>Where Credit Is Due

>A Timeline of the Mortgage Crisis: A field guide to the loan sharks and politicos who got us into the predatory lending mess.

by Nomi Prins

MotherJones.com (July 02 2008)

1913: Federal Reserve Act creates national banking system.

1914: Federal Trade Commission Act prohibits unfair or deceptive business practices.

1933: With memories of 1929 stock crash still fresh, Glass-Steagall Act separates “commercial banks” focusing on consumer activities (checking, savings) from “investment banks”, which deal with speculative trading and mergers.

1968: Truth in Lending Act requires banks to disclose loan terms & fees.

1970: Bank Holding Company Act Amendments first step toward weakening Glass-Steagall; allow commercial banks, via holding companies, to both accept deposits and make commercial loans.

1978: Supreme Court’s Marquette decision gives banks the right to make loans in states other than where they are headquartered; lenders rush to places with the weakest consumer protections, for example Delaware and South Dakota.

1980: After interest rates rise thirteen percentage points in two years, President Carter signs law further hollowing out Glass-Steagall. The measure – pushed through by Senator Jake Garn (R-Utah), a former insurance executive – demolishes usury caps for mortgages and raises bar for prosecuting lenders.

January 1981: Senator Garn becomes chair of Senate Banking, Housing, and Urban Affairs Committee with fellow deregulation advocate M Danny Wall as majority staff director. American Banker exults that “lobbyists here view Mr Wall’s promotion as a gift swept to shore by the [Republican Party] tide last election day”.

1982: Senator Garn coauthors Garn-St Germain Depository Institutions Act, which deregulates savings and loan industry.

1984: S&Ls start crashing in Texas as oil boom peters out. More than 1,000 thrifts nationwide will fail between 1986 and 1995; debacle will cost $500 billion, including $124 billion in taxpayer money.

April 2 1987: Senator John McCain meets with federal regulators to discuss investigation of Lincoln Savings and Loan. The thrift’s owner, Charles Keating, was the senator’s business partner and campaign contributor, and flew McCain around on his private jet.

September: Drexel Burnham Lambert, home to “junk-bond king” Michael Milken, creates “collateralized debt obligations” (cdos) – securities made up of myriad loans and bonds with different risk levels.

December 9 1988: Silverado S&L collapses, leaving $1.3 billion taxpayer liability; board members include Neil Bush, who engineered loans to friends in what federal Office of Thrift Supervision will call “multiple conflicts of interest”. Bush later tells Congress a few of his deals may have looked “a little fishy”.

February 6 1989: President George H W Bush bails out S&L industry; among those helped is his son, Jeb, as government takes over most of a $5 million second mortgage on his Miami office building.

September 30 1995: Congress enacts Truth in Lending Act “reform”, easing regulations on creditors; bill powered through by Representative Bill McCollum (R-Florida), a key recipient of finance, insurance, and real estate (FIRE) donations ($136,000 in 1993-94).

December 22: As part of Newt Gingrich’s Contract With America, Congress enacts a measure making it more difficult to sue companies for securities fraud.

August 2 1996: Office of Thrift Supervision issues rule preempting almost all state laws regulating S&L credit activities.

1997-1998: FIRE sector spends more than $200 million on lobbying and $150 million on political donations; top agenda items include repealing Glass-Steagall to facilitate mergers.

March 4 1998: First Union acquires The Money Store, nation’s 5th-largest subprime lender (and home to ex-Yankee broadcaster Phil Rizzuto’s commercials).

April 1998: Citicorp and Travelers announce biggest-ever corporate merger ($70 billion); transaction technically illegal under Glass-Steagall; CEO Sandy Weill launches $12 million campaign to repeal law.

June 1998: Conseco purchases mobile home lender turned subprime powerhouse Green Tree in $6 billion deal.

July 1999: North Carolina General Assembly bucks deregulation trend, passing landmark measure to curb predatory lending.

November 1999: Gramm-Leach-Bliley Act guts Glass-Steagall, setting off wave of megamergers among banks and insurance and securities companies. Driving force is Senator Phil Gramm (R-Texas), who has received $4.6 million from FIRE sector over previous decade.

June 20 2000: Treasury and HUD urge Federal Reserve to investigate subprime units of major banks. No Federal Reserve action follows.

June 26: First Union closes The Money Store, takes $2.8 billion write-down.

December 14: As Congress heads for Christmas recess, Senator Gramm attaches 262-page amendment to an omnibus appropriations bill. Commodity Futures Modernization Act will deregulate derivatives trading, give rise to Enron debacle, and open door to an explosion in new, unregulated securities.

December 27: American Homeownership and Economic Opportunity Act makes it harder for consumers to get out of lender-required insurance. National Association of Realtors lobbies hard for it, spending $9 million, plus $4 million in contributions.

March 6 2001: FTC sues Citigroup and its subsidiary Associates, nation’s second largest subprime originator, charging “systematic abusive lending practices” involving two million borrowers; eighteen months later Citigroup settles for a paltry $215 million.

April 6: Federal Reserve chairman Alan Greenspan signals concern with “abusive lending practices that target vulnerable segments of the population and can result in unaffordable payments, equity stripping, and foreclosure”.

July 27: “‘Predatory’ is really a high-profile word with no definition”, Ameriquest chairman Stephen W Prough tells Congress, urging rollback of subprime regulations.

April 22 2002: Georgia’s new anti-predatory law signed; Ameriquest helps lead campaign against it and announces that it won’t do business in Georgia until law is changed. Standard & Poor’s refuses to rate Georgia mortgage securities, choking credit supply to state’s home buyers; law gutted within a year.

October 7: Swiss investment bank UBS announces that Senator Gramm is joining it to “advise clients on corporate finance issues and strategy”; he will also lobby Congress, Treasury, and Federal Reserve on banking and mortgage issues as industry pushes to eliminate predatory-lending rules.

December 18: Conseco files for bankruptcy, mostly due to its purchase of subprime lender Green Tree. In all, thirteen banks have failed during 2002 – most, according to a Federal Reserve report, because of bad loans and “improper accounting related to the securitizing of assets”.

March 2003: HSBC acquires Household Finance, nation’s fourth-largest subprime lender.

May 1: New Jersey’s anti-predatory-lending law signed. Again, Ameriquest and other lenders launch campaign to kill it and Standard & Poor’s says it won’t rate certain New Jersey securities; law gutted within a year.

2004: Ameriquest employees give total of $200,000 to Bush campaign; founder Roland Arnall and wife Dawn give more than $5 million to pro-Bush PACS. Arnall later appointed ambassador to Netherlands.

January 7 2004: Federal Office of the Comptroller of the Currency issues final rule to preempt states from applying most of their credit laws to national banks and their subsidiaries.

March 2005: Representative Robert Ney (R-Ohio) – who will later go to prison on corruption charges related to Abramoff scandal – introduces Responsible Lending Act, billed as an anti-predatory-lending measure but in fact designed to preempt stronger state laws. Key supporters include New Century Financial, nation’s second-largest subprime lender, which has contributed nearly $50,000 to Ney’s campaign. Consumer advocates call it “Loan Shark Protection Act”.

