Enriching the people who cause poverty

Government to government aid is a reward for being better than anyone else at causing poverty

By Marc Morano

DURBAN, South Africa – South African development activist Leon Louw declared the UN's “Green Climate Fund” nothing more than an attempt by wealthy nations to keep the poor nations from developing.

In an exclusive interview with Climate Depot at the Durban UN climate summit, Louw declared foreign aid or “government to government aid” is simply a way for rich countries to reward poor countries who are “best at causing poverty.” Louw is the Executive Director of South Africa's Free Market Institute which is considered the “3rd ranked most influential think-tank in Africa.”

“What the government of rich countries are saying to poor countries is: 'Those of you who are best at causing poverty, we will enrich you, we will give you money,'” Louw told Climate Depot while attending the UN climate summit.

“Government to government aid is a reward for being better than anyone else at causing poverty. Countries that get more government to government aide have lower economic growth rates. Countries with less aid, have higher growth rates. If you subsidize failure you get failure and foreign aid does exactly that. It rewards people for being unsuccessful,” Louw stated.

The Associated Press described the UN climate fund as a method to “distribute tens of billions of dollars a year to poor countries to help them adapt to changing climate conditions and to move toward low-carbon economic growth.”

But Louw, says the UN climate fund will wreak havoc on the developing world's poor. Louw explained: “The money goes to government and governments spend it on of course on themselves, meaning various government projects, creating bigger departments -- bigger bureaucracies, it's called big bureaucratic capture. They build empires, they build conference centers, and they buy political support. They go and distribute the money to communities where they want support and votes.”

Louw was at the Durban summit to oppose the UN climate fund to poor nations. According to Louw, the entire UN foreign aid process is aimed at keeping the developing world's poor – poor.

“The money goes to the people who then are better at causing poverty. They can hire more bureaucrats, pass more laws have more regulations. If you are good at causing poverty, we will give you more money to do what you do more of, which is to cause poverty. So they enrich the people who cause poverty, they compliment them on how good they are at causing poverty,” Louw said.

Louw said the entire premise for the UN's climate fund is an admission that their goal is to keep poor nations poor.

The UN is admitting -- this is implicit in the fund -- that combating climate change is very costly, especially for poor people, its devastating for poor countries. What the UN is saying is: 'We want you to indulge our opinion of climate change and if you do so it's going to cause a great deal of poverty and unemployment in poor counties.' You cannot, as a poor country, subscribe to the Kyoto Protocol and grow. The two are mutually exclusive,” Louw explained

Louw continued: “So What the rich counties say is 'don't worry, we will reward you for again causing poverty, if you adopt our climate policies that will cause poverty.' That is why there is a UN fund, in other words, they admit it. So having environmental policies causes poverty and they say 'we will enrich you for doing so, we will reward you for causing poverty.'”

“The UN is saying to poor countries: 'Those of you who adopt more anti-prosperity, anti- jobs, and anti-growth policies, under the pretense of environmentalism, we will enrich you. It doesn't matter -- as long as you cause poverty -- we will enrich you.'”

Louw asserts that the developing world does not need the wealthy Western world to achieve riches.

“Poor countries can become rich very quickly, like China, India, and in Africa, Ghana. Ghana, which has moved more than any other country in the world from being un-free to a free economy, is having 12 percent growth. It's now one of the highest growth counties in the world.

"Africa itself, Sub-Saharan, what used to be called black Africa, is now the highest sustained growth region of the world. The highest growth country in the world over the last 30 years is Batswana. So they don't need the rich countries to help them. All they need is for the rich counties to leave them alone.”

Louw says that if left alone, the developing world can gain wealth and freedom.

“They can actually overtake the rich countries like Hong Kong did. They become richer than the rich countries. China and India are headed that way. So now what the rich counties do is a kind of eco-imperialism. The rich nations say to the poor nations: 'Now you have to stop growth, you have got to stay poor. If you -- the government -- manage to keep your country poor, undeveloped and backward, we will then compensate you.' It is not a compensation for what the rich countries have done, it's a compensation for the ability of the governments of the poor countries to stop them from becoming rich,” Louw concluded.

Plundering other peoples money

Free Market Hostility

A quick getaway to the islands

Greece - No PSI

by Tyler Durden

As expected banks couldn't agree to a haircut.  Now Greece, the EU, the IMF, and taxpayers, will pay out about about $11 billion of principal and interest before the end of the year.  I don't know who holds the bonds maturing this year, but some of that money is probably finding its way into banks that survive solely on the grace of central bank funding.

The next big payout is due in March.  I suspect banks will once again get a nice trip to Athens.  Enjoy some food, some sightseeing, and "in spite of great efforts" once again fail to reach a deal, and wait for the Troika to pay Greece so that they can get paid again.  If my travel brochures are accurate, it will be more junior bank negotiators then because the senior people will save themselves for the May negotiations when the weather should be just perfect for a quick getaway to the islands.

