay bills.

Although the fallacy of imagining that corporations behave as entities separate from their executives is not significant for the future of D&B’s business, it is very important for the future of our democracy.

The newly authorized corporate spending to promote political candidates on top of the existing spending on lobbying to influence legislation now impacts who gets elected in the first place.

That matters because legislation by politicians whose campaigns are largely funded by wealthy individuals and the corporate treasuries they control inevitably favors those wealthy individuals.

That was not what the framers of our Constitution intended.  Their goal was for legislation to “promote the general Welfare.”

 

TCN, Episode 11 – Corruption and Government

Saddened when I went trekking by all the hardships I saw, I thought: “I know how to devise strategies, what’s a good one for Nepal?”  It was only after many more trips that I saw the root of the problem.

It is easy to see a good strategy for Nepal.  It has over 80,000 MW of hydro-power potential, much of which it could export, and its near neighbor, Bhutan, has made good deals with India to do exactly that.

But Nepal has failed to make such deals and has developed less than 1% of its potential.

Why the difference?  Corruption.  Corruption is when someone uses a position of authority for their personal gain.

But the whole point of having a position of authority throughout Nepal’s history was personal gain.

And that motivation has not changed — see Electricity and Corruption.

Nepal never had what we understand by “government”.  Its administration never was intended to provide services to the people.  It existed to operate a tax farming business owned by Hindu kings and run by a high caste Hindu family.

That ruling elite was a tiny minority within the high caste groups that make up less than a third of Nepal’s diverse population where over a hundred mutually unintelligible languages are spoken.

As these charts from a good article on the topic illustrate, Chhetri and Hill-Brahmin people make up 29% of the 28 million population.  Doma’s Tamang people are one of the larger non-Hindu tribal groups.

Nepalese population by jat

Since Nepal was owned and operated by high caste Hindus for 240 years and the Hindu monarchy fell only seven years ago it is no surprise that the government is still dominated by high caste Hindus.

Nor is it surprising, given the enormous over-representation of high caste men in the government, judiciary, journalism and other positions of influence, that they would have engineered the new Constitution to maintain their privileged position.

Voting in Nepal is along ethnic lines unless that’s trumped by who pays most for your vote.  Brahmin and Chettri subsistence farmers who live in the hills will vote for wealthy Brahmin and Chettri politicians simply because of their caste.

That is why the electoral districts defined in the new Constitution were jerrymandered to include a sufficient number of hill people.

Nepalese Leadership by Caste

Can this culture of “corruption” that makes it impossible for Nepalis to have “government” be changed?

When the new Constitution was announced, Dr. Baburam Bhatterai, Prime Minister from August 2011 to March 2013, split from the Maoist Party that had led the monarchy’s overthrow.  He is forming a new party.  To replace exploitation with government, he says, it is necessary to start anew.

Baburam’s leadership will have some effect but much more will be necessary, and while legislation can sometimes be enacted quickly, cultures only ever change slowly.

Nepal’s politics-for-profit culture will not be changed by those it benefits.  I’m hoping the protests by the Madhesi that make life even harder for all but the privileged few will turn out to have been the equivalent of our civil rights protests half a century ago.

TCN, Episode 8 – Electricity and Corruption

India’s Prime Minister, Modi, came here not too long ago and was hugely popular.  That has changed now the high caste owned media allied with the high caste politicians is blaming India for the blockade.

Modi was popular because he kept getting out of his car to talk with ordinary Nepalis.  Politicians don’t do that.  He was popular, too, because he said India would make big investments in Nepal to stimulate its economy.  He said that was in India’s best interest as well as Nepal’s.  Increased trade between them would be good for everyone.

In particular, he promised massive investment in hydro power generation.  India would buy some of the electricity.  Much of it would be for Nepalis.

An engineer friend of Nagendra’s who works for the electricity company told him why that will never happen.  A new higher capacity distribution network would be necessary.

It would also, by the way, be good to upgrade the “last mile” part of the grid that looks like this, but that could wait.

Electricity Pole

The higher capacity transmission lines would need new towers.  Each of them would need a small parcel of land and buying that land is why the network can’t be built.  Payoffs for every parcel to leaders of the three major political parties and each local party would make the venture cost-prohibitive.

Can’t the legal system be used to overcome such corruption?  I hoped the new Constitution would restructure the judiciary to be independent.  I should have known better.  If the judiciary was not controlled by the politicians, they would risk prosecution for corruption.

Democracy is impossible in a society like this.  Everyone knows the politicians’ promises are empty.  The culture overall, not just in the political sphere, is to tell you what you want to hear so you will be happy.  You will not be happy when it doesn’t happen, but you never really counted on the promise, anyway.

The security guard for the bank beside Nagendra’s shop who is Tamang like Doma’s family explained how he voted in the last election.   The Congress Party promised 3,000 rupees for his vote.  He was going to vote for them, but then the Maoist Party promised 5,000.  Neither of them would do what they promised if elected so he went with the higher price.

Kathmandu was a paradise when Nagendra moved here in 1980.  He got his drinking water from the Bagmati River.  The result of ongoing failure of government?  It is now a sewer.

Bagmati River Kathmandu

Kathmandu’s population is now over a million yet fully 95% of its waste water is untreated and is dumped directly into rivers.  Garbage collection is an equally sorry story.  Much of it is disposed of haphazardly along the river banks.  That also ends up in the water.

