FBI Storing Information on Activities Protected by the First Amendment, Memos Obtained by ACLU Show
NEW YORK – The FBI has been illegally using its community outreach programs to secretly collect and store information about activities protected by the First Amendment for intelligence purposes, according to FBI documents released today by the American Civil Liberties Union.
“The trust that community outreach efforts aim to create is undermined when the FBI exploits these programs to gather intelligence on the very members of the religious and community organizations agents are meeting with,” said Michael German, ACLU senior policy counsel and a former FBI agent. “The FBI should be honest with community organizations about what information is being collected during meetings and purge any improperly collected information.”
FOIA documents showing instances of inappropriate intelligence gathering include:
• San Francisco FBI memos, written in 2007 and 2008 by agents who attended Ramadan Iftar dinners under the guise of the FBI’s mosque outreach program, documenting participants’ names, conversations and presentations. The 2008 memo also recorded participants’ contact information and descriptions of their opinions and associations.
• A 2009 San Jose, Calif. FBI memo describing FBI participation in a career day sponsored by an Assyrian community organization. Agents detailed conversations with three community leaders and members about their opinions, backgrounds and charitable activities.
• A 2007 San Jose, Calif. FBI memo describing a mosque outreach meeting attended by 50 people representing 27 Muslim community and religious organizations, identifying each person by name and organization and analyzing their “demographics.”
“Except under certain special circumstances, the Privacy Act bars the FBI from maintaining records like these describing how Americans exercise their First Amendment rights to freedom of speech and association,” said Nusrat Choudhury, a staff attorney with the ACLU National Security Project. “Congress passed this law to prevent records obtained by the government for one purpose from being used for another reason without a person’s consent, but that is precisely what the FBI has done.”
There is no indication in the FOIA documents that community members were informed that the FBI’s outreach activities were used for intelligence gathering purposes or could be potentially used to target these people and their organizations for investigations.
One of the organizations whose members were noted attending the mosque outreach meeting was the Muslim Community Association (MCA). “Like all Americans, we want to help the FBI. Now we feel betrayed,” said MCA Board Secretary Isa Shaw. “We support the idea of building trust through FBI community outreach programs, but the government should not be taking advantage of it to violate our First Amendment rights like this.”
The ACLU is calling on the Department of Justice Inspector General to investigate Privacy Act violations in the FBI’s San Francisco and Sacramento Divisions and to initiate a broader audit of FBI practices nationwide. It is also urging the FBI to stop using community outreach for intelligence purposes, to be honest with community organizations regarding what information is collected and retained during community outreach meetings and to purge all improperly collected information.
The request for these documents was made by the ACLU of Northern California, the Asian Law Caucus and the San Francisco Bay Guardian.
A detailed description of examples (with links to FOIA documents) showing the FBI’s improper collection of information at community outreach meetings is available at:
On 22 May, 2007, The Guardian UK’s front page announced: “Iran’s secret plan for summer offensive to force US out of Iraq.” The writer, Simon Tisdall, claimed that Iran had secret plans to defeat American troops in Iraq, which included “forging ties with al-Qaida elements.” The coming “showdown” was an Iranian plot to influence a vote in the US Congress. Based entirely on briefings by anonymous US officials, Tisdall’s “exclusive” rippled with lurid tales of Iran’s “murder cells” and “daily acts of war against US and British forces.” His 1,200 words included just 20 for Iran’s flat denial.
It was a load of rubbish: in effect a Pentagon press release presented as journalism and reminiscent of the notorious fiction that justified the bloody invasion of Iraq in 2003. Among Tisdall’s sources were “senior advisers” to Gen. David Petraeus, the US military commander, who, in 2006, described his strategy of waging a “war of perceptions … conducted continuously through the news media.”
The media war against Iran began in 1979 when the West’s placeman Mohammad Reza Shah Pahlavi, a tyrant, was overthrown in a popular Islamic revolution. The “loss” of Iran, which under the shah was regarded as the “fourth pillar” of Western control of the Middle East, has never been forgiven in Washington and London.
Last month, The Guardian UK’s front page carried another “exclusive”: “MoD [Ministry of Defence] prepares to take part in US strikes against Iran.” Again, anonymous officials were quoted. This time the theme was the “threat” posed by the prospect of an Iranian nuclear weapon. The latest “evidence” was warmed-over documents obtained from a laptop in 2004 by US intelligence and passed to the International Atomic Energy Agency (IAEA). Numerous authorities have cast doubt on these suspected forgeries, including a former IAEA chief weapons inspector. A US diplomatic cable released by WikiLeaks describes the new head of the IAEA, Yukiuya Amano, as “solidly in the US court” and “ready for prime time.”
The Guardian UK’s 3 November “exclusive” and the speed with which its propaganda spread across the media were also prime time. This is known as “information dominance” by the media trainers at the Ministry of Defence’s psyops (psychological warfare) establishment at Chicksands, Bedforshire, who share premises with the instructors of the interrogation methods that have led to a public inquiry into British military torture in Iraq. Disinformation and the barbarity of colonial warfare have historically had much in common.
Having beckoned a criminal assault on Iran, The Guardian UK opined that this “would of course be madness.” Similar arse-covering was deployed when Tony Blair, once a “mystical” hero in polite liberal circles, plotted with George W. Bush and caused a bloodbath in Iraq. With Libya recently dealt with (“It worked,” said The Guardian UK), Iran is next, it seems.
The role of respectable journalism in Western state crimes – from Iraq to Iran, Afghanistan to Libya – remains taboo. It is currently deflected by the media theater of the Leveson inquiry into phone hacking, which Daily Telegraph’s Benedict Brogan describes as “a useful stress test.” Blame Rupert Murdoch and the tabloids for everything and business can continue as usual. As disturbing as the stories are from Lord Leveson’s witness stand, they do not compare with the suffering of the countless victims of journalism’s warmongering.
The lawyer Phil Shiner, who has forced a public inquiry into British military’s criminal behavior in Iraq, says that embedded journalism provides the cover for the killing of “the hundreds of civilians killed by British forces when they had custody of them, [often subjecting them] to the most extraordinary, brutal things, involving sexual acts … embedded journalism is never ever going to get close to hearing their story.” It is hardly surprising that the Ministry of Defence, in a 2,000-page document leaked to WikiLeaks, describes investigative journalists – journalists who do their job – as a “threat” greater than terrorism.
In the week The Guardian UK published its “exclusive” about Ministry of Defence planning for an attack on Iran, Gen. Sir David Richards, Britain’s military chief, went on a secret visit to Israel, which is a genuine nuclear weapons outlaw and exempt from media opprobrium. Richards is a highly political general who, like Petraeus, has worked the media to considerable advantage. No journalist in Britain revealed that he went to Israel to discuss an attack on Iran.
Honorable exceptions aside – such as the tenacious work of The Guardian UK’s Ian Cobain and Richard Norton-Taylor – our increasingly militarized society is reflected in much of our media culture. Two of Blair’s most important functionaries in his mendacious, blood-drenched adventure in Iraq, Alistair Campbell and Jonathan Powell, enjoy a cozy relationship with the liberal media, their opinions sought on worthy subjects while the blood in Iraq never dries. For their vicarious admirers, as Harold Pinter put it, the appalling consequences of their actions “never happened.”
