The propaganda machine-7: The rise of think tanks

(For previous posts in this series, see here.)

As I said in the previous post, a key development in the growth of the propaganda machine over the last three decades has been the growth in the number of so-called ‘think tanks’.

So what exactly is a ‘think tank’ and what does it do? If you look at how they are portrayed in the major media, you will get the impression that they are non-university based organizations that perform the same kinds of study and research functions that universities do. But that is misleading. Think tanks are essentially propaganda operations disguised as academic ones, which allows propagandists and ideologues to pretend that they are disinterested academics. They are far closer to Madison Avenue advertising firms than they are to university departments. As the website SourceWatch says:

A Think Tank is an organization that claims to serve as a center for research and/or analysis of important public issues. In reality, many think tanks are little more than public relations fronts, usually headquartered in state or national seats of government and generating self-serving scholarship that serves the advocacy goals of their industry sponsors.
. . .
Of course, some think tanks are more legitimate than that. Private funding does not necessarily make a researcher a shill, and some think-tanks produce worthwhile public policy research. In general, however, research from think tanks is ideologically driven in accordance with the interests of its funders.

Think tanks are funded primarily by large businesses and major foundations. They devise and promote policies that shape the lives of everyday Americans: Social Security privatization, tax and investment laws, regulation of everything from oil to the Internet. They supply experts to testify on Capitol Hill, write articles for the op-ed pages of newspapers, and appear as TV commentators. They advise presidential aspirants and lead orientation seminars to train incoming members of Congress.

Think tanks have a decided political leaning. There are twice as many conservative think tanks as liberal ones, and the conservative ones generally have more money. This is no accident, as one of the important functions of think tanks is to provide a backdoor way for wealthy business interests to promote their ideas or to support economic and sociological research not taking place elsewhere that they feel may turn out in their favor. Conservative think tanks also offer donors an opportunity to support conservative policies outside academia, which during the 1960s and 1970s was accused of having a strong “collectivist” bias.

The goal of many of these think-tanks is to provide a right-wing alternative to what they assert is a left-wing bias in academia, but their larger goal is to dominate the media and shift it rightward by alleging that the media and academic has a left-wing bias and flooding the market with their point of view.

The think tanks work hard to make themselves look and sound like academia, so that they can exploit the reputation for careful study and scholarly objectivity that universities have accumulated over the centuries. They create job titles like Senior Research Scholars and Fellows and even give them names that sound like endowed chairs. In universities, endowed chairs are usually awarded to highly distinguished scholars who have an exemplary research and publishing history. But such titles are intellectually cheap at think tanks. For example, Charles Murray at the AEI, who co-authored The Bell Curve has the title of ‘W. H. Brady Scholar’, which makes him sound like he has earned academic credibility the same way that the holder of an endowed chair in a university has. But he does not have to have done anything of the sort. One does not have to earn those titles by publishing in academic journals and meet the scholarly criteria set by one’s peers. All one has to do is to please one’s bosses which means having the willingness and ability to say well whatever they want you to say.

Politicians and businesses find think tanks to be useful since they can get pseudo-scholarly support from them for almost any policy they wish to implement. As Plain Dealer reporter Tom Brazaitis said: “Modern think tanks are nonprofit, tax-exempt, political idea factories where donations can be as big as the donor’s checkbook and are seldom publicized. . .Technology companies give to think tanks that promote open access to the internet. Wall Street firms donate to think tanks that espouse private investment of retirement funds.” If a business or politician wants some scholarly-looking study to support some policy, think tanks are only too eager to oblige, as long as they get paid. Thus the universities, the usual source for at least somewhat dispassionate research and analysis, can be bypassed.

The American Enterprise Institute (AEI), one of the oldest right-wing think tanks, is a preferred choice since it is by now a well-known name. For example, during the time that the tobacco industry was disputing the scientific consensus that smoking was a killer, they commissioned AEI to produce a ‘study’ to try and discredit the strong scientific evidence of the link between smoking and death.

Global warming provides another example. There is an emerging scientific consensus (though not unanimous) that this is a serious problem requiring urgent action to reverse the trend. But businesses find this issue irksome because efforts to combat warming constrain their ability to maximize profits. So how can you discredit global warming? You get a sympathetic think tank to generate opposing views, to supposedly provide ‘balance’, by cherry-picking data to support your desired conclusions.So the AEI offered $10,000 to scientists to write against global warming. They have the money and the impetus to do such things because ExxonMobil CEO Lee Raymond is on the AEI board of trustees and the company gave AEI approximately $925,000 between 1998 and 2003.

The idea is to use the think tanks to create in the public’s mind that there is disagreement and controversy over whatever the issue is and thus defer any action until a ‘solution’ is found. The real goal is to delay action for as long as possible.

These are classic examples of how businesses and politicians use these think tanks to advance specific agendas.

Next: The difference between academia and think tanks.

POST SCRIPT: Madness caused by religion

These are the kinds of news reports that make me furious.

An 11-year-old girl died from diabetes after her parents prayed for her recovery rather than calling for medical assistance.

Madeline Neumann died on Sunday in Wisconsin, from an undiagnosed but treatable ailment.

Dan Vergin, the local police chief, said she had been ill for a month, suffering symptoms such as nausea, vomiting, excessive thirst, loss of appetite and weakness.

“She just got sicker and sicker until she was dead,” he said.

Even after her death, her parents, Dale and Leilani Neumann, who did not belong to any organised faith, prayed over her body in the hope that she might be resurrected.

This is what ‘faith’ does to people. It robs them of basic thought. And even after this appalling tragedy, the parents cannot draw the proper lesson. Blinded and brainwashed by religion, they reach exactly the wrong conclusion.

Mr Vergin said the couple, who run a coffee shop in Wausau, had blamed her death on their lack of faith. (my emphasis)

“They have a little Bible study of a few people,” said Mr Vergin. “These are not bizarre people.”

Police chief Vergin, sad to say, is probably right. The parents are not “bizarre” in the sense of being unusual in their beliefs. They are not even bad people. They are merely carrying out what religious leaders have always told them is a good thing: just put your faith in god and all will be well.

And as a result, their daughter, whom I am sure they loved dearly, is dead.

The propaganda machine-6: The Powell memo and its aftermath

(For previous posts in this series, see here.)

Lewis Powell’s confidential 1971 memo to the US Chamber of Commerce laid out the framework that was largely followed by the business community in the subsequent decades. In it he admits quite frankly that the media and academia are already owned or controlled by big business interests and expresses puzzlement as to why they are not using that power more overtly to serve their own interests.

Here are some excerpts from the memo:

No thoughtful person can question that the American economic system is under broad attack . . . We are not dealing with sporadic or isolated attacks from a relatively few extremists or even from the minority socialist cadre. Rather, the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts . . . .The most disquieting voices joining the chorus of criticism come from perfectly respectable elements of society: from the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences, and from politicians.
. . .
One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.

The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The boards of trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.

Most of the media, including the national TV systems, are owned and theoretically controlled by corporations which depend upon profits, and the enterprise system to survive.

He then argues that the business community should organize and take specific action to control the discourse in its favor, based on a carefully thought out, long range strategy, and be willing to pour considerable financial resources into it.

What specifically should be done? The first essential — a prerequisite to any effective action — is for businessmen to confront this problem as a primary responsibility of corporate management.

The overriding first need is for businessmen to recognize that the ultimate issue may be survival — survival of what we call the free enterprise system, and all that this means for the strength and prosperity of America and the freedom of our people.
. . .
Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.