This afternoon the three kids and I will cross the bridge where that picture was taken and move back to Doma’s mom’s rooms.  She doesn’t like to but maybe she will have to cook with wood on the roof.  Doma’s aunt enjoys doing that and wants us to stay but we’ve been burdening her long enough.

Beyond the Media Hype: Palestine


Why is it harder to “understand” Palestine than Lebanon or other Middle East states?  Because Palestine lacks the conceptual framework of statehood.  It does not even exist on this map of Middle Eastern states that aims to illustrate the incoherence of our current alliances.

The map’s precise borders suggest stability, too.  Although Iraq, Libya, Syria and Yemen are sunk in civil war, they seem to be unified like currently stable Egypt, Iran, Israel, and Saudi Arabia.

Middle East Alliances

Previous posts in this series have begun to illuminate the deep conflict between long-powerful Iran and recently-wealthy Saudi Arabia, why Yemen has become a proxy in their rivalry, and how Jordan, Lebanon and Syria became independent states.  Now we can explore why Palestine did not become one and start to think holistically about what is driving Middle Eastern conflicts.

The region between Egypt, Syria and Arabia known for thousands of years as Palestine was among the world’s first settled agricultural communities.  It is a crossroads for commerce, cultures and religions, the place where Judaism and Christianity were born.  Controlled over the centuries from Egypt, Persia, Greece, Rome, Turkey, Britain and more, its boundaries changed constantly.

Today’s Palestine is part of what was Greater Syria under Turkey’s Ottoman Empire.  That Syria was the entire region from the Mediterranean to the Euphrates and the Arabian Desert to southern Turkey’s Taurus Mountains.  When the Ottomans got control by conquering Egypt in 1517, they subdivided it into administrative districts, some of which correspond to today’s states.

When the Ottoman Empire fell at the end of WW1, the League of Nations granted Britain and France Mandates over the region.  Those Mandates placed former German and Turkish colonies under the “tutelage” of Britain and France “until such time as they are able to stand alone.”

Note:  If that sounds patronizing, it is worth noting that it is what we are currently trying to do in Iraq and Afghanistan.

Having secretly agreed during WW1 how they would divide it between them, Britain and France established states in their mandated territories.  That was when Lebanon and Syria became separate nations.  Britain divided its territory into Palestine and Transjordan, which later became Jordan.

Palestine and Transjordan Map

Europe’s concept of nation states had come to the Arab world late in the 19th century.  It gave rise everywhere to a growing rejection of colonialism and in Greater Syria to the theory of a pluralistic Syrian nationality that supported multiple religions: Sunni and Shia, Christian and Jewish.

The idea of an independent Palestine within Greater Syria arose when Britain established Mandatory Palestine with a modern nation-state boundary.  The desire for that independence greatly increased as a result of fast growing Zionist immigration into what is now Israel.

The Palestinian Liberation Organization (PLO) founded in 1964 to liberate Palestine by armed struggle was secularist then like Greater Syria even though about 90% of Palestinians are Sunni.

Islam only became significant in Palestinian politics with the 1980s rise of the Hamas offshoot of the Muslim Brotherhood founded in Egypt in 1928 as a religious, political, and social movement.

But let’s take a step back.  How did Ottoman Greater Syria become home to diverse people and religions, and what is the specific history of today’s Palestinian State?

The Roman Empire began converting to Christianity when it was reunified by emperor Constantine.  His mother brought Christianity to Jerusalem in 326 and Palestine grew to become a center of Christianity.  Although Greater Syria was conquered by Muslims in 636, the majority of its population remained Christian until the late 12th century.

Persecution of Christians began growing in the late 10th century during a long series of wars between Egyptian, Central Asian and Persian Empires and Europe’s Crusaders.  Then the decline of the eastern remainder of the Roman Empire in the early 13th century dramatically cut Christian influence throughout the region.

In the early 20th century, Zionist settlers began buying land in what is now Israel and evicting Palestinian peasants.  At the same time, support began growing in Britain for the establishment there of a Jewish homeland.

Jewish Owned Land in Palestine 1945

Muslim-Christian Associations formed throughout the area in opposition and became a national group that agitated for an independent Palestine.  Protests grew as mass Jewish immigration continued.  The protests developed into a 1936-1939 mass uprising.

After WW2 in 1947, the UN proposed the partition of Britain’s Mandatory Palestine into an Arab state, a Jewish state and the Special International Regime for the City of Jerusalem.

Palestinian leaders along with those of Egypt, Iraq, Lebanon, Saudi Arabia, Syria, Yemen, Afghanistan, Iran, Pakistan, Turkey, Greece, Cuba and India rejected any such plan of partition saying it violated the UN charter’s principle that people have the right to decide their own destiny.

Although Palestinian and Arab leaders now accept the partition in broad terms as a fait accompli, they continue to consider it unfair.

Jews owned 7% of Mandatory Palestine but were given 56% of it.  The area under Jewish control contained 45% of the Palestinian population.  Much of the Arab land was unfit for agriculture.

The Negev desert given to the Jewish state was also sparsely populated and unsuitable for agriculture but that area was a “vital land bridge protecting British interests from the Suez Canal to Iraq.”

Note:  To understand Palestinians’ reaction, imagine the UN establishing Native American homelands corresponding to where they lived before Columbus and returning 56% of the USA to them.