On 24 November, International Day for the Elimination of Violence Against Women, the feminist scholars Cynthia Cockburn and Ann Oakley, attacked what they called “certain widespread masculine traits and behaviours.” They demanded that the “culture of masculinity should be addressed as a policy issue.” Testosterone was the problem. They made no mention of a system of rampant state violence that has rehabilitated empire, creating 740,000 widows in Iraq and threatening whole societies, from Iran to China. Is this not a “culture,” too? Their limited though not untypical indignation says much about how media-friendly identity and issues politics distract from the systemic exploitation and war that remain the primary source of violence against both women and men.
The WMF was chosen because it accepts nominations from individuals, institutions and organizations without the need for national or state endorsement. The fund is an independent organization registered as a charity and based in New York City. It is concerned with saving some of the world’s most treasured places, whether great buildings, sites or singular monuments.
In preparing the application, we carried out extensive research on Lifta — its rich history, its unique architectural, cultural and social character — and found it to be an embodiment of everything Palestinian.
The tragic history of Lifta is no less important an element in its nomination than its special architectural character. This is because Lifta, unlike most other urban environments, was built by its own inhabitants who also owned the houses and the nearly 1,200 hectares (approximately 3,000 acres) which belonged to it.
The construction of Lifta’s cube-like buildings topped by their domed roofs was only possible because of the use of the single natural material the inhabitants employed: the special Jerusalem stone. The unique cluster of buildings seem to be embedded into the gentle slopes of the hills around them, and not one house vies for recognition over its neighbor. These houses are a perfect example of how to build a community in total harmony with the physical environment without pretense or architectural pastiche.
Since its depopulation in 1948-49, Lifta has been kept deserted by the Israeli authorities and it currently faces demolition by speculative developers. As a last act of architectural violation, gangs of drug addicts and squatters have been roaming the village and destroying the elegant domed roofs in an attempt to prevent a return by Lifta’s legitimate owners.
Alas, Lifta will see darker days ahead, should genuine efforts to save it from demolition fail.
Making the case for Lifta
Our application to the WMF included many illustrations, historical documents, indicative plans and some superb photographs taken at various periods of Lifta’s recent history. An important document included with the application was our “Save Lifta” petition which attracted 2,958 signatures from around the world. This number, at which point the petition was closed in time to file the application, symbolically represented the number of Lifta inhabitants in 1948 before it was ethnically cleansed. Had we kept the petition open, we were certain it would have attracted thousands of other signatures.
The 2012 WMF Watch List criteria for assessment and eventual selection of entries to its prestigious list include the significance of the site, the urgency of the conditions and the viability of feasible action (“World Monuments Fund, Nomination Guidelines”).
In our application, we carefully addressed them one by one with supporting material to show that Lifta deserved recognition and protection.
Of the above criteria, urgency was the most relevant in Lifta’s case because, as is now well-documented in reports published by The Electronic Intifada, The Guardian and elsewhere, the Israel Lands Administration (ILA), which claims to own Lifta and its surrounding terrain, has parcelled the village land for sale by tender to private developers to build more than 210 luxury housing units with shops, hotels and a museum for wealthy Jewish expatriates.
Nearby and slightly below the village, it has been reported that a secure tunnel is being planned and built to connect this site to the nearby Knesset (Israeli parliament) building for use by VIPs and state officials when the future development is completed.
All of this has been planned to be carried out under the noses of the few surviving original Lifta owners and their many descendants who have not been allowed to return to the village — although a good number of them have taken refuge only a few kilometers away.
Deceased family members cannot even be graced with a burial plot in Lifta. Even a return through death has been prevented. Living in proximity to Lifta, and being buried in it, we thought, would certainly meet the WMF 2012 Watch List’s two other criteria: relevance and significance. In our submission, we had included many more compelling reasons to meet these criteria.
On 11 February, the application was successfully filed and later confirmed by the WMF to be valid and in order. A decision date, we were told, was to be expected towards the end of September 2011. Due diligence required us to contact the WMF to ensure that all was on track. This was again confirmed.
During the last week of September, the WMF website announced that the jury had made their selection and the results would be announced on 28 September. On 1 October, we received by email a letter dated 29 September signed by Erica Avrami, Director of Research and Education at WMF. It included this statement: “We regret that the Lifta Village was not selected for inclusion in the 2012 Watch.”
Significance of Lifta as a heritage site
Lifta, for us, symbolizes not only the cultural, architectural and contextual importance of a heritage site, but also its political significance. Architectural history is full of such examples, whether single buildings, or a cluster of them, where the political element in fact played an important part in their formation and evolution.
Lifta, without doubt, is considered a “hot potato” because it is as much a symbol of the Palestinian tragedy as it is a physical manifestation of it. Could it have been, we tried to guess, Lifta’s “political” dimension which de-classified it from the Watch List?
In order that a future re-nomination of Lifta may be attempted, it was important for us to get an absolute understanding of the reasons why Lifta was de-selected in order that we may avoid derailment in the future. We spoke to Avrami at the WMF and, after a brief discussion, we asked her, “was the decision to exclude Lifta a political one?” The answer came in an email about two weeks later and it confirmed our worst fears:
“The Watch nomination for Lifta village incorrectly located the site in the Palestinian Territory, when it is in fact within the current borders of Israel [our emphasis]. Factual inaccuracies are something taken into consideration in the review and selection process.”
It is worth repeating here that our application was accepted and validated back in February and there were no questions raised at the time, or since, about Lifta’s geographical location. Our application had clearly showed Lifta’s coordinates on the map which accompanied the application and positively placed it inside the Corpus Separatum zone designated by the 1947 Partition Plan under UN Resolution 181.
As the reason for disqualifying Lifta is seen now to be its geographical location and not necessarily the other criteria, we felt that we were about to be embroiled in a debate on an issue which sits at the core of the Israel-Palestine question.
For the sake of historical correctness, we had no choice but to rely on international conventions to safeguard Lifta from physical oblivion. An extract of the UN Resolution 181 Partition map was sent to the WMF with another map showing the UN designated are of Jerusalem and its environs within the Corpus Separatum international zone. Lifta sat comfortably inside that zone, and as the WMF response emphasized “the current borders of Israel,” we also sent the WMF another extract of the UN map showing the 1949 Armistice Lines which wrapped around West Jerusalem and the village of Lifta at the cessation of hostilities.
We explained that these lines are exactly what they were meant to be according to international legal definitions: “Armistice Lines represent where the hostilities between the parties ceased until the warring parties reach final agreement.” This is in accordance with international law and the Geneva Convention.
In its response dated 1 November, the WMF wrote:
“World Monuments Fund is a private, not-for-profit organization that undertakes the World Monuments Watch as part of advocacy work on behalf of heritage around the world. We are not an intergovernmental organization that must abide by international conventions …” (my emphasis).
However, the WMF is part of the United Nations, listed under the “Official Relations” section of UNESCO. By definition, therefore, it is required to respect international law (“UNESCO – World Monuments Fund).