Powell went on to outline what should be done on campuses, in secondary schools, in the media, and in the courts to combat what he clearly viewed as a menace. Among other things, he recommended the creation of a ‘staff of scholars’ sympathetic to business interests who would be prolific in writing articles and books and thus flood the market with that point of view. He also recommended creating a pro-business ‘staff of speakers’ and ‘speakers bureaus’ that would be able to similarly flood campuses and the media with their point of view.

The Powell memo became the basis on which we saw the rapid proliferation in the 1970s of so-called ‘think tanks’ (i.e., the ‘staff of scholars’). Right-wing business leaders and foundations started pouring money into this kind of activity to support the activities of an increasingly large number of people to enable them to eventually have an impact on policy and the media. What has become apparent in the decades following the Powell memo is that there are a large number of very wealthy very right-wing people who are willing to spend large sums of money to support mouthpieces who will espouse the kinds of views they want to be disseminated.

Before long, there was an alphabet soup of right wing foundations, think tanks, and institutes, all dedicated to flooding college campuses and the media with right-wing views, while all the while complaining that those institutions had a pervasive left-wing bias. Before the Powell memo, only the Hoover Institute at Stanford (1919) and the American Enterprise Institute (1943) played that role in a significant way. After the Powell memo, businesses and wealthy right-wing interests started pouring money into creating an alternative to academic scholarship and as a result, the 1970s saw the explosion of right-wing so-called ‘think tanks’. The Heritage Foundation was set up in 1973, the Cato Institute in 1977, the Manhattan Institute in 1978, and many more later.

It was necessary, though, to create a cadre of intellectuals who would understand that their role was to propagate this pro-business message and who could occupy all these new positions that were being created and to do all the writing and speaking that were called for. So business groups poured money into privately funded right-wing campus newspapers and other publications to serve as kind of a farm system to develop the skills in selected young people so that they could play the roles assigned to them. These people were supported as they obtained advanced degrees and started working in the think tanks that began sprouting like mushrooms.

One could think of the whole project as essentially a privately funded welfare program for right-wingers.

An article in the National Review describes the early days of this process that shows how this policy was carried out on campuses. In 1978 William Simon, who had been President Ford’s Treasury secretary, and Irving Kristol, a founder of neo-conservatism, established the Institute for Educational Affairs (IEA).

The institute would “seek out promising Ph.D. candidates and undergraduate leaders, help them establish themselves through grants and fellowships and then help them get jobs with activist organizations, research projects, student publications, federal agencies or leading periodicals.”
. . .
The IEA received significant start-up funds from corporations such as Dow Chemical, Coca-Cola, and General Electric.
. . .
The IEA ended up playing a pivotal role in the rise of conservative college papers founded in the early Eighties. The new decade saw the founding of, to name just a few, The Dartmouth Review, The Michigan Review, The Primary Source at Tufts, The Harvard Salient, The Princeton Tory, The Oregon Commentator, and The Virginia Advocate. IEA also organized conferences where the editors of these new papers could connect, as well as learn more about journalism.

This was just one of the early efforts. But because of the farm system established by identifying and funding and grooming young people on college campuses, there are now enough people who are both able and willing to play that role, and are well-rewarded for doing so. It is precisely within this framework that the third-tier pundits have found their niche. But in a sense they are just the entertainers while the people in the think tanks are the ones who really develop the conservative and neo-conservative pro-business agenda. These people and places became the sources of targeted attacks on the media and the universities.

Next: What is a think tank and how do they function?

POST SCRIPT: The ‘good’ war reexamined

World War II grows in misty memory as the last major ‘good war’. As such, it has served a valuable role in justifying other wars. Each new enemy of the US is now routinely identified as the new Hitler driven by the desire to control the whole world. This was the rhetoric used against Saddam Hussein and Iraq and is now being used against Ahmadinejad and Iran.

A recent review by Mark Kurlansky of Nicholson Baker’s Human Smoke: The Beginnings of World War II, the End of Civilization says that the book debunks the myth that World War II was a ‘good’ war.

According to the myth, British and American statesmen naively thought they could reason with such brutal fascists as Germany’s Hitler and Japan’s Tojo. Faced with this weakness, Hitler and Tojo tried to take over the world, and the United States and Britain were forced to use military might to stop them.

Rather than Roosevelt and Churchill being doughty fighters against fascism reluctantly drawn into a major war, the book argues that they were a rabid warmongers and anti-Semites who until very late in the game were quite friendly towards Hitler and the fascists. What Roosevelt and Churchill were really concerned about was defeating communism.

Kurlansky ends his review:

Read Human Smoke. It may be one of the most important books you will ever read. It could help the world to understand that there is no Just War, there is just war — and that wars are not caused by isolationists and peaceniks but by the promoters of warfare.

You can read an interview with Baker here and an except from his book here.

The propaganda machine-5: The Fairness Doctrine and the Powell memo

(For previous posts in this series, see here.)

Three factors discussed so far in the creation of the propaganda machine are the rise of 24/7 cable news networks, nationwide talk radio enabled by satellite communications and toll-free numbers, and the relaxation of media ownership rules that resulted in the concentration of ownership.

The fourth factor in the creation of the propaganda machine was the elimination of the ‘Fairness Doctrine’ in 1987 that resulted in media outlets being allowed to become explicitly and overtly and consistently partisan and ideological. As Steve Rendall says, that doctrine, adopted in 1949, tried to at least limit the extent to which public airwaves could be hijacked by narrowly commercial or partisan interests or by those seeking to use them exclusively for their own profit.

[The Fairness Doctrine] required broadcasters to devote some of their airtime to discussing controversial matters of public interest, and to air contrasting views regarding those matters. Stations were given wide latitude as to how to provide contrasting views: It could be done through news segments, public affairs shows or editorials.
. . .
There are many misconceptions about the Fairness Doctrine. For instance, it did not require that each program be internally balanced, nor did it mandate equal time for opposing points of view. And it didn’t require that the balance of a station’s program lineup be anything like 50/50.
. . .
The Fairness Doctrine simply prohibited stations from broadcasting from a single perspective, day after day, without presenting opposing views.

After the repeal of this doctrine during the Reagan administration, media outlets gave up any pretence to being neutral on public policy matters. This opened the way to stations broadcasting Rush Limbaugh and his clones for hour after hour. As Robert McChesney says in his book The Problem of the Media (2003):

Talk radio has not only stormed into prominence on the AM dial but it also “tends to run the gamut from conservative . . . to very conservative,” as one reporter characterized it. “There are 1,500 conservative radio talk show hosts,” the conservative activist Paul M. Weyrich boasts. “The ability to reach people with our message is like nothing we have ever seen before.” The right wing dominance of broadcasting is demonstrated by the shift of groups such as Reed Irvine’s Accuracy in Media and Phyllis Schlafley’s Eagle Forum. Back in the 1970s and 1980s they crusaded for the Fairness doctrine – which required broadcasters to present contrasting perspectives on politics – as a way to battle liberal bias on the airwaves; since the ascendance of Rush Limbaugh et al. these groups now oppose the Fairness Doctrine. (p. 116)

In fact, on March 11, 2008, Bush said that he would veto any legislation incorporating the Fairness Doctrine.

For all their bluster about the ‘liberal bias’ in the media, the people who make this charge know it is not true.