Why would any bank agree to a haircut when they are getting unlimited virtually free funding on the one hand, and the Troika has shown zero willingness to stand its ground and force a default?

Just as we wrote back in June, we suspect the banks willingness to offload as much of their GGB exposure in basis packages has lead to a significant amount of the non-Troika-owned GGBs being held in hedged positions and at the mercy of hedge funds earning from the Bond-CDS position (and of course unwilling to accept non-CDS-triggering haircuts voluntarily). We also note that over the last week or so has seen the basis package cost rise modestly as demand for that pair has picked up.

10 trillion reasons to weep

OECD warns on global funding struggle

By David Oakley

Markets and governments face an uphill struggle to fund themselves next year amid extreme uncertainty over the eurozone and the global economy, as new figures reveal that the borrowing of industrialised governments has surged beyond $10tr this year and is forecast to grow further in 2012.

The Organisation for Economic Co-operation and Development, which represents the leading industrialised nations, will warn in its latest borrowing outlook, due to be published this month, that financial stresses are likely to continue with the “animal spirits” of the markets – their unpredictable nature – a threat to the stability of many governments that need to refinance debt.

Hans Blommestein, head of public debt management at the OECD, said: “[On occasion], market events seem to reflect situations whereby animal spirits dominate market dynamics, thereby pushing up sovereign borrowing rates with serious consequences for the sustainability of sovereign debt.”

For the foreseeable future it will be a “great challenge” for a wide range of OECD countries to raise large volumes in the private markets, with so-called rollover risk a big problem for the stability of many governments and economies.

Rollover risk is the threat of a country not being able to refinance or rollover its debt, forcing it either to turn to the European Central Bank in the case of eurozone countries or to seek emergency bail-outs, which happened to Greece, Ireland and Portugal. The OECD says the gross borrowing needs of OECD governments is expected to reach $10.4tr in 2011 and will increase to $10.5tr next year – a $1tr increase on 2007 and almost twice as much as in 2005. This highlights the risks for even the most advanced economies that in many cases, such as Italy and Spain, are close to being shut out of the private markets.

While borrowing was higher in 2009 and 2010, the risks are greater than ever because of rising borrowing costs in turbulent, unpredictable markets.

The OECD says that the share of short-term debt issuance in the OECD area remains at 44 per cent, much higher than before the global financial crisis in 2007. This, according to some investors, is a problem as it means governments have to refinance, sometimes as often as every month, rather than being able to lock in more debt for the longer term that helps stabilise public finances.

The OECD also warns that a big problem is the loss of the so-called risk-free status of many sovereigns, such as Italy and Spain, and possibly even France and Austria. The latter two have triple A credit ratings but investors no longer consider them risk-free.

Path to agrarian poverty

It’s not dead yet

Green thinkers are plain wrong to claim there are natural limits to how much we can expand our economies.

By Colin McInnes

Just before the advent of agriculture during the Neolithic revolution - about 10,000 years ago - the global population is estimated to have been a few million souls. If those present-day souls who obsess about resources are correct, then our Neolithic ancestors were the super-rich of human history. The entire planet and its resources were at their disposal, shared amongst their small number. In comparison, now that there are seven billion of us walking the Earth, surely we should be much worse off? After all, all that land and all those resources need to be spread so much thinner?

Of course, we’re now more prosperous than our Neolithic ancestors could possibly have imagined. We have used innovation to multiply the utility of the physical resources of the finite Earth. A handheld Neolithic stone axe contains atoms of silicon and aluminium amongst others. Using modern innovation, we can now rearrange those same atoms to produce a smartphone, which some argue has better utility than an axe. This is the true historical meaning of growth: it involves complexity not just consumption. And there are no practical limits to such growth.

For many commentators, however, economic growth will soon be ancient history, just like those stone axes. For example, in a recent article, Richard Heinberg, author of The End of Growth, claimed that growth has come to an end. Millennia of growth have now apparently come to a crashing end. We have gone from the slow-burning Neolithic revolution, which re-arranged nature to our liking, to the expansion of agriculture, and the great Industrial Revolution, which eventually freed us from the land. However, growth sceptics such as Heinberg are positing why economic growth should end right now, in the early twenty-first century, when we are more prosperous and resourceful than at any time in the past.

Human history is littered with economic and physical bottlenecks that were eventually overcome. The Elizabethans worried they were running out of wood - they spoke of ‘peak wood’, no less - and began to use coal as a substitute. In so doing, they unwittingly precipitated the Industrial Revolution. They even had their own growth sceptic in agricultural writer Arthur Standish. In 1615 he claimed that ‘there may be as much timber raised as will maintaine the kingdome for all uses forever’, while advocating a sustainable, wood-burning society as an alternative to the use of energy-dense coal. We can be thankful that Standish was politely ignored. The Industrial Revolution was just around the corner, leading to an escape from millennia of near-Malthusian stagnation and a decoupling of the costs of energy and labour.