But as is usually the case at the UN, rights take a back seat to politics. The US State Department’s “Diplomacy In Action” section created the US Ambassadors Fund for Cultural Preservation, which has donated over $2 million to the WMF. In view of the fact that the US has punished UNESCO for admitting Palestine as a member on 31 October 2011, the political link between the State Department funding and the WMF cannot be underestimated.
Despite the WMF’s refusal to include Lifta on its watch list, the village’s fate appears directly relevant to the organization’s work. This can be seen from a comment made by Bonnie Burnham, the WMF’s president, in a 2006 interview with the National Trust for Historic Preservation:
“Time, war, and politics are destroyers of monuments. Which is the biggest threat? In a global context, unquestionably, the biggest is war. In addition to destroying buildings, armed conflict destroys the entire national capacity to deal with heritage” (“The Short Answer: Bonnie Burnham”).
If the WMF was prepared to address that threat, surely it would be acting to save Lifta.
Antoine Raffoul is a chartered Palestinian architect living and practicing in London. He is also a coordinator of 1948 Lest We Forget and can be reached at info AT 1948 DOT org DOT uk.
New York – In October, the Alameda County Sheriff’s Department turned parts of the campus of the University of California in Berkeley into an urban battlefield. The occasion was Urban Shield 2011, an annual SWAT team exposition organized to promote “mutual response,” collaboration and competition between heavily militarized police strike forces representing law enforcement departments across the United States and foreign nations.
At the time, the Alameda County Sheriff’s Department was preparing for an imminent confrontation with the nascent “Occupy” movement that had set up camp in downtown Oakland, and would demonstrate the brunt of its repressive capacity against the demonstrators a month later when it attacked the encampment with teargas and rubber bullet rounds, leaving an Iraq war veteran in critical condition and dozens injured. According to Police Magazine, a law enforcement trade publication, “Law enforcement agencies responding to…Occupy protesters in northern California credit Urban Shield for their effective teamwork.”
Training alongside the American police departments at Urban Shield was the Yamam, an Israeli Border Police unit that claims to specialize in “counter-terror” operations but is better known for its extra-judicial assassinations of Palestinian militant leaders and long record of repression and abuses in the occupied West Bank and Gaza Strip. Urban Shield also featured a unit from the military of Bahrain, which had just crushed a largely non-violent democratic uprising by opening fire on protest camps and arresting wounded demonstrators when they attempted to enter hospitals. While the involvement of Bahraini soldiers in the drills was a novel phenomenon, the presence of quasi-military Israeli police – whose participation in Urban Shield was not reported anywhere in US media – reflected a disturbing but all-too-common feature of the post-9/11 American security landscape.
The Israelification of America’s security apparatus, recently unleashed in full force against the Occupy Wall Street Movement, has taken place at every level of law enforcement, and in areas that have yet to be exposed. The phenomenon has been documented in bits and pieces, through occasional news reports that typically highlight Israel’s national security prowess without examining the problematic nature of working with a country accused of grave human rights abuses. But it has never been the subject of a national discussion. And collaboration between American and Israeli cops is just the tip of the iceberg.
Having been schooled in Israeli tactics perfected during a 63 year experience of controlling, dispossessing, and occupying an indigenous population, local police forces have adapted them to monitor Muslim and immigrant neighborhoods in US cities. Meanwhile, former Israeli military officers have been hired to spearhead security operations at American airports and suburban shopping malls, leading to a wave of disturbing incidents of racial profiling, intimidation, and FBI interrogations of innocent, unsuspecting people. The New York Police Department’s disclosure that it deployed “counter-terror” measures against Occupy protesters encamped in downtown Manhattan’s Zuccotti Park is just the latest example of the so-called War on Terror creeping into every day life. Revelations like these have raised serious questions about the extent to which Israeli-inspired tactics are being used to suppress the Occupy movement.
The process of Israelification began in the immediate wake of 9/11, when national panic led federal and municipal law enforcement officials to beseech Israeli security honchos for advice and training. America’s Israel lobby exploited the climate of hysteria, providing thousands of top cops with all-expenses paid trips to Israel and stateside training sessions with Israeli military and intelligence officials. By now, police chiefs of major American cities who have not been on junkets to Israel are the exception.
“Israel is the Harvard of antiterrorism,” said former US Capitol Police Chief Terrance W. Gainer, who now serves as the US Senate Sergeant-at-Arms. Cathy Lanier, the Chief of the Washington DC Metropolitan Police, remarked, “No experience in my life has had more of an impact on doing my job than going to Israel.” “One would say it is the front line,” Barnett Jones, the police chief of Ann Arbor, Michigan, said of Israel. “We’re in a global war.”
Karen Greenberg, the director of Fordham School of Law’s Center on National Security and a leading expert on terror and civil liberties, said the Israeli influence on American law enforcement is so extensive it has bled into street-level police conduct. “After 9/11 we reached out to the Israelis on many fronts and one of those fronts was torture,” Greenberg told me. “The training in Iraq and Afghanistan on torture was Israeli training. There’s been a huge downside to taking our cue from the Israelis and now we’re going to spread that into the fabric of everyday American life? It’s counter-terrorism creep. And it’s exactly what you could have predicted would have happened.”
Changing the way we do business
The Jewish Institute for National Security Affairs (JINSA) is at the heart of American-Israeli law enforcement collaboration. JINSA is a Jerusalem and Washington DC-based think tank known for stridently neoconservative policy positions on Israel’s policy towards the Palestinians and its brinkmanship with Iran. The group’s board of directors boasts a Who’s Who of neocon ideologues. Two former JINSA advisors who have also consulted for Israeli Prime Minister Benjamin Netanyahu, Douglas Feith and Richard Perle, went on to serve in the Department of Defense under President George W. Bush, playing influential roles in the push to invade and occupy Iraq.
Through its Law Enforcement Education Program (LEEP), JINSA claims to have arranged Israeli-led training sessions for over 9000 American law enforcement officials at the federal, state and municipal level. “The Israelis changed the way we do business regarding homeland security in New Jersey,” Richard Fuentes, the NJ State Police Superintendent, said after attending a 2004 JINSA-sponsored Israel trip and a subsequent JINSA conference alongside 435 other law enforcement officers.
During a 2004 LEEP trip, JINSA brought 14 senior American law enforcement officials to Israel to receive instruction from their counterparts. The Americans were trained in “how to secure large venues, such as shopping malls, sporting events and concerts,” JINSA’s website reported. Escorted by Brigadier General Simon Perry, an Israeli police attaché and former Mossad official, the group toured the Israeli separation wall, now a mandatory stop for American cops on junkets to Israel. “American officials learned about the mindset of a suicide bomber and how to spot trouble signs,” according to JINSA. And they were schooled in Israeli killing methods. “Although the police are typically told to aim for the chest when shooting because it is the largest target, the Israelis are teaching [American] officers to aim for a suspect’s head so as not to detonate any explosives that might be strapped to his torso,” the New York Times reported.
Cathy Lanier, now the Chief of Washington DC’s Metropolitan Police Department, was among the law enforcement officials junketed to Israel by JINSA. “I was with the bomb units and the SWAT team and all of those high profile specialized [Israeli] units and I learned a tremendous amount,” Lanier reflected. “I took 82 pages of notes while I was there which I later brought back and used to formulate a lot of what I later used to create and formulate the Homeland Security terrorism bureau in the DC Metropolitan Police department.”
Some of the police chiefs who have taken part in JINSA’s LEEP program have done so under the auspices of the Police Executive Research Forum (PERF), a private non-governmental group with close ties to the Department of Homeland Security. Chuck Wexler, the executive director of PERF, was so enthusiastic about the program that by 2005 he had begun organizing trips to Israel sponsored by PERF, bringing numerous high-level American police officials to receive instruction from their Israeli counterparts.
PERF gained notoriety when Wexler confirmed that his group coordinated police raids in 16 cities across America against “Occupy” protest encampments. As many as 40 cities have sought PERF advice on suppressing the “Occupy” movement and other mass protest activities. Wexler did not respond to my requests for an interview.
Lessons from Israel to Auschwitz
Besides JINSA, the Anti-Defamation League (ADL) has positioned itself as an important liaison between American police forces and the Israeli security-intelligence apparatus. Though the ADL promotes itself as a Jewish civil rights group, it has provoked controversy by publishing a blacklist of organizations supporting Palestinian rights, and for condemning a proposal to construct an Islamic community center in downtown New York, several blocks from Ground Zero, on the basis that some opponents of the project were entitled to “positions that others would characterize as irrational or bigoted.”
Through the ADL’s Advanced Training School course on Extremist and Terrorist Threats, over 700 law enforcement personnel from 220 federal and local agencies including the FBI and CIA have been trained by Israeli police and intelligence commanders. This year, the ADL brought 15 high-level American police officials to Israel for instruction from the country’s security apparatus. According to the ADL, over 115 federal, state and local law enforcement executives have undergone ADL-organized training sessions in Israel since the program began in 2003. “I can honestly say that the training offered by ADL is by far the most useful and current training course I have ever attended,” Deputy Commissioner Thomas Wright of the Philadelphia Police Department commented after completing an ADL program this year. The ADL’s relationship with the Washington DC Police Department is so cozy its members are invited to accompany DC cops on “ride along” patrols.
The ADL claims to have trained over 45,000 American law enforcement officials through its Law Enforcement and Society program, which “draws on the history of the Holocaust to provide law enforcement professionals with an increased understanding of…their role as protectors of the Constitution,” the group’s website stated. All new FBI agents and intelligence analysts are required to attend the ADL program, which is incorporated into three FBI training programs. According to official FBI recruitment material, “all new special agents must visit the US Holocaust Memorial Museum to see firsthand what can happen when law enforcement fails to protect individuals.”
Among the most prominent Israeli government figure to have influenced the practices of American law enforcement officials is Avi Dichter, a former head of Israel’s Shin Bet internal security service and current member of Knesset who recently introduced legislation widely criticized as anti-democratic. During the Second Intifada, Dichter ordered several bombings on densely populated Palestinian civilian areas, including one on the al-Daraj neighborhood of Gaza that resulted in the death of 15 innocent people, including 8 children, and 150 injuries. “After each success, the only thought is, ‘Okay, who’s next?’” Dichter said of the “targeted” assassinations he has ordered.
Despite his dubious human rights record and apparently dim view of democratic values, or perhaps because of them, Dichter has been a key figure in fostering cooperation between Israeli security forces and American law enforcement. In 2006, while Dichter was serving at the time as Israel’s Minister of Public Security, he spoke in Boston, Massachusetts before the annual convention of the International Association of Chiefs of Police. Seated beside FBI Director Robert Mueller and then-Attorney General Alberto Gonzalez, Dichter told the 10,000 police officers in the crowd that there was an “intimate connection between fighting criminals and fighting terrorists.” Dichter declared that American cops were actually “fighting crimiterrorists.” The Jerusalem Post reported that Dichter was “greeted by a hail of applause, as he was hugged by Mueller, who described Dichter as his mentor in anti-terror tactics.”
A year after Dichter’s speech, he and then-Secretary of the Department of Homeland Security Michael Chertoff signed a joint memorandum pledging security collaboration between America and Israel on issues ranging from airport security to emergency planning. In 2010, Homeland Security Secretary Napolitano authorized a new joint memorandum with Israeli Transport and Road Safety Minister Israel Katz shoring up cooperation between the US Transportation Security Agency – the agency in charge of day-to-day airport security – and Israel’s Security Department. The recent joint memorandum also consolidated the presence of US Homeland Security law enforcement personnel on Israeli soil. “The bond between the United States and Israel has never been stronger,” Napolitano remarked at a recent summit of AIPAC, the leading outfit of America’s Israel lobby, in Scottsdale, Arizona.
The Demographic Unit
For the New York Police Department, collaboration with Israel’s security and intelligence apparatus became a top priority after 9/11. Just months after the attacks on New York City, the NYPD assigned a permanent, taxpayer-funded liaison officer to Tel Aviv. Under the leadership of Police Commissioner Ray Kelly, ties between the NYPD and Israel have deepened by the day. Kelly embarked on his first trip to Israel in early 2009 to demonstrate his support for Israel’s ongoing assault on the Gaza Strip, a one-sided attack that left over 1400 Gaza residents dead in three weeks and led a United Nations fact-finding mission to conclude that Israeli military and government officials had committed war crimes.
Kelly returned to Israel the following year to speak at the Herziliya Conference, an annual gathering of neoconservative security and government officials who obsess over supposed “demographic threats.” After Kelly appeared on stage, the Herziliya crowd was addressed by the pro-Israel academic Martin Kramer, who claimed that Israel’s blockade of Gaza was helping to reduce the numbers of “superfluous young men of fighting age.” Kramer added, “If a state can’t control these young men, then someone else will.”
Back in New York, the NYPD set up a secret “Demographics Unit” designed to spy on and monitor Muslim communities around the city. The unit was developed with input and intensive involvement by the CIA, which still refuses to name the former Middle East station chief it has posted in the senior ranks of the NYPD’s intelligence division. Since 2002, the NYPD has dispatched undercover agents known as “rakers” and “mosque crawlers” into Pakistani-American bookstores and restaurants to gauge community anger over US drone strikes inside Pakistan, and into Palestinian hookah bars and mosques to search out signs of terror recruitment and clandestine funding. “If a raker noticed a customer looking at radical literature, he might chat up the store owner and see what he could learn,” the Associated Press reported. “The bookstore, or even the customer, might get further scrutiny.”
The Israeli imprimatur on the NYPD’s Demographics Unit is unmistakable. As a former police official told the Associated Press, the Demographics Unit has attempted to “map the city’s human terrain” through a program “modeled in part on how Israeli authorities operate in the West Bank.”
Shop ‘til you’re stopped
At Israel’s Ben Gurion International Airport, security personnel target non-Jewish and non-white passengers, especially Arabs, as a matter of policy. The most routinely harassed passengers are Palestinian citizens of Israel, who must brace themselves for five-hour interrogation sessions and strip searches before flying. Those singled out for extra screening by Shin Bet officers are sent to what many Palestinians from Israel call the “Arab room,” where they are subjected to humiliating questioning sessions (former White House Health and Human Services Secretary Donna Shalala encountered such mistreatment during a visit to Israel last year). Some Palestinians are forbidden from speaking to anyone until takeoff, and may be menaced by Israeli flight attendants during the flight. In one documented case, a six-month-old was awoken for a strip search by Israeli Shin Bet personnel. Instances of discrimination against Arabs at Ben Gurion International are too numerous to detail – several incidents occur each day – but a few of the more egregious instances were outlined in a 2007 petition the Association for Civil Rights in Israel filed with the country’s Supreme Court.
Though the Israeli system of airline security contains dubious benefits and clearly deleterious implications for civil liberties, it is quietly and rapidly migrating into major American airports. Security personnel at Boston’s Logan International Airport have undergone extensive training from Israeli intelligence personnel, learning to apply profiling and behavioral assessment techniques against American citizens that were initially tested on Palestinians. The new procedures began in August, when so-called Behavior Detection Officers were placed in security queues at Logan’s heavily trafficked Terminal A. Though the procedures have added to traveler stress while netting exactly zero terrorists, they are likely to spread to other cities. “I would like to see a lot more profiling” in American airports, said Yossi Sheffi, an Israeli-born risk analyst at the Massachusetts Institute of Technology Center for Transportation and Logistics.
Israeli techniques now dictate security procedures at the Mall of America, a gargantuan shopping mall in Bloomington, Minnesota that has become a major tourist attraction. The new methods took hold in 2005 when the mall hired a former Israeli army sergeant named Mike Rozin to lead a special new security unit. Rozin, who once worked with a canine unit at Ben Gurion Airport in Israel, instructed his employees at the Mall of America to visually profile every shopper, examining their expressions for suspicious signs. His security team accosts and interrogates an average of 1200 shoppers a year, according to the Center for Investigative Reporting.
One of the thousands who fell into Rozin’s dragnet was Najam Qureshi, a Pakistani-American mall vendor whose father accidentally left his cell phone on a table in the mall food court. A day after the incident, FBI agents appeared at Qureshi’s doorstep to ask if he knew anyone seeking to harm the United States. An army veteran interrogated for two hours by Rozin’s men for taking video inside the mall sobbed openly about his experience to reporters. Meanwhile, another man, Emile Khalil, was visited by FBI agents after mall security stopped him for taking photographs of the dazzling consumer haven.
“I think that the threat of terrorism in the United States is going to become an unfortunate part of American life,” Rozin remarked to American Jewish World. And as long as the threat persists in the public’s mind, Israeli securitocrats like Rozin will never have to worry about the next paycheck.
“Occupy” meets the Occupation
When a riot squad from the New York Police Department destroyed and evicted the “Occupy Wall Street” protest encampment at Zuccotti Park in downtown Manhattan, department leadership drew on the anti-terror tactics they had refined since the 9/11 attacks. According to the New York Times, the NYPD deployed “counterterrorism measures” to mobilize large numbers of cops for the lightning raid on Zuccotti. The use of anti-terror techniques to suppress a civilian protest complemented harsh police measures demonstrated across the country against the nationwide “Occupy” movement, from firing tear gas canisters and rubber bullets into unarmed crowds to blasting demonstrators with the LRAD sound cannon.
Given the amount of training the NYPD and so many other police forces have received from Israel’s military-intelligence apparatus, and the profuse levels of gratitude American police chiefs have expressed to their Israeli mentors, it is worth asking how much Israeli instruction has influenced the way the police have attempted to suppress the Occupy movement, and how much it will inform police repression of future upsurges of street protest. But already, the Israelification of American law enforcement appears to have intensified police hostility towards the civilian population, blurring the lines between protesters, common criminals, and terrorists. As Dichter said, they are all just “crimiterrorists.”
“After 9/11 we had to react very quickly,” Greenberg remarked, “but now we’re in 2011 and we’re not talking about people who want to fly planes into buildings. We’re talking about young American citizens who feel that their birthright has been sold. If we’re using Israeli style tactics on them and this stuff bleeds into the way we do business at large, were in big trouble.”
Conventional economic wisdom teaches that it is not in the interests of employers to drive wages down to desperation levels, since most consumers are wage earners and consumption demand generates from 66 to 72 percent of the Gross Domestic Product. Were employers to drive wages too low they would at the same destroy their customer base, which is good for neither capital nor labor. This line of reasoning assumes that capitalism is organized such that each nation’s labor market is both entirely domestic and the sole source of the demand for its economy’s output. But capitalism is a global system and its sovereign components are not closed economies. The typical large corporations’ labor pool and customer base are now globally dispersed. In fact, the last few decades have seen the creation, for the first time in history, of a global labor market.
The outsourcing of jobs has become common knowledge, and is perceived by most working people as a significant source of the nation’s unemployment woes. The loss of jobs to cheaper labor markets is nothing new; it has been building since the 1960s. In 1959, manufacturing represented 28 percent of domestic output. In 2008, it represented 11.5 percent. This tendency has accelerated with the deregulation of cross-border capital flows. Since 2000 the United States has lost thousands of factories and a total of about 5.5 million manufacturing jobs, representing a 32 percent decline. By the end of 2009, less than 12 million Americans worked in manufacturing. The last time we saw those numbers was in 1941.
Widget production is not the only sector that has seen job outsourcing. We are perhaps most familiar with offshore phone centers, but all sorts of uptown jobs have also been shipped out. Highly trained engineers and draftsmen, architects, computer programmers and other kinds of high-tech workers are increasingly employed by US companies in China, Russia, India, and the Philippines.
In these neoliberal times we are no longer scandalized to learn that this pattern is heartily championed by none other than the chairman of president Obama’s Council on Jobs and Competitiveness, Jeffrey Immelt, who happens to be CEO of General Electric. 2010 was a banner year for GE, when $9.1 billion of its total profits of $14.2 billion came from its overseas operations. Immelt pulls no punches in his indifference to US workers. At a December 6, 2002 investors meeting he enthused “When I am talking to GE managers, I talk China, China, China, China, China. You need to be there. You need to change the way people talk about it and how they get there. I am a nut on China. Outsourcing from China is going to grow to 5 billion. We are building a tech center in China. Every discussion today has to center on China. The cost basis is extremely attractive. You can take an 18 cubic foot refrigerator, make it in China, land it in the United States, and land it for less than we can make an 18 cubic foot refrigerator ourselves.”
This is the man Obama put in charge of a committee assembled to address the nation’s unemployment crisis. But don’t think that Immelt’s obsession with overseas economic activity is only about cheap labor and lower costs. He goes on: “Today we go to Brazil, we go to China, we go to India, because that’s where the customers are.” My goodness, this looks like the Leninist thing about the insufficiency of domestic markets to absorb the economy’s output. The US worker is not only becoming decreasingly important as an input to production, (s)he is no longer seen by big capital as the most promising customer, the most robust source of sales revenue.
On both the supply side and the demand side, the US worker/consumer is perceived as incrementally inessential. The former Labor Secretary under Clinton and current liberal blogger Robert Reich thinks that this strategy is irrational, even on capitalist terms: “Corporate profits are up right now largely because pay is down and companies aren’t hiring. But this is a losing game even for corporations over the long term. Without enough American consumers, their profitable days are numbered. After all, there’s a limit to how much profit they can get out of cutting American payrolls or even selling abroad. European consumers are in no mood to buy. And most Asian economies, including China, are slowing.” Reich doesn’t get it.