“There’s been a massive change in the media in this country in the last fifteen years,” Rush Limbaugh exulted. “Now it’s 2002 and the traditional liberal media monopoly does not exist anymore.” But such celebratory comments are usually confined to more private back-slapping sessions. The dominating conservative pundits still sing the incessant refrain that the media are dominated by . . . liberals.” (McChesney, p. 116)

This drumbeat is so steady that the media has internalized it (we will look more closely into this phenomenon in a later posting) and now goes out of its way to placate conservatives by giving their voices a lot of prominence. In 2001, CNN’s chief Walter Isaacson even went to the extent of asking conservatives how his network could be made more palatable to them. (McChesney, p. 116)

The fifth major factor in the rise of the propaganda machine may the most important one since it forms the foundation on which the other four were built. It is the deliberate policy set into motion in the 1970s to push media determinedly to the right.

To understand how this last but most important development came about, we need to go back in time to the late 1960s and look at how events during those turbulent years were perceived.

[C]onservative critics blamed the liberal media for losing the Vietnam war and for fomenting dissent in the United States. Pro-business foundations were aghast at what they perceived as anti-business sentiment prevalent among Americans, especially middle-class youth who had typically supplied a core constituency. Mainstream journalism – which, in reporting the activities of official sources, was giving people like Ralph Nader sympathetic exposure – was seen as turning Americans away from business. At that point the political Right, supported by its wealthy donors, began to devote enormous resources to criticizing and intimidating the news media. This was a cornerstone of the broader campaign to make the political culture more pro-business and more conservative. (McChesney, p. 111)</

Leaders in the conservative business community felt that action had to be taken to counter this trend. In 1971, Lewis Powell (then a corporate lawyer) was invited by his friend, the Director of the US Chamber of Commerce, to analyze the problem and make recommendations for how to deal with it. Powell submitted a confidential memo just two months before he was nominated to the Supreme Court by President Nixon.

UC Berkeley professor of linguistics and cognitive science George Lakoff, who has written extensively about the importance of the way that political issues get framed in public policy debates, says that Powell reported that “all of our best students are becoming anti-business because of the Vietnam War, and that we needed to do something about it. Powell’s agenda included getting wealthy conservatives to set up professorships, setting up institutes on and off campus where intellectuals would write books from a conservative business perspective, and setting up think tanks.”

This memo was instrumental in setting in motion a whole program aimed at dominating the discourse in both academia and media with a decidedly pro-business message.

Next: What the Powell memo actually said and what actions emanated from it.

POST SCRIPT: Gay scientists isolate gene that causes Christianity

(Thanks to OneGoodMove.)

Capitalist Christianity and prophetic Christianity

(For the two previous posts in this series, see here and here.)

The manufactured outrage over Barack Obama’s former pastor Jeremiah Wright’s comments shows the extent to which capitalist Christianity has taken over in America. In this version, Christianity is presented as some kind of self-help program, a lifestyle choice, that is designed to make you feel good about yourself. In this approach, you just have to say some slogan about accepting Jesus as your personal lord and savior, and bingo! you have automatically become a Good Person, guaranteed a place in heaven. This version of Christianity does not deal exclusively with heaven, though. It is also believed that god wants you to be rich and prosperous, so one has it nice both here and in the hereafter. Being poor or sick or otherwise troubled is seen as a sign that you are somehow unworthy or have failed god in some way.

The clergy who endorse this capitalist Christianity ignore the prophetic tradition of preachers, going all the way back to the Old Testament. The true meaning of ‘prophet’ in the Bible is not someone who primarily foretells the future, as is popularly thought, but someone who reveals the truth. Preachers in this tradition saw their role as to shine a harsh light on injustice and on their own people’s evil actions, and demand that they repent and change their behavior or god would punish them severely. Read any of those Old Testament prophets’ thundering denunciations of Israel and you will see that Wright’s damning of America after listing all its crimes fall squarely within that tradition. Take the prophet Amos, for example:

This is what the LORD says:
“For three sins of Israel,
even for four, I will not turn back my wrath.
They sell the righteous for silver,
and the needy for a pair of sandals.
They trample on the heads of the poor
as upon the dust of the ground
and deny justice to the oppressed.
. . .
Now then, I will crush you
as a cart crushes when loaded with grain.” (Amos 2:6,7,13)

This kind of message (that oppressing the poor and otherwise swerving from the path of justice is guaranteed to bring down god’s wrath) is rarely heard today in the megachurches of the dominant classes, the world of comfortable capitalist Christianity. Such a message is aimed squarely at those with a smug sense of their own virtue and would make people uncomfortable. The people hearing it may not come back and give generously to the church or may find a new church that preaches a more soothing message. That would be bad because in capitalist Christianity, increasing your market share of well-to-do believers is everything.

But this prophetic message finds great resonance in the churches of oppressed people throughout the world because they know exactly what it means to be exploited like the people championed by Amos. They wait for the day when god will punish those who have oppressed them. Liberation theology finds a warmer reception in the developing world than in the developed.

The boundaries of this great divide between the churches of capitalist Christianity and prophetic Christianity largely overlaps with the boundaries between white and black churches and this is why white people are surprised when the curtain that separates the two is occasionally raised.

Chris Britt, editorial cartoonist of the Springfield Journal Register captures the acute disconnect between the way that white people and black people view the racial situation in America.


As Obama said in his speech:

For the men and women of Reverend Wright’s generation, the memories of humiliation and doubt and fear have not gone away; nor has the anger and the bitterness of those years. That anger may not get expressed in public, in front of white co-workers or white friends. But it does find voice in the barbershop or around the kitchen table.

People who as a group have not experienced a long history of cruel oppression may not fully appreciate the depth of anger and bitterness that echoes down generation after generation as personal stories of atrocities are passed on, getting slightly more diffuse each time but never quite going away. I know this from my own experience, even though I do not think that I am normally an angry or bitter person. Even though the British left Sri Lanka before I was born, there are times when I feel anger and bitterness against the British for the deep divisions they deliberately created in their colonies that have later resulted in ethnic wars. I would find it laughable if anyone said to me that the British possessed an Essential Goodness and that their colonial occupation was benign. There are also times when I feel deep anger and resentment against my country of birth Sri Lanka for the way that the Tamil minority has been treated, and still continues to be treated by the majority community.

It is easy for the members of the community that caused the injustices to say that we should let bygones be bygones, but those emotional scars run deep and cannot be removed by mere words. This anger is normally kept under control but given the right triggers, can bubble to the surface.

When Wright listed the harmful actions that the US has taken against other people, especially in the Middle East, and said that the attacks of 9/11 were the consequence of such acts, he was merely articulating the ‘blowback’ political analysis of people like Chalmers Johnson, an analysis which is widely accepted by serious policy analysts as the correct motivation for the attacks of 9/11, except that Wright was framing that political analysis in the context of religious punishment for sins. (See Justin Raimondo for a good analysis of the political content of Wright’s sermons.)

When Jerry Falwell and Pat Robertson said that the events of 9/11 were god’s punishment for America’s tolerance of homosexuality and abortion, they were making a similar point to Wright, but with a different target. The significant difference is that Falwell and Robertson were laying the blame at powerless individuals (like gays and those receiving and providing abortions) as causes of that crime and hence got off lightly. Wright, unlike Falwell and Robertson, was challenging the very myth of America’s Essential Goodness and aiming his criticisms straight at the actions of the military-business-political-media complex that rules America. That is why he has been vilified in ways that Falwell and Robertson were not.

Wright is not the first black preacher to say such things and will not be the last. When Wright said right after the events of 9/11, “We bombed Hiroshima, we bombed Nagasaki and we nuked far more than the thousands in New York and the Pentagon, and we never batted an eye. We have supported state terrorism against the Palestinians and the black South Africans, and now we are indignant. Because the stuff we have done overseas has now been brought back into our own front yard. America’s chickens are coming home to roost”, and when he also said “We bombed Cambodia, Iraq, and Nicaragua, killing women and children while trying to get public opinion turned against Castro and Ghadhafi . . . We put [Nelson] Mandela in prison and supported apartheid the whole 27 years he was there”, he was following up on similar analyses made by Martin Luther King, Jr. (another preacher in the prophetic tradition) in the context of the Vietnam war, suggesting that god would rain down punishment on America for its political sins.

King said in a sermon in 1968:

God didn’t call America to do what she’s doing in the world now. God didn’t call America to engage in a senseless, unjust war as the war in Vietnam. And we are criminals in that war. We’ve committed more war crimes almost than any nation in the world, and I’m going to continue to say it. And we won’t stop it because of our pride and our arrogance as a nation.

But God has a way of even putting nations in their place. The God that I worship has a way of saying, “Don’t play with me.” He has a way of saying, as the God of the Old Testament used to say to the Hebrews, “Don’t play with me, Israel. Don’t play with me, Babylon. Be still and know that I’m God. And if you don’t stop your reckless course, I’ll rise up and break the backbone of your power.” And that can happen to America.

King was murdered just two months after delivering that sermon.

Of course, where preachers like Wright and King and Falwell and Robertson, followers of capitalist Christianity and prophetic Christianity alike, all make a mistake is in thinking that they all know what god wants and what god does, even if they are each saying things that contradict the others.

God is not going to solve the problem of deep racial divisions in America, Sri Lanka, Rwanda, or anywhere else in the world, because god does not exist. That is our responsibility.

Obama’s speech provides a small window of opportunity to start that process. We have to open that window wider and walk through it.

POST SCRIPT: The little girl is all grown up

Some readers may have seen the ‘telephone at 3:00 am’ ad that Hillary Clinton made that suggested that Obama did not have the experience to handle crises. It turns out that the images of sleeping children used in that ad were from stock footage filmed eight years ago.

Ironically, one the children in that ad is now eighteen and is campaigning for Obama. She has made a new ad that you can see below:

The myth of Essential Goodness

One of the things that would amuse me if it did not have such serious consequences is that white people in America are always shocked, just shocked, when they get even a glimpse of the anger and resentment that exists among many black people about they way they have been treated and still continue to be treated in this country.

The reason for this perpetual state of surprise is that many white people tend to unquestioningly accept a powerful myth: that America is the one country in the world possessed of an Essential Goodness, bestowed by god. They believe that not only do Americans as individuals possess this quality (that they mysteriously acquire simply by being born within its geographical boundaries), but that the nation as a whole, this political entity, collectively possesses this same quality. The possession of this Essential Goodness is believed to make America morally superior to every other country.

Of course we committed genocide against the Native Americans, we institutionalized and perpetuated a long and brutal slavery, along with lynchings and murders, we have killed millions and millions of people in many small countries under the pretence of defending and spreading democracy, but it is held that all that is in the past and anyway were done by a few misguided individuals a long time ago and is not a reflection on the people as a whole. Despite all that history, the myth persists that we are and always have been, Essentially Good, and that anyone who challenges that myth in any way is spreading a vicious and hateful lie that is borderline treasonous. People who adhere to that myth cannot seem to wrap their minds around the idea that other ethnic groups, with a history of being oppressed, might not find it so compelling.

This powerful myth serves as the basis of a sense of self-identity that is thought to be uplifting but is actually dangerous because it can lead to arrogance, blindness, hubris, and an unwillingness to learn from the harsh lessons of history. A paper in Psychological Review showed that individuals, groups, and even nations that think highly of themselves without any real basis for doing so, resort to violence when they do not receive the inflated respect they feel they are entitled to. High self-esteem that is unsupported by actual achievements or abilities turns out to be harmful. (Roy F. Baumeister, Laura Smart, Joseph M. Boden, Relation of Threatened Egotism to Violence and Aggression: The Dark Side of High Self-Esteem, Psychological Review, 1996, vol. 103, No. 1, 5-33.)

America’s politicians pander to this powerful and corrosive myth since it conveniently enables them to always get the benefit of the doubt of the public when they do something obviously wrong. Since America is Essentially Good, people think that there must be a benevolent reason for any action taken by its government and are eager to seize on any excuse to believe in its good intent. The public acceptance of the weak, almost non-existent, and obviously fraudulent case made for the invasion of Iraq is a case in point.

The brutal fact that history reveals, and which so many of us seem unwilling to accept, is that no people are special, no people are possessed of an Essential Goodness. Not the Germans who were passive in the face of the murder of Jews during World War II, not the Americans who were passive during the murder an estimated half million Vietnamese, not the Ethiopians who were passive during the destruction of Eritrea, not the Hutus who were passive during the murder of the Tutsis, with the list being continued almost indefinitely.

The hardest lesson for us to accept is that we are just like other people.

The commonly heard opening phrase “Only in America can . . .” is a symptom of this belief in American exceptionalism. That preamble is usually followed by a boast that can almost always easily shown to be false, but the truth is immaterial to the speaker of such sentiments. He is appealing to the myth about our Essential Goodness and thus cannot be challenged. Even Barack Obama appealed to this myth in his otherwise exemplary speech on race. He did this to distinguish himself from his former pastor Jeremiah Wright because Wright had committed the one unforgivable sin in American political discourse, a sin even worse than blasphemy, even worse than denying the Holy Spirit, which the Bible tells us is the only unforgivable sin. By listing all the crimes that he felt America had committed and then saying “Not God bless America, God damn America”, Wright had denied the Essential Goodness of America, denied that god had a special place in his heart for America and would always take its side.

For these words, he has been vilified by those who were looking for a reason, any reason, to fan racist flames and discredit Obama as a candidate. I think that a commenter at Talking Points Memo said it best

What drives me crazy is how this could have been avoided so easily if Wright was the slightest bit media-savvy. Had he merely controlled his tongue and limited himself to advocating an attack on Iran to encourage massive worldwide Muslim attacks leading to a fulfillment of the biblical prophecy of end-times and bringing about Armageddon and the summary slaughter of every Jew, Muslim, Catholic, and non-believer on the planet while rapturing him and his flock up to heaven, then followed it up by denouncing Catholics as cult members and blaming Hurricane Katrina on gay people, this story wouldn’t be metastasizing like this. One five minute milquetoast repudiation by Obama and it would all be behind him.

But what does Wright do instead? He spews this vile “God damn America” bile. What a psycho.

In the next post, I will look at the prophetic tradition in which Wright’s sermon is embedded.

Next: Capitalist Christianity versus prophetic Christianity

POST SCRIPT: Hilarious story

I wrote before that the intelligent design creationists were going to release a documentary called Expelled: No Intelligence Allowed where they continue their whining about how these mean scientists are saying nasty things about their nice theory.

Biologist and blogger P.Z. Myers, who has been a fierce critic of intelligent design creationism and was interviewed for the film, has an absolutely hilarious story about what happened to him when he went to see a prescreening of the film. I don’t want to spoil it for you. Just read his post.

Also, don’t forget today’s screening of The God Delusion Debate between Richard Dawkins and John Lennox in Strosacker Auditorium at 7:00 pm.

UPDATE: After the screening, Richard Dawkins and P. Z. Myers share a good laugh at what happened.

Barack Obama’s speech on race

As readers of this blog know, I have not been an enthusiastic supporter of Barack Obama, voting for him in the Ohio primary as the default choice since the alternative of Hillary Clinton is much worse in comparison, and John McCain is truly awful.