American Indians Map Census BureauPre-Columbian USA Culture MapCivil war broke out.  It became an inter-state war when Israel declared independence in May 1948.  Forces from Egypt, Jordan Syria and Iraq joined the Palestinians but Israel ended up with both its UN-recommended territory and almost 60% of the proposed Arab state.

Jordan took the rest of the West Bank and Egypt the Gaza Strip.  No Palestinian state was created.

During ten months of battles, around 700,000 Palestinians, 60% of all those in Mandatory Palestine in 1947, fled or were driven out.  In the following three years, about the same number of Jews immigrated to Israel, 110% of those in Mandatory Palestine in 1947.

Note:  Again to put numbers in perspective, imagine 193 million Americans (60% of of 321M) being driven out in less than a year and replaced in the next three years by the same number of Muslim immigrants (who we imagine already make up 15% of our population).

UN_Palestine_Partition_Versions_1947

What happened next?  In 1967 Israel captured the rest of the former British Mandate of Palestine, taking the West Bank from Jordan and the Gaza Strip from Egypt.

In 1973 Syria tried but failed to regain the Golan heights and Egyptian military forces invaded with some success.

Following the case fire, Israel returned the Sinai Peninsula to Egypt and Egypt became the first Arab country to recognize Israel.

Israel annexed East Jerusalem in 1980.

In 1987, a new Palestinian uprising began.  The following year Chairman of the PLO Yasser Arafat declared Palestine’s independence.

In 1993, Israel and the PLO agreed to the creation of a Palestinian National Authority (PNA) as the interim self-government body to administer 39% of the West Bank under the PNA’s Fatah faction and the Gaza Strip under its Hamas wing.  Further negotiations were to take place but did not.

Israel continued to occupy 61% of the West Bank.

Palestine and Israel Map Now

In 2000, another uprising began.  That came to an end following the death of Yasser Arafat and Israel’s withdrawal from the Gaza strip.  Israel retained control of the Gaza Strip air space and coast.

In 2011, the President of the Palestinian Authority and Chairman of the PLO submitted Palestine’s application for membership in the UN.

In 2012, the UN granted de facto recognition of the sovereign state of Palestine.  Canada, Israel and the USA voted against the upgrade.  President Obama said “genuine peace can only be realised between Israelis and Palestinians themselves … it is Israelis and Palestinians – not us – who must reach an agreement on the issues that divide them.”

The State of Palestine can now join treaties and specialized UN agencies, pursue legal rights over its territorial waters and air space, and bring “crimes against humanity” and war-crimes charges to the International Criminal Court.

Palestine UN Votes

What may be the future for Palestinians, and what is indicated for our foreign policy?

A state with the territory of Mandatory Palestine could have become self-supporting.  One made up of the land-locked West Bank and the separate Gaza Strip can not.

Jordan’s first king may have been right–a state whose territory included the West Bank as well as today’s Jordan could have been good for Palestinians.

A non-viable but internationally recognized State of Palestine may be a necessary stepping stone for Palestinians and Israelis to make peace but a different arrangement of territories in that region is inevitable.

History shows the absurdity of our belief that the borders of existing nation states just need to be accepted and democratic elections established, then all will be well.  Borders make administration possible.  Believing people on the other side of the border are intrinsically different breeds fear and makes peace impossible.

Beyond the Media Hype: Lebanon

Lebanon’s location bordering Syria made it a trading hub between the Mediterranean and Arab worlds and resulted in it becoming the most religiously diverse country in the Middle East.  Its mountains isolated religious and ethnic groups from each other.

Lebanon Simple Map

Lebanon is north-south alternating strips of lowland and highland–a coastal plain, a mountain range, a central plateau, then more mountains.  Its shoreline is regular, rocky and has no deep harbor.   The Beqaa Valley between the mountain ranges is the main agricultural area but fruit and vegetables grow well on the very narrow maritime plain.

Lebanon Topography

The CIA estimates the population to be 40% Christian, 27% Shia, 27% Sunni, and 5% quasi-Shia Druze.  The Lebanese Information Center estimates 34% Christians while Statistics Lebanon estimates 46% Christian.  The 34% to 46% range for Christians is matched by a 27% to 40% range for Shia.

There are several Christian groups.  Maronite Catholics make up 21% of the overall population, Greek Orthodox 8%, Greek Catholic 5%, Protestant 1% and 6% other denominations.  When the last census was taken in 1932, Christians were 53% of the total.  It was about the same in 1956 but more Christians than Muslims have emigrated since then and the Muslim population has a higher birth rate.

Lebanon has over thousands of years been part of many empires.  It became an orthodox Christian center under the Romans.  They persecuted an ascetic Christian tradition established near Mount Lebanon in the late 4th century by a hermit named Maron.  Most of Lebanon was ruled as a Christian Crusader State from 1109 to 1289.

Most eastern Mediterranean Christian communities swore allegiance to the head of Eastern Christianity in Constantinople, but the Maronites aligned with the Pope in Rome, which led to centuries of support from France and Italy even after Lebanon became part of the Ottoman Empire in 1516.

In 1842, fighting between Maronites and the Druze led to the Mount Lebanon area being separated into a Christian district in the north and a Druze one in the south, both of which reported to the governor of the Sidon district in Beirut.  France got the northern district separated entirely from Muslim Syria in 1861 to protect Mount Lebanon’s 80% Christian population

Lebanon Religion Map

In 1920, after the Ottoman Empire fell, the League of Nations gave Syria and Lebanon to France, and Palestine and Iraq to Britain.  France was welcomed by Christians around Mount Lebanon and vehemently rejected by Muslims in Syria.  It took until 1923 for France to gain full control.

