The WTO was only four years old in 1999, when protest in the streets with violence unmatched since the civil rights riots of the '60s stigmatized its conference in Seattle. Up to that time, few Americans had any idea there was a problem with "free" trade. The anger evident in those protests is illuminated by these interview excerpts:
BILL MOYERS (9/5/03 on PBS): "What do you mean by globalization?"
DR. VANDANA SHIVA: "It is rules written into the World Trade Organization. It is rules that say you cannot decide the agriculture policy. You cannot decide your tariff structures. You cannot decide to make sure your people have food. You cannot decide that people in your country have jobs. The market will decide it and the market will be favored on the basis of unfair asymmetric rules of trade."
BILL MOYERS: "Who writes those rules?"
DR. VANDANA SHIVA: "Unfortunately, it wasn't governments even though they're the members of the WTO. The rules of WTO were written by corporations. There were four new areas brought into trade (in 1995) that never belonged to trade: agriculture, intellectual property, services and investment. Now, each of these four areas had a treaty in the General Agreement on Trade and Tariffs in the Uruguay Round. Every one of those treaties was driven by a particular group of companies. The agricultural agreement driven by Agri-Business. The Trade Related Intellectual Intellectual Property Rights (TRIPS) agreement (was) driven by the pharmaceutical industry, the biotech industry and the entertainment industry. The services agreement (was) driven by the financial interests, the banks; and now increasingly driven by the water companies which want to treat trade in water as a trade in services."
In that 2003 interview Dr Shiva was angry about the WTO and her words fairly represent the feelings and opinions of hundreds of millions of ordinary people in India and other underdeveloped countries. Here in the US it took another seven years for the consequences of globalization to provoke a comparable level of anger, manifested by the rise of the Tea Party in the election of 2010. Those of us who are interested in global solutions may doubt that typical Tea Party-goers have the slightest notion of what the WTO is, but their fundamental complaints parallel Dr. Shiva's. What it comes down to is the government is working against ordinary people: allowing jobs to flow abroad while shutting down factories and hollowing out local economies; allowing agribusiness to push farmers into bankruptcy; allowing Fannie and Freddie, both quasi-government agencies, to facilitate a real estate bubble significantly financed by foreign capital; and by allowing special interests, especially foreign special interests, to so corupt federal elections that "Washington" has become their synonym for "evil."
The Tea Party (unwittingly) and Dr Siva together share anger at the effects of globalization, distrust of government, and outrage at whoever keeps us tied to an international institution that has the power to compel national institutions like the US Congress to get in line. Here's more from the same Bill Moyer interview:
DR. VANDANA SHIVA: "...the Coca-Colas of the world, the Cargills of the world, the Monsantos of the world, the Suez-Vivendis of the world... rest on local elites who also benefit out of destroying the livelihoods of their own people. It is not the case that Indian elites don't join with the global elites. Globalization in my view is a partnership of elites to exploit the people of the world against the… will of people."
BILL MOYERS: "It was just a coincidence that earlier this week I happened to read a report by a company here in New York saying that corruption in India is at an all-time high. That in some (Indian) states, in fact, less than 1/3 of the development money reaches its intended goals... That 40 percent of famine relief stock is sold on the black market..."
DR. VANDANA SHIVA: "And it's been made worse by the kind of money that global corporations bring in. Two decades ago, every politician of India had to go house to house, (to) ask for funding. (You can be) sure that the financial base of elections was (& is) the political base of governance. You know, kick-backs is the name given to corporate bribes. In the case of Enron, I mean, its corrupt factors here were known. But very little is known about the fact that Enron came into India along with Bechtel to set up a plant. And they had an entire budget item called 'political education' that through the court hearings in India was revealed to be corruption money." (Here in the US, instead of calling it "political education", we call it "campaign financing". Whatever you call it, the result is the same.)
The straight jacket invented at the Uruguay round is fiendishly seductive. Membership in the WTO bestows "most favored nation" status, meaning in part that other member countries can not discriminate against a member when it comes to tariffs. This is a compelling incentive to join, and those who don't suffer penalties at the customs house.
But when a country does join, it becomes subject to rules about agri-business; intellectual property; banking, finance; and rules that open any privatization of public services to global competition. In addition, it turns out that such rules impose unexpected restrictions on national regulatory policy. Here are some examples of WTO rules at work:
• "The WTO ruled that the U.S. must rewrite parts of its Clean Air Act to permit imports of less pure gasoline; the result may be more air pollution and lung disease."
• "The European Union was told it cannot ban imports of beef products (from the U.S.) that had been treated with potentially cancer-causing hormones."
• "And, after a challenge by the U.S., Europe was told to stop favoring bananas grown in the Caribbean by small independent farmers over Chiquita Bananas grown by corporate, plantationstyle, agriculture." (from bss.sfsu.edu)
Coercive intrusions like these are obviously off the radar for tea baggers; what concerns them is the incomprehensible fact that the capitalist dogma they believe in isn't working for America any more. The irony is, since the end of WWII our government has never wavered in its zeal for capitalist dogma and for free trade as its essential principle. Guided by corporate interests, the US was a prime mover behind the creation of the WTO. But as it has turned out, by assiduously implementing corporate interests in the rules of the WTO, we have undermined our larger national interests. Manufacturing employment dropped 31% during the "W" years, and take-home pay for middle America took a hit. But credit cards and home equity loans filled the income gap, leading to mass-produced lending and a general lowering of underwriting standards. Low standards and the underwriting fraud that it encouraged fueled a real estate bubble. The collapse of the bubble, followed by the stock market crash in '08, punctured middle class prosperity, thereby triggering massive service industry job losses. Taken together, these setbacks set off a plunge in tax revenues and a scramble to cut jobs in local governments.
Tea baggers are cheering the state and municipal blood letting, while impotent centrists in Washington, facing comparable fiscal shortfalls, are going down the same road with budget cuts that will dramatically shrink federally supported employment. Meanwhile, the asymmetric benefit/penalty mix of "free trade," and WTO subversion of democratic selfdetermination are causing a diverse backlash, hardening antagonisms between corporate globalists and people concerned with climate change, the environment, sustainability, and a long list of social issues.
Regardless of backlash, economic globalization is not going away; not so long as we have jumbo jets, giant container ships, the internet, cell phones and relative peace among nations. So, instead of lapsing into Tea Party-like irrationality, fair minded people everywhere will have to face up to the challenge of finding a way to regulate the global economy so that in addition to tweaking trade into sustainable equilibrium among nations, such regulation will also promote human and environmental values. If we don't get busy and do this, we may wake up to notice that the WTO has become a de-facto world government that is utterly undemocratic and concerned only with the well being of the elite.
Will the "Global Economy" submit to Global Regulation?
September 2011
World trade today operates on an economic playing field where labor cost bottom fishing and regulatory arbitrage are the norm. This was not the case as recently as the mid '80s when the Reagan administration used and adjusted tariff policy to counteract foreign mercantilism and non-tariff barriers. Properly implemented, tariff policy can also support fair domestic wage rates and protect industries with high regulatory or environmental burdens from being driven out of business by cheap imports from nations lacking responsible regulations.