April: Bankruptcy Abuse Prevention and Consumer Protection Act makes it far harder for consumers (but not businesses) to discharge debts. Chief sponsor, Senator Charles Grassley (R-Iowa), has received $2 million-plus from FIRE sector since 1989.

September 1: As housing bubble begins to deflate, administration economist Patrick Lawler announces, “There is no evidence here of prices topping out. On the contrary, house price inflation continues to accelerate.”

September 22: Illinois Supreme Court hands mortgage lenders a victory, blowing away a three percent cap on fees for loans with more than eight percent interest.

January 23 2006: Ameriquest settles 49-state investigation into deceptive subprime practices for $325 million.

April 27: Federal Reserve chairman Ben Bernanke acknowledges “signs of softening” in housing market, but says a “sharp slowdown” unlikely.

July 10: Henry M Paulson Jr sworn in as Treasury secretary, leaving job as Goldman Sachs chairman and CEO. In 2005, Goldman securitized $68 billion in residential mortgages and $23 billion in “other assets” primarily related to CDOs.

January 2 2007: Representative Barney Frank (D-Massachusetts) assumes chairmanship of House Financial Services Committee. FIRE sector tops his list of contributors, with total of $746,000 for 2005-06 cycle.

January 29: Paulson tells Congress, “One of the pleasant surprises I had coming to government has been the strong economy we have today”.

February 22: HSBC’s head of mortgage-lending business resigns. Its losses reach $10.5 billion.

February 28: Bernanke tells House Budget Committee the housing sector “is a concern, but at this point we don’t see it as being a broad financial concern or a major factor in assessing the course of the economy”.

February 28: New-home sales reported down 20.1% from previous year.

March 12: Senator John McCain’s presidential campaign announces that Senator Gramm will join it as cochair and economic policy adviser.

April 2: Subprime giant New Century Financial files for Chapter Eleven after being forced to repurchase billions of dollars of bad loans.

May 3: UBS shuts down Dillon Read Capital Management, its US subprime arm. GM’s finance unit announces deep losses on subprime mortgages. SEC task force begins meeting to examine Wall Street’s handling of subprime loans.

June 9: In Wall Street Journal interview, former Federal Reserve governor Edward Gramlich accuses Greenspan of blocking a 2000 proposal to increase scrutiny of subprime lenders. Greenspan responds there are “a very large number of small institutions, some on the margin of scrupulousness and very hard to detect when they are doing something wrong”.

July 16: Jim Cramer, host of CNBC’s Mad Money, says the subprime “lending thing” is “completely meaningless … It has no relevance whatsoever”. Less than three weeks later, Cramer will have meltdown on air, pleading with Federal Reserve to cut rates and save Wall Street.

July 19-20: In congressional testimony, Bernanke cuts growth forecasts for 2007 and 2008, blaming problems in housing market; warns that subprime crisis could cost up to $100 billion.

August 6: American Home Mortgage, one of the largest US independent home-loan providers, files for Chapter Eleven.

August 16: Countrywide, biggest US mortgage lender, narrowly avoids bankruptcy by taking out emergency $11.5 billion loan.

August 31: Ameriquest goes out of business.

September 14: Representative Barney Frank in Boston Globe: Mortgage crisis “was in large part a natural experiment on the role of regulation”.

September 20: Treasury secretary Paulson tells House Financial Services Committee that “fundamental reappraisals in the pricing and appetite of risk have taken place numerous times … We are in the process of another such reappraisal”.

September 30: UBS announces third-quarter losses of $690 million.

January 2008: Number of homes facing foreclosure up 57% compared to same month of previous year. US unemployment rises sharply.

January 10: Cleveland files lawsuit against numerous financial institutions alleging that their activities in connection with securitization of subprime mortgages created a “public nuisance”. (Litigation still pending.)

January 15: Citigroup reports $9.8 billion loss for fourth quarter and writes down $18 billion in subprime losses.

January 22 & 30: Federal Reserve makes biggest rate cut in 25 years – 1.25 percentage points, to three percent.

February 6: Longest period of decline in nationwide house prices since 1990.

March 7: Former bosses of Merrill Lynch, Countrywide, and Citigroup questioned by a congressional panel about the $460 million in compensation they received between them during five years of subprime boom.

March 16: Bear Stearns announces takeover by JPMorgan Chase in Federal Reserve -engineered bailout; measure approved by Board of Governors with fewer votes than required by law, under a post-9/11 “national security emergency” exception.

March 25: In speech on housing market, Senator McCain calls for easing crisis by “removing regulatory, accounting, and tax impediments to raising capital”.

April 18: Jerry Bowyer, chief economist for financial services firm Benchmark, says in New York Sun op-ed that fault for subprime crisis “lies with the small army of hard-left political hustlers who spent the early 1990s pushing risky mortgages on home lenders. And the fault lies especially with the legislators that gave them the power to do it.”

April 29: Foreclosure activity reported up 112% from first quarter of 2007.

May 6: Bush announces he will veto legislation directing $15 billion to neighborhoods ransacked by foreclosures. Also threatens to veto legislation to provide $300 billion for struggling homeowners (and force lenders to renegotiate some mortgages) because it would be a “burdensome bailout” that “opens taxpayers to too much risk”.

Mother Jones writer Nomi Prins has worked at Goldman Sachs and Bear Stearns.

Research assistance by Sara Abbas and Megan Kiefer

This article has been made possible by the Foundation for National Progress, the Investigative Fund of Mother Jones, and gifts from generous readers like you.

Copyright (c) 2008 The Foundation for National Progress


Bill Totten http://www.ashisuto.co.jp/english/index.html

>The case for nationalizing the banks

>by Barry Grey

wsws.org (January 19 2009)

Published by the International Committee of the Fourth International (ICFI)

Less than four months after Congress passed the Bush administration’s Troubled Asset Relief Program (TARP), authorizing the Treasury Department to spend $700 billion in taxpayer money to bail out the banks, the same banks that received the government handouts are reporting massive losses and the incoming Obama administration is preparing to funnel hundreds of billions in additional funds to Wall Street.

In the interim, the financial crisis has deepened and precipitated a global recession that is acknowledged to be the worst since the Great Depression of the 1930s. Millions more workers, told last fall by Bush and Obama that the government bailout, supposedly designed to benefit “Main Street” and not “Wall Street”, would avert a financial meltdown and mass unemployment, have lost their jobs, their homes and their life savings. Meanwhile, the bankers have refused to use their windfalls to lend to businesses and consumers and have instead either hoarded the government cash or used it to buy up smaller firms.

None of the CEOs and speculators whose corrupt and reckless policies brought their own institutions and the global economy to ruin, while they rewarded themselves with seven- and eight-figure compensation packages, and none of the government regulators who colluded in the plundering of the economy have been called to account. The bankers, with the complicity of the government, flatly refuse to reveal what they have done with the money they received from the Treasury.