France added Tripoli, north of which is primarily Sunni, to the former Ottoman district of Mount Lebanon, along with Sidon, south of which is chiefly Shia, and the Bekaa Valley, which has a mix of Muslims, Christians and Druze, and established it in 1926 as the democratic republic of Lebanon.

A political system was established that shares power based on religious communities.  There is an unwritten agreement that the president will be Maronite Christian, the speaker of the parliament Shia, the prime minister Sunni and the Deputy Speaker of Parliament and the Deputy Prime Minister Greek Orthodox.  The Shia have considered themselves marginalized ever since.  They as well as the Maronites were persecuted by the Ottomans.

Lebanon Detail Map

When France’s puppet government during WW2 allowed Germans through Syria to attack British forces in Iraq, Britain invaded Syria and Lebanon.  France then said Lebanon would become independent with France’s ongoing support.  But when the newly elected Lebanese government abolished France’s mandate in 1943, France imprisoned them.  France was then forced by international pressure to recognize Lebanon as fully independent.  France withdrew its troops in 1946.

In 1958, Muslim demands for reunification with Syria led to the brink of civil war and US military intervention when Muslims wanted Lebanon to join the newly formed Egyptian-Syrian United Arab Republic.  Tension with Egypt had been growing since 1956 when Lebanon’s Christian president did not break with Israel and the Western powers that attacked Egypt to regain control of the Suez Canal.

Internal tensions continued to grow.  In 1975, civil war broke out between a Christian coalition and an alliance of Druze and Muslims with the Palestine Liberation Organization (PLO).  Syria sent troops, allegedly for peace-keeping, that remained in Lebanon until 2005, long after the end of the war.

The PLO leaders had set up new headquarters in Beirut after they lost the 1970-71 civil war with the Sunni monarchy for control of Jordan.  The PLO was founded in 1964 in Jordan where Palestinian refugees from Israel had become the majority population.

Thousands of Palestinian fighters fled to Lebanon after the Syrian civil war, preceded by refugees from Israel and followed by more from Jordan.  There are 450,000 Palestinian refugees in Lebanon now, primarily in the south.

In 1978, Israel invaded southern Lebanon to push PLO forces away from the border.

In 1982, PLO attacks led to a second Israeli invasion through Shia southern Lebanon and a siege of Shia Beirut.  The militant Shia political party Hezbollah came into being in the next few years to expel Israel forever and end Shia marginalization.

Lebanon_sectors_map

The civil war ended in 1990 with an agreement to disband all non-governmental Lebanese militias and deploy the Lebanese army on the border with Israel.  But Syria’s Shia government, which controlled Lebanon then, with fundamentalist Shia Iran’s support, allowed Hezbollah to continue fighting a guerrilla war against Israel and the South Lebanon Army in Shia areas occupied by Israel until 2000.    Many see Hezbollah as a proxy of Syria and Iran.

Hezbollah has continued fighting with reduced intensity since then to liberate Shebaa Farms in the Golan Heights, territory occupied by Israel since 1967.  The UN considers Shebaa Farms Syrian territory.  Both Syria and Lebanon consider it part of Lebanon.  UN resolutions in any case require Israel to withdraw from all occupied territories.

In 2005, a former Prime Minister who worked to end Syrian dominance of Lebanon was assassinated, for which some accused Syria, others Israel.  Demonstrators supported by the West demanded the end of what some consider military occupation by Syria and its undue influence on Lebanon’s government.  A 1991 treaty made Syria responsible for Lebanon’s protection.

In 2006, Hezbollah launched rocket attacks and raids into Israel.  They responded by invading southern Lebanon, and with airstrikes throughout the country that destroyed bridges, ports, power stations, water and sewage treatment plants, schools, hospitals and homes.

Lebanon locations bombed 2006

The latest threat to Lebanon’s stability is the Syrian civil war.  Of Lebanon’s total 5,883,600 population, 450,000 are Palestinian refugees and 1,200,000 are recent Syrian refugees.  Refugees make up almost 30% of the population and 20% are very recent arrivals.

Diverse populations are not easily governed even in a democracy.

Most nations in the Middle East are autocracies–Sunni in Saudi Arabia and Jordan, Shia in Iran and Syria, first Sunni now Shia in Iraq.  Lebanon is a parliamentary democratic republic a quarter or more of whose population is either Christian, Shia or Sunni citizens, or refugees from Palestine, Jordan and Syria, most them Sunni.  That’s a formidable challenge.

And Lebanon’s government was dominated by Syria from 1975 to 2005, while southern Lebanon still is dominated by PLO and Hezbollah forces, which makes it a battle ground with Israel in the quest for a Palestinian nation state.

Lebanon’s future is inextricably tied with Syria, which is in turmoil, Palestine which does not exist as a nation state, and Israel.  It seems to have been a mistake to have established Lebanon as an independent nation state and/or not to establish Palestine as one at the same time.

Beyond the Media Hype: Kuwait

Kuwait is just smaller than New Jersey.  Its key geographic feature is Kuwait Bay, a sheltered harbor with almost half the country’s 120 miles of coast on the Persian Gulf.  It has a well accepted 155 mile border with Saudi Arabia and a 150 mile contested one with Iraq.