But I was really impressed by the speech he gave last Tuesday on race, triggered by the ridiculous flap over some words spoken by the former pastor of his church. If you haven’t seen the speech, you can join the three million people who have viewed it on YouTube or read the full transcript.

The speech was quite extraordinary both for the things he did not say and do as well as for the things he said and did. It was a long speech, lasting about forty minutes, but it was not a stem-winder with resounding phrases. There were no jokes, no innuendo, no digs at political opponents. While there was applause from the audience on a few occasions, there were no built-in, cued-up, applause lines, like one sees in campaign speeches or the awful State of the Union addresses. In fact, Obama seemed to prefer no applause at all and seemed to want to just get on with it. There were no rhetorical flourishes, no crescendos, no dramatic modulations, not even very many memorable phrases.

In his understated and low-key speech, Obama used just one rhetorical device, the pause, and he used it extremely well in a way that reminded me of Harold Pinter’s memorable 2005 Nobel Prize acceptance speech which I have discussed earlier.

Obama quietly delivered a powerful message about the state of race relations in the US and how the way it is currently conducted poisons everything and everyone it touches and of the need to change that situation.

For once we had a major political figure talk like an adult about the serious issue of race. Even more impressive, he seemed to be assuming that the audience also consisted of adults. What made the event so extraordinary, and at the same time reflects so poorly on the state of our political discourse, was that such events are so rare.

He spoke about one issue that I have repeatedly emphasized, how race and other issues are almost always deliberately discussed in inflammatory ways, so that they become distractions from vital issues, and he issued a challenge to the media and to us to change that. He did not take a Pollyannaish view of race or try to disavow the people or history that are integral to dealing with it. Instead he correctly said that we need to know and understand that history if we are ever to overcome it.

The fact is that the comments that have been made and the issues that have surfaced over the last few weeks reflect the complexities of race in this country that we’ve never really worked through – a part of our union that we have yet to perfect. And if we walk away now, if we simply retreat into our respective corners, we will never be able to come together and solve challenges like health care, or education, or the need to find good jobs for every American.

Understanding this reality requires a reminder of how we arrived at this point. As William Faulkner once wrote, “The past isn’t dead and buried. In fact, it isn’t even past.” We do not need to recite here the history of racial injustice in this country. But we do need to remind ourselves that so many of the disparities that exist in the African-American community today can be directly traced to inequalities passed on from an earlier generation that suffered under the brutal legacy of slavery and Jim Crow.

But what was most important in the speech was the indictment of the media about how they cover race and politics and the challenge that he issued to them and us to talk like adults about race, a topic that is at once so ephemeral (after all, the concept of race has no biological standing) and yet so important.

This is where we are right now. It’s a racial stalemate we’ve been stuck in for years. Contrary to the claims of some of my critics, black and white, I have never been so naïve as to believe that we can get beyond our racial divisions in a single election cycle, or with a single candidacy – particularly a candidacy as imperfect as my own.
. . .
For we have a choice in this country. We can accept a politics that breeds division, and conflict, and cynicism. We can tackle race only as spectacle – as we did in the OJ trial – or in the wake of tragedy, as we did in the aftermath of Katrina – or as fodder for the nightly news. We can play Reverend Wright’s sermons on every channel, every day and talk about them from now until the election, and make the only question in this campaign whether or not the American people think that I somehow believe or sympathize with his most offensive words. We can pounce on some gaffe by a Hillary supporter as evidence that she’s playing the race card, or we can speculate on whether white men will all flock to John McCain in the general election regardless of his policies.

We can do that.

But if we do, I can tell you that in the next election, we’ll be talking about some other distraction. And then another one. And then another one. And nothing will change.

That is one option. Or, at this moment, in this election, we can come together and say, “Not this time.”

We have to look to comedian Jon Stewart who, between the jokes, gives one of the most adult media reactions to the speech.

The reactions to Obama’s speech are interesting. Those who would never have voted for him anyway have been nitpicking it to death but in the process come off looking petty. But he put in a tricky position those who pride themselves on being at least somewhat enlightened. If they continue to harp on Wright’s words, they will be acknowledging that they really don’t want the kind of discussion Obama is calling for but simply want to continue to use race as a divisive tool. Even Fox News’s Chris Wallace was so embarrassed by his colleagues on his own network over their relentless focus on precisely the kind discussion that Obama deplored that he publicly took them to task for it. It seemed like even he had had enough.

We can only hope that this speech will change the way that race is discussed in America.

In the next post, I will say more about the context in which Obama’s speech came to be delivered.

POST SCRIPT: The God Delusion Debate

Case’s Campus Freethought Alliance (CFA), in partnership with the Case InterVarsity Christian Fellowship, will present a screening of The God Delusion Debate beginning at 7 p.m. on Tuesday, March 25 in Strosacker Auditorium. The program features biologist Richard Dawkins, who needs no introduction, debating points from his book The God Delusion with John Lennox, a mathematician, philosopher of science, and a Christian.

You can see just the opening to the debate here. In the interests of time, this 20-minute introduction explaining the debate set up and having the debaters give brief biographies of themselves will not be shown at the event.

At 8:30, immediately, following the screening, there will be refreshments and then a panel discussion.

For more information about the program and CFA, see here.

The propaganda machine-4: Major developments in its creation

(For previous posts in this series, see here.)

The third tier pundits are a byproduct of five significant developments in media ownership and control.

The first is the rise of 24/7 cable news networks that has created a voracious demand for people to fill all that airtime. There is just not enough real news to report, and creating good investigative reports on important topics costs money which eats into profits. There is a limit to how much time one can spend on celebrity gossip. Even coverage of Britney Spears can get stale. The supply of attractive young women who go missing, another source of endless cable news media fascination, is also limited. As a result, the cable news networks depend heavily on talk shows since having people give opinions costs little money. But the people who have studied issues in depth and have informed opinions based on deep knowledge tend to be academics but they have jobs that require them to teach and do research and thus are not readily available at a moment’s notice to come and talk about the day’s events, assuming they even wanted to. This leaves a niche for a large number of professional pundits whose job is to be at the media’s beck and call. The third tier pundits fill that niche.

The second development that facilitated the growth of the propaganda machine is the rise of talk radio. Along with cable news TV, it came to prominence in the late 1980s as a result of satellite technology, and its functioning was greatly aided by the increasing use of toll free phone numbers (which originated in 1967), which enabled nationwide call-in shows to become popular.

A third factor is the increasing concentration of media ownership in a few hands. As former dean of the University of California-Berkeley Graduate School of Journalism Ben Bagdikian says in his book The Media Monopoly (1997):

With each passing year … the number of controlling firms in all these media has shrunk: from fifty corporations in 1984 to twenty-six in 1987, followed by twenty-three in l990, and then, as the borders between the different media began to blur, to less than twenty in 1993. In 1996 the number of media corporations with dominant power in society is closer to ten. In terms of media possessions and resources, the newest dominant ten are Time Warner, Disney, Viacom, News Corporation Limited (Murdoch), Sony, Tele-Communications, Inc., Seagram (TV, movies, cable, books, music), Westinghouse, Gannett, and General Electric.