The "conventional wisdom" holds that protected industries become fat and lazy price gougers. Free trade, on the other hand, supposedly benefits all nations by spreading industrial development around the world, bringing the benefit of cash wages to third world populations who can then become consumers of goods that globalization has made cheap enough for them to afford. Thus an upward global spiral of prosperity "will raise all boats", and in fact something like that did seem to be happening under the liberalizing influence of post-WWII US policy.
During the '80s and '90s, however, the US balance of trade turned from positive to persistently negative as globalized U.S. corporations moved their production abroad to stay ahead in the "race the bottom." To explain why manufacturing jobs dropped from 30% to just above 10% of the US labor force in half a century, economists pronounced that higher productivity was responsible (caveat: the Labor Department admits that its statistics ascribe outsourcing cost savings to US "productivity"). In the process, the US stopped making consumer essentials, from shoes to TVs to lightbulbs, and the trade deficit ballooned to a three quarter trillion dollar annual rate during the "W" Bush years.
Such enormous deficits had to be financed by borrowing from countries that were running trade surpluses. Any country but the US would quickly see its currency devalued by such profligate deficits. But since WWII the dollar has been the clearing currency of international trade. Consequently, when the US credit bubble burst in '08, the demand for dollars only strengthened because world traders still needed dollars to clear their purchases and the crisis had made dollars much more difficult to borrow.
Now that a few years have passed since that crash, US unemployment hovers near 10% while the proportion of the workforce without a proper job is closer to 20%. State and local governments play into a losing game, fishing to attract business from other locales with tax offsets, even while they lay off workers and public school teachers to balance budgets hit by declining revenues and rateables. Any honest economist would tell you a downward economic spiral is underway, exacerbated by this self-imposed austerity. But that conclusion is often contradicted by officials who are trumpeting optimism to shore up their misguided austerity measures. Meanwhile the US public lives in a twilight zone of uncertainly waiting for the other shoe to drop.
Will it be another financial crisis precipitated by credit default swap dominos? Will it be a US Treasury default imposed by Tea Party know-nothings in Congress? Or will it be a second-round mortgage crisis, set off by declining property values due to mortgage industry intransigence in dealing with unemployed home-owners? With Washington obsessed by politics, the trade deficit continuing at a halftrillion dollar annual rate (about 6 million dollars a second !), and service jobs joining industrial jobs flowing out of the country in search of "bottom" costs, some sort of crisis is inevitable. And because the US has generally succeeded in globalizing it's manufacturing, it's employment, its dollar, and its Treasury debt, inevitably the crisis will be global in scope.
One "solution" to US troubles typically applied to other countries in financial trouble -- national impoverishment via currency devaluation – is actively resisted by our big trading partners because a dollar devaluation would slash the value of their vast dollar holdings. Currently four and a half trillion dollars of US Treasury securities are held by foreign investors or governments, to say nothing of trillions more in private securities and IOUs. China and Japan are our biggest creditors. China in particular has recently been vocal about looking for some alternative to the dollar. These creditors realize they have been riding a red/white/&blue tiger: that can not pay its debts and can not stop running up more debt at an alarming rate.
Our big trading partners are also loath to press for the other corrective "solution" applied to debtor nations – imposed national austerity – because that would eviscerate their biggest export market. So, with the two orthodox neoliberal solutions off the table, how is the US ever going to bring its international accounts back into balance? The selfimposed domestic austerity we are embarked upon is not going to do it because those of us who still have jobs and money in our pockets will continue buying imported lightbulbs, shoes and TVs. And with outsourced labor readily available at $2 an hour, or less, why would any profit minded capitalist even dream of opening a light bulb factory here?
According to its proponents, a global free market will optimize the sourcing of labor, materials and capital, and maximize productivity while minimizing cost. However, experience has repeatedly shown that unregulated markets tend to booms and busts. World trade is no exception. What we are looking at now is the final stage of a goods import boom to a country that foolishly has come to depend on imports for a financially unsustainable quantity of essential goods, fueled by a boom in dollars loaned back to us by our trading "partners." Do we have to experience the looming bust to comprehend that sustained trade imbalances lead to unsustainable international financial imbalances? Just as regulation was needed to restrain bank panics, regulation is needed to restrain financial panics, which are predictable when a country's international debts mount with no end in sight. However the panic occurs, whether it is currency panic or a cascade of credit default swaps triggering a another anking crisis, it will impoverish both debtors and creditors, wiping out asset values on a wholesale basis. A cascade of business failures attend these panics, and economic contraction follows. While some rich people may become less rich, others who bet (hedged/swapped) on default become more rich. Meanwhile, millions of middle and working class people will lose the jobs, lose their homes, and be wiped out financially.
Is "our solution" a global bureaucracy empowered to regulate world trade? The term "global bureaucracy" has an all-powerful ring to it, and perhaps that may not be such a good idea, after all. But since we already have a relatively all-powerful membership organization devoted to global trade, perhaps the best way to defuse the looming …crisis might be to agitate for a reform of the WTO. What we would be looking for is a set of WTO rules with the objective of keeping every country within a reasonable range of import/export equilibrium.
Up to this point one of the chief objectives of the WTO has been to encourage lower tariffs, together with national commitments to "bind" those tariffs so once they are lowered they can't be raised up again. But when some country begins running an unsustainable chronic trade deficit, common sense tells us that temporary adjustments to that inflexible tariff landscape are needed. Tariffs are actually the oldest, simplest, most flexible, and most directly expeditious way to regulate trade. Of course, what we are talking about is regulating trade to prevent destabilizing imbalances. Even though this is a simple idea, it has never been considered because tariffs have always been associated with colonial era mercantilism – the manipulation of a country's trading relationships by its government to serve that country's narrow interests. Here we are turning that association on it head, proposing to use tariffs to protect the interests of the global community at large while also protecting innocent working and middle class populations from unemployment and financial punishment.
This simple expedient is not going to be popular on Wall Street because doing away with imposed austerity will make punitive loan rates, privatizations, and related asset liquidations far less likely. Wall Street profits from hedging and currency speculation would also be sharply reduced. Rules promoting trade equilibrium may also be opposed by countries currently pouring exports into the US consumer market, because such imposed national tariff adjustments would temporarily make their exports less affordable here. Offsetting those negatives, the Armageddon of a $ panic will be averted, so countries holding our IOUs will be protected and central bankers and governments that otherwise might be urged to participate in a bailout of unprecedented proportions will be able to relax.
While we are at it, logic tells us that if tariff adjustments can be used as tools to promote trade equilibrium among nations, there is no reason why those same tools can't also be applied to promote policy objectives relating to factors that give one country an advantage over another when it comes to the production of goods involved in trade. Other things being equal, countries that allow their industries to treat the environment as a free dumping ground will have significant cost advantages over countries that enforce environmental protection. Tariff policy can turn up the pressure on irresponsible nations by giving protection to nations that enforce environmental standards. In addition, countries where working conditions are unsafe and oppressive, where child labor is common, where workers are fired, beaten or murdered if they try to organize, where labor is kept cheap by human oppression… should not be allowed to compete on even terms with countries that treat workers fairly and respect their right to bargain collectively for better pay and benefits. Quantifying such differences between nations might sound like a bureaucratic maze, but actually, environmental conditions can be measured objectively using water samples; air samples, food samples… etc. Similarly, labor rights can be fairly measured by sampling the opinions of the work force using random sampling techniques that that give a predictable margin of error.