While innovation-driven growth has delivered immense improvements to the human condition, it is also the means through which human needs can be gradually decoupled from the environment. Growth emerges from productivity, doing more with less. For example, new additive manufacturing technologies, so-called ‘3D printers’, look set partly to replace the wasteful subtractive manufacturing of machine tools. In contrast, in coming down from our oil high, as advocated by Heinberg, we could regress to using whale oil for lighting, as was the case prior to commercial oil production. But this hardly constitutes progress, economic or environmental.

The key point to Heinberg’s argument is that growth is constrained by the availability of energy. In this, he is correct. Physics tells us that we can put order into disordered matter using high-grade energy, generating low-grade waste heat in the process. Consider, though, that since the formation of the Earth, its finite mass has not changed, but self-organising systems such as rain forests have evolved to manufacture wonderfully complex structures from dead matter. Energy from the sun is used to photosynthesise complex molecules, while waste heat is radiated to cold space through the leaf canopy. But while unthinking biology can evolve impressive feats such as giant redwood trees, thinking humans can conceive and create artificial structures such as the sensational Burj Khalifa tower in Dubai, reaching almost 10 times as high as the forests.

In the same manner, a growing economy does not necessarily mean a garage of sports-utility vehicles for every man, woman and child on the planet. But it does mean a perpetual motion of innovation that can liberate us from the physical constraints of our environment. Mechanical excavators liberated us from back-breaking labour, rapid transportation freed us from the insularity of village life, and spaceflight recently freed us from the limitations of gravity. Just as the directed random walk of evolution seeks out new arrangements of matter in biology, human innovation can continue to rearrange matter in more useful forms through engineering.

However, Heinberg argues that high-grade energy is becoming scarce, that we have eaten the low-hanging fruit. Consequently, growth must end as we lack sufficient energy to rearrange matter into more useful forms, whether smartphones, tractors or vaccines. In reality, high-grade energy is anything but scarce.

Fossil fuels represent energy which is not of our time; they represent energy from the sun stored in compacted dead plant matter. But nuclear fuels represent energy which is not of our place. Their immense energy density, about a million times greater than fossil fuels, comes from the final moments of collapse of ancient stars which fused lighter elements into uranium and thorium. Even the prophet of ‘peak oil’, M King Hubbert, a man beloved of growth sceptics, cleverly recognised that while fossil-fuel use will no doubt ultimately peak, nuclear fuels are essentially forever, because they are so energy dense.

Let’s be clear: there is no shortage of high-grade, carbon-free energy to deliver a future of shared prosperity. But we need the will, ambition and inventiveness to exploit it. We also need to recognise that we have only scratched the surface of nuclear energy. Even modern light-water reactors are woefully inefficient at turning the energy of collapsing stars stored in nuclear fuels into useful work. But through future innovation, we can tap almost all of that clean, compact energy considerately provided by nature.

The real worry of Heinberg’s vision of a post-growth world is his straight-faced assertion that ‘there should be [an] increasing requirement for local production and manual labour’. This chilling claim is more Year Zero than zero growth. A return to carbohydrate-fuelled manual labour may be appealing to Heinberg and others as a means of powering down our lives and reconnecting with the land. But he shouldn’t expect a long queue of volunteers.

Ultimately, Heinberg’s thinking - and that of many other anti-growth writers - represents a needlessly limit-setting view. It would deliver a future of material poverty and intellectual stagnation with hard-won advances in human welfare abandoned. It is unlikely that future generations would thank us, and we simply have no right to inflict it upon them. Indeed, unilaterally proclaiming that growth should cease at this entirely arbitrary juncture of human history displays a degree of apocalyptic angst. Ironically, while environmenalists love to bang on about saving the planet for the sake of the children, insisting that we must regress to a simpler way of life displays a degree of contempt for future generations.

To be taken seriously, Heinberg and others need to articulate a long-term vision of a post-growth sustainable society. Is it a future of permanent energy austerity, but somehow unlimited cultural growth, or is it really a return to agrarian poverty? Fortunately, just like Elizabethan writer Arthur Standish, Heinberg’s own growth-sceptic views are unlikely to prevail. Even if some faction of humanity were to choose a future of economic stagnation, they would simply be outcompeted by others who pursue innovation and growth. Thankfully, there will always be some smart ass who wants to fly to the moon.

Circling closer to the center

Syria Comes of Age

An extraordinary population boom fuels the revolt against Bashar al-Assad's regime.

BY DAVID KENNER

Each day, for 268 days, there have been the same videos: Syrians coming come out of the woodwork, filling alleys in previously quiescent neighborhoods. They have become experts in the art of protest, employing ornate signs and candles to call for the end of Bashar al-Assad's regime and, increasingly, the president's execution. They are killed in steadily increasing numbers -- more than 4,000 by last count, according to the United Nations.