Less than 1% of Kuwait is arable land and 90% of the population lives around the Kuwait Bay.    Kuwaitis make up only around 30% of the 4.1M population, which also includes 1.1M Arab expatriates and 1.4M Asian expatriates.  Most of Kuwait’s citizens are Muslim, an estimated 60%–70% Sunnis and 30%–40% Shias.

Kuwait Physical Map

Kuwait’s strategically located deep water port has since ancient times been important for trade.  It was colonized by Greece, fell to the Persian Sassanid Empire, then to a Muslim Caliphate in 636 AD, to a kingdom in Iraq and in 1521 to the Portuguese.  Then Arabs moved in from Saudi Arabia and took control.

The king who established Kuwait’s dynasty declared allegiance in 1752 to the Ottoman governor of Iraq.   Kuwait was then nominally governed from Basra in southern Iraq.  In practice, it was largely autonomous.  It took over much of the trade that passed through Basra when that city was attacked by Iran from 1775-79 and quickly became the primary center for shipping between Arabia, Iraq, Syria, East Africa and India.  Ships made in Kuwait carried most of the area’s trade from the late eighteenth through the nineteenth century.

Kuwait’s borders were defined in 1913 when Britain made an agreement that it was part of the Ottoman Empire.  It encompassed all land within about 110 miles from the capital.  Britain confirmed that definition in 1922 when it controlled Iraq.  Limiting Iraq’s access to the Persian Gulf to about 35 miles of swampy coastline made it almost impossible for Iraq to become a naval power.

Iraq gained independence from Britain in 1932.  In 1938 it asserted a claim to rule Kuwait, and although it formally recognized the existing border in 1963, it continued to press for control over Bubiyan and Warbah islands through the 1960s and ’70s.

In August 1990, Iraq invaded and claimed all of Kuwait.  The UN restored its independence the following year and a UN commission reconfirmed the border, but Iraq did not accept the result.

803213.ai

Kuwait’s economy was devastated in the first half of the 20th century by a British trade blockade when Kuwait supported the Ottoman Empire in WW1, then by a Saudi Arabian trade blockade from 1923-37 whose aim was to annex Kuwait, and also by the Great Depression which drastically cut European demand for goods shipped via Kuwait from India and Africa.

Kuwait’s king in 1896 was assassinated and replaced by his half-brother.  When his brother’s former allies got Ottoman backing he asked Britain for naval support.  They agreed, seeing it as an opportunity to counter German influence in the region.  In 1899 Kuwait pledged never to cede territory without Britain’s consent, which gave Britain control of Kuwait’s foreign policy and security.

Kuwait  was saved by British forces when it was invaded by Saudi Arabia in 1919-20.  Britain redefined its border with Saudi Arabia after that at a conference where Kuwait had no representative.  Although Saudi Arabia got more than half Kuwait’s former territory, they continued their economic blockade and intermittent raiding.

Kuwait’s large oil reserves were discovered in 1937 but exploration was delayed by WW2.  When oil exports began in 1951, most Kuwaitis were still impoverished.  A major program of public works was begun almost immediately and by 1952, Kuwait was the largest exporter of oil in the Persian Gulf region.  That attracted many foreign workers, especially from Palestine, Egypt and India.

The royal family’s rule had been relatively limited up until WW2 but oil revenues eliminated their financial dependency on merchants who had always been Kuwait’s primary source of income.  Oil now accounts for nearly half of GDP and 94% of export revenues and government income.

Kuwait Oilfields Map

Kuwait gained independence from Britain in 1961 and became the first Gulf country to establish a constitution and parliament.  It embraced Western liberal attitudes and most Kuwaiti women did not wear the hijab in the 1960s and ’70s.  It consistently ranks as having the freest media in the Arab world, outranking Israel since 2009, and is the only Gulf state ranked even “partly free.”  Its legal system is mostly secular with separate family law for Sunni, Shia and non-Muslim residents.

Kuwait supported Iraq in its 1980-88 war with Iran but refused to write off the $65B of loans it had made.  Then came economic rivalry after Kuwait increased oil production by 40%, and in 1990, Iraq claimed Kuwait was stealing oil by slant drilling into its Rumaila field near the border.  Iraq attempted to annex Kuwait later that year.

Before the 1980-88 Iran-Iraq war, Kuwait was the Gulf’s only pro-Soviet state.  Its relationship with the US had been strained ever since independence in 1961 and it refused to allow USA military bases in 1987.  But now, since Iraq’s 1990 invasion, the US has 10,000 soldiers based in Kuwait.

I knew nothing about Iraq or Kuwait at the time of that invasion.  I supported the US-led response to what I accepted as a war of aggression.  Now I’m not sure what I think.

Kuwait does not have the geography of a state.  It is tiny and lacks natural borders.  Its borders were defined arbitrarily by Britain.   Until Britain gained control, it was governed from Iraq.  Iraq’s desire for it as a deep water port on the Persian Gulf makes sense.  But Kuwait’s government has been pretty good for its citizens, enormously better than Iraq’s, or Saudi Arabia’s.

Beyond the Media Hype: Saudi Arabia

Where next to combat my ignorance about the Middle East?  Here.  We Americans fear and loathe Arabs in general but we imagine Saudis to be our friends.