Within a straightforward rules-based global solution as described here, free trade could generally flourish, currency gyrations due to trade imbalances would be damped down to a range that could be set by policy, and austerity imposed as an international financial sanction would be completely eliminated. The United Nations declaration of human rights would get some teeth in the enforcement of fair labor standards, and Mother Earth could at last begin to recover from several centuries of unrestrained industrial abuse.
The "conventional wisdom" holds that protected industries become fat and lazy price gougers. Free trade, on the other hand, supposedly benefits all nations by spreading industrial development around the world, bringing the benefit of cash wages to third world populations who can then become consumers of goods that globalization has made cheap enough for them to afford. Thus an upward global spiral of prosperity "will raise all boats", and in fact something like that did seem to be happening under the liberalizing influence of post-WWII US policy.
During the '80s and '90s, however, the US balance of trade turned from positive to persistently negative as globalized U.S. corporations moved their production abroad to stay ahead in the "race the bottom." To explain why manufacturing jobs dropped from 30% to just above 10% of the US labor force in half a century, economists pronounced that higher productivity was responsible (caveat: the Labor Department admits that its statistics ascribe outsourcing cost savings to US "productivity"). In the process, the US stopped making consumer essentials, from shoes to TVs to lightbulbs, and the trade deficit ballooned to a three quarter trillion dollar annual rate during the "W" Bush years.
Such enormous deficits had to be financed by borrowing from countries that were running trade surpluses. Any country but the US would quickly see its currency devalued by such profligate deficits. But since WWII the dollar has been the clearing currency of international trade. Consequently, when the US credit bubble burst in '08, the demand for dollars only strengthened because world traders still needed dollars to clear their purchases and the crisis had made dollars much more difficult to borrow.
Now that a few years have passed since that crash, US unemployment hovers near 10% while the proportion of the workforce without a proper job is closer to 20%. State and local governments play into a losing game, fishing to attract business from other locales with tax offsets, even while they lay off workers and public school teachers to balance budgets hit by declining revenues and rateables. Any honest economist would tell you a downward economic spiral is underway, exacerbated by this self-imposed austerity. But that conclusion is often contradicted by officials who are trumpeting optimism to shore up their misguided austerity measures. Meanwhile the US public lives in a twilight zone of uncertainly waiting for the other shoe to drop.
Will it be another financial crisis precipitated by credit default swap dominos? Will it be a US Treasury default imposed by Tea Party know-nothings in Congress? Or will it be a second-round mortgage crisis, set off by declining property values due to mortgage industry intransigence in dealing with unemployed home-owners? With Washington obsessed by politics, the trade deficit continuing at a halftrillion dollar annual rate (about 6 million dollars a second !), and service jobs joining industrial jobs flowing out of the country in search of "bottom" costs, some sort of crisis is inevitable. And because the US has generally succeeded in globalizing it's manufacturing, it's employment, its dollar, and its Treasury debt, inevitably the crisis will be global in scope.
One "solution" to US troubles typically applied to other countries in financial trouble -- national impoverishment via currency devaluation – is actively resisted by our big trading partners because a dollar devaluation would slash the value of their vast dollar holdings. Currently four and a half trillion dollars of US Treasury securities are held by foreign investors or governments, to say nothing of trillions more in private securities and IOUs. China and Japan are our biggest creditors. China in particular has recently been vocal about looking for some alternative to the dollar. These creditors realize they have been riding a red/white/&blue tiger: that can not pay its debts and can not stop running up more debt at an alarming rate.
Our big trading partners are also loath to press for the other corrective "solution" applied to debtor nations – imposed national austerity – because that would eviscerate their biggest export market. So, with the two orthodox neoliberal solutions off the table, how is the US ever going to bring its international accounts back into balance? The selfimposed domestic austerity we are embarked upon is not going to do it because those of us who still have jobs and money in our pockets will continue buying imported lightbulbs, shoes and TVs. And with outsourced labor readily available at $2 an hour, or less, why would any profit minded capitalist even dream of opening a light bulb factory here?
According to its proponents, a global free market will optimize the sourcing of labor, materials and capital, and maximize productivity while minimizing cost. However, experience has repeatedly shown that unregulated markets tend to booms and busts. World trade is no exception. What we are looking at now is the final stage of a goods import boom to a country that foolishly has come to depend on imports for a financially unsustainable quantity of essential goods, fueled by a boom in dollars loaned back to us by our trading "partners." Do we have to experience the looming bust to comprehend that sustained trade imbalances lead to unsustainable international financial imbalances? Just as regulation was needed to restrain bank panics, regulation is needed to restrain financial panics, which are predictable when a country's international debts mount with no end in sight. However the panic occurs, whether it is currency panic or a cascade of credit default swaps triggering a another anking crisis, it will impoverish both debtors and creditors, wiping out asset values on a wholesale basis. A cascade of business failures attend these panics, and economic contraction follows. While some rich people may become less rich, others who bet (hedged/swapped) on default become more rich. Meanwhile, millions of middle and working class people will lose the jobs, lose their homes, and be wiped out financially.
Is "our solution" a global bureaucracy empowered to regulate world trade? The term "global bureaucracy" has an all-powerful ring to it, and perhaps that may not be such a good idea, after all. But since we already have a relatively all-powerful membership organization devoted to global trade, perhaps the best way to defuse the looming …crisis might be to agitate for a reform of the WTO. What we would be looking for is a set of WTO rules with the objective of keeping every country within a reasonable range of import/export equilibrium.
Up to this point one of the chief objectives of the WTO has been to encourage lower tariffs, together with national commitments to "bind" those tariffs so once they are lowered they can't be raised up again. But when some country begins running an unsustainable chronic trade deficit, common sense tells us that temporary adjustments to that inflexible tariff landscape are needed. Tariffs are actually the oldest, simplest, most flexible, and most directly expeditious way to regulate trade. Of course, what we are talking about is regulating trade to prevent destabilizing imbalances. Even though this is a simple idea, it has never been considered because tariffs have always been associated with colonial era mercantilism – the manipulation of a country's trading relationships by its government to serve that country's narrow interests. Here we are turning that association on it head, proposing to use tariffs to protect the interests of the global community at large while also protecting innocent working and middle class populations from unemployment and financial punishment.
This simple expedient is not going to be popular on Wall Street because doing away with imposed austerity will make punitive loan rates, privatizations, and related asset liquidations far less likely. Wall Street profits from hedging and currency speculation would also be sharply reduced. Rules promoting trade equilibrium may also be opposed by countries currently pouring exports into the US consumer market, because such imposed national tariff adjustments would temporarily make their exports less affordable here. Offsetting those negatives, the Armageddon of a $ panic will be averted, so countries holding our IOUs will be protected and central bankers and governments that otherwise might be urged to participate in a bailout of unprecedented proportions will be able to relax.