The vote by the US Senate on Thursday, after intensive lobbying by the Obama transition team, to release the second $350 billion installment of the $700 billion slush fund sets the stage for an even more massive bailout. In a taste of things to come, the day after the Senate vote, the Treasury agreed to hand over another $20 billion to Bank of America as part of a new rescue package that will have the government absorb up to $118 billion of the bank’s losses. Economists and Federal Reserve officials are openly saying that TARP will have to be followed by many more such bailout funds.

All of this adds up to a colossal fraud perpetrated on the American people – who overwhelmingly oppose the bailouts – for the sole purpose of protecting the interests of the financial aristocracy. There is not now, and there never was, a considered, worked-out plan to solve the financial crisis and avert a social catastrophe.

When Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, and Federal Reserve Chairman Ben Bernanke called an emergency meeting of congressional leaders in mid-September to demand that they sign off on their proposal to authorize the use of $700 billion in public funds to rescue the banks, the document they presented was less than three pages long.

Just three weeks after Congress passed the TARP legislation, Paulson announced that the plan he and Bernanke had put forward as the solution to the crisis was being scrapped. Instead of using the money to buy “troubled” subprime and other asset-backed securities from the banks, he decided to simply hand the banks billions in cash, with virtually no strings attached.

Suddenly a political and media establishment that had for decades lambasted the notion of “throwing money” at social problems and opposed any government intervention into the market spoke with one voice of the need for massive government action to place the resources of the people in the hands of the Wall Street elite. When it came to protecting the wealth of the bankers and big shareholders, the operative phrase was “anything goes”.

The reality of class relations in America is being mercilessly exposed. The cost of the multi-trillion-dollar handout to Wall Street is to be borne by the working class. Obama cites the vast rise in budget deficits and government debt as a result of the bailouts as justification for sweeping cuts in social programs – including Social Security, Medicare and Medicaid – upon which tens of millions of workers and retirees depend.

The new wave of bank bailouts will do no more to solve the crisis than the last one. None of the measures being devised can seriously address the deepening economic catastrophe because they leave untouched the basic interests of the ruling class, which are rooted in its private ownership and control of the financial system.

For the same reason none of the financial wizards on Wall Street, in academia or in government can give a coherent explanation of the crisis. As defenders of the capitalist system, they dare not acknowledge that the global financial meltdown is an expression of the breakdown of the capitalist system itself.

The current crisis is the inevitable outcome of two inter-related processes: The protracted decline of American capitalism and a crisis of profitability in basic production that is rooted in fundamental contradictions of the capitalist system. Behind the colossal growth of financial parasitism and outright criminality is the attempt by the American ruling elite to overcome the mounting contradictions of its system by shifting investment from manufacturing to ever more exotic forms of financial speculation. Particularly over the past three decades the financial power brokers, supported by the government, have dismantled much of the industrial base of the United States to seek higher rates of profit from various forms of financial manipulation. The creation of wealth for the ruling class has been largely separated from the creation of real value in the production process.

Now the countless trillions of paper values are collapsing, leaving in their wake an economic and social disaster. To even begin to offset these losses the ruling class must intensify its exploitation of the working class, spreading unemployment, poverty and social misery.

No progressive economic plan to solve the crisis can be developed apart from taking the major banks and financial institutions out of private hands. They must be nationalized and transformed into public utilities under the democratic control of the working population. The vast financial resources that the banks control must be used to provide decent education, housing, health care, retirement benefits and well-paying jobs for all.

This should be carried out without compensation to their former owners, while securing the deposits and savings of working people and small business owners.

The books of the major banks, financial firms, insurance companies and hedge funds must be opened to public examination to lay bare their illegal and socially destructive activities.

There must be a public accounting of the fraud and corruption that have fueled the crisis, and those responsible must be held accountable, including by means of criminal prosecution.

The billions of dollars in social wealth diverted into the private accounts of speculators and bankers must be recovered, to be used for the expansion of social programs that benefit the masses.

This is not merely, or even primarily, a technical task. It is a political and revolutionary one. The power of the financial aristocracy must be broken. As with the ancien regime before the French Revolution, the continued sway of the American financial elite stands as an absolute obstacle to any socially progressive and rational economic policy. The financial elite adamantly opposes any measures that impinge on its wealth and prerogatives, regardless of the cost to society at large. Indeed, it is plotting every day, in league with its bribed agents in the Democratic and Republican parties, to exploit the crisis of its own making to monopolize an even greater share of the national wealth.

The prerequisite for the nationalization of the banks and their subordination to the needs of society is an independent political movement of the working class on the basis of socialist policies. It is a question of state power. No capitalist government can or will carry out this task. What is required is a political and revolutionary struggle to establish a workers’ government.

Copyright (c) 1998-2009 World Socialist Web Site – All rights reserved


Bill Totten http://www.ashisuto.co.jp/english/index.html

>The Swedish model is the best hope for western banks

>by Christopher Wood

Financial Times FT.com (January 20 2009)

As newspaper headlines are full of stories about more forced capital injections by governments into leading American and British banks, it has surely become time to end the present ad hoc approach to the intensifying banking crisis.

In the US and Britain most of the big banks have now become a weird hybrid of public and private sector, given growing government equity stakes in these banks. This raises the issue of the deeply flawed policy response to the crisis. This is that if the authorities are not prepared to let insolvent financial institutions go bust, which would be the quickest, most effective way to correct excesses, as the Lehman precedent demonstrates, the next best way is to nationalise the, in effect bust, banks outright. This remains the opposite of what is happening in the US and the other country most vulnerable to an imploding financial services sector, namely Britain. Rather, what is happening is nationalisation by stealth.

This approach reached its ludicrous extreme in the November bail-out of Citigroup, where the US government put more money in than the entire market capitalisation of the company on the day the deal was announced. But the taxpayer ended up with only a 7.8 per cent equity stake while incumbent management was left in place! Yet now, just two months later, still more taxpayer money looks as if it is about to be poured into Citigroup, while a similar sweetheart deal has been done with Bank of America.

This approach is a recipe for gross conflicts of interest. It means the institutions receiving taxpayer money are encouraged to continue to avoid ultimately necessary writedowns because of the hope of yet more bail-outs. Yet the reality is that there is an established template for what to do in banking crises if governments remain determined, as they do, not to allow bank failures. That is the Swedish model of the early 1990s.

Under this model banks were nationalised, fully aligning the interests of the institution with that of the taxpayer, while the depositor was fully protected. In the process shareholders were in effect wiped out, as they should be, and incumbent management was replaced, as it should be. This left none of the massive conflicts of interest, as well as perverse unintended consequences, caused by the present anomalous situation in the west where too many banks are being rewarded for failure – leading, incidentally, to a massive competitive disadvantage for those banks that managed their affairs more prudently.

A crucial principle of the Swedish model is that banks were forced to write down their assets to market and take the hit to their equity before the recapitalisation began. This is of course precisely what has not happened in either the US or Britain, where too many policy measures seek to delay asset price clearing and only add public sector debt on top of existing private sector debt. This is why the current approach in the west to the banking crisis can be compared more accurately with Japanese policy in the 1990s, and that clearly did not work. The outcome, as then, is increasingly zombie-like banks.