Who represents these protesters is a matter of dispute -- a Syrian opposition delegation was memorably pelted with eggs in Cairo last month by fellow anti-regime activists who objected to the group's apparent willingness to negotiate with the Assad regime. But who the protesters are is no mystery: They are the product of an extraordinary demographic boom in Syria that has left huge swathes of the country disenfranchised and poor. And they are very angry.

From the 1960s to the early 1990s, Syria boasted one of the most rapidly expanding populations in the world. The country's population doubled from 5.3 million in 1963 to 10.6 million in 1986, and then more than doubled again during the past quarter-century, to approximately 23 million. Before birth rates began falling in the mid-1980s, only two countries -- Yemen and Rwanda -- had higher fertility rates, according to Youssef Courbage, a researcher at the National Institute for Demographic Studies in Paris, in a paper titled "Fertility Transition in Syria."

At the peak of Syria's demographic boom, 44 Syrians were born for every 1,000 people, far exceeding the population growth in neighboring Lebanon (30 births per 1,000 people), and dwarfing that in the United States (16 births per 1,000), according to World Bank data. Population growth was also disproportionately focused in the countryside, creating a swelling class of have-nots in the new Syria.

Syria's birth rates have declined in recent years, but still remain equal to other revolutionary states in the Arab world. Twenty-four Syrians were born for every 1,000 people in 2008 -- the same as Egypt, and exceeding Tunisia's rate of 18 births per 1,000 people.

If the areas where these trends have been felt the strongest were superimposed on a map, they would largely line up with the regions of greatest unrest in Syria. From the south in Deraa, where the protests first gained momentum, to the east in Deir al-Zour, this is a revolt of the neglected countryside. It is also a revolt of long-persecuted cities such as Hama and down-and-out suburbs in Damascus and Homs -- neighborhoods that many of the migrants from the countryside call home.

The Syrian government is at least partially to blame for the country's runaway birth rates. As far back as 1956, Youssef Helbaoui, the head of economic analysis in Syria's Planning Department, argued that "A birth-control policy has no reason for being in this country. [Thomas] Malthus could not find any followers among us."

President Hafez al-Assad, who presided over the population spike of the 1980s, followed the same policies as his predecessors. As Courbage notes, he kept contraceptives scarce and argued that high growth rates "have stimulated proper socio-economic improvements." Until 1987, his government even encouraged births by awarding medals and small material gifts to families with over 10 children.

The result is that, in this era of youth revolt, Syria has one of the youngest populations in the Arab world. From the mid-1960s through the 1990s, the proportion of Syria's population below age 15 held constant at roughly half, while the percentage of Syrians older than 70 declined to a meager 3 percent. Even today, after fertility rates have declined, nearly 60 percent of Syrians are believed to be under the age of 20.

This long-running demographic boom has fundamentally transformed the country that the Assad family has ruled for over 60 years. At the end of World War II in 1945, when Hafez al-Assad was still a schoolboy, Damascus was a sleepy town of 300,000 inhabitants. By the time he seized control of the state in 1970, it had surpassed 800,000 -- and by the late 1980s, it had exploded to over 3 million, according to Patrick Seale's Asad: The Struggle for the Middle East.

This demographic transformation was accompanied by what Syrian intellectual Sadiq al-Azm called the rise of the "merchant-military complex." When the Baath Party seized power in a coup in 1963, Seale writes, there were only 55 "millionaires," in Syrian lire, in the entire country. That figure expanded to 1,000 millionaires in 1973, and rose to 3,500 by 1976 -- of whom 10 percent were worth 100 million Syrian lire (roughly $25 million). Under Syria's centralized economy at the time, the path to enrichment was through Hafez and his Baath party. This trend only accelerated under Bashar, whose billionaire cousin Rami Makhlouf has been estimated to control 60 percent of the Syrian economy.

As Bashar strengthened his ties with the nouveaux riches in Damascus and Aleppo, the children of the countryside found themselves left out in the cold. The International Statistical Institute's World Fertility Survey's report on Syria shows that rural women birthed roughly three more children, on average, than their urban counterparts during the peak of the country's demographic boom. Many of these youths looked to make it good in Syria's rapidly swelling urban centers, straining the capacity of these cities to the limit.

But whether these Syrians stayed in the country or made their way to the cities, they found it nearly impossible to pull themselves up from the bootstraps. "At the national level, growth was not pro-poor," a 2004 report produced jointly by the Syrian government and the UNDP assessed politely, as it highlighted the country's rising income inequality.

Syria's education system has contributed to this problem by utterly failing to pave the way to meaningful employment. A 2009 Syrian government survey found that more than half of Syrians leave school before finishing their secondary education, and that an overwhelming majority of this group assessed that their schooling was of little or no use in their first job. The report went on to find that students found the most success in finding work through family and friend ties, but noted that "the efficiency of job allocation patters based on informal networks is questionable."