Saudi Arabia is mostly inhospitable desert that covers 80% of the Arabian Peninsula.  The prophet Muhammed united nomadic tribes here in the early 7th century and established an Islamic state that his followers rapidly expanded.   The center of the Muslim world soon moved to better lands and most of what is now Saudi Arabia reverted to tribal rule.

In the 16th century, Ottoman rulers of Turkey north of Iraq added the Red Sea, the Persian Gulf and the Arabian Peninsula to their empire.  Their control of the area varied over the next four centuries.  In 1916, tribal leaders encouraged by Britain mounted a failed revolt then the Ottoman Empire collapsed at the end of WW I.  Ibn Saud, who founded today’s Saudi Arabia and avoided the revolt, continued his three decades long campaign against his regional rivals.

He established the kingdom of Saudi Arabia in 1932 as an absolute monarchy governed under a puritanical form of Sunni Islam known as Wahhabi that is practiced by 85–90% of Saudis.  The other 10-15%, who face systematic discrimination, are Shi’a.   No faith other than Islam is permitted, conversion by Muslims to other religions is outlawed and so is proselytizing by non-Muslims.

The royal family controls all the kingdom’s important posts.  Around 200 of more than 7,000 princes occupy the  key ministries and regional governorships.  The country in effect belongs to the Ibn Saud family.

Saudi Arabia is bordered by Jordan and Iraq to the north with Egypt, Israel and Palestine to Jordan’s west.  Syria is in the northwest and Iran is a few miles east over the Persian Gulf.  These borders were drawn up by the British and French at the end of WW I with little regard for tribal, religious or ethnic realities.

Saudi_Arabia_map(Map created by Norman Einstein, February 10, 2006)

Saudi Arabia is interesting to two communities.  Mecca, the birthplace of Muhammed and the site of his first revelation of the Quran, is Islam’s holiest city.  Non-Muslims are prohibited from it and a pilgrimage to it is mandatory for Muslims.  That Saudi Arabia is the world’s dominant oil producer and exporter and has the world’s second largest proved petroleum reserves motivates our interest.

Oil was struck in Pennsylvania in 1859, Russia found it in the Caucasus in 1873, then the British found it in Iraq in 1903.  They promptly declared they would “regard the establishment of a naval base or a fortified port in the Persian Gulf by any other power as a very grave menace to British interests, and we should certainly resist it with all the means at our disposal.”  Five years later, they struck oil in Iran.

Three years after that, the British began converting their navy from coal, of which they had ample supplies, to oil, of which they had none.  They landed forces in Iraq in 1914, captured Baghdad and began projecting power from there.  More oil was found in the Persian Gulf, starting in Bahrain in 1931 and followed by Kuwait and Qatar.  Then in 1933, Americans found oil in Saudi Arabia.

American businessmen were cautiously welcomed by the Saudi king as less threatening than Britain or other colonial powers.  He negotiated well with Aramco executives, the business established to export the oil, and later with the US government, trading oil for infrastructure development that transformed Saudi Arabia in a very short time from a medieval fiefdom to a 20th century one that became leader of the petroleum exporters, OPEC.

Oil_Reserves_Top_5_Countries

Saudi Arabia gained control of 20% of Aramco in 1972, full control in 1980 and was by 1976 the largest oil producer in the world.  In 1973, Saudi Arabia led an oil boycott against Western countries that supported Israel in its war against Egypt and Syria.

The Islamic revolution in Iran in 1979 led Saudi Arabia’s king to fear rebellion by the Shi’a minority in the east where the oil is located, and in the same year protesters against laxity and corruption in his government seized the Grand Mosque in Mecca.  These events led to enforcement of much stricter religious observance and a greater role in government for Muslim legal scholars.

The royal family’s relations had been primarily with Aramco leaders until the reign of King Khalid starting in 1975.  After 1975 was when Saudi and US foreign policy grew closely aligned.

Saudi Arabia provided $25B to Iraq in its 1980-88 war against Iran, which we supported.  It condemned Iraq’s 1990 invasion of Kuwait and allowed US and coalition troops to be stationed in Saudi Arabia.  But it did not support or participate in the 2003 US-led invasion of Iraq.  The US by then no longer seemed a dependable ally.

There is significant opposition in Saudi Arabia both to US influence, and to the absolute monarchy.  The strongest opposition comes from Sunni religious leaders who want a stricter form of Islamic rule.  Others want the opposite.  The Saudi government was rated the 5th most authoritarian government out of 167 in 2012.  Women have almost no rights, it’s the only country in the world that bans them from driving.  There is also opposition from the Shi’a minority as well as tribal and regional opponents.

The Saudi royal family’s greatest fear, however, until the recent rise of the Islamic State whose stated goal is leadership of an Islamic world, has been Iran’s growing influence.  They are more alarmed now the US and Iran seem to be inching closer to a rapprochement.

So the Saudi royal family needs US military support but is at odds with us among other reasons because, like every other nation in the Middle East, they opposed the creation of Israel and are supportive of the Palestinians.  They have condemned the Hezbollah militants in Lebanon, but the Saudi royal family is Sunni and Hezbollah are Shi’a.

The royal family must also deal with anti-American feeling among the Saudi people.   Osama Bin Laden and fifteen of the nineteen 9/11 hijackers were from Saudi Arabia and it is widely believed, in former US Secretary of State Hilary Clinton’s words, that: “Donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide.”