As Robert McChesney says in his book The Problem of the Media (2003, p. 224-235), in the late 19th and early twentieth centuries, the issue of what to do with the power of corporations, including media, was a burning issue. There were many alternative models that were possible that would have allowed for diverse views in the media. But the government, under the powerful influence of corporations, decided to allow private, profit-making entities to rule the media. They were aided in this by one of the most controversial Supreme Court decisions ever, the 1886 ruling of County of Santa Clara v. Southern Pacific Railroad Company which was erroneously interpreted as granting personhood (and thus constitutional rights protections) to corporations. In other words, it is now widely (but erroneously) assumed that the Supreme Court has ruled that corporations have the same rights as you and me, although they have much greater powers than us. (After all, they can be in many places at once, have much greater resources of all kinds, and live far longer than people).

The media giants had long-chafed at the limits placed on the number of media outlets that could be owned by a single entity. Even though the Federal Communication Commission was very sympathetic to media owners and wanted to accommodate them, overturning those restrictions proved to be difficult because the general public had an intuitive sense that such restrictions were a good thing and opposed moves to remove them. But Bill Clinton in 1996 had legislation passed that eliminated the caps on the number of radio stations that companies could own nationally and as a result, “Almost overnight, the radio industry’s structure was turned upside down. Well over half the stations were sold until a few massive firms like Clear Channel (owner of more than 1,200 stations) and Viacom came to rule the roost.” (McChesney, p. 231)

Of course, you are not likely to find the media reporting on this topic extensively. The media is quite shy about revealing the extent of its own reach and power and dominance.

Next: The other two developments: the Fairness Doctrine and the Powell memo

POST SCRIPT: Arthur C. Clarke

Arthur C. Clarke died on Tuesday at the age of 90 in his adopted country of Sri Lanka, where he had lived since 1956. I am not a huge fan of the science fiction genre in general but I liked the writings of Clarke, who was grounded in good science, although he never went to college. You can see the list of his scientific predictions here. The one that came true most spectacularly being the idea of geosynchronous communication satellites. [UPDATE: Commenter Vasantha corrects me and says that Clarke went back to college after serving in World War II and earned a first class degree (the highest category awarded by British universities) in physics and mathematics.]

I had the pleasure of meeting Clarke when I was teaching at the University of Colombo. I was teaching an optics course and wanted to show the students holograms, which were somewhat of a novelty in the early 1980s. I tried to make one in the physics department darkroom but failed miserably. I heard that Clarke had some and went to his home to see if I could borrow one. He was very friendly, and in addition to lending me a few holograms, he also enthusiastically talked about science.

Clarke’s death reminded me of how much pleasure I derived from two of his books Childhood’s End and Rendezvous with Rama and Stanley Kubrik’s terrific film 2001: A Space Odyssey, all of which I experienced long ago while I was in college. I plan to enjoy them again soon.

Two somber anniversaries

Yesterday, March 19, 2008 saw the fifth anniversary of the tragic invasion of Iraq by the US, a deliberate act of aggression against a country that had posed no threat whatsoever to it, an action that is going to have serious negative consequences for US power an influence in the world, both militarily and economically. Historians looking back might see that as a watershed event, a peak in the power hubris of a country. Apart from the appalling death and destruction that has been wreaked on the people of Iraq, with hundreds of thousands of Iraqis dead and injured and vast numbers of internal and external refugees, the invasion of Iraq has also brought to the surface the decline of US economic power.

But three days earlier saw the 40th anniversary of another military action, the massacre that took place on March 16, 1968 in the Vietnamese village of My Lai. I have described before the details of this awful event when the soldiers of Charlie Company led by Lt. William Calley went into that doomed village, rounded up over three hundred and fifty civilians, old men and women and children, herded them into ditches and sprayed them with machine gun fire. There were no Vietnamese men of fighting age present and no reports of the US troops being fired upon before they unleashed their barrage.

A US helicopter pilot Hugh Thompson came across the scene while the massacre was in its final stages and at great risk to himself and his two man crew put down his helicopter between the soldiers and the victims and said that he would shoot the US troops if they killed any more civilians. He then rescued the few remaining survivors of the carnage and flew them away. Although he reported the incident to his superiors, no action was taken. An ambitious young army officer named Colin Powell was one of those who persuaded his superiors that nothing had happened that was worth investigating.

Some time later, another military veteran Ron Ridenour heard about the event from a soldier in Charlie Company and was horrified by the story. He started telling the Congress, the White House and the Pentagon, anyone who would listen, urging that action be taken. Finally, in September 1989, William Calley was charged with the crime, but there was no publicity at all.

The My Lai massacre exploded into public consciousness in November of that year when a young investigative reporter named Seymour Hersh heard of this story, dug around until he got the facts, and broke the story. In this fascinating interview on the radio program On the Media Hersh describes how he tracked Calley down.

(You can hear a longer unedited interview and read the transcript here.)

Calley was convicted of the murder of 22 civilians but President Nixon ordered that he be released pending his appeal, and eventually commuted his sentence to time already served. So in the end, Calley served just three and a half years of house arrest for this appalling crime. This is of course consistent with the general policy that ‘our’ people are deserving of every excuse for committing any atrocity while the life of the ‘enemy’ is worth next to nothing. As General William Westmoreland, commander of US forces in Vietnam said “The Oriental doesn’t put the same high price on life as does a Westerner. Life is plentiful. Life is cheap in the Orient.” So what if some Vietnamese here or there are murdered?

We see that same disregard for Iraqi lives now that we saw then for Vietnamese lives. The US military refuses to count the number of Iraqis killed by them, let alone the number that have died from all the other acts of violence since the war began. This has been left to independent investigators who put the number of Iraqi dead at around one million.

Calley’s defense was that he was just following orders and there is some evidence that there had been a deliberate policy by the US military to indiscriminately kill everyone who lived in areas that were supposedly controlled by the enemy. In a recent article Gareth Porter looks at an internal report done by General William Peers in late 1969 as a result of the My Lai outcry. The report found that “the troops who entered My Lai and three other hamlets of the village of Son My had been led to believe that everyone in the village should be killed. Testimony before the Peers inquiry also showed that the platoon leaders involved in the operation had been given that same message by two company commanders.”

But no one high up in the chain of command was ever prosecuted for those murders. In fact, the events at My Lai were far from unique. The infamous Tiger Force squads had orders to kill every one they found in certain areas, regardless of whether they were civilians or not.

As recounted by members of the Tiger Force who were present, and reported by Pulitzer Prize-winning Toledo Blade journalists Michael Sallah and Mitch Weiss, Westmoreland told them, “[I]f there are people who are out there – and not in the camps – they’re pink as far as we’re concerned. They’re Communist sympathizers. They were not supposed to be there.”

That message gave the Tiger Force officers the idea that they were authorized to kill anyone who chose to remain in Viet Cong base areas. Sallah and Weiss found that Tiger Force had carried out no fewer than 19 killing sprees against civilians in “specified strike zones.” The unit commanders justified the wanton murder of civilians to Army investigators by explaining that the creation of a free fire zone gave U.S. troops the right to “kill anything that moved.”

Another article goes into more detail:

From February to September 1967, the US Army’s “Tiger Force” commando unit murdered hundreds of civilians, mainly in Quang Ngai province, according to research compiled by Army investigators in the 1970s, and verified by reporters Michael Sallah and Mitch Weiss in 2003.

No memorial commemorates the victims of Tiger Force, and the massacres the unit committed do not figure in Vietnamese history texts.

In 2006, Nicholas Turse, then a graduate student at Columbia University, found that declassified documents showed US military investigators had verified 320 reports of atrocities committed by US troops in Vietnam, not including the massacres at My Lai. Investigators had failed to corroborate some 500 other reports.

The reports which turned out to be true included massacres of dozens of civilians in Quang Nam province in late 1967 by B Company of the Army’s 1st Battalion, 35th Infantry, 4th Infantry Division.