The ultimate endgame in countries such as the US and Britain is still likely to be full-scale nationalisation of most of the banking system, as the logic of such action finally becomes overwhelming. But it would be much better if this were done proactively rather than reactively, since it would accelerate resolution of the financial crisis. This is why nationalising the banks would also be bullish for stock markets, if not for the specific bank stocks themselves – although, obviously, there are powerful vested interests wanting to prevent such an ultimate course of action.

Another point about nationalisation, as in the Swedish model, is that it allows the government to separate the bad assets from banks’ balance sheets and place them in one big “bad bank”. This should enable whatever is left of the smaller “good” bank, which should be managed by old-fashioned commercial bankers, to become a viable private sector operator again more quickly. Another more technical, albeit important, point is that, given that many of the bad assets in this cycle will be derivative- related in some form or other, where two nationalised banks have been counterparties to the same transaction the derivative deal could be in effect terminated or cancelled because the government would be the owner of both entities. In this respect the limited number of counterparties in the $55,000 billion (as estimated by the International Swaps and Derivatives Association in mid-2008) credit default swap market could suddenly become a positive and not, as now, a systemic negative.

It is true the Swedish model is not a pain-free panacea. It would just mean the beginning of an orderly work out. Unfortunately, the deflationary pain is inevitable because of the scale of the credit boom of recent years, the excesses of which were ignored for so long by the relevant central bankers.

Christopher Wood, equity strategist for CLSA Ltd, in Hong Kong, is the author of The Bubble Economy (first published by Atlantic Monthly Press, 1992)

Copyright The Financial Times Limited 2009

“FT” and “Financial Times” are trademarks of the Financial Times.

(c) Copyright The Financial Times Ltd 2009.


Bill Totten http://www.ashisuto.co.jp/english/index.html

>The Ecology of Social Change

>by John Michael Greer

The Archdruid Report (January 28 2009)

Druid perspectives on nature, culture, and the future of industrial society

Last week’s Archdruid Report post was a bit of a departure from this blog’s normal fare, but it was a departure with a purpose. By turning a spotlight on the way that so many Americans have projected what amounts to a paranoid mythology of incarnate evil onto whichever side of the political spectrum they don’t inhabit, I hoped to begin a conversation about the immense gap between expectation and reality that hamstrings most attempts at constructive social change, in America as elsewhere.

I have to say that the true believers in the mythology responded to their cue with a great deal of enthusiasm. I received a bumper crop of angry screeds assailing me, in lively and in some cases unprintable language, for suggesting that people should be judged by their actions rather than the intentions imputed to them by their most bitter enemies. My favorite among these comments rounded off a thumping denunciation by demanding that I resign at once from my position as archdruid. The author never quite got around to explaining why acceptance of his extremist ideology should be so vital a part of my job description, so I didn’t take his advice.

Now it so happens that I spent much of the weekend reading Carl Jung’s memorably weird autobiography Memories, Dreams, Reflections (1963), and so it was hard to miss the relevance of Jung’s concept of shadow projection to all this. The shadow is Jung’s name for the mental dumpster into which individuals and societies stuff the aspects of themselves they dare not face; when the dumpster gets too full, one refuge from self-knowledge lies in tipping its contents onto someone else, and claiming that the objectionable qualities belong to the scapegoat rather than oneself.

It needs to be recognized in this context that it’s only in modern morality plays that scapegoats are invariably virtuous and innocent. In the real world, it often happens that the person targeted has his own faults, sometimes grievous ones, and that these are routinely used to justify whatever other accusations are heaped on him. This process seems universal among human beings – I very much doubt any of us are entirely free of the habit of seeing our own worst qualities in the people we dislike – but its intensity varies between individuals, cultures, and historical periods, and Jung is surely right to point out that it reaches peaks when an individual or a society get caught in the gap between what the world is assumed to be and what it actually is.

Survey any of the major historic outbreaks of mass scapegoating and violence and you’ll find it in a context where socially acceptable belief systems failed to keep up with a changing world. Behind the European witch hunts, for example, lay the collapse of late medieval worldviews that hardened into dogma as they were cracking apart at the seams, just as the fatal mismatch between German fantasies of global dominion and Germany’s actual status as a little country without oil reserves or defensible borders in an age of sprawling petroleum-fueled empires played a major role in setting the stage for its catastrophic 20th-century history.

What makes the situation in contemporary America interesting, from this perspective, is the way that its mainstream culture and its self-described alternative countercultures have fallen into versions of the same double-bind. Many posts here, and of course quite a bit of excellent analysis by other authors, have outlined the way that the narratives of the cultural mainstream in contemporary America built a worldview of perpetual progress and limitless abundance on the temporary foundation of cheap fossil fuels, and have been made hopelessly irrelevant by the end of the petroleum age. Less often discussed and, I believe, less often noticed is the way that most current proposals meant to replace the current order of society with a better one also rest on beliefs about the world that hold up very poorly in the face of experience.

The mismatch here can best be traced along a specific fault line dividing future visions from present realities. Page through any recent proposal for substantive social change and odds are that the better world it envisions is usually, at least in theory, better in terms of every variable its authors consider relevant. There are rarely any tradeoffs, or any sense of the bitter choices that so often constrain the decisions of real societies in the real world; the inhabitants of the better future do not have to choose between peace and freedom, between feeding the hungry and protecting the environment, or indeed between any two values; given the right social system, the implication seems to be, you can have it all.

Consider the ways in which these same proposals hope to bring about the change they envision and the same fracture opens up. Whether they put their faith in organization, political action and the like, or expect some deus ex machina, whether cataclysmic or mystical, to sweep away the old order of things and leave the field clear for the future to be born, nearly all of them assume that the only obstacles to a Utopian society, the only factors that force hard choices on people, are the institutions, individuals, or attitudes governing today’s world.

These curious habits of thought unfold from a single assumption: that human choices and only human choices place limits on the perfection of human society. Back of this assumption lies the prestige of the Enlightenment cult of reason, with its conviction that building a better social mousetrap will cause the world to beat a path to your Utopian door. Yet it’s hard to think of an assumption that has been more thoroughly disproved by experience. Consistently, the more Utopian a new society has appeared on paper, the more disastrous it has turned out to be in practice. Proponents of social change tend to insist that their new society will be different, but at this point in history, that insistence is starting to wear very thin.

The crucial flaw in most of today’s ideas about social change, then, may just be that – even when they wrap themselves in environmental slogans – they are rooted in a fundamental denial of ecology. Imagine for a moment that instead of a human society, we are talking about some other ecosystem composed of living things. That ecosystem has evolved over many generations in relationship to other systems, animate and inanimate, and it maintains itself by complex balances that challenge any attempt at analysis. What happens when human beings set out to reengineer the ecosystem to suit their own preferences, especially if they assume as a matter of course that their new ecosystem will necessarily be stable, balanced, and healthy if it is pleasing to them?

Of course we don’t have to speculate about the answer; the catastrophic results of human mismanagement of natural ecosystems are far too well documented. Our species has learned the hard way, over and over again, that tinkering with an ecosystem needs to be done with exquisite care. It can be done – traditional societies all over the world have evolved ways of shaping their environments for human benefit that still maintain the overall integrity of the ecosystem, and today’s permaculturists and students of appropriate technology are moving in the same direction – but it can only be done in small steps, with a great deal of knowledge and an even greater supply of patience.

I am coming to suspect that exactly the same thing is true of human societies. The discipline of human ecology has shown that the same principles that shape the environmental relationships of other species and other communities also apply to our species and our communities. Like these other living things, human beings depend for their survival on natural cycles, and are subject to natural limits. Like the communities of other living things, human communities – from villages to nations – are shaped by their history, adapt to their environments, face hard choices between competing goods, and respond homeostatically in order to counter movements toward disruptive change.

Thus social change is possible, just as environmental change is possible, but it may need to be pursued in a very different spirit from the one that motivates the Utopian ideologies of the present and the recent past. If we are to take human ecology seriously, it seems to me, it’s time to start trying to understand the ecological conditions – the relationships linking human beings to each other, to other living things, and to inanimate nature – that foster desirable social changes. Then, in the manner of tribal gardeners carefully replacing noxious plants with edible ones, those who desire those changes might work to bring about those conditions, keeping an eye on the results and letting experience rather than ideology guide their efforts.

As far as I know, the art of applied human ecology or social ecotechnics suggested here exists only in the most embryonic form, and no little effort will be needed even to begin the process of evolving it. Still, the attempt to better society by remaking it according to some ideological model or other has failed so consistently that it’s high time to try something else.

´╗┐John Michael Greer has been active in the alternative spirituality movement for more than 25 years, and is the author of a dozen books, including The Druidry Handbook (2006) and The Long Descent (2008). He lives in Ashland, Oregon.


Bill Totten http://www.ashisuto.co.jp/english/index.html

>Bernanke’s speech shows where BOJ failed

>by Richard A Werner The Daily Yomiuri (January 29 2009)

US Federal Reserve Board Chairman Ben Bernanke gave an interesting speech at the London School of Economics in mid-January. Unusual for speeches by the head of a major central bank, Bernanke was fairly direct in his message and coherent in his analysis. He also gave some insights into what seems to be his actual thinking. If he does mean what he said, then this speech could be of significance for the world economy – and also of interest in Japan.

The Bank of Japan has for almost twenty years insisted that it did not have the tools to end the banking-bust depression, could not help the deflation, was basically powerless, and that it depended on some structural reform that was supposed to be implemented by others – the government in particular. By contrast, Bernanke emphasized that the Fed had the tools available to battle the financial and economic crisis, and was using them without delay.

Bernanke has written about Japanese deflation and the policies of the Bank of Japan in his academic writings and has sharply criticized the Bank of Japan for its inaction and for allowing a banking crisis to be transformed into a multiyear economic downturn and depression.

Bernanke explained what he had written in his analysis of the Bank of Japan’s policy many years ago in his lecture, namely that a central bank could eventually boost asset prices by creating money and putting it into circulation through purchases of assets and direct lending, and could in this way support and stimulate the economy. He used the term quantitative easing, which had become well known in the context of the Bank of Japan. Indeed, it is a term that was originally used in Japanese (ryoteki kanwa) in the early 1990s by critics of the Bank of Japan.

I have been one of the main users of this term because I wanted to contrast such needed policy from traditional ways of monetary stimulation or the monetarist way of referring to boosting the money supply. I wanted to emphasize that using the price mechanism of interest rates was not likely to help and therefore quantitative monetary policy was required.

What’s wrong with the BOJ?

While the expression quantitative easing had been mainly used by Bank of Japan critics, this changed in 2001 when the Bank of Japan proclaimed it would try what critics had then been demanding for almost a decade – one can’t fault the bank for rushing into new things … Thus in March 2001, the Bank of Japan announced it was officially going to change its monetary policy by switching from its alleged use of interest rates to adopting quantitative easing (using the term ryoteki kanwa and translating this as quantitative easing in its English announcements).

However, the Bank of Japan’s use of this term created much confusion because the policy it adopted in 2001 and many subsequent years was not the true quantitative easing that critics such as myself had demanded. The quantity that needs easing is the quantity of credit creation. This is necessary and sufficient for a recovery in a situation like this. The Bank of Japan, however, chose to merely increase the reserves of banks held at the central bank. This is a traditional monetarist policy prescription, which boosts a measure called high powered money, but the measure is pointless. I had warned many times that this was likely to fail.

What good does it do the economy if banks deposit more money in the central bank? More credit creation is needed. That can only come from the central bank or through the normal route – from commercial banks through the extension of bank loans. But the Bank of Japan failed to boost credit creation. Thus its quantitative easing policy failed. As a result of this failure, the Bank of Japan’s leaders would in the following years give speeches stating that the critics had been proven wrong. They would claim they tried quantitative easing as critics recommended, and it failed!

However, we witnessed only the tatemae (facade) of quantitative easing, not the honne (actual fact). Before 2001, the Bank of Japan did not actually want to reflate the economy. As Bank of Japan leaders have said on the record, they were quite happy about the recession because they used it to put pressure on the government to change laws and introduce US-style deregulated free-market capitalism.

Despite its official conversion to quantitative easing in 2001, this stance did not change. The central bank kept the quantity of credit creation tight. Thus, despite the nominal rise in high-powered money, the economy remained mired in recession. There was a brief recovery in 2006 – and again this is a case in point – it was based on a temporary recovery in credit creation. However, this policy was reversed by the Bank of Japan as soon the first shoots of recovery had become visible and Japan has been heading back into deflation ever since. One can only hope that the Bank of Japan will follow former Fed Chairman Alan Greenspan’s recent example and admit that the current global crisis has disproved and discredited the deregulated free-market model.

Monetize fiscal policy

What is interesting about the Fed’s current policies is that there seems to be some real – in the correct meaning of the term – quantitative easing going on. Credit creation by the Fed is ballooning. This is done by direct purchases of assets by the Fed and by direct lending by the Fed. The Fed has now also started to purchase mortgage-backed securities. It seems that Bernanke is not using smoke and mirrors. What he says seems to be what he actually thinks and plans to do (his honne) – quite a revolutionary approach to central banking.

Many observers and experts are currently wondering whether the world is now going to go down the road that Japan has traveled over the past eighteen years – a road that includes rising unemployment, deflation, falling asset prices and a shrinking economy. The potential for this to occur exists because the credit bubbles in Britain, Ireland, Spain, the United States and a number of other countries operated on the same mechanics as the Japanese bubble economy of the 1980s. Excessive credit creation used for speculative purposes drove up asset prices, but it was predictable that it all had to turn into bad debts, busting the banking system and resulting in a credit-crunch recession.