Very recently, the king criminalized “participating in hostilities outside the kingdom” fearing that Saudis taking part in Syria’s civil war will return knowing how to overthrow a monarchy.  Syria now defines terrorism as “calling for atheist thought in any form, or calling into question the fundamentals of the Islamic religion on which this country is based.”  One of the groups they have named as a terrorist organization is the Muslim Brotherhood.

Fear of its neighbors motivates Saudi Arabia to spend more than 10% of its GDP on its military, among the highest percentage of military expenditure in the world.  The kingdom has a long standing military relationship with Pakistan.  Some believe it funded Pakistan’s nuclear weapons program and could purchase such weapons from them for itself.

A good representative of what the Saudi government fears is Safar al-Hawali, a scholar who was a leader of the 1991 movement opposing the presence of US troops on the Arabian peninsula and a leader of a 1993 group that was the first to openly challenge the monarchy.

No surprise that al-Hawali is also a critic of the US government.

In 2005, al-Hawali wrote in An Open Letter to President Bush “the Roman Empire claimed to be the symbol of freedom and civilized values, just as you referred to America in your first statement after the incidents of September 11.  It was the greatest world power of its day, the heir of Greek civilization.  It had a Senate and a façade of democracy.  The Roman citizen had freedom of religion and personal behavior.  All this made it superior to other Empires throughout the world, and yet history does not speak well of this Empire because of the repulsive crime with which it stained its reputation: the persecution of the Christians.”

Elsewhere, al-Halawi wrote: “Since World War II, America has not been a democratic republic: it has become a military empire after the Roman model … the American way can be discerned and defined in one word: war.  America unhesitatingly enters into war anywhere in the world … Thus we notice that America is always seeking an enemy, and if it does not find one it creates one and inflates it using its terrible media to persuade its people’s conscience that the war it has declared is necessary and for a just cause.”  (“Inside the Mirage” Thomas A. Lippman, p. 328)

We imagine Saudi Arabia is our friend, but our thirst for oil provokes their memories of colonial powers.  Saudis and others in the Middle East don’t understand our unquestioning support for Israel.  Their Muslim leaders are as suspicious of American Christians as we are of them.  Inside Saudi Arabia the Shi’a minority is oppressed by their Sunni rulers, Wahhabi fundamentalists battle progressives, and nobody except the royal family can have a role in government.

Preconceptions like the ones we and Saudis hold about each other are not a dependable basis for friendship.  Instead, they fuel hatred.

War on Poverty

This Guest Post prompted by media pieces is chiefly comments on them by friends.  I’m posting it because it is so relevant to my post earlier today about our federal jobs program.

LarryN started the discussion by posting this is important, an article about the correlation between income and life expectancy.  Nationwide, men in the upper income half who reach 65 live six years longer than in the late 1970s: men in the lower half live one year longer.  The article uses a pair of have and have-not counties 350 miles apart to dramatize the issue.  Women’s life expectancy grew by five years since 1985 in the wealthy community: in the have-not county it fell by two years.

AngeloC replied [edited for length]:  “this article tells us your quality of life across a variety of categories including life expectancy is worse if you are poor.  What the author does not comprehend are the circumstances and choices that cause people to become poor and keep them that way.  If you are born out of wedlock, or grow up in a chaotic family situation, or use drugs, or drop out of high school, then your chances of being poor are quite high.  Conversely, the poverty rate for families comprised of a married couple is miniscule, as is the case for those who have finished college.  We’ve been “at war” with poverty for 50 years now, and we are currently spending one Trillion dollars annually to battle poverty.  So if money alone is the answer, then how much more would we need to spend to make poverty go away? George Will makes some good points here.”

Will’s main points are: “Nearly 48 million people receive food stamps — this dependency is inimical to upward mobility”, “the government’s [near-zero interest rate] monetary policy breeds inequality” and “the federal government’s fiscal and regulatory policies discourage businesses from growing the economy with the mountain of money the Fed has created.”

JohnK responded [edited for length]:  “regulatory policies have something to do with discouraging business expansion, but the primary cause for lack of business expansion is lack of an expanding market.  As a result of off-shoring in search of cheap wages to reduce production costs, and increasing use of automation, jobs in the U.S. and therefore the wherewithal to purchase goods is rapidly diminishing.  Food stamps and short-term subsidies help a bit by injecting some purchasing wherewithal into the economy, but at best, it’s a Band-Aid on a serious hemorrhage.  The Fed is injecting money into the banks to increase borrowing to expand business, but again, why borrow to expand your business if your market is shrinking?  The money is being injected where it isn’t used to expand the economy. The Fed is limited in what it can do.

“What might help is for the President and the Congress to set up a long-term, well-planned 20-30 year program to rebuild and expand our infrastructure.  Our roads, railroads, bridges need re-building and ongoing maintenance.  If we are to meet the electricity needs of a more dynamic economy and the millions of electric vehicles hitting the roads, we should be enhancing and expanding our electric grid.  With the ever increasing costs of extracting fossil energy, we should be expanding our renewable energy sources and reducing fossil fuel use by providing a modern efficient railway system.  Investing in rebuilding and enhancing our infrastructure over a long period of time will provide for a huge number of jobs in the construction, steel and cement manufacture, and ancillary industries and will give a boost to the whole economy as workers spend their wages on buying goods. 

“Why a 20-30 year plan?  This will give businesses the confidence to expand, knowing that federal spending on infrastructure enhancement will continue for a long time.  The Fed can’t initiate this.  Only the President and Congress can do it, but once the program is in place, the Treasury can issue bonds to pay for it and the Fed can buy them.   That will pay for a useful enhancement of infrastructure that will support our economic needs for decades to come.”

The discussion continues.  We all agree with the initial statement — this is important.  Although at first we saw implications that appeared to be in conflict, signs emerged that we may reach agreement on the underlying issue.  That means, if we get to that point, we could potentially also agree on an action program.

My proposed program would include revamping our electric grid to facilitate generation from renewable energy sources and make it less vulnerable to attack.  We could spend dramatically less on our military if we were not dependent on Middle East oil.

While cutting our military spend I would, however, continue to fund the Defense Research Projects Agency (DARPA) sponsoring of revolutionary technologies.  That is where transformational breakthroughs in power generation and storage technology are most likely to originate.

But the primary point of this post is it illustrates how politicians also have at times debated so as to govern well.  They could work that way again.

Our Sacrosanct Jobs Program

A news article this week brought to mind something British politician Tony Benn said, “I remember setting sail to South Africa for training [as a WW2 RAF pilot] and being part of a war aims meeting.  It was the most brilliant political meeting I ever attended.  One man spoke of the mass unemployment of the 1930s and said that if we could attain full employment by killing Germans, we could have full employment by building houses, schools and hospitals.”

The article is about a $643M contract with Bath Iron Works (BIW) for which Maine Senators Collins, a Republican, and King, an independent, got funding.  They say it will “allow the Navy to send another DDG-51 to sea when the Navy’s fleet needs to preserve important combat capabilities in support of our national defense.”  Democratic Representative Pingree said, “this is excellent news for the families who earn their living at BIW.”  A shop steward who represents BIW workers said, “the contract brings more stability to the company, which employs about 5,400 people.”

So, my representatives in Washington, the BIW workers and their families, local business owners, everyone around here is happy we’re going to build more of these ships that were “originally designed to defend against Soviet aircraft, cruise missiles and nuclear attack submarines.”

What struck me is, although we don’t think of Defense that way, it has grown into an enormous jobs program.  What’s more it’s a program whose rationale and scope we do not question.

President Reagan’s budget director David Stockman has points to make, however.  In The Ukraine, The War Party and the Pentagon’s Swamp of Waste he writes, “the $625 billion allocated to DOD this year amounts to a colossal destruction of economic resources for no benefit whatsoever to the safety and security of the American people.”

Stockman is angry, perhaps because “About three decades ago I called the Pentagon a “swamp of waste” during an off-the-record interview that ended-up on the evening news. Presently I ended-up in President Reagan’s woodshed–explaining that, well, yes, I did say that because it was in fact true.”   His article is excellent background reading.

I don’t feel emotional about this but I am equally determined to do what I can so we do question how we want to spend that $625B of tax revenue.  The current program does have some benefit — it provides a lot of jobs — but as Tony Benn realized, some of them could be different jobs.  Some could be jobs without the risk of being killed or maimed.

Defense spending has huge support.  There was a bi-partisan agreement to cut (sequester) federal spending this year.  Stockman notes that “Had every dime of the $55 billion sequester been implemented, this year’s DOD budget would have been roughly $600 billion … in 1989, the DOD budget was about $475 billion in today’s inflation-adjusted dollars.”   Even though DOD spending would have been up 25% from 25 years earlier, when the time came to make the cuts, Congressman Paul Ryan and others said making them would be tantamount to surrender.  So the cuts were not made.

What provoked Stockman’s article is, “Contrary to the bombast, jingoism, and shrill moralizing flowing from Washington and the mainstream media, America has no interest in the current spat between Putin and the mobs of Kiev.”

Echoing President Eisenhower’s famous warning when he left office sixty years ago, he says,  “The source of the current calamity-howling about Russia is the Warfare State–that is, the existence of vast machinery of military, diplomatic and economic maneuver that is ever on the prowl for missions and mandates and that can mobilize a massive propaganda campaign on the slightest excitement.”

Stockman is outraged that we believe the propaganda and by our hypocrisy: “We have invaded every country to our South–from the Dominican Republic to Guatemala and Panama and assassinated or overthrown dozens of  their leaders–all within the 60 year span since Nikita Khrushchev gifted Crimea to his minions in Kiev. So precisely which nearby borders are so sacrosanct and exactly who has done the more egregious violating?”

I’ve written before about our defense spending and military strategy over which “we the people” have no control.  President Reagan greatly accelerated spending on what was in fact a spurious rationale, it dropped and stabilized in the next decade, then it was driven to extraordinary new heights by President Bush based on a new spurious rationale.  The numbers below show our total defense spending, not just what is presented in the US budget defense line item but also the spending on “overseas contingency operations” i.e., the wars President Bush started in Iraq and Afghanistan.

Trends in US Military Spending

We might be encouraged by Congress’ refusal to approve President Obama’s recent desire to take military action in Syria except that (A) Congress is currently of a mind to refuse everything he proposes and (B) everyone in Congress always wants more military spending in their district.

Important as it is to make rational changes to our defense spending and decide what kind and size jobs program we want to fund, however, we first need a government that functions, one that could debate such questions, arrive at decisions and take action.

I’m still absorbing research about how we could get such a government and, following a break where I’m hoping for sun and heat, I will report back next month.