While we are at it, logic tells us that if tariff adjustments can be used as tools to promote trade equilibrium among nations, there is no reason why those same tools can't also be applied to promote policy objectives relating to factors that give one country an advantage over another when it comes to the production of goods involved in trade. Other things being equal, countries that allow their industries to treat the environment as a free dumping ground will have significant cost advantages over countries that enforce environmental protection. Tariff policy can turn up the pressure on irresponsible nations by giving protection to nations that enforce environmental standards. In addition, countries where working conditions are unsafe and oppressive, where child labor is common, where workers are fired, beaten or murdered if they try to organize, where labor is kept cheap by human oppression… should not be allowed to compete on even terms with countries that treat workers fairly and respect their right to bargain collectively for better pay and benefits. Quantifying such differences between nations might sound like a bureaucratic maze, but actually, environmental conditions can be measured objectively using water samples; air samples, food samples… etc. Similarly, labor rights can be fairly measured by sampling the opinions of the work force using random sampling techniques that that give a predictable margin of error.
Within a straightforward rules-based global solution as described here, free trade could generally flourish, currency gyrations due to trade imbalances would be damped down to a range that could be set by policy, and austerity imposed as an international financial sanction would be completely eliminated. The United Nations declaration of human rights would get some teeth in the enforcement of fair labor standards, and Mother Earth could at last begin to recover from several centuries of unrestrained industrial abuse.
Economic Recovery and Globalism
July 2009
According to Paul Samuelson, "Economists have correctly predicted nine of the last five recessions.” Such “accuracy” likely also applies to recent rosy predictions of recovery from our current slump. The Conference Board’s index of leading economic indicators moved up in April for the first time in 7 months, led by stock prices, and the index of consumer expectations. Weak elements, which continued to move down, included building permits and manufacturers' new orders for capital goods. While the psychology of the stock market can turn on a dime, and so can consumer expectations, business commitments such as building permits and orders for capital goods reflect fundamental forces.
The current pattern with regard to building permits in the US is unusual. Historically, housing construction has been one of the first to turn positive during a slump, because of real estate’s sensitivity to interest rates. Typically rates tighten when the economy heats up, shutting out payment-sensitive brackets of homebuyers. As a slump takes hold, the demand for bank credit slackens and the mortgage rate situation begins to reverse itself. Then, brackets of homebuyers previously shut out are able to qualify again, setting in motion a whole range of ripple effects throughout the economy. Regrettably, it's different this time because interest rates were kept artificially low by the Fed.
Not only was no bracket of motivated buyers restrained during the Bush years, but at the peak virtually anyone willing to sign a promissory note was able to get a “sub-prime” mortgage. So it's not surprising there is no rebound now, as the slump deepens, even though mortgage rates are lower than they have been in 50 years. And worse still, with construction materials and labor costs little changed, yet with home prices down as much as 60% depending on metro-market, builders have little appetite to risk whatever capital they may have left. The result is that building permits are currently running at a rate of less than 50,000 units, down from over 200,000 three years ago.
Likewise, a turn-around in industrial orders for capital goods is not likely to follow the typical pattern of post-WWII recessions. When a period of prosperity peaked, orders for capital equipment would fall off sharply because industrial production would be throttled back well below capacity due to ballooning inventories, in turn the result of slackening consumer demand. This is true now, too, but with a difference. While twenty years ago approximately 90% of manufactured goods consumed in the US were made here, now the figure is more like 75%. Much of this loss has occurred recently --manufacturing employment in the US dropped from 18.5 million workers in 2000 to 12.5 million currently--because US industries have been globalizing themselves to take advantage of dramatically lower labor costs in other countries. The consequence is that when inventories finally do tighten, plants in China, Mexico, Brazil, dia, and other cheap labor areas will be getting capital infusions from the very same corporations that used to do their capital spending here in the US.
In addition to residential construction and industrial capital equipment, another traditional counter-recessionary dynamic is deficit spending by the government. This time, in spite of bitter opposition by the Republicans, Congress has voted the Obama administration authority to throw massive sums into stimulus measures.
But unfortunately by mid May, three months after the President signed the stimulus bill, less than 6% of the authorized money was spent, and that was mostly in the form of social service payments to the states (unemployment extensions, for example). Unless the stimulus money gets out there and goes to create jobs, it won’t even begin to get us out of this recession.
Complicating any hope for recovery, all three of these counter-recessionary factors are perversely linked to the global economic crisis. During the Bush years the principal source of mortgage credit for US homebuyers shifted to Wall Street, which packaged mortgages into derivative securities and peddled them all over the world. However, this pattern of finance caused a disconnect between mortgage credit underwriting at the local level, and long term ownership of the loans which might be anywhere in the world. In the heady chase for origination fees, unrestrained by any long term responsibility, sub-prime borrowers were routinely qualified, often fraudulently. So Wall Street’s triple-A rating for derivatives based on those mortgages turned out to be fraudulent too, and market for them collapsed, with global effects. Now, the entire real-estate finance business is in a drastic state of retrenchment with no more foreign money coming in.
On the subject of capital spending by US industry, there is little hope of much counter recessionary kick in the foreseeable future because our most successful corporations are up to their necks in that global “race to the bottom,” and heavily dependent on countries with the lowest labor costs and environmental protection standards. Consequently, the industrial jobs lost here are not coming back. And the countries where those jobs have gone, like China, India and Brazil, are well positioned to take advantage of the lapse of US demand for their exports by refocusing idled manpower and entrepreneurial spirit on emerging technologies, such as “green energy.”
Finally, with regard government deficit spending, neither taxes nor domestic funding sources are adequate to finance the Obama administration’s giant stimulus package. In the past, foreign countries have been happy to snap up US treasury debt because the dollar has been the dominant reserve currency of central banks, world wide. The dollar has survived in this role since WWII thanks to a paradoxical circumstance. For a nation’s central bank notes to be available in good enough supply to be the international reserve currency of choice, the country must be running a deficit covered by selling its treasury notes in international markets. If that country begins running a persistent surplus and redeems its borrowings, the reduced supply will make that country’s obligations unsuitable for international reserve accumulation. So, paradoxically, the supply of dollars to the rest of the world depends on the U.S. deficit, and yet at the same time the willingness of other countries to hold dollars depends on the US economy’s ability to inspire confidence. Regrettably, this financial crisis has badly shaken international confidence in Wall Street, the capitalist system, and the US. So, if the dollar starts to slide, it will become significantly more difficult and costly to finance the giant stimulus (among a host of other consequences of a dollar debacle on US citizens).
Countries like China with big dollar holdings are helping us keep the dollar stable. But China has signaled its desire to change the rules so it doesn’t have to keep financing the endless deficits of a nation whose economy has been wounded by Wall Street fraud and by the global race to the bottom (of which China is probably the primary beneficiary, ironically). The challenge for China is to make a relatively smooth transition from the dollar to some other reserve currency, while also shifting from so heavily exporting to the US, to diversifying more broadly to other markets. For a new reserve currency, China favors notes to be issued prospectively by the International Monetary Fund, whose value would be tied to a basket of currencies including the dollar. The Obama administration, with a stimulus to finance, obviously would like to delay any such transition as long as possible. This was dramatically illustrated at the June 24-26 United Nations' Conference on the World Financial and Economic Crisis where our UN Representative Susan Rice made a statement before the conference started praising the reform agenda that included consideration of the prospective IMF reserve notes, but then she was replaced as the conference got underway by a stand-in who proceeded to oppose reform… reportedly at the insistence of the Treasury Department.