There is no small amount of irony in the current crisis, though Bashar may not care to recognize it. Just as his Alawite community came down from the mountains in generations past to seize control of the state, the citizens filling Syria's streets for the past eight months are also seeking to reverse decades of marginalization. And as they move through Syria's squares and alleyways, they are slowly circling closer to the center.

The middle way

War Collectivism in World War I

by Murray N. Rothbard

More than any other single period, World War I was the critical watershed for the American business system. It was a "war collectivism," a totally planned economy run largely by big-business interests through the instrumentality of the central government, which served as the model, the precedent, and the inspiration for state-corporate capitalism for the remainder of the 20th century.

That inspiration and precedent emerged not only in the United States but also in the war economies of the major combatants of World War I. War collectivism showed the big-business interests of the Western world that it was possible to shift radically from the previous, largely free-market, capitalism to a new order marked by strong government, and extensive and pervasive government intervention and planning, for the purpose of providing a network of subsidies and monopolistic privileges to business, and especially to large business, interests. In particular, the economy could be cartelized under the aegis of government, with prices raised and production fixed and restricted, in the classic pattern of monopoly; and military and other government contracts could be channeled into the hands of favored corporate producers. Labor, which had been becoming increasingly rambunctious, could be tamed and bridled into the service of this new, state-monopoly-capitalist order, through the device of promoting a suitably cooperative trade unionism, and by bringing the willing union leaders into the planning system as junior partners.

In many ways, the new order was a striking reversion to old-fashioned mercantilism, with its aggressive imperialism and nationalism, its pervasive militarism, and its giant network of subsidies and monopolistic privileges to large business interests. In its 20th-century form, of course, the new mercantilism was industrial rather than mercantile, since the industrial revolution had intervened to make manufacturing and industry the dominant economic form. But there was a more significant difference in the new mercantilism. The original mercantilism had been brutally frank in its class rule, and in its scorn for the average worker and consumer.[2]Instead, the new dispensation cloaked the new form of rule in the guise of promotion of the overall national interest, of the welfare of the workers through the new representation for labor, and of the common good of all citizens. Hence the importance, for providing a much-needed popular legitimacy and support, of the new ideology of 20th-century liberalism, which sanctioned and glorified the new order. In contrast to the older laissez-faire liberalism of the previous century, the new liberalism gained popular sanction for the new system by proclaiming that it differed radically from the old, exploitative mercantilism in its advancement of the welfare of the whole society. And in return for this ideological buttressing by the new "corporate" liberals, the new system furnished the liberals the prestige, the income, and the power that came with posts for the concrete, detailed planning of the system as well as for ideological propaganda on its behalf.

For their part, the liberal intellectuals acquired not only prestige and a modicum of power in the new order, they also achieved the satisfaction of believing that this new system of government intervention was able to transcend the weaknesses and the social conflicts that they saw in the two major alternatives: laissez-faire capitalism or proletarian, Marxian socialism. The intellectuals saw the new order as bringing harmony and cooperation to all classes on behalf of the general welfare, under the aegis of big government. In the liberal view, the new order provided a middle way, a "vital center" for the nation, as contrasted to the divisive "extremes" of left and right.

I.

We have no space here to dwell on the extensive role of big business and business interests in getting the United States into World War I. The extensive economic ties of the large business community with England and France, through export orders and through loans to the Allies — especially those underwritten by the politically powerful J.P. Morgan & Co. (which also served as agent to the British and French governments) — allied to the boom brought about by domestic and Allied military orders, all played a leading role in bringing the United States into the war. Furthermore, virtually the entire eastern business community supported the drive toward war.[3]

Apart from the role of big business in pushing America down the road to war, business was equally enthusiastic about the extensive planning and economic mobilization that the war would clearly entail. Thus, an early enthusiast for war mobilization was the United States Chamber of Commerce, which had been a leading champion of industrial cartelization under the aegis of the federal government since its formation in 1912. The chamber's monthly, The Nation's Business,foresaw in mid-1916 that a mobilized economy would bring about a sharing of power and responsibility between government and business. And the chairman of the US chamber's executive committee on national defense wrote to the du Ponts, at the end of 1916, of his expectation that "this munitions question would seem to be the greatest opportunity to foster the new spirit" of cooperation between government and industry.[4]

The first organization to move toward economic mobilization for war was the Committee on Industrial Preparedness, which in 1916 grew out of the Industrial Preparedness Committee of the Naval Consulting Board, a committee of industrial consultants to the navy dedicated to considering the ramifications of an expanding American navy. Characteristically, the new CIP was a closely blended public-private organization, officially an arm of the federal government but financed solely by private contributions. Moreover, the industrialist members of the committee, working patriotically without fee, were thereby able to retain their private positions and incomes. Chairman of the CIP, and a dedicated enthusiast for industrial mobilization, was Howard E. Coffin, vice president of the important Hudson Motor Co. of Detroit. Under Coffin's direction, the CIP organized a national inventory of thousands of industrial facilities for munitions making. To propagandize for this effort, christened "industrial preparedness," Coffin was able to mobilize the American Press Association, the Associated Advertising Clubs of the World, the august New York Times, and the great bulk of American industry.[5]