Some soldiers returning from Vietnam were so traumatized by what they had done and seen done that in 1971 that they organized the Winter Soldiers hearings, where they gave their personal testimonies. It is now available as a documentary with that same name. I have seen it and the stories they tell are sad and horrifying.

The soldiers recounted story after story of the appalling things that were committed routinely by the soldiers on the Vietnamese. And the brutality was indiscriminate, against old and young and infants, men and women, combatants and civilians. People were pushed out of helicopters, they were raped, they were tortured and killed in cold blood, in ways that sicken you. Entire villages were routinely and systematically destroyed. One person testified that while their truck passed a group of five little children, one child gave made a rude gesture at them. The truck slowed and the soldiers killed all the children in a volley of fire.

The soldiers spoke of a brutal culture that pervaded the entire military. Their superior officers deliberately kept vague as to what the soldiers could and could not do but did not reprimand anyone for anything, even if they witnessed these atrocities. As a result, each soldier soon developed the attitude that all Vietnamese were fair game, that anything could be done to them and there would not be any consequences. And they knew that their superiors knew and approved and even carried out these acts.

The events at My Lai, far from being an aberration by “a few bad apples” (the standard reaction by the Pentagon and official Washington to such revelations) were, in the words of the soldiers, SOP (standard operating procedure).

The media in 1971 pretty much ignored the explosive revelations at the Winter Soldier hearings, deciding that the people did not need to hear about the awful things done in their name by their own soldiers in a war prosecuted by their own government. And history is repeating itself. Right now there is another set of hearings going on, again under name of Winter Soldiers, with soldiers who have served in Iraq and Afghanistan recounting the awful things that they did. And once again, the major media is ignoring them. But you can find it on alternative news sites like Democracy Now and The Real News Network.

This is what war does. Even perfectly ordinary young people, given a lethal weapon and thrust into the middle of a hostile population whom they do not know and whose language they do not speak, frightened that any person they meet might want to kill them, can easily end up becoming either killers or the abettors of killers. And those who like Calley had psychopathic tendencies to begin with can become monsters.

Seymour Hersh describes what the mother of one of the soldiers who took part in the My Lai massacre told him when he went to interview her son.

“I gave them a good boy and they sent me back a murderer.”

This is what war does to people.

POST SCRIPT: Iraq retrospective

Here is a good multimedia retrospective of the Iraq war, put together by the Reuters wire service from their reporters in the field.

Ignoring the elephants

Presidential elections involve two distinct phases. In the first phase, the Villagers drive out of the race anyone who might even remotely threaten the power and privileges of the pro-business/pro-war single party oligarchy that runs the country. Once that is achieved, then the Villagers create major controversies over personal and social issues, so that the electorate gets really fired up and angry and think that important issues are at stake, and not notice that the game is already over. (See here and here for who the Villagers are and the role they play.)

We are now comfortably in that second phase of the process. There is little to choose from between Obama and Clinton in terms of policy differences and so we have this ridiculous amount of attention being paid to statements made by their supporters and other trivialities. When the Democratic nominee is finally determined, we will then see the same kind of intense attention on trivial issues between the two party nominees.

As I said in a 2006 post on election year politics:

As a result, the overture to familiar strains of election year sloganeering are being heard, following a similar pattern. In the months leading to November, one can expect to hear a lot about the following: gay marriage, abortion, immigrants, flag burning, English-only rhetoric, UN bashing, estate tax repeal, and assisted suicide.

All these issues (except for immigration and the estate tax) share the characteristic that they are largely symbolic and directly affect only a tiny minority of people. They have little relevance to the actual lives of most people, but they do aim straight at the emotional core of the base and provide many opportunities to push people’s buttons and make them angry. And expect to hear lots of talk about god and religion, perhaps involving those old faithfuls such as displaying the ten commandments in public places or the pledge of allegiance or prayer in schools and similar church-state separation issues.

However, I would not be surprised if a completely unexpected, but equally trivial, new issue emerges suddenly, since the ones I have listed are, like, so-o-o-o 2004, and the extremist base loves fresh raw meat.

That has happened. Look at the kinds of media coverage that the race now gets. The big issues that the country faces are the wars in Iraq and Afghanistan and the threat of a US attack on Iran; the hundreds of thousands of dead and injured in Iraq and the massive number of displaced people and refugees; the large and continuing budget and trade deficits; the rapid decline in the value of the dollar against other major currencies; the threat of an imminent recession; the crisis facing many homeowners due to the subprime debacle; the shakiness of the US banking system because of that same issue; and the spiraling cost of health care and the lack of coverage for over forty million people, a large fraction of whom are children.

These are all signs that the US has gotten itself into a tailspin. Paul Craig Roberts spells out the magnitude of the problems that have been created. All these issues affect each and every one of us, either directly or indirectly, and have major long-term consequences. Whoever becomes president in November will inherit a financial and military mess that will require very tough and unpopular decisions.

And yet, how much coverage do we have of the candidates’ views on these topics and what their priorities and plans are for dealing with them? Take for example the unprecedented actions by the Federal Reserve to bail out the big investment banks that made lots of money but now are in serious trouble. What are the candidates’ views on this situation? What would they do as president? Do they approve of this kind of government intervention in the financial sector?

We are clearly not going to get any kind of adult talk on this issue from the current president. Last Friday, when the Bear Stearns news was rocking global financial markets, Bush talked to a group of economists at the Economic Club of New York who, along with people around the world, were presumably anxious to hear what the government’s response would be. According to a reporter present, what they heard would have given them the impression of a president who was either in fantasyland, oblivious to what is going on around him or completely out of his depth.

[Y]ou had to wonder what the international financial community makes of a country whose president could show up to talk economics in the middle of a liquidity crisis and kind of flop around the stage as if he was emcee at the Iowa Republican Pig Roast.

We’re really past expecting anything much, but in times of crisis you would like to at least believe your leader has the capacity to pretend he’s in control.
. . .
Our credit markets are foundering, and all we’ve got is a guy who looks like he’s ready to kick back and start the weekend.
. . .
[T]his economic crisis has been going on for months, and all the president could come up with sounded as if it had been composed for a Rotary Club and then delivered by a guy who had never read it before.

He then spoke about his Big Plan: sending checks of $600 to everyone! Oh yes, that should definitely turn things around. Oh, and he’s also totally against congressional earmarks now, though he was fine with them while the Republicans controlled Congress. That was pretty much it. One wonders if there are any adults in this administration.

Here is Jon Stewart on the economic mess and Bush’s speech:

Meanwhile, on Friday itself Wall Street investors started a steady drumbeat demanding that the Fed cut interest rates once again at its regular meeting on Tuesday, by another huge amount, perhaps even as high as one percentage point. The Fed duly obliged cutting rates by a quarter point on Sunday, itself a highly unusual action, and then followed with a further cut of ¾ point on Tuesday. The stock markets duly soared upwards again.

Cutting interest rates by large amounts might please Wall Street investors, at least in the short run, but it has consequences for the long term. Doing so while European rates stay high results in the dollar, already at record lows, sinking even further. This will raise the price of oil and other imports, increasing the rate of inflation and aggravating the trade deficit. All this makes foreign investors even more wary of dollar-based investments, which may make it harder to sell them US treasury bonds to finance the deficits.