As for World Federalists and other citizens for global solutions, the good news is that the prospective reform of the international financial system is gradually building support, and will of necessity draw the world’s trading nations into a more cooperative and mutually responsible framework. This will be one more brick in the gradual evolution of global institutions and laws, although one that will inevitably come at a cost to the prestige and economic dominance of the USA. .
According to Paul Samuelson, "Economists have correctly predicted nine of the last five recessions.” Such “accuracy” likely also applies to recent rosy predictions of recovery from our current slump. The Conference Board’s index of leading economic indicators moved up in April for the first time in 7 months, led by stock prices, and the index of consumer expectations. Weak elements, which continued to move down, included building permits and manufacturers' new orders for capital goods. While the psychology of the stock market can turn on a dime, and so can consumer expectations, business commitments such as building permits and orders for capital goods reflect fundamental forces.
The current pattern with regard to building permits in the US is unusual. Historically, housing construction has been one of the first to turn positive during a slump, because of real estate’s sensitivity to interest rates. Typically rates tighten when the economy heats up, shutting out payment-sensitive brackets of homebuyers. As a slump takes hold, the demand for bank credit slackens and the mortgage rate situation begins to reverse itself. Then, brackets of homebuyers previously shut out are able to qualify again, setting in motion a whole range of ripple effects throughout the economy. Regrettably, it's different this time because interest rates were kept artificially low by the Fed.
Not only was no bracket of motivated buyers restrained during the Bush years, but at the peak virtually anyone willing to sign a promissory note was able to get a “sub-prime” mortgage. So it's not surprising there is no rebound now, as the slump deepens, even though mortgage rates are lower than they have been in 50 years. And worse still, with construction materials and labor costs little changed, yet with home prices down as much as 60% depending on metro-market, builders have little appetite to risk whatever capital they may have left. The result is that building permits are currently running at a rate of less than 50,000 units, down from over 200,000 three years ago.
Likewise, a turn-around in industrial orders for capital goods is not likely to follow the typical pattern of post-WWII recessions. When a period of prosperity peaked, orders for capital equipment would fall off sharply because industrial production would be throttled back well below capacity due to ballooning inventories, in turn the result of slackening consumer demand. This is true now, too, but with a difference. While twenty years ago approximately 90% of manufactured goods consumed in the US were made here, now the figure is more like 75%. Much of this loss has occurred recently --manufacturing employment in the US dropped from 18.5 million workers in 2000 to 12.5 million currently--because US industries have been globalizing themselves to take advantage of dramatically lower labor costs in other countries. The consequence is that when inventories finally do tighten, plants in China, Mexico, Brazil, dia, and other cheap labor areas will be getting capital infusions from the very same corporations that used to do their capital spending here in the US.
In addition to residential construction and industrial capital equipment, another traditional counter-recessionary dynamic is deficit spending by the government. This time, in spite of bitter opposition by the Republicans, Congress has voted the Obama administration authority to throw massive sums into stimulus measures.
But unfortunately by mid May, three months after the President signed the stimulus bill, less than 6% of the authorized money was spent, and that was mostly in the form of social service payments to the states (unemployment extensions, for example). Unless the stimulus money gets out there and goes to create jobs, it won’t even begin to get us out of this recession.
Complicating any hope for recovery, all three of these counter-recessionary factors are perversely linked to the global economic crisis. During the Bush years the principal source of mortgage credit for US homebuyers shifted to Wall Street, which packaged mortgages into derivative securities and peddled them all over the world. However, this pattern of finance caused a disconnect between mortgage credit underwriting at the local level, and long term ownership of the loans which might be anywhere in the world. In the heady chase for origination fees, unrestrained by any long term responsibility, sub-prime borrowers were routinely qualified, often fraudulently. So Wall Street’s triple-A rating for derivatives based on those mortgages turned out to be fraudulent too, and market for them collapsed, with global effects. Now, the entire real-estate finance business is in a drastic state of retrenchment with no more foreign money coming in.
On the subject of capital spending by US industry, there is little hope of much counter recessionary kick in the foreseeable future because our most successful corporations are up to their necks in that global “race to the bottom,” and heavily dependent on countries with the lowest labor costs and environmental protection standards. Consequently, the industrial jobs lost here are not coming back. And the countries where those jobs have gone, like China, India and Brazil, are well positioned to take advantage of the lapse of US demand for their exports by refocusing idled manpower and entrepreneurial spirit on emerging technologies, such as “green energy.”
Finally, with regard government deficit spending, neither taxes nor domestic funding sources are adequate to finance the Obama administration’s giant stimulus package. In the past, foreign countries have been happy to snap up US treasury debt because the dollar has been the dominant reserve currency of central banks, world wide. The dollar has survived in this role since WWII thanks to a paradoxical circumstance. For a nation’s central bank notes to be available in good enough supply to be the international reserve currency of choice, the country must be running a deficit covered by selling its treasury notes in international markets. If that country begins running a persistent surplus and redeems its borrowings, the reduced supply will make that country’s obligations unsuitable for international reserve accumulation. So, paradoxically, the supply of dollars to the rest of the world depends on the U.S. deficit, and yet at the same time the willingness of other countries to hold dollars depends on the US economy’s ability to inspire confidence. Regrettably, this financial crisis has badly shaken international confidence in Wall Street, the capitalist system, and the US. So, if the dollar starts to slide, it will become significantly more difficult and costly to finance the giant stimulus (among a host of other consequences of a dollar debacle on US citizens).
Countries like China with big dollar holdings are helping us keep the dollar stable. But China has signaled its desire to change the rules so it doesn’t have to keep financing the endless deficits of a nation whose economy has been wounded by Wall Street fraud and by the global race to the bottom (of which China is probably the primary beneficiary, ironically). The challenge for China is to make a relatively smooth transition from the dollar to some other reserve currency, while also shifting from so heavily exporting to the US, to diversifying more broadly to other markets. For a new reserve currency, China favors notes to be issued prospectively by the International Monetary Fund, whose value would be tied to a basket of currencies including the dollar. The Obama administration, with a stimulus to finance, obviously would like to delay any such transition as long as possible. This was dramatically illustrated at the June 24-26 United Nations' Conference on the World Financial and Economic Crisis where our UN Representative Susan Rice made a statement before the conference started praising the reform agenda that included consideration of the prospective IMF reserve notes, but then she was replaced as the conference got underway by a stand-in who proceeded to oppose reform… reportedly at the insistence of the Treasury Department.
As for World Federalists and other citizens for global solutions, the good news is that the prospective reform of the international financial system is gradually building support, and will of necessity draw the world’s trading nations into a more cooperative and mutually responsible framework. This will be one more brick in the gradual evolution of global institutions and laws, although one that will inevitably come at a cost to the prestige and economic dominance of the USA. .
Individual Privacy, Freedom,
and the
Wild West World of Electronic Communications
and the
Wild West World of Electronic Communications
April 2007
We've all heard the recent revelations about the Bush administration's unauthorized wiretaps. We've struggled to understand what "data-mining" means, and wondered what data our government is applying this technique to. Calm down! These are all US government programs, for our "protection." But, sadly, it doesn't end with the FBI or NSA. Most of us are familiar with term "spyware", something our computer anti-virus vendors regard as a threat on a par with Trojans and malware; but aside from those vendors, no one else seem to care about this sort of unauthorized data-mining, probably because it's "harmless." Google, and other big "home-page" sites are also recording our movements on the net, the better to feed us ads that that cater to (prey upon) our demonstrated areas of interest. These big outfits say they're being strictly ethical with the data they mine, but all bets are off when what they're collecting gets subpoenaed!