The reference to “European consumers” is beside the point; Immelt and company don’t have Europe in mind. Exports are indeed the name of the current game, but the consumers are thought by the elite to be found in the emerging markets. Obama has for years been chanting the “export more, consume less” mantra as the key to US economic revival. His bosses reason by process of elimination. They know that the economy’s total product is generated by four and only four kinds of spending: consumption demand, investment demand, government demand and export demand. Consumption is not promising as a spur to production and profits because most consumers are wage earners, and they are low-paid, have taken absolute reductions in pay, are heavily indebted and are un- or underemployed. Investment doesn’t cut it for two reasons: no employer invests when purchasing power is exceptionally low, and, more importantly and completely unacknowledged by commentators, the present depression is not caused by a scarcity of productive facilities or by outdated equipment. A well developed complement of productive facilities is fully in place and ready to go. There is no need for additional investment. As for government spending for productive purposes, this is ruled out by the neoliberal consensus. Obama has repeatedly stressed that recovery must be rooted in the fabled self-restorative workings of the private sector.
We are left with exports as the economic Open Sesame. Obama has laid out the game plan in some detail in a speech, on his National Export Initiative, to the annual conference of the Import-Export Bank (March 11, 2010): “The world’s fastest-growing markets are outside our borders. We need to compete for those customers because other nations are competing for them.”
The focus on exports is consistent with the current geopolitics of the elite, which is reliably registered in the business press, most notably in such key journals as Foreign Affairs, The Financial Times and The Economist. There is thought to be a global shift of manufacturing activity from “the West” to “the East,” as the economically mature US, Europe and Japan deindustrialize while the emerging markets, mainly in Asia, take up the global slack by developing their own industrial prowess. Reich’s observation that “most Asian economies, including China, are slowing” is correct but inconsequential. What matters, as Obama notes, is where the “world’s fastest-growing markets” are to be found. Asia’s current slowing growth is compatible with the rapid growth, within China and India for example, of a new middle class and a nouveau riche. These are viewed by Western elites as where the present and prospective action is.
A now notorious Citigroup report encapsulates this economic cosmology in its thesis that “the World is dividing into two blocs – the Plutonomy and the rest.” Mounting inequality has become planet-wide. In a globalized world, the story goes, national consumers -“the US consumer”, “the French consumer”, “the Japanese consumer”- are obsolete. There are only the rich and the rest. The former are proportionally small in number but growing rapidly as neoliberal policy transfers to them the resources of the rest. The latter are accordingly marginal to what matters to the owning class.
A US-based CEO of one of the world’s largest hedge funds told a writer for The Atlantic that “the hollowing out of the American middle class didn’t really matter.” The CEO described the subject of an executive discussion earlier this year: “… if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade.” The Chief Financial Officer of a US internet company expresses the same sentiment: “We demand a higher paycheck than the rest of the world. So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.” At the summer 2010 Aspen Ideas Festival, the CEO of the Silicon Valley firm Applied Materials claimed that were he starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the US. The pull to be close to the customers -most of them in Asia- is enormous.” And Thomas Wilson, CEO of Allstate, is unabashedly frank about the way in which globalization generates an opposition between working-class and business interests: “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business… American businesses will adapt.” (See Chrystia Freeland, “The Rise of the New Global Elite,” in The Atlantic, January/February 2011.)
What all this comes to is a political economy of redistribution. Slow global economic growth over the past 30 or 40 years, and with no end in sight, has been construed by the Left as an indication of spreading “crisis,” a failure of capitalism to live up. From the perspective of working people the characterization is on the mark, since capitalism’s legitimizing ideology assures us that all will prosper when capitalism is doing its job. But from the point of view of capitalists, whose objective is to accumulate wealth, slow growth is not necessarily a sign of crisis, since wealth can be accumulated by redistribution, by widening inequality, in the absence of robust growth rates. This is what is currently taking place intra- and internationally. The outsourcing of jobs and customers is part of that game. Profits are revenues minus costs. Revenue maximization is thought by elites to be sought offshore. Cost reduction is to be created everywhere.
We can call this the Third-Worldization of the Rest, or, if we focus on the wage-earners of the developed countries, the creeping obsolescence of the working class. Workers can of course never be rendered entirely obsolete. What is happening is that we are approaching that condition asymptotically. One might object that there are clear limits to how impoverished working people can be made – after all, workers have to be maintained as work-ready. Upward redistribution can only go so far. But ever-widening inequality is perceived by elites as feasible by virtue of the limitless possibilities of greater indebtedness. Workers can make ends meet by indefinitely mortgaging their future income.
It is not far-fetched to see a growing resemblance of US and poor-country workers. High-priced economic forecasters and consultants are known to refer to the US as “Europe’s Mexico.” In the near future, they predict, some US states, mostly in the South but also including California and the Rust Belt, will be not only the cheapest manufacturing locations in the developed world, but also competitive with India and China. Wages are rising in the production- and service-oriented poor countries and falling in the rich ones. And US workers tend to quiescence, while unrest is brewing in the periphery. Costs of production are gradually converging between China and the US: declining-wage US workers are more productive. Non-union workers contracted by Ford to do inspection and repairs at the Dearborn truck plant make $10 an hour without benefits, which is projected to be less than the Chinese average by 2015.
Companies like Ford, Caterpillar, Wham-O Inc. (Frisbees), Master Lock, Suarez Manufacturing and General Electric have recently relocated production from China and Mexico to Georgia, Ohio, Indiana, Wisconsin, California and Michigan. This may or may not be a growing trend, but the mere fact of some US regions becoming newly competitive with Mexico and China bespeaks the declining fortunes of the US worker.
The New York Times’ favorite neoliberal wild man Thomas Friedman summarizes the immiseration project in his trademark manner: the task in our country is to “cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the ax to programs such as school building and road maintenance.” Friedman goes on to excoriate US and Western European workers for believing in the “tooth fairy” and expecting government services without paying for them. In America, Friedman says, the baby-boomers, who inherited the prosperity of the post-war years, had “eaten through all that abundance like hungry locusts… After 65 years in which politics in the West was, mostly, about giving things away to voters, it’s now going to be, mostly, about taking things away. Goodbye Tooth Fairy politics, hello Root Canal politics.” (May 9, 2010)
The oligarchy has laid out, in plain and simple terms, its game plan. What shall be our response?
Alan Nasser is Professor Emeritus of Political Economy at The Evergreen State College in Olympia, Washington. This article is adapted from his book in progress, The “New Normal”: Chronic Austerity and the Decline of Democracy. He can be reached at firstname.lastname@example.org
AlternateFocus on Nov 23, 2011
Alternate Focus interviews Nurit Peled-Elhanan, author of the forthcoming book Palestine in Israeli School Books: Ideology and Propaganda in Education. Nurit Peled-Elhanan argues that the textbooks used in the school system are laced with a pro-Israel ideology, and that they play a part in priming Israeli children for military service. She analyzes the presentation of images, maps, layouts and use of language in History, Geography and Civic Studies textbooks, and reveals how the books might be seen to marginalize Palestinians, legitimize Israeli military action and reinforce Jewish-Israeli territorial identity.
On November 29, the New York Times ran an article by the Learning Network on the anniversary of the 1947 U.N. Partition Plan of Palestine. The article gave a brief description of the effects and background of U.N. resolution 181, including a short description of the Palestinian Nakba.
But after publication, the Times edited out the word “expulsion” from the article.
The text originally read:
“May 14, 1948, Jewish leaders in the region formed the state of Israel. British troops left, thousands of Palestinian Arabs were expelled or fled and Arab armies soon invaded Israel.”
The NYT explains the editing of the text in the corrections section at the bottom of the webpage, citing “reader comments” as motivating the choice. The correction in full:
“We have changed a sentence in this entry in response to reader comments. The original sentence read “British troops left, thousands of Palestinian Arabs were expelled or fled and Arab armies soon invaded Israel.” We have removed “were expelled” and “soon.”
And ah, while we’re on Corrrections: The article incorrectly identifies the Palestinian Authority as the formal leadership of the Palestinian people. The Palestinian Liberation Organization (PLO) is the official representation of the Palestinian people to the U.N. The Palestinian Authority is an interim civil administration with jurisdiction in the occupied Palestinian Territories.
The article was published by the NYT educational blog, the Learning Network, “Teaching and Learning with the New York Times.”
Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.
Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by cancelling the debts and redistributing property or taking its usufruct for the state.
Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.
By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.
This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, also communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.
Near Eastern rulers proclaimed clean slates for debtors to preserve economic balance
Charging interest on advances of goods or money was not originally intended to polarize economies. First administered early in the third millennium BC as a contractual arrangement by Sumer’s temples and palaces with merchants and entrepreneurs who typically worked in the royal bureaucracy, interest at 20 per cent (doubling the principal in five years) was supposed to approximate a fair share of the returns from long-distance trade or leasing land and other public assets such as workshops, boats and ale houses.
As the practice was privatized by royal collectors of user fees and rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws (c. 1750 BC) cancelled their debts in times of flood or drought. All the rulers of his Babylonian dynasty began their first full year on the throne by cancelling agrarian debts so as to clear out payment arrears by proclaiming a clean slate. Bondservants, land or crop rights and other pledges were returned to the debtors to “restore order” in an idealized “original” condition of balance. This practice survived in the Jubilee Year of Mosaic Law in Leviticus 25.
The logic was clear enough. Ancient societies needed to field armies to defend their land, and this required liberating indebted citizens from bondage. Hammurabi’s laws protected charioteers and other fighters from being reduced to debt bondage, and blocked creditors from taking the crops of tenants on royal and other public lands and on communal land that owed manpower and military service to the palace.
In Egypt, the pharaoh Bakenranef (c. 720-715 BC, “Bocchoris” in Greek) proclaimed a debt amnesty and abolished debt-servitude when faced with a military threat from Ethiopia. According to Diodorus of Sicily (I, 79, writing in 40-30 BC), he ruled that if a debtor contested the claim, the debt was nullified if the creditor could not back up his claim by producing a written contract. (It seems that creditors always have been prone to exaggerate the balances due.) The pharaoh reasoned that “the bodies of citizens should belong to the state, to the end that it might avail itself of the services which its citizens owed it, in times of both war and peace. For he felt that it would be absurd for a soldier … to be haled to prison by his creditor for an unpaid loan, and that the greed of private citizens should in this way endanger the safety of all.”
The fact that the main Near Eastern creditors were the palace, temples and their collectors made it politically easy to cancel the debts. It always is easy to annul debts owed to oneself. Even Roman emperors burned the tax records to prevent a crisis. But it was much harder to cancel debts owed to private creditors as the practice of charging interest spread westward to Mediterranean chiefdoms after about 750 BC. Instead of enabling families to bridge gaps between income and outgo, debt became the major lever of land expropriation, polarizing communities between creditor oligarchies and indebted clients. In Judah, the prophet Isaiah (5:8-9) decried foreclosing creditors who “add house to house and join field to field till no space is left and you live alone in the land.”
Creditor power and stable growth rarely have gone together. Most personal debts in this classical period were the product of small amounts of money lent to individuals living on the edge of subsistence and who could not make ends meet. Forfeiture of land and assets – and personal liberty – forced debtors into bondage that became irreversible. By the 7th century BC, “tyrants” (popular leaders) emerged to overthrow the aristocracies in Corinth and other wealthy Greek cities, gaining support by cancelling the debts. In a less tyrannical manner, Solon founded the Athenian democracy in 594 BC by banning debt bondage.
But oligarchies re-emerged and called in Rome when Sparta’s kings Agis, Cleomenes and their successor Nabis sought to cancel debts late in the third century BC. They were killed and their supporters driven out. It has been a political constant of history since antiquity that creditor interests opposed both popular democracy and royal power able to limit the financial conquest of society – a conquest aimed at attaching interest-bearing debt claims for payment on as much of the economic surplus as possible.
When the Gracchi brothers and their followers tried to reform the credit laws in 133 BC, the dominant Senatorial class acted with violence, killing them and inaugurating a century of Social War, resolved by the ascension of Augustus as emperor in 29 BC.
Rome’s creditor oligarchy wins the Social War, enslaves the population and brings on a Dark Age
Matters were more bloody abroad. Aristotle did not mention empire building as part of his political schema, but foreign conquest always has been a major factor in imposing debts, and war debts have been the major cause of public debt in modern times. Antiquity’s harshest debt levy was by Rome, whose creditors spread out to plague Asia Minor, its most prosperous province. The rule of law all but disappeared when publican creditor “knights” arrived. Mithridates of Pontus led three popular revolts, and local populations in Ephesus and other cities rose up and killed a reported 80,000 Romans in 88 BC. The Roman army retaliated, and Sulla imposed war tribute of 20,000 talents in 84 BC. Charges for back interest multiplied this sum six-fold by 70 BC.
Among Rome’s leading historians, Livy, Plutarch and Diodorus blamed the fall of the Republic on creditor intransigence in waging the century-long Social War marked by political murder from 133 to 29 BC. Populist leaders sought to gain a following by advocating debt cancellations (e.g., the Catiline conspiracy in 63-62 BC). They were killed. By the second century AD about a quarter of the population was reduced to bondage. By the fifth century Rome’s economy collapsed, stripped of money. Subsistence life reverted to the countryside.
Creditors find a legalistic reason to support parliamentary democracy
When banking recovered after the Crusades looted Byzantium and infused silver and gold to review Western European commerce, Christian opposition to charging interest was overcome by the combination of prestigious lenders (the Knights Templars and Hospitallers providing credit during the Crusades) and their major clients – kings, at first to pay the Church and increasingly to wage war. But royal debts went bad when kings died. The Bardi and Peruzzi went bankrupt in 1345 when Edward III repudiated his war debts. Banking families lost more on loans to the Habsburg and Bourbon despots on the thrones of Spain, Austria and France.
Matters changed with the Dutch democracy, seeking to win and secure its liberty from Habsburg Spain. The fact that their parliament was to contract permanent public debts on behalf of the state enabled the Low Countries to raise loans to employ mercenaries in an epoch when money and credit were the sinews of war. Access to credit “was accordingly their most powerful weapon in the struggle for their freedom,” Richard Ehrenberg wrote in his Capital and Finance in the Age of the Renaissance (1928): “Anyone who gave credit to a prince knew that the repayment of the debt depended only on his debtor’s capacity and will to pay. The case was very different for the cities, which had power as overlords, but were also corporations, associations of individuals held in common bond. According to the generally accepted law each individual burgher was liable for the debts of the city both with his person and his property.”
The financial achievement of parliamentary government was thus to establish debts that were not merely the personal obligations of princes, but were truly public and binding regardless of who occupied the throne. This is why the first two democratic nations, the Netherlands and Britain after its 1688 revolution, developed the most active capital markets and proceeded to become leading military powers. What is ironic is that it was the need for war financing that promoted democracy, forming a symbiotic trinity between war making, credit and parliamentary democracy which has lasted to this day.
At this time “the legal position of the King qua borrower was obscure, and it was still doubtful whether his creditors had any remedy against him in case of default.” (Charles Wilson, England’s Apprenticeship: 1603-1763: 1965.) The more despotic Spain, Austria and France became, the greater the difficulty they found in financing their military adventures. By the end of the eighteenth century Austria was left “without credit, and consequently without much debt,” the least credit-worthy and worst armed country in Europe, fully dependent on British subsidies and loan guarantees by the time of the Napoleonic Wars.
Finance accommodates itself to democracy, but then pushes for oligarchy
While the nineteenth century’s democratic reforms reduced the power of landed aristocracies to control parliaments, bankers moved flexibly to achieve a symbiotic relationship with nearly every form of government. In France, followers of Saint-Simon promoted the idea of banks acting like mutual funds, extending credit against equity shares in profit. The German state made an alliance with large banking and heavy industry. Marx wrote optimistically about how socialism would make finance productive rather than parasitic. In the United States, regulation of public utilities went hand in hand with guaranteed returns. In China, Sun-Yat-Sen wrote in 1922: “I intend to make all the national industries of China into a Great Trust owned by the Chinese people, and financed with international capital for mutual benefit.”
World War I saw the United States replace Britain as the major creditor nation, and by the end of World War II it had cornered some 80 per cent of the world’s monetary gold. Its diplomats shaped the IMF and World Bank along creditor-oriented lines that financed trade dependency, mainly on the United States. Loans to finance trade and payments deficits were subject to “conditionalities” that shifted economic planning to client oligarchies and military dictatorships. The democratic response to resulting austerity plans squeezing out debt service was unable to go much beyond “IMF riots,” until Argentina rejected its foreign debt.
A similar creditor-oriented austerity is now being imposed on Europe by the European Central Bank (ECB) and EU bureaucracy. Ostensibly social democratic governments have been directed to save the banks rather than reviving economic growth and employment. Losses on bad bank loans and speculations are taken onto the public balance sheet while scaling back public spending and even selling off infrastructure. The response of taxpayers stuck with the resulting debt has been to mount popular protests starting in Iceland and Latvia in January 2009, and more widespread demonstrations in Greece and Spain this autumn to protest their governments’ refusal to hold referendums on these fateful bailouts of foreign bondholders.
Shifting planning away from elected public representatives to bankers
Every economy is planned. This traditionally has been the function of government. Relinquishing this role under the slogan of “free markets” leaves it in the hands of banks. Yet the planning privilege of credit creation and allocation turns out to be even more centralized than that of elected public officials. And to make matters worse, the financial time frame is short-term hit-and-run, ending up as asset stripping. By seeking their own gains, the banks tend to destroy the economy. The surplus ends up being consumed by interest and other financial charges, leaving no revenue for new capital investment or basic social spending.
This is why relinquishing policy control to a creditor class rarely has gone together with economic growth and rising living standards. The tendency for debts to grow faster than the population’s ability to pay has been a basic constant throughout all recorded history. Debts mount up exponentially, absorbing the surplus and reducing much of the population to the equivalent of debt peonage. To restore economic balance, antiquity’s cry for debt cancellation sought what the Bronze Age Near East achieved by royal fiat: to cancel the overgrowth of debts.
In more modern times, democracies have urged a strong state to tax rentier income and wealth, and when called for, to write down debts. This is done most readily when the state itself creates money and credit. It is done least easily when banks translate their gains into political power. When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade. The fall of the Roman Empire demonstrates what happens when creditor demands are unchecked. Under these conditions the alternative to government planning and regulation of the financial sector becomes a road to debt peonage.
Finance vs. government; oligarchy vs. democracy
Democracy involves subordinating financial dynamics to serve economic balance and growth – and taxing rentier income or keeping basic monopolies in the public domain. Untaxing or privatizing property income “frees” it to be pledged to the banks, to be capitalized into larger loans. Financed by debt leveraging, asset-price inflation increases rentier wealth while indebting the economy at large. The economy shrinks, falling into negative equity.
The financial sector has gained sufficient influence to use such emergencies as an opportunity to convince governments that the economy will collapse if they it do not “save the banks.” In practice this means consolidating their control over policy, which they use in ways that further polarize economies. The basic model is what occurred in ancient Rome, moving from democracy to oligarchy. In fact, giving priority to bankers and leaving economic planning to be dictated by the EU, ECB and IMF threatens to strip the nation-state of the power to coin or print money and levy taxes.
The resulting conflict is pitting financial interests against national self-determination. The idea of an independent central bank being “the hallmark of democracy” is a euphemism for relinquishing the most important policy decision – the ability to create money and credit – to the financial sector. Rather than leaving the policy choice to popular referendums, the rescue of banks organized by the EU and ECB now represents the largest category of rising national debt. The private bank debts taken onto government balance sheets in Ireland and Greece have been turned into taxpayer obligations. The same is true for America’s $13 trillion added since September 2008 (including $5.3 trillion in Fannie Mae and Freddie Mac bad mortgages taken onto the government’s balance sheet, and $2 trillion of Federal Reserve “cash-for-trash” swaps).
This is being dictated by financial proxies euphemized as technocrats. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even more unpayable.
Neither banks nor public authorities (or mainstream academics, for that matter) calculated the economy’s realistic ability to pay – that is, to pay without shrinking the economy. Through their media and think tanks, they have convinced populations that the way to get rich most rapidly is to borrow money to buy real estate, stocks and bonds rising in price – being inflated by bank credit – and to reverse the past century’s progressive taxation of wealth.
To put matters bluntly, the result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation. Government planning and taxation is accused of being “the road to serfdom,” as if “free markets” controlled by bankers given leeway to act recklessly is not planned by special interests in ways that are oligarchic, not democratic. Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.
The failure to take the wishes of voters into consideration leaves the resulting national debts on shaky ground politically and even legally. Debts imposed by fiat, by governments or foreign financial agencies in the face of strong popular opposition may be as tenuous as those of the Habsburgs and other despots in past epochs. Lacking popular validation, they may die with the regime that contracted them. New governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.
At the very least, they may seek to pay by re-introducing progressive taxation of wealth and income, shifting the fiscal burden onto rentier wealth and property. Re-regulation of banking and providing a public option for credit and banking services would renew the social democratic program that seemed well underway a century ago.
Iceland and Argentina are most recent examples, but one may look back to the moratorium on Inter-Ally arms debts and German reparations in 1931. A basic mathematical as well as political principle is at work: Debts that can’t be paid, won’t be.