The investments made by investment banks like Bear Stearns are highly leveraged, meaning that they buy securities with just a small amount as down payment and finance the rest, just like the way we buy houses with a small down payment and finance the rest with a mortgage. The difference is that when buying a house (in normal times) the down payment is usually 10 to 20% and the value of the collateral (the house) is worth more than the loan, so that if the borrower can’t repay the loan, the lender can still recover the money by selling that asset.

In the case of Bear Stearns, it is estimated that the size of its purchases outnumbered its actual assets by a ratio of 28-to 1, meaning that it bought securities for 28 times the value of the actual cash it put into the purchase. The balance was borrowed. Usually these banks sell these highly leveraged securities long before the loan is due to be repaid and thus are able to repay the debt. But in this case, nobody wants to buy their securities. When the bills came due, the banks could not sell and thus had no money, which is why the bank had a liquidity crisis. When the Fed came to the rescue by guaranteeing these securities, it was essentially saying that they would pay up if the value of the securities did not rise again and creditors came for their money.

Hanging over everyone is the uncertainty. How many other big banks are holding on to how much mortgage backed securities? How much did they leverage? How far is the Federal Reserve willing to go in using taxpayer money to prop up these banks?

On Monday the biggest commercial bank in Cleveland, National City Bank, lost 43% of its value in one day, fueled by suspicions that it was holding a large amount of now worthless mortgage-backed securities. Before 1999, commercial banks were restricted by the Glass-Steagall Act from taking the kinds of risks that investment banks take, because the government insured the deposits of those banks and did not want to underwrite excessive risk taking. That act was passed in 1933 in the wake of the Great Depression because banks had been making highly speculative investments and thus caused the crash. But in 1999 Congress and Bill Clinton removed that barrier and now the rot that has infected the investment banks has spread into the commercial banking sector also.

As the days go by, watch for more volatility, fueled by rumors.

POST SCRIPT: The God Delusion Index

Answer this series of questions and calculate the extent of your own God Delusion.

Yet another federal bailout for the rich

Last Tuesday, the Federal Reserve Board said that it would guarantee up to $300 billion worth of the highly devalued assets held by those banks that had been speculating in the subprime real estate market, thus enabling those banks to borrow money because of the federal guarantee. Nobody else would accept the subprime mortgage portfolios as collateral for loans. So in effect the taxpayers were being put on the hook if the loans could not be repaid. The stock market that day reacted with glee, skyrocketing upwards. (I explained what was going on here.)

That party ended on Friday. The big investment bank Bear Stearns said that it could not meet its obligations and requested a loan from another big investment bank JPMorgan Chase. The latter, unlike the general public, was aware of the nature of the assets held by Bear Stearns and said nothing doing, unless the Federal Reserve was willing to guarantee that loan too. The Fed, always eager to please the big financial interests on Wall Street, readily agreed and in a single day the whole transaction was approved. This is pretty amazing speed when you consider that $30 billion of taxpayer money was involved.

But the news of Bear Stearns’ troubles, which came just two days after a cheery message of confidence by its head just two days earlier that everything was just fine and dandy, sent jitters down the spine of investors who wondered how bad the situation really was and what dark secrets existed in the vaults of other big financial institutions.

They found out on Sunday when it was announced that JPMorgan Chase was actually buying Bear Stearns for the astoundingly low price of $2 per share, with the Fed once again guaranteeing the transaction. Just last year that stock had been trading at $172 per share. In just one year, the bank had lost almost 99% of its value, a collapse of Enron-sized proportions, but this time affecting one of the oldest and largest investment banks in the country. The total cost to JPMorgan Chase to buy this former financial powerhouse was only $236 million. Given that the Bear Stearns’ fancy headquarters building alone was estimated to be worth about a billion dollars, this fire sale price indicates that Bear Stearns was in even more terrible shape than previously thought.

To understand what is going on here, we need to know that banks invest the money deposited in them to make money for themselves and their depositors. They do this by buying and selling securities of various types. But they are expected to keep a certain percentage of that money in cash to meet the routine demands of depositors who need to withdraw money for whatever reason. As long as not too many people want too much money at once, the banks are said to have sufficient ‘liquidity’ and the system works well. Even if the banks run out of cash, they can get short-term loans from the Fed or other banks using their securities as collateral. The interest on these loans is what is called the ‘discount rate’ and it is much less than the interest that we pay on loans. These kinds of loans are routinely done and are meant to ease any short-term liquidity problems.

But if there are suspicions that a bank is in trouble, that can lead to a stampede of depositors all demanding their money at the same time and we have a ‘run’ on the bank. If the banks cannot convert enough of their securities to cash or raise large enough loans, it can go bankrupt. This can happen even if a bank is perfectly sound. All it requires is a rumor of trouble to cause a run.

It was to prevent such problems that the FDIC system was set up. This said that whatever happened to a bank, the government would guarantee to reimburse depositors up $100,000 each. This was meant to reassure depositors so that they need not panic and withdraw their money suddenly. This is what possibly saved Countrywide Bank last year when it was discovered to have had huge losses by investing in subprime portfolios. I, for example, have an account at Countrywide but did not panic and ask for my money back when I heard the news of its troubles, precisely because of the guarantee.

In return for this government guarantee, the commercial banks have to submit to supervision by the government to make sure that they are not making too many risky investments, though we see in the case of Countrywide that the system is not foolproof.

But investment banks like Bear Stearns are not like the commercial banks ordinary people deal with. There are two kinds of investors in banks like Bear Stearns, those who buy shares in the bank and those who give the bank their money to manage. These banks are outside the FDIC system and the federal government has not previously assumed any responsibility for them or their depositors. Those banks are not like the ones where most ordinary people have accounts. These are meant for very wealthy investors for whom $100,000 is just pocket money. It is presumed that these wealthy depositors and investors are financially savvy people who are capable of evaluating for themselves the risks involved and do not need the government to protect their interests.

These investment banks can and do take much greater risks with their investments in return for much higher rates of return than we get on our checking and savings account. This is capitalism in theory, where there is supposed to be a correlation between risk and reward.

But the trouble was that Bear Stearns was one of the worst culprits causing the subprime mortgage debacle, underwriting many of the transactions and causing the inflation in values of those securities that had little relationship to the actual value of the properties. So when the party ended, they got stuck holding a lot of securities which they had paid high prices for and which were now worthless. When investors started suspecting that things were not going well and started trying to take out their money, Bear Stearns did not have the money and could not sell its securities to raise anywhere near enough money, and nobody would lend them money using those worthless securities as collateral.

Except the government. In an unprecedented move, the Federal Reserve decided that they would intervene to try and prop up, at least partially, Bear Stearns so that it did not go bankrupt by offering guarantees for loans given to it, essentially putting an artificial value on its securities. In essence, the government is using taxpayers’ money to try and protect the wealthy financial interests associated with these investment banks. It is true that the people who held shares in Bear Stearns have lost money due to declining share prices but there is little the government can do about that. But by guaranteeing the value of the mortgage collateral, it bought those investors some time

So rather than seeing capitalism in practice what we have is capitalism in theory but a perverse socialism in practice, where the risk is borne by all taxpayers but the benefits in the form of profits accrue to just a few. All those people in government and business who preach financial discipline to the poor and say that people should be held accountable for their decisions, tend to conveniently change their tune when it is themselves or their friends who are affected.

I have shown this clip by British comedians John Bird and John Fortune before but I am showing it again because they describe precisely how we got into this mess and mention by name Bear Stearns and discuss the two funds owned by them that lie at the heart of their problems.

It is unnerving that two comedians in another country in October 2007 could finger the problem that is just now rocking the financial markets in the US.

Once again, I am not an economist so people who are more knowledgeable can chime in with corrections.