Perhaps the most bizarre and frightening potentials come from a sort of data-mining that represents a mongrelization of the two categories described above. This is the totally out of control surveillance that combines the Brave New World potential of government data mining with the unauthorized and secretive data snatching proclivities of private entities. How does this occur? It happens when a government "outsources." When we know about this sort of outsourcing, it's OK, like the data that Aetna collects on Medicare clients. It's when we don't know, but have reason to suspect, that the prospect gets frightening.
An edifying example of this sort of mongrelized "outsourcing" takes us back to September 2001, when reports surfaced that the Israeli secret service, Mossad, tried to tip off the FBI and the CIA that they believed Al Qaeda was about to attack some prominent targets in the US. The FBI knew Mossad had recently sent a lot of agents to US, and had been keeping tabs on several dozen of them, and so was suspicious of the tip, thinking Mossad had some devious agenda. So they basically ignored the warning. The attacks occurred, and our government thrashed around, alternately admitting, spinning, and then denying reports about Mossad tracking the terrorists. A number of stories about it were published in leading newspapers, and Fox News ran a series of four TV reports publicizing some of the evidence, but ultimately all reputable news media bowed to pressure, pressed no doubt in the name of "national security", and pulled back from the story.
Most intriguing, our government's relationship with Israel entered a new phase: in some respects the foreign policies of the two nations merged to become a single strategy. We attacked the country Israel feared most, the one which had bombarded them with Scud missiles a decade earlier, without ever offering a credible reason for doing so and then stood back and held off their critics while they savaged southern Lebanon. Without getting into conspiracy theories (and of course such theories abound), the real question is, how was Mossad able to track the terrorists here in the US, and how did they know the 9/11 team's exact timetable? There really is only one reasonable answer and that is: via telephone network data-mining, used in concert with more traditional surveillance methods such as wiretapping. Incredible as it may seem, there is solid evidence to support this conjecture.
When Ma Bell was broken up, the RBOCs (regional Bell operating companies) that inherited the local call business were cut off from Bell Labs, the technical development center. Instead of trying to develop their own new systems in-house, the RBOCs generally have taken the route of contracting out their technical requirements. One of the more nightmarish jobs has been keeping the billing software up to date, especially considering the absolutely free-form chaos of wireless. One contractor has come up on top in this business: Amdocs; and, remarkably, it is a Israeli-run company. Here are some tidbits from a 2003 article about the company: "SBC Communications was Amdocs' first (US) customer (back in the '80s). From there, Amdocs expanded into helping RBOCs process records, and eventually the company moved into the billing arena. 'Then wireless started taking off; that's when we really moved into billing,' says Couture. The company went public in 1998 and 'has had really rapid growth.' Today Amdocs has approximately $1.5 billion in revenues (2002) and close to 10,000 employees," says Couture..." (http://www.xchangemag.com/articles/431supsys1.html )
Here is a (partial) customer list from the company's 2002 annual report: "Bell Canada, BellSouth, BT, Cable & Wireless, Cingular, Deutsche Telekom, Japan Telecom, KT Freetel, Nextel, Orange, Qwest, SBC, Sprint, Sprint PCS, TDC, VoiceStream and Western Wireless." In that annual report, the only clue that it is an Israeli company is in Note 16 on employee benefits, where the bulk of the discussion concerns policies that relate to Israeli employees specifically. No corporate headquarters is specified; instead, principal offices around the world are listed. However, Amdocs' main development center is in Israel and those working there would have routine access to analyze any customer's call billing data base. This access would allow them to determine who is calling who, and when they do it. Done systematically, on a regular basis, this amounts to data-mining, and allows you to track any person who uses a telephone, and follow him on a day by day basis throughout the areas that Amdocs serves (which includes 90% of the USA and much of Europe).
Now consider the possibility that Amdocs may have been infiltrated by the Mossad, whether with the knowledge of Amdocs' management, or without it. As an Israeli-run company, such infiltration would have been easy to do. Could this very logical possibility have escaped the FBI and the CIA? Of course not. In fact, immediately after 9/11 scores of Israeli agents in the US were arrested. But all these Mossad people were quietly released within a few months. We have to assume that an accommodation was reached. It is logical to assume that the telephone data- mining capabilities that served the Israelis before 9/11 began serving the US intelligence agencies not long after 9/11. We don't fully trust Mossad, of course, so it seems certain we have some of our own technical specialists involved.
Our involvement is strongly suggested by the Bush administration's admission, in 2005, that it had been doing wiretaps without obtaining secret court orders as required by the Foreign Intelligence Surveillance Act. In traditional surveillance, investigations move at human speed and the number of wiretaps requested is in some reasonable relationship to the number of agents working on the ground, making requests for them. But when you are doing telephone data- mining, the situation is entirely different because the number of suspect phone numbers can mushroom at electronic speed. Whenever a suspect number calls a number it hasn't called before, or vice-versa, you need to identify the party at the new number. If this turns out to be an unknown person, the speedy way to check-out the unknown person is to tap the new number. And we know the Bush administration told Congress it gave the go-ahead to the speedy approach, virtually admitting it was employing telephone data-mining.
Getting back to Mossad; like any other investigative agency, once they have identified a suspect phone number, they too will want to move to the logical next step, which is to tap. But how can they do it, especially in the US? We have to assume they foresaw this necessity long ago because it turns out there is another Israeli originated company capable of covering this requirement. Here is a company description from a corporate website: "Verint Systems Inc., formerly Comverse Infosys, based in Woodbury, New York (a subsidiary of Comverse Technology, Inc., a US company, traded OTC) is a leading provider of analytic software solutions for digital video security and surveillance, communications interception, and enterprise business intelligence. Verint software generates actionable intelligence through the collection, retention and analysis of voice, fax, video, email, Internet and data transmissions from multiple types of communications. Verint products are installed in government facilities, airports and transportation systems, customer contact and service centers, corporations, financial institutions, and other organizations. Verint has a global presence with sales and support services across the U.S. and in 50 countries worldwide." ( http://www.cmvt.com/aboutCTI.asp?top=1&id=2)
Comverse had sales of $1,270,000,000 for the fiscal year ending in 2002, making it, like Amdocs, the world leader in its field. And like Amdocs, it's annual report makes no effort to publicize its link to Israel. However, once a company goes public, some things can not be entirely concealed. Here are excerpts from the section of the 2003 annual report that deals with research and development: "A portion of the Company's research and development operations benefit from financial incentives provided by government agencies...in Israel. ...During the past fiscal year, the Company's research and development activities included projects submitted for partial funding under a program administered by the Office of the Chief Scientist of the Ministry of Industry and Trade of the State of Israel... Permission from the government of Israel is required for the Company to manufacture outside of Israel products resulting from research and development activities funded under such programs, or to transfer outside of Israel related technology rights, and in order to obtain such permission the Company may be required to increase the royalties to the applicable funding agencies and/or repay certain amounts received as reimbursement of research and development costs."