The CIP was succeeded, in late 1916, by the fully governmental Council of National Defense, whose advisory commission — largely consisting of private industrialists — was to become its actual operating agency. (The council proper consisted of several members of the cabinet.) President Wilson announced the purpose of the CND as organizing "the whole industrial mechanism … in the most effective way." Wilson found the council particularly valuable because it "opens up a new and direct channel of communication and cooperation between business and scientific men and all departments of the Government."[6] He also hailed the personnel of the council's advisory commission as marking "the entrance of the nonpartisan engineer and professional man into American governmental affairs" on an unprecedented scale. These members, declared the president grandiloquently, were to serve without pay, "efficiency being their sole object and Americanism their only motive."[7]

Exulting over the new CND, Howard Coffin wrote to the du Ponts in December 1916 that "it is our hope that we may lay the foundation for that closely knit structure, industrial, civil and military, which every thinking American has come to realize is vital to the future life of this country, in peace and in commerce, no less than in possible war."[8]

Particularly influential in establishing the CND was Secretary of the Treasury William Gibbs McAdoo, son-in-law of the president, and formerly promoter of the Hudson and Manhattan Railroad and associate of the Ryan interests in Wall Street.[9] Head of the advisory commission was Walter S. Gifford, who had been one of the leaders of the Coffin Committee and had come to government from his post as chief statistician of the American Telephone and Telegraph Co., a giant monopoly enterprise in the Morgan ambit. The other "nonpartisan" members were Daniel Willard, president of the Baltimore and Ohio Railroad; Wall Street financier Bernard M. Baruch; Howard E. Coffin; Julius Rosenwald, president of Sears, Roebuck and Co.; Samuel Gompers, president of the AF of L; and one scientist and one leading surgeon.

Months before American entry into the war, the advisory commission of the CND designed what was to become the entire system of purchasing war supplies, the system of food control, and censorship of the press. It was the advisory commission that met with the delighted representatives of the various branches of industry, and told the businessmen to form themselves into committees for sale of their products to the government, and for the fixing of the prices of these products. Daniel Willard was, unsurprisingly, put in charge of dealing with the railroads, Howard Coffin with munitions and manufacturing, Bernard Baruch with raw materials and minerals, Julius Rosenwald with supplies, and Samuel Gompers with labor. The idea of establishing committees of the various industries, "to get their resources together," began with Bernard Baruch. CND commodity committees, in their turn, invariably consisted of the leading industrialists in each field; these committees would then negotiate with the committees appointed by industry.[10]

At the recommendation of the advisory commission, Herbert Clark Hoover was named head of the new Food Administration. By the end of March 1917, the CND appointed the Purchasing Board to coordinate government's purchases from industry. Chairman of this board, the name of which was soon changed to the General Munitions Board, was Frank A. Scott, a well-known Cleveland manufacturer, and president of Warner & Swasey Co.

Yet centralized mobilization was proceeding but slowly through the tangle of bureaucracy, and the United States Chamber of Commerce urged Congress that the director of the CND "should be given power and authority in the economic field analogous to that of the chief of state in the military field."[11] Finally, in early July, the raw materials, munitions, and supplies departments were brought together under the new War Industries Board, with Scott as chairman, the board that was to become the central agency for collectivism in World War I. The functions of the WIB soon became the coordinating of purchases, the allocation of commodities, and the fixing of prices and priorities in production.

Administrative problems beset the WIB, however, and a satisfactory "autocrat" was sought to rule the entire economy as chairman of the new organization. The willing autocrat was finally discovered in the person of Bernard Baruch in early March 1918. With the selection of Baruch, urged strongly on President Wilson by Secretary McAdoo, war collectivism had achieved its final form.[12] Baruch's credentials for the task were unimpeachable; an early supporter of the drive toward war, Baruch had presented a scheme for industrial war mobilization to President Wilson as early as 1915.

The WIB developed a vast apparatus that connected to the specific industries through commodity divisions largely staffed by the industries themselves. The historian of the WIB, himself one of its leaders, exulted that the WIB had established

a system of concentration of commerce, industry, and all the powers of government that was without compare among all the other nations.… It was so interwoven with the supply departments of the army and navy, of the Allies, and with other departments of the Government that, while it was an entity of its own … its decisions and its acts … were always based on a conspectus of the whole situation. At the same time, through the commodity divisions and sections in contact with responsible committees of the commodities dealt with, the War Industries Board extended its antennae into the innermost recesses of industry. Never before was there such a focusing of knowledge of the vast field of American industry, commerce, and transportation. Never was there such an approach to omniscience in the business affairs of a continent.[13]

Big-business leaders permeated the WIB structure from the board itself down to the commodity sections. Thus, Vice Chairman Alexander Legge came from International Harvester Co.; businessman Robert S. Brookings was the major force in insisting on price fixing; George N. Peek, in charge of finished products, had been vice president of Deere & Co., a leading farm-equipment manufacturer. Robert S. Lovett, in charge of priorities, was chairman of the board of Union Pacific Railroad, and J. Leonard Replogle, Steel Administrator, had been president of the American Vanadium Co. Outside of the direct WIB structure, Daniel Willard of the Baltimore & Ohio was in charge of the nation's railroads, and big businessman Herbert C. Hoover was the "food czar."

In the granting of war contracts, there was no nonsense about competitive bidding. Competition in efficiency and cost was brushed aside, and the industry-dominated WIB handed out contracts as it saw fit.

It's officially over

The Era of Apathy

After a decade of being treated like children, Russia's electorate is finally finding its voice.

BY TANYA LOKSHINA

The scope of the protests that have followed Russia's Dec. 4 parliamentary elections, which protesters claim were rigged, have not only shocked Prime Minister Vladimir Putin and his cohort -- it has shocked the opposition as well. And Kremlin officials have no one to blame but themselves for this swelling protest movement.

The first protests kicked off that Sunday night, following the ballot, with a demonstration of approximately 5,000 to 10,000 people in the central Moscow area of Chistye Prudy. The protest turned ugly when riot police attacked protesters marching toward the Central Electoral Commission building, dispersing demonstrators, sometimes roughly, and detaining people at random. More than 200 of the detained -- including some opposition leaders, journalists, and well-known activists -- were held overnight in crowded cells with no food and no access to lawyers. Administrative trials started the next day, sentencing protesters to 15 days of incarceration, officially for resisting police orders but in fact for merely expressing their discontent with the authorities.

The following days saw more protests against Putin and the ruling United Russia party in Moscow and other large Russian cities. They culminated in a massive rally of over 50,000 people in Moscow's Bolotnaya Square on Dec. 10 (and this is a very conservative assessment, as the opposition is claiming approximately 100,000). The protesters were met with a massive police and military presence -- armored personnel carriers on the ground, roaring helicopters in the sky -- which spoke of potential trouble, but the day passed without a single provocative act by the demonstrators nor a single use of force by the police.

The demonstrators wore white ribbons on their coats, and many carried multicolored balloons and flowers, emphasizing the nonviolent and nonpartisan spirit of the protest. Smiling young women pressed white carnations and chrysanthemums on young uniformed servicemen, and some shyly accepted those gifts of peace, giggling like school kids. Democrats, communists, anarchists, radical lefties, and people with no political convictions chanted: "I'm a citizen of my state!" "We want fair elections!" "Our opinion matters!" That evening, state-owned television channels featured short reports about the massive demonstration. They simply had to.

What caused this extraordinary awakening of Russian citizens, who have previously appeared sullenly acquiescent to the erosion of democracy during the Putin era? Russia's Interior Ministry was quick to blame social networks for "threatening the foundations of the society" and "contributing to the rise in extremist views." Putin, predictably, is blaming everything on Western interference, bashing U.S. Secretary of State Hillary Clinton for supposedly sending a "signal" to the opposition to destabilize Russia. In fact, however, two signature blunders by Putin's own regime served as the trigger for this current round of protests.

First, it all started with President Dmitry Medvedev's revelation on Sept. 24 that Putin would run for the Russian presidency next year, while he would lead United Russia in the parliamentary vote. Putin himself said, "I want to say directly: An agreement over what to do in the future was reached between us several years ago."

Western media and policymakers often explain the lack of pluralism in Russia by pointing to how Russians love Putin's strong rule, his populist machismo. That may be so, but Russians, as the elections this month have shown, have also become increasingly unhappy with more than a decade of so-called "soft" authoritarianism. When Russians heard that what they long suspected was coming true, many felt they had no option but to take to the streets. This frustration alone, though, was probably not enough to convince tens of thousands to gather in Bolotnaya Square for the first time since the stormy 1990s. It was the brazen acknowledgment by the head of government that the decision had actually been made long ago and that the public -- children that they are -- simply hadn't needed to know about it. It was this gross, infantilizing condescension that became the tipping point. The realization that the authorities are not even trying to pretend that public opinion matters, that individual choice matters, that voters have decision-making power, was just too bitter a pill to swallow.

After the parliamentary election results began coming in, the Kremlin made its second painfully obvious mistake. Exit polls for Moscow that showed United Russia's share of the vote at a meager 27 percent miraculously disappeared from the website of the Public Opinion Foundation, a leading polling agency known for its loyalty to the government. While people around the world were watching the protest movement unfold in Moscow, all that Russians could see on federal television were wildlife programs and "nothing's happening" news.

Independent journalists and the public were overwhelmed with disgust. A correspondent of Kommersant FM radio, Stanislav Kucher, addressed Russia's infamously kowtowed broadcast journalists with a stinging rebuke: "Thousands of people are pouring into the streets of both capitals of what's for now our common homeland for the first time in 10 years, to say what they think about the elections. And yet the same television stations that show the president say not a word about the protests -- that's just unprofessional." Kucher added that television people hid "information from millions of people"-- at minimum manipulating their attitude and at maximum disgracing themselves and their profession.