The policy response taken by the key central bank may be where the parallels end. The current measures taken by the Fed and their scale are unusually aggressive and contrast sharply with the policies adopted by the Bank of Japan since 1991. The Fed also is monetizing fiscal policy, while the Japanese central bank has so far refused to do so. Thus at present, one can say that the US economy is likely to recover far more quickly than the economies of other countries, notably Japan. Where central banks continue to let credit creation stagnate, and where they refuse to monetize fiscal policy, economies will continue to shrink. At the moment, this includes Japan and Britain.

The British government’s fiscal stimulation has been entirely unfunded, which means that all the government bonds issued to fund it have deprived the banking system of liquidity. Hence bank lending will continue to slow. For Britain and other post-bubble economies such as Ireland and Spain, we must expect a long slump, perhaps even on a Japanese scale. But that depends on the goals of the respective central banks.

One lesson we should learn is that there should be more public debate about the role of central banks in creating the current global crisis and the role they should play from now on. Over the past thirty years, central banks worldwide have become more independent from governments and parliaments. Yet, despite their increased power, macroeconomic performance has deteriorated and the world has seen an unusually large number of banking and economic crises.

In almost all cases, the crises were due to bubbles caused by excessive credit creation for speculative purposes – something I had warned needed monitoring and restricting by central banks. But the central banks chose to let credit creation rip. Only if the goal of central banks had been to create and exacerbate business cycles could we say that they have done a good job.

It seems clear, therefore, that the topic of central bank independence should be reviewed, for this independence has not had the desired results.


Werner is professor of international banking at the School of Management, University of Southampton, and author of the books Princes of the Yen (2003) – whose Japanese version En no Shihaisha (2001) was a bestseller – and New Paradigm in Macroeconomics (2005).


Bill Totten http://www.ashisuto.co.jp/english/index.html

>Think Again

>Climate Change

by Bill McKibben

Common Dreams (January 05 2009)

Act now, we’re told, if we want to save the planet from a climate catastrophe. Trouble is, it might be too late. The science is settled, and the damage has already begun. The only question now is whether we will stop playing political games and embrace the few imperfect options we have left.

“Scientists Are Divided”

No, they’re not. In the early years of the global warming debate, there was great controversy over whether the planet was warming, whether humans were the cause, and whether it would be a significant problem. That debate is long since over. Although the details of future forecasts remain unclear, there’s no serious question about the general shape of what’s to come.

Every national academy of science, long lists of Nobel laureates, and in recent years even the science advisors of President George W Bush have agreed that we are heating the planet. Indeed, there is a more thorough scientific process here than on almost any other issue: Two decades ago, the United Nations formed the Intergovernmental Panel on Climate Change (IPCC) and charged its scientists with synthesizing the peer-reviewed science and developing broad-based conclusions. The reports have found since 1995 that warming is dangerous and caused by humans. The panel’s most recent report, in November 2007, found it is “very likely” (defined as more than ninety percent certain, or about as certain as science gets) that heat-trapping emissions from human activities have caused “most of the observed increase in global average temperatures since the mid-20th century”.

If anything, many scientists now think that the IPCC has been too conservative – both because member countries must sign off on the conclusions and because there’s a time lag. Its last report synthesized data from the early part of the decade, not the latest scary results, such as what we’re now seeing in the Arctic.

In the summer of 2007, ice in the Arctic Ocean melted. It melts a little every summer, of course, but this time was different – by late September, there was 25 percent less ice than ever measured before. And it wasn’t a one-time accident. By the end of the summer season in 2008, so much ice had melted that both the Northwest and Northeast passages were open. In other words, you could circumnavigate the Arctic on open water. The computer models, which are just a few years old, said this shouldn’t have happened until sometime late in the 21st century. Even skeptics can’t dispute such alarming events.

“We Have Time”

Wrong. Time might be the toughest part of the equation. That melting Arctic ice is unsettling not only because it proves the planet is warming rapidly, but also because it will help speed up the warming. That old white ice reflected eighty percent of incoming solar radiation back to space; the new blue water left behind absorbs eighty percent of that sunshine. The process amps up. And there are many other such feedback loops. Another occurs as northern permafrost thaws. Huge amounts of methane long trapped below the ice begin to escape into the atmosphere; methane is an even more potent greenhouse gas than carbon dioxide.

Such examples are the biggest reason why many experts are now fast-forwarding their estimates of how quickly we must shift away from fossil fuel. Indian economist Rajendra Pachauri, who accepted the 2007 Nobel Peace Prize alongside Al Gore on behalf of the IPCC, said recently that we must begin to make fundamental reforms by 2012 or watch the climate system spin out of control; NASA scientist James Hansen, who was the first to blow the whistle on climate change in the late 1980s, has said that we must stop burning coal by 2030. Period.

All of which makes the Copenhagen climate change talks that are set to take place in December 2009 more urgent than they appeared a few years ago. At issue is a seemingly small number: the level of carbon dioxide in the air. Hansen argues that 350 parts per million is the highest level we can maintain “if humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted”. But because we’re already past that mark – the air outside is currently about 387 parts per million and growing by about two parts annually – global warming suddenly feels less like a huge problem, and more like an Oh-My-God Emergency.

“Climate Change Will Help as Many Places as It Hurts”

Wishful thinking. For a long time, the winners-and-losers calculus was pretty standard: Though climate change will cause some parts of the planet to flood or shrivel up, other frigid, rainy regions would at least get some warmer days every year. Or so the thinking went. But more recently, models have begun to show that after a certain point almost everyone on the planet will suffer. Crops might be easier to grow in some places for a few decades as the danger of frost recedes, but over time the threat of heat stress and drought will almost certainly be stronger.

A 2003 report commissioned by the Pentagon forecasts the possibility of violent storms across Europe, megadroughts across the Southwest United States and Mexico, and unpredictable monsoons causing food shortages in China. “Envision Pakistan, India, and China – all armed with nuclear weapons – skirmishing at their borders over refugees, access to shared rivers, and arable land”, the report warned. Or Spain and Portugal “fighting over fishing rights – leading to conflicts at sea”.

Of course, there are a few places we used to think of as possible winners – mostly the far north, where Canada and Russia could theoretically produce more grain with longer growing seasons, or perhaps explore for oil beneath the newly melted Arctic ice cap. But even those places will have to deal with expensive consequences – a real military race across the high Arctic, for instance.

Want more bad news? Here’s how that Pentagon report’s scenario played out: As the planet’s carrying capacity shrinks, an ancient pattern of desperate, all-out wars over food, water, and energy supplies would reemerge. The report refers to the work of Harvard archaeologist Steven LeBlanc, who notes that wars over resources were the norm until about three centuries ago. When such conflicts broke out, 25 percent of a population’s adult males usually died. As abrupt climate change hits home, warfare may again come to define human life. Set against that bleak backdrop, the potential upside of a few longer growing seasons in Vladivostok doesn’t seem like an even trade.

“It’s China’s Fault”

Not so much. China is an easy target to blame for the climate crisis. In the midst of its industrial revolution, China has overtaken the United States as the world’s biggest carbon dioxide producer. And everyone has read about the one-a-week pace of power plant construction there. But those numbers are misleading, and not just because a lot of that carbon dioxide was emitted to build products for the West to consume. Rather, it’s because China has four times the population of the United States, and per capita is really the only way to think about these emissions. And by that standard, each Chinese person now emits just over a quarter of the carbon dioxide that each American does. Not only that, but carbon dioxide lives in the atmosphere for more than a century. China has been at it in a big way less than twenty years, so it will be many, many years before the Chinese are as responsible for global warming as Americans.

What’s more, unlike many of their counterparts in the United States, Chinese officials have begun a concerted effort to reduce emissions in the midst of their country’s staggering growth. China now leads the world in the deployment of renewable energy, and there’s barely a car made in the United States that can meet China’s much tougher fuel-economy standards.

For its part, the United States must develop a plan to cut emissions – something that has eluded Americans for the entire two-decade history of the problem. Although the US Senate voted down the last such attempt, Barack Obama has promised that it will be a priority in his administration. He favors some variation of a “cap and trade” plan that would limit the total amount of carbon dioxide the United States could release, thus putting a price on what has until now been free.

Despite the rapid industrialization of countries such as China and India, and the careless neglect of rich ones such as the United States, climate change is neither any one country’s fault, nor any one country’s responsibility. It will require sacrifice from everyone. Just as the Chinese might have to use somewhat more expensive power to protect the global environment, Americans will have to pay some of the difference in price, even if just in technology. Call it a Marshall Plan for the environment. Such a plan makes eminent moral and practical sense and could probably be structured so as to bolster emerging green energy industries in the West. But asking Americans to pay to put up windmills in China will be a hard political sell in a country that already thinks China is prospering at its expense. It could be the biggest test of the country’s political maturity in many years.

“Climate Change Is an Environmental Problem”

Not really. Environmentalists were the first to sound the alarm. But carbon dioxide is not like traditional pollution. There’s no Clean Air Act that can solve it. We must make a fundamental transformation in the most important part of our economies, shifting away from fossil fuels and on to something else. That means, for the United States, it’s at least as much a problem for the Commerce and Treasury departments as it is for the Environmental Protection Agency.

And because every country on Earth will have to coordinate, it’s far and away the biggest foreign-policy issue we face. (You were thinking terrorism? It’s hard to figure out a scenario in which Osama bin Laden destroys Western civilization. It’s easy to figure out how it happens with a rising sea level and a wrecked hydrological cycle.)

Expecting the environmental movement to lead this fight is like asking the USDA to wage the war in Iraq. It’s not equipped for this kind of battle. It may be ready to save Alaska’s Arctic National Wildlife Refuge, which is a noble undertaking but on a far smaller scale. Unless climate change is quickly de-ghettoized, the chances of making a real difference are small.

“Solving It Will Be Painful”

It depends. What’s your definition of painful? On the one hand, you’re talking about transforming the backbone of the world’s industrial and consumer system. That’s certainly expensive. On the other hand, say you manage to convert a lot of it to solar or wind power – think of the money you’d save on fuel.

And then there’s the growing realization that we don’t have many other possible sources for the economic growth we’ll need to pull ourselves out of our current economic crisis. Luckily, green energy should be bigger than IT and biotech combined.

Almost from the moment scientists began studying the problem of climate change, people have been trying to estimate the costs of solving it. The real answer, though, is that it’s such a huge transformation that no one really knows for sure. The bottom line is, the growth rate in energy use worldwide could be cut in half during the next fifteen years and the steps would, net, save more money than they cost. The IPCC included a cost estimate in its latest five-year update on climate change and looked a little further into the future. It found that an attempt to keep carbon levels below about 500 parts per million would shave a little bit off the world’s economic growth – but only a little. As in, the world would have to wait until Thanksgiving 2030 to be as rich as it would have been on January 1 of that year. And in return, it would have a much-transformed energy system.

Unfortunately though, those estimates are probably too optimistic. For one thing, in the years since they were published, the science has grown darker. Deeper and quicker cuts now seem mandatory.

But so far we’ve just been counting the costs of fixing the system. What about the cost of doing nothing? Nicholas Stern, a renowned economist commissioned by the British government to study the question, concluded that the costs of climate change could eventually reach the combined costs of both world wars and the Great Depression. In 2003, Swiss Re, the world’s biggest reinsurance company, and Harvard Medical School explained why global warming would be so expensive. It’s not just the infrastructure, such as sea walls against rising oceans, for example. It’s also that the increased costs of natural disasters begin to compound. The diminishing time between monster storms in places such as the US Gulf Coast could eventually mean that parts of “developed countries would experience developing nation conditions for prolonged periods”. Quite simply, we’ve already done too much damage and waited too long to have any easy options left.

“We Can Reverse Climate Change”

If only. Solving this crisis is no longer an option. Human beings have already raised the temperature of the planet about a degree Fahrenheit. When people first began to focus on global warming (which is, remember, only twenty years ago), the general consensus was that at this point we’d just be standing on the threshold of realizing its consequences – that the big changes would be a degree or two and hence several decades down the road. But scientists seem to have systematically underestimated just how delicate the balance of the planet’s physical systems really is.

The warming is happening faster than we expected, and the results are more widespread and more disturbing. Even that rise of one degree has seriously perturbed hydrological cycles: Because warm air holds more water vapor than cold air does, both droughts and floods are increasing dramatically. Just look at the record levels of insurance payouts, for instance. Mosquitoes, able to survive in new places, are spreading more malaria and dengue. Coral reefs are dying, and so are vast stretches of forest.

None of that is going to stop, even if we do everything right from here on out. Given the time lag between when we emit carbon and when the air heats up, we’re already guaranteed at least another degree of warming.

The only question now is whether we’re going to hold off catastrophe. It won’t be easy, because the scientific consensus calls for roughly five degrees more warming this century unless we do just about everything right. And if our behavior up until now is any indication, we won’t.




Bill Totten http://www.ashisuto.co.jp/english/index.html


>This is how a government elected to stamp out sleaze became worse than its predecessor.

by George Monbiot

The Guardian (January 27 2009)

So now the circle is closed. The government which won a landslide victory in 1997 after Tory MPs were revealed to have taken cash for parliamentary questions now faces far graver allegations: cash for laws {1, 2}. Along the way, almost every policy which distinguished it from John Major’s corrupt and pointless regime has been abandoned.

The difference between these two moments – 1997 and 2009 – is that now there is nowhere to turn. There are the minor parties, but they have been systematically excluded by another broken promise: the failure to reform the electoral system. New Labour has engineered the worst of all worlds: it has sustained a system which ensures that only one of two parties has a chance of power, and it has rooted out the policies which made a choice between the two worthwhile. At least when the Tories were in government we could dream of something better.

It is fitting and unsurprising that the scene of the new scandal is the unelected second chamber whose proper reform Blair and Brown have spent twelve years avoiding. The deregulation of the banks, the love affair with the neocons, the failure to tax the rich, Peter Mandelson … is there any slithering cop-out which has not now returned to haunt this government?

The premise of Robert Harris’s novel The Ghost (2007) – that Blair’s premiership was the creation of a foreign intelligence service – is correct in spirit if not in substance. For twelve years the government of this country has acted as an agent of other powers: the US; big business; big money; anything except the electorate. It is hard now to believe that it was elected in a frenzy of hope very much like the excitement surrounding Barack Obama.

Tomorrow, with impeccable timing, the Alliance for Lobbying Transparency launches its campaign in parliament for public scrutiny of the contacts between legislators and professional hustlers {3}. There’s a major lobbying scandal about once a month in this country, and no one who is aware of the government’s failure to regulate this industry should be surprised. It was elected to stamp out sleaze, but since 1997 it has done almost nothing.

So do our noble lords, unmolested by the law, routinely put the interests of business above those of the people who didn’t elect them? As SpinWatch records, in 2007 some of them were selling parliamentary passes to lobbyists for defence, transport, freight and legal companies {4}. In October of that year the Labour peer Lord Hoyle admitted that he had been paid by an arms company rep to introduce him to the minister for defence procurement, Lord Drayson {5}, although Lord Hoyle was cleared by a house of lords committee in May 2008. Last year, Lady Harris gave a researcher’s pass to Robin Ashby, whose company lobbies ministers on behalf of BAE Systems and other weapons manufacturers. Lady Harris is paid by Mr Ashby as an adviser to another company he runs {6}.

But the problem is not confined to the House of Lords. Lobbying undermines democracy throughout the British government. In March last year, for example, we discovered that the government passed data which it had withheld from the public to the airport operator BAA. The data showed that a third runway at Heathrow would immediately breach European noise and pollution limits, ensuring that it could never be built. BAA and the government worked together to re-engineer the figures to fit the limits. Their fake data was then presented to the public in the government’s consultation paper {7, 8}. It was used again this month to justify the decision to approve the third runway. This is the kind of wheeze you’d expect in Nigeria.

Like Nigeria, the UK has no effective safeguards against such collusion. As the House of Commons Public Administration Committee points out, “lobbying activity in the United Kingdom is subject to no specific external regulation” {9}. Nor is it subject to anything resembling self-regulation. The sleazebags who suborn our representatives operate in a world without rules.

On the other side of the fence, there are a few feeble constraints on the behaviour of MPs and officials. For example, former ministers and civil servants who want to work for the companies they used to regulate have to apply to the Advisory Committee on Business Appointments. Its members are a representative sample of British society: three lords and three knights, all white, all male, all educated at Oxford or Cambridge, all over seventy {10}. These young firebrands never stop anyone from taking up a post in business, advising only that former ministers and officials do not become “personally involved in lobbying” for twelve months after they leave the government {11}. This doesn’t prevent them from telling their new employers who needs to be lobbied and how, and where the most lucrative opportunities might lie.

The rules have actually slackened over the past few years. The new ministerial code published in 2007 dropped the requirement that meetings between ministers and lobbyists should be recorded {12}. It’s not just that contacts between legislators and business lobbyists are virtually unregulated; we’re not even allowed to see what’s going on.

Earlier this month, the public administration committee proposed a series of anti-corruption rules. They’re a reasonable start, which would take us more or less to the position the United States reached in 1946, when the Federal Regulation of Lobbying Act was passed. Since then the US Congress, which admittedly has even graver cases of corruption to contend with, has passed a series of further laws, culminating in the 2007 Honest Leadership and Open Government Act. Anyone can now see, with a quick internet search, who is lobbying whom, whom they represent and how much they are being paid. Lobbyists who fail to comply with the rules can be imprisoned for five years {13}. Last week Barack Obama signed an executive order banning everyone working for the government from participating in any matter relating to their former employment for two years after leaving office {14}.

But even the public administration committee’s timid and dated proposals have been received with horror by government ministers. The Cabinet Office minister Tom Watson told the committee “we have a pretty good system in the UK” and demanded that it show him evidence of a systemic problem within the lobbying industry {15}.

Some of us believe that a major scandal every few weeks is as much evidence as anyone would need, but Watson’s Fork is a cunning device. Without the regulations the committee proposes, whose purpose is to open the system up to public scrutiny, it’s impossible to accumulate the comprehensive evidence Mr Watson demands. Without this level of evidence, he won’t introduce regulations.

So what else should the government expect? The sleaze scandals, as they did during the dying days of the last Conservative government, will now emerge thick and fast, as disillusioned officials risk their liberty by leaking documents that should have been freely available, and journalists, scenting blood, close in. Labour will be driven from office with the same howls of execration that saw off the Tories in 1997. But this time there’ll be no bonfires, no bunting, no dancing in the streets, just the tired shuffling sound of a million more voters turning away from politics.



1. Jonathan Calvert, Claire Newell and Michael Gillard, 25th January 2009. Whispered over tea and cake: price for a peer to fix the law. The Sunday Times.

2. Philippe Naughton, 26th January 2009. Peers apologise, but deny wrongdoing, as Sunday Times releases audio. Times Online.

3. Lobbying Exposed, 28th January 2009, 10 am, Portcullis House. The Alliance for Lobbying Transparency.

4. SpinWatch, April 2008. Lobbying: Access and influence in Whitehall – Public Administration Committee. Supplementary memorandum. http://www.publications.parliament.uk/pa/cm200809/cmselect/cmpubadm/36/36we36.htm#note121

5. David Leigh and Rob Evans, 26th October 2007. Peer was paid to introduce lobbyist to minister. The Guardian.

6. James Macintyre, 26th June 2008. Exposed: the arms lobbyist in Parliament. The Independent.

7. Marie Woolf and Jon Ungoed-Thomas, 9th March 2008. Evidence fix led to third runway being approved. The Sunday Times.

8. See also Toby Helm, 18th January 2009. Fury at airport lobby links to No 10. The Observer.

9. House of Commons Public Administration Select Committee, 5th January 2009. Lobbying: Access and influence in Whitehall. Volume I, para 44. http://www.publications.parliament.uk/pa/cm200809/cmselect/cmpubadm/36/36i.pdf

10. http://www.acoba.gov.uk/about_us.aspx

11. House of Commons Public Administration Select Committee, ibid, para 96.

12. The Committee on Standards in Public Life, cited by the House of Commons Public Administration Select Committee, ibid, para 187.

13. Craig Holman, 2008. Making the US Lobbying Disclosure Act Work as Intended: Implications for the European Transparency Initiative. Public Citizen. http://www.europarl.europa.eu/comparl/afco/hearings/20071008/holman_en.pdf

14. Barack Obama, January 2009. Executive Order – Ethics Commitments by Executive Branch Personnel.

15. Tom Watson, 19th June 2008. Public Administration Committee – Minutes of Evidence. http://www.publications.parliament.uk/pa/cm200809/cmselect/cmpubadm/36/8061901.htm

Copyright (c) 2006 Monbiot.com


Bill Totten http://www.ashisuto.co.jp/english/index.html