To understand Comverse's role, it helps to understand that wiretapping no longer requires anyone to go and physically tap a wire. It's all software-driven now, just like telephone call connection, or routing over the internet. As the leading contractor for surveillance technology, the company's employees have routine access to such installations for maintenance and upgrading, and probably have work-arounds that can penetrate any kind of electronic security because that is their business, and they are the best at it.
If we assume that both Comverse and Amdocs have cadres of Mossad employees in their ranks, it is clear enough that Israeli intelligence would have the capability to telephonically track and listen to just about anyone they wanted to, in Europe or America. This seems to explain how they knew the World Trade Center would be attacked, and how they were able to warn the FBI and the CIA it was going to happen, and how it happened that Israeli employees of Odigo, a company headquartered in the Trade Center area, were warned two hours before the attacks (reported by the Washington Post 9/27/01, and other media), and how Mossad had a van full of their agents watching the planes hit the Trade Center from a prominent vantage point in Liberty State park, directly across the Hudson in New Jersey (all occupants of the van were arrested and later questioned by the FBI - this is in the Fox News report that can be viewed [if you have media player capability] at http://www.informationclearinghouse.info/article7545.htm and also was reported by many newspapers just after 9/11. )
Israel clearly grasped the potential of outsourcing electronic surveillance long before our government did. Of necessity, it needed to track enemies outside of the jurisdiction it controls, and evidently made the decision to fund an outsourcing program (as suggested in the R&D note of the Comverse report, quoted above) at least 25 years ago. Now that our government has climbed on board Israel's coat-tails, we may feel a little safer from 9/11 style terrorists here in the US. But our concern is about the global prospect, and regrettably as we benefit from outsourced surveillance "protecting" us, we also understand it is a two edged sword that sooner or later will "seriously infringe on individual privacy and freedom".
Foreshadowing what is to come, there have already been complaints by law enforcement that "war-on-drugs" operations were compromised by what had to be sophisticated telephonic data-mining and surveillance, with suspicion aimed at Comverse. After all, if the Regan administration could raise money for the contras in central America, under the table, why shouldn't Mossad, or some free-lancer within its ranks raise needed funds in a similar way? The reality is, power corrupts, and unregulated, outsourced power corrupts even faster.
No publicly transparent national government is capable of regulating the spying by intelligence services that occurs on public networks. For one thing, the world of electronic communications has no meaningful border, as we have seen with the activities of Mossad. Secondly, all the dirty work can be performed by private contractors, or agents working in secret under the cover of private enterprise whose owners are either ignorant or willing to lie in the service of what they perceive as a higher cause. In addition to this, there also is the growing problem of irresponsible private use, particularly of the internet: viruses, spam, hacking, internet data-mining, spyware... etc. Again, no national government can do much about it beyond cracking down at home and closing its electronic borders, tantamount to cutting off one's nose to spite one's face.
It looks like another case where a global authority is needed. Ideally, such an authority would regulate and license electronic communications networks with cross-border linkages, impose standards on data collection by the companies providing such networks, audit compliance, maintain a court where police departments could request surveillance permits for specific investigations on licensed networks, and where individuals or governments could file suits against perceived abusers. Ideally this proposed court would allow individuals to file against their own national governments, a feature that would tend to reinforce the kind of audit or inspection procedures which inevitably meet with resistance, evasion and outright deception. If we're lucky, and move fast enough, there is still hope that we can derail this "Brave New World" of deniable global surveillance and undeniable electronic intrusion that has invented itself within the last twenty years.
We've all heard the recent revelations about the Bush administration's unauthorized wiretaps. We've struggled to understand what "data-mining" means, and wondered what data our government is applying this technique to. Calm down! These are all US government programs, for our "protection." But, sadly, it doesn't end with the FBI or NSA. Most of us are familiar with term "spyware", something our computer anti-virus vendors regard as a threat on a par with Trojans and malware; but aside from those vendors, no one else seem to care about this sort of unauthorized data-mining, probably because it's "harmless." Google, and other big "home-page" sites are also recording our movements on the net, the better to feed us ads that that cater to (prey upon) our demonstrated areas of interest. These big outfits say they're being strictly ethical with the data they mine, but all bets are off when what they're collecting gets subpoenaed!
Perhaps the most bizarre and frightening potentials come from a sort of data-mining that represents a mongrelization of the two categories described above. This is the totally out of control surveillance that combines the Brave New World potential of government data mining with the unauthorized and secretive data snatching proclivities of private entities. How does this occur? It happens when a government "outsources." When we know about this sort of outsourcing, it's OK, like the data that Aetna collects on Medicare clients. It's when we don't know, but have reason to suspect, that the prospect gets frightening.
An edifying example of this sort of mongrelized "outsourcing" takes us back to September 2001, when reports surfaced that the Israeli secret service, Mossad, tried to tip off the FBI and the CIA that they believed Al Qaeda was about to attack some prominent targets in the US. The FBI knew Mossad had recently sent a lot of agents to US, and had been keeping tabs on several dozen of them, and so was suspicious of the tip, thinking Mossad had some devious agenda. So they basically ignored the warning. The attacks occurred, and our government thrashed around, alternately admitting, spinning, and then denying reports about Mossad tracking the terrorists. A number of stories about it were published in leading newspapers, and Fox News ran a series of four TV reports publicizing some of the evidence, but ultimately all reputable news media bowed to pressure, pressed no doubt in the name of "national security", and pulled back from the story.
Most intriguing, our government's relationship with Israel entered a new phase: in some respects the foreign policies of the two nations merged to become a single strategy. We attacked the country Israel feared most, the one which had bombarded them with Scud missiles a decade earlier, without ever offering a credible reason for doing so and then stood back and held off their critics while they savaged southern Lebanon. Without getting into conspiracy theories (and of course such theories abound), the real question is, how was Mossad able to track the terrorists here in the US, and how did they know the 9/11 team's exact timetable? There really is only one reasonable answer and that is: via telephone network data-mining, used in concert with more traditional surveillance methods such as wiretapping. Incredible as it may seem, there is solid evidence to support this conjecture.
When Ma Bell was broken up, the RBOCs (regional Bell operating companies) that inherited the local call business were cut off from Bell Labs, the technical development center. Instead of trying to develop their own new systems in-house, the RBOCs generally have taken the route of contracting out their technical requirements. One of the more nightmarish jobs has been keeping the billing software up to date, especially considering the absolutely free-form chaos of wireless. One contractor has come up on top in this business: Amdocs; and, remarkably, it is a Israeli-run company. Here are some tidbits from a 2003 article about the company: "SBC Communications was Amdocs' first (US) customer (back in the '80s). From there, Amdocs expanded into helping RBOCs process records, and eventually the company moved into the billing arena. 'Then wireless started taking off; that's when we really moved into billing,' says Couture. The company went public in 1998 and 'has had really rapid growth.' Today Amdocs has approximately $1.5 billion in revenues (2002) and close to 10,000 employees," says Couture..." (http://www.xchangemag.com/articles/431supsys1.html )
Here is a (partial) customer list from the company's 2002 annual report: "Bell Canada, BellSouth, BT, Cable & Wireless, Cingular, Deutsche Telekom, Japan Telecom, KT Freetel, Nextel, Orange, Qwest, SBC, Sprint, Sprint PCS, TDC, VoiceStream and Western Wireless." In that annual report, the only clue that it is an Israeli company is in Note 16 on employee benefits, where the bulk of the discussion concerns policies that relate to Israeli employees specifically. No corporate headquarters is specified; instead, principal offices around the world are listed. However, Amdocs' main development center is in Israel and those working there would have routine access to analyze any customer's call billing data base. This access would allow them to determine who is calling who, and when they do it. Done systematically, on a regular basis, this amounts to data-mining, and allows you to track any person who uses a telephone, and follow him on a day by day basis throughout the areas that Amdocs serves (which includes 90% of the USA and much of Europe).
Now consider the possibility that Amdocs may have been infiltrated by the Mossad, whether with the knowledge of Amdocs' management, or without it. As an Israeli-run company, such infiltration would have been easy to do. Could this very logical possibility have escaped the FBI and the CIA? Of course not. In fact, immediately after 9/11 scores of Israeli agents in the US were arrested. But all these Mossad people were quietly released within a few months. We have to assume that an accommodation was reached. It is logical to assume that the telephone data- mining capabilities that served the Israelis before 9/11 began serving the US intelligence agencies not long after 9/11. We don't fully trust Mossad, of course, so it seems certain we have some of our own technical specialists involved.
Our involvement is strongly suggested by the Bush administration's admission, in 2005, that it had been doing wiretaps without obtaining secret court orders as required by the Foreign Intelligence Surveillance Act. In traditional surveillance, investigations move at human speed and the number of wiretaps requested is in some reasonable relationship to the number of agents working on the ground, making requests for them. But when you are doing telephone data- mining, the situation is entirely different because the number of suspect phone numbers can mushroom at electronic speed. Whenever a suspect number calls a number it hasn't called before, or vice-versa, you need to identify the party at the new number. If this turns out to be an unknown person, the speedy way to check-out the unknown person is to tap the new number. And we know the Bush administration told Congress it gave the go-ahead to the speedy approach, virtually admitting it was employing telephone data-mining.
Getting back to Mossad; like any other investigative agency, once they have identified a suspect phone number, they too will want to move to the logical next step, which is to tap. But how can they do it, especially in the US? We have to assume they foresaw this necessity long ago because it turns out there is another Israeli originated company capable of covering this requirement. Here is a company description from a corporate website: "Verint Systems Inc., formerly Comverse Infosys, based in Woodbury, New York (a subsidiary of Comverse Technology, Inc., a US company, traded OTC) is a leading provider of analytic software solutions for digital video security and surveillance, communications interception, and enterprise business intelligence. Verint software generates actionable intelligence through the collection, retention and analysis of voice, fax, video, email, Internet and data transmissions from multiple types of communications. Verint products are installed in government facilities, airports and transportation systems, customer contact and service centers, corporations, financial institutions, and other organizations. Verint has a global presence with sales and support services across the U.S. and in 50 countries worldwide." ( http://www.cmvt.com/aboutCTI.asp?top=1&id=2)
Comverse had sales of $1,270,000,000 for the fiscal year ending in 2002, making it, like Amdocs, the world leader in its field. And like Amdocs, it's annual report makes no effort to publicize its link to Israel. However, once a company goes public, some things can not be entirely concealed. Here are excerpts from the section of the 2003 annual report that deals with research and development: "A portion of the Company's research and development operations benefit from financial incentives provided by government agencies...in Israel. ...During the past fiscal year, the Company's research and development activities included projects submitted for partial funding under a program administered by the Office of the Chief Scientist of the Ministry of Industry and Trade of the State of Israel... Permission from the government of Israel is required for the Company to manufacture outside of Israel products resulting from research and development activities funded under such programs, or to transfer outside of Israel related technology rights, and in order to obtain such permission the Company may be required to increase the royalties to the applicable funding agencies and/or repay certain amounts received as reimbursement of research and development costs."
To understand Comverse's role, it helps to understand that wiretapping no longer requires anyone to go and physically tap a wire. It's all software-driven now, just like telephone call connection, or routing over the internet. As the leading contractor for surveillance technology, the company's employees have routine access to such installations for maintenance and upgrading, and probably have work-arounds that can penetrate any kind of electronic security because that is their business, and they are the best at it.
If we assume that both Comverse and Amdocs have cadres of Mossad employees in their ranks, it is clear enough that Israeli intelligence would have the capability to telephonically track and listen to just about anyone they wanted to, in Europe or America. This seems to explain how they knew the World Trade Center would be attacked, and how they were able to warn the FBI and the CIA it was going to happen, and how it happened that Israeli employees of Odigo, a company headquartered in the Trade Center area, were warned two hours before the attacks (reported by the Washington Post 9/27/01, and other media), and how Mossad had a van full of their agents watching the planes hit the Trade Center from a prominent vantage point in Liberty State park, directly across the Hudson in New Jersey (all occupants of the van were arrested and later questioned by the FBI - this is in the Fox News report that can be viewed [if you have media player capability] at http://www.informationclearinghouse.info/article7545.htm and also was reported by many newspapers just after 9/11. )
Israel clearly grasped the potential of outsourcing electronic surveillance long before our government did. Of necessity, it needed to track enemies outside of the jurisdiction it controls, and evidently made the decision to fund an outsourcing program (as suggested in the R&D note of the Comverse report, quoted above) at least 25 years ago. Now that our government has climbed on board Israel's coat-tails, we may feel a little safer from 9/11 style terrorists here in the US. But our concern is about the global prospect, and regrettably as we benefit from outsourced surveillance "protecting" us, we also understand it is a two edged sword that sooner or later will "seriously infringe on individual privacy and freedom".
Foreshadowing what is to come, there have already been complaints by law enforcement that "war-on-drugs" operations were compromised by what had to be sophisticated telephonic data-mining and surveillance, with suspicion aimed at Comverse. After all, if the Regan administration could raise money for the contras in central America, under the table, why shouldn't Mossad, or some free-lancer within its ranks raise needed funds in a similar way? The reality is, power corrupts, and unregulated, outsourced power corrupts even faster.
No publicly transparent national government is capable of regulating the spying by intelligence services that occurs on public networks. For one thing, the world of electronic communications has no meaningful border, as we have seen with the activities of Mossad. Secondly, all the dirty work can be performed by private contractors, or agents working in secret under the cover of private enterprise whose owners are either ignorant or willing to lie in the service of what they perceive as a higher cause. In addition to this, there also is the growing problem of irresponsible private use, particularly of the internet: viruses, spam, hacking, internet data-mining, spyware... etc. Again, no national government can do much about it beyond cracking down at home and closing its electronic borders, tantamount to cutting off one's nose to spite one's face.
It looks like another case where a global authority is needed. Ideally, such an authority would regulate and license electronic communications networks with cross-border linkages, impose standards on data collection by the companies providing such networks, audit compliance, maintain a court where police departments could request surveillance permits for specific investigations on licensed networks, and where individuals or governments could file suits against perceived abusers. Ideally this proposed court would allow individuals to file against their own national governments, a feature that would tend to reinforce the kind of audit or inspection procedures which inevitably meet with resistance, evasion and outright deception. If we're lucky, and move fast enough, there is still hope that we can derail this "Brave New World" of deniable global surveillance and undeniable electronic intrusion that has invented itself within the last twenty years.
Subscribe to:
Posts (Atom)