The official information blockade only contributed to the protest mood. More than 35,000 people signed up for the Dec. 10 rally via Facebook, and after the initial hard-line reaction and threats of using brutal force against the protesters, the authorities had to relent. The opposition not only received an official sanction for the demonstration, but the authorities also agreed to provide a "corridor" for those choosing to gather closer to Red Square, so that those protesters could march across the bridge to the other bank of the Moscow River and join the bigger crowd.

So what comes next?

Moscow is no Tahrir, and what's happening in Russia at the moment is not yet a revolution. But Dec. 10 was indeed a historic moment: Thousands of Russians made it clear that they would no longer be ignored. The authorities also realized that hard-line measures and broadcast blockades would only worsen their position and that they must take their critics into account.

The period until the March 4 presidential election is now of paramount importance. Even if Putin does return to the presidency at that time, the powerful voice of discontent played out in the streets and through social media will prove impossible for him to ignore. The era of apathy is officially over.

A bridge too far

The man who predicted the European debt crisis

By Charles Lane

Europe’s financial crisis is rapidly metastasizing into a political one, and the coherence of the European Union is more doubtful than at any previous time in recent memory.

That’s the meaning of last week’s European summit, in which 26 leaders either accepted a German-French plan for tight fiscal discipline or agreed to consider it — while British Prime Minister David Cameron said no, amid nationalistic finger-pointing across the continent.

Europe’s politicians are making a hash out of the once-proud project of United Europe, and, in the process, making a prophet out of Martin Feldstein.

In 1997, before the first euro note had rolled off the presses, the Harvard economist surveyed Europe’s plans for a single currency and, in a lengthy essay in Foreign Affairs, predicted that they would come to grief.

Like many of his colleagues, Feldstein doubted the single currency’s economic viability absent political and fiscal union.

What Feldstein saw with special clarity, though, was the disaster that would ensue even — or perhaps especially — if Europe tried to increase political and fiscal union for the sake of monetary union.

As Feldstein wrote: “A political union of European nations is conceived of as a way of reducing the risk of another intra-European war among the individual nation-states. But the attempt to manage a monetary union and the subsequent development of a political union are more likely to have the opposite effect. Instead of increasing intra-European harmony and global peace, the shift to [monetary union] and the political integration that would follow it would be more likely to lead to increased conflicts within Europe and between Europe and the United States.”

Feldstein foresaw that the trigger for political tension would be a sharp economic downturn, imposing different levels of unemployment on different members of the monetary union, because high-unemployment countries could not recover their competitiveness through currency devaluation.

The ensuing “conflicts over economic policies and interference with national sovereignty could reinforce long-standing animosities based on history, nationality, and religion,” Feldstein warned. “Germany’s assertion that it needs to be contained in a larger European political entity is itself a warning. Would such a structure contain Germany, or tempt it to exercise hegemonic leadership?”

Sounds like a summary of Europe’s current predicament.

Britain is divided between euro-skeptics who think Cameron is a national hero and europhiles who think he has severed their ties to the huge continental market. In France, meanwhile, President Nicolas Sarkozy responds to criticism of his alleged subservience to Germany by claiming a compensatory victory over the financiers of perfidious Albion.

German Chancellor Angela Merkel pursues her long-term plan for a European budget-balancing rule, untroubled, it seems, by the fact that this is a recipe for ruinous austerity in the short run.

Merkel, like many of her countrymen, cannot or will not see that southern Europe’s debt crisis is the mirror image of Germany’s immense trade surpluses, and that Germany, too, must adjust if the euro is to be saved.

A recent PricewaterhouseCoopers report lays out four possible endgames. In the most benign, the European Central Bank takes mass quantities of bad debt onto its balance sheet and Europe avoids a depression at the expense of higher inflation and slower long-run growth.

The only difference among the other choices — organized default by the euro zone’s biggest debtors; a Greek exit from the euro; and the rise of a new, smaller euro zone led by France and Germany — is the depth of the recession each would trigger.

In 1997, Feldstein thought that a failed currency union could lead to war. That seems far-fetched, even now.

But today’s blame game among Europe’s politicians may soon seem mild indeed. A full-scale backlash against the EU, and its Franco-German leadership, can hardly be ruled out.

Europe could become a much more troubled and self-absorbed region — less able either to counter the United States in world affairs or to support it. The collateral damage to the U.S. economy from a European slump may exacerbate transatlantic tensions.

Postwar Europe was right to forge a single market and common international stance. But the single currency was a bridge too far. Instead of creating a Europe wealthier and more diplomatically potent than the sum of its parts, the euro is impoverishing much of the continent and reducing it, once again, to a squabbling gaggle of nation-states.

They should have listened to Feldstein.