TBR News September 6, 2014

Sep 06 2014


The Voice of the White House


            Washington, D.C. Septermber 5, 2014: ”The article printed below is a typical piece of official propaganda, published by a newspaper with the strongest government connections. The writers make entirely false assumptions and, having done so, go on to build their opinions. We have highlighted examples of this in red for our reader’s entertainment:



Mr. Putin Tests the West in Ukraine

August 28 2014


New York Times

 The evidence has been mounting for some time, but there is no longer any doubt: Russian troops are in Ukraine, not as volunteers, as the rebel commander in Donetsk would have the world believe, but in units equipped with mobile artillery and heavy military equipment.

A senior NATO officer reported on Thursday that the alliance had monitored a “significant escalation” in Russia’s military “interference” in Ukraine, and that well over 1,000 Russian soldiers are operating inside the southeast of the country. The officer, Brig. Gen. Nico Tak, called it “interference,” presumably because “invasion” would mean an all-out military assault. But, by any name, it is a large and unacceptable escalation of Russia’s aggression against Ukraine.

President Obama was right in his news conference on Thursday to rule out military action, but new, tougher Western economic sanctions are obviously needed to make clear to President Vladimir Putin of Russia that the West views his lies and escalating aggression as a major threat.

Mr. Obama declined to speak of an “invasion” in his relatively restrained comments, describing the latest developments only as “a continuation” of what Russia has been up to and of his “expectation” that the allies will deepen the sanctions. His ambassador to the United Nations, Samantha Power, was more blunt in her address Thursday to the Security Council, where she described Russia’s actions as “a deliberate effort to support, and now fight alongside, illegal separatists in another sovereign country.” That should be the reality guiding Mr. Obama when he meets with NATO allies in Wales next week.

NATO suspects the Russian goal is to prevent a military defeat of the rebels and freeze the conflict in an open-ended cease-fire, with Russia left in effective control of Ukraine’s industrial heartland, following the template of Russia’s frozen conflicts with Moldova and Georgia. But Russia’s motive is not the issue here. It is Russia’s violation of a cardinal principle of the international order since World War II — states do not seize territory by force.

 Mr. Putin has played his dangerous game in Ukraine with cunning and deceit since the ouster in February of the corrupt Viktor Yanukovych lost him a Ukrainian president he could manipulate. First he annexed Crimea outright. Shocking and outrageous as that was, at least no blood was shed; Mr. Putin claimed that history and a Russian population as justification for that seizure. The Western reaction was limited to modest sanctions.

 Since then, Mr. Putin has turned his attention to southeastern Ukraine, holding intimidating military exercises on the Ukrainian border and sending in ever more men and arms in support of secessionists in Donetsk and Luhansk, all the while falsely denying any Russian involvement other than humanitarian concern for the ethnic Russian population.

After the rebels shot down a Malaysian jetliner with a Russian missile, and after Kiev made gains against the rebels, Russia’s involvement became more overt, with reports of artillery fire across the border, armored columns crossing into Ukraine and Russian soldiers caught or killed inside Ukraine. The United States and the European Union ratcheted up the sanctions, but Mr. Putin continued to deny any involvement. He will no doubt deny the latest evidence as well, and will cynically claim some Ukrainian or Western plot.

             Comments from European leaders on Thursday showed they recognize the danger of this moment. European Union leaders meeting on Saturday must join the United States in expanding the economic sanctions. France should seriously reconsider delivering the Mistral assault ships it has sold Russia. And when NATO leaders gather next week, they should give strong reassurances to NATO members along Russia’s borders that they will be protected should Moscow turn its attentions on them.


Sanctions rebound to hit Europeans

August 21, 2014

by Brian Cloughley

Asia Times


The Financial Times commented on August 10 that in reaction to the chaos in Ukraine, “Western policy has become a mere knee-jerk escalation of sanctions”, and for once the FT has got it right about foreign affairs. The US and its disciples in Europe and Australia have imposed sanctions on Russia for its alleged interference in Ukraine, which has got nothing whatever to do with the US or anyone else. And Russia, understandably, is answering back.

In spite of there being no proof whatever produced by the West’s intercept spooks and other sleuths there is no doubt that Russia has been involved in Ukraine, finding out about and even trying to influence its policies – just as the US is spying on and trying to influence domestic policies in almost every country on this blighted globe and has recently given Ukraine its special attention.

The difference between the activities of the US and Russia is that Ukraine is right next door to Russia, and many of its eastern-located citizens are of Russian origin and speak Russian and think Russian and feel that their cultural roots are Russian and want to belong to Russia, just as their entire country did until 23 years ago.

On the other hand, Washington considers it has the God-given right to listen to everyone’s private deliberations and tell every nation in the world how to run its affairs and if necessary to enforce this by military intervention. The fact that such military fiddling proved utterly catastrophic in Vietnam, Cuba, Iraq, Yemen, Afghanistan and Libya is neither here nor there. The next frontier is Ukraine.

And poor decrepit leaderless old Britain, socially confused and morally collapsing, tries to combat what it sees as world chaos by following the example of its erratic mentor in applying sanctions on Russia, a country whose amity it would be well-advised to seek.

There is no border between the US or the UK and Ukraine. There is no military treaty binding them together. Ukraine is not a member of the North Atlantic Treaty Organization. It doesn’t belong to the European Union. It has no cultural connection with that Union, and its trade with the entire EU is tiny. It is, however, dependent on Russia for a great deal. And so is the EU, which has no intention whatever of letting Ukraine join it.

Russo-Ukrainian relations are a bilateral matter between Russia and Ukraine. But ever eager to indulge in provocative nose-poking, the US and Britain headed the Charge of the Spite Brigade and decided that an attractive means of trying to foul up the lives of large numbers of perfectly innocent people was imposition of sanctions, proven in history to be totally ineffective in making governments bow to the commands of the sanctioneers.

The West’s malevolent sanctions on Russia were not imposed because Russia had in any way affected the well-being, economic circumstances, territorial integrity or social structure of the United States or of any nation that jumped on the US sanctions’ bandwagon. There was no question of enforcing sanctions because Russia’s actions anywhere in the world had impacted adversely on one single citizen of any Western nation. But they were imposed, anyway, just to try to make things difficult for Moscow and to try to ratchet up tension between Russia and the West.

The sanctions have been an irritant to Moscow, but sanctions are usually more than that, and in the past have proved useless in persuading governments to act contrary to what they perceive as national interests – but they’ve been effective in destroying the lives of ordinary people who have done no harm to anyone.

The US and Britain, for example, imposed sanctions on Iran for a decade before they invaded it in their lunatic foray which led to the current catastrophe in the region. Their vindictive restrictions inflicted hideous misery on ordinary citizens. But there were some principled people who protested about the appalling human crisis inflicted on Iraq by the US and its misguided ally.

Dennis Halliday, head of the United Nations’ humanitarian program in Iraq, resigned in protest against the criminal carnival, as did his successor, Hans von Sponeck. They made it clear that “the death of some 5-6,000 children a month is mostly due to contaminated water, lack of medicines and malnutrition. The US and UK governments’ delayed clearance of equipment and materials is responsible for this tragedy, not Baghdad.”

Halliday and von Sponeck were honorable men, but of course they were reviled by those who knew perfectly well what effect sanctions were having – because the sanctions had been planned that way. The British and American governments were told plainly that their prohibition on movement of life-saving material was killing children. And the only action they took was to enforce sanctions even more energetically.

But we know that children don’t matter to war planners and their supporters. After all, when Madeleine Albright, the then US ambassador to the UN, was asked on television whether she considered the deaths of half a million Iraqi children a reasonable result of US sanctions, she replied (see YouTube, here) with the pitiless, utterly heartless statement that “this is a very hard choice, but … we think the price is worth it”.

If any people in official positions in America or Britain disagreed with her judgement that the deaths of half a million children were justified and acceptable, they kept very quiet about it. And such policy continues.

But there’s one enormous problem for the countries of the European Union in joining the US in imposing sanctions on Russia: rebounding retaliation by Moscow.

This is already affecting European economies, and especially the incomes of small producers of foodstuffs, the ordinary folk who always suffer in one way or another from the effects of lordly sanctions, none of which will inconvenience for one instant the high mucky-mucks of the US and other countries who decided to go down the sanctions route. They’ll be perfectly comfortable, and not one of them will suffer in the slightest from Russia’s riposte. But for their citizens it will be quite another matter, because many of them they will experience grave financial loss and considerable distress.

Russia decided to hit back against US and EU sanctions by barring some US and EU imports. And why shouldn’t it, after such gross provocation? But there’s a definite downside for innocent people. For example, Russia is the biggest market for French apples and pears, of which 1.5 million tonnes were expected to be exported this year. Now, thanks to Russia’s reply to the US/UK-sponsored embargo there are hundreds of small farmers in France who are going to have a miserable Christmas. The Scottish and Norwegian fishing industries are suffering appallingly because their exports to Russia were enormous. Now – nothing.

And there is now a curious lack of reporting about all this in the Western media. It’s a major story, but after the first couple of days of media interest in it suddenly became back page stuff in the print media, and blank-out on radio and television.

They’re not interested in Polish, Spanish, Dutch and Greek fruit-growers going bankrupt. Poland, for example, exports over a billion dollars-worth of food to Russia every year, and is suffering accordingly, and a Greek spokesman said that “Russia absorbed more than 60% of our peach exports and almost 90% of our strawberries,” as over 3,500 tonnes of peaches lay rotting in stores and trucks. Ten per cent of the EU’s annual agricultural exports went to Russia. Now – thanks to Moscow’s riposte to US-led imposition of sanctions, there won’t be any.

You might say that this is Russia’s fault. But why should Russia sit meekly and take punishment by the US and the EU that has been imposed by reason of spite?

The European agriculture commissioner, Romanian Dacian Ciolos – yearly salary 250,000 euros (US$333,000), untaxed and not including expenses – declared that Europe’s farmers will “re-orient rapidly toward new markets and opportunities”. But just how this miracle is going to take place is not explained.

Mr Ciolos, like President Barack Obama and British Prime Minister David Cameron and all the other rich, scheming fatheads who began and are prolonging this vicious economic war, will not himself be affected in the tiniest way by any of their nonsense. It’s only the little people who suffer.

One particularly out-of-touch British politician, the Secretary of State for the Environment, said that Russia’s action “is totally unjustified and I share the concerns of Scotland’s fishing industry about the possible impact on their business”. She declared, presumably seriously, that the UK would “call on the European Commission to consider the merits of any potential World Trade Organization case to ensure the rules of international trade are upheld”, which ignores the fact that it was the European Commission that followed Washington in ensuring that the principles of international trade were shattered by their sanctions on Russia.

The US/EU sanctions of the new Cold War have dropped from pages and screens. But this doesn’t mean that the problem has gone away. Russia’s position is that “We have repeatedly said that Russia is not an advocate of the sanctions rhetoric and did not initiate it. But in the event that our partners [sic] continue their unconstructive and even destructive practices, additional measures are being worked out” in order to make it clear that imposition of sanctions on Russia by the West will continue to be entirely counter-productive.

No doubt the complacent position of Washington, London and Brussels will be that “We think the price is worth it.”

            Brian Cloughley is a former soldier who writes on military and political affairs, mainly concerning the sub-continent. His book A History of the Pakistan Army is now in its fourth edition.

A New Reason to Question the Official Unemployment Rate

August 26, 2014

by David Leonhardt

New York Times

The Labor Department’s monthly jobs report has been the subject of some wacky conspiracy theories. None was wackier than the suggestion from Jack Welch, the former General Electric chief executive, that government statisticians were exaggerating job growth during President Obama’s 2012 re-election campaign. Both Republican and Democratic economists dismissed those charges as silly.

But to call the people who compile the jobs report honest, nonpartisan civil servants is not to say that the jobs report is perfect. The report tries to estimate employment in a big country – and to do so quickly, to give policy makers, business executives and everyone else a sense of how the economy is performing. It’s a tough task.

And it has become tougher, because Americans are less willing to respond to surveys than they used to be.

 How Not to Be Misled by the Jobs Report A new academic paper suggests that the unemployment rate appears to have become less accurate over the last two decades, in part because of this rise in nonresponse. In particular, there seems to have been an increase in the number of people who once would have qualified as officially unemployed and today are considered out of the labor force, neither working nor looking for work.

The trend obviously matters for its own sake: It suggests that the official unemployment rate – 6.2 percent in July – understates the extent of economic pain in the country today. That makes intuitive sense. Wage growth is weak, and Americans are pretty dissatisfied with the economy, according to other surveys. The new paper is a reminder that the unemployment rate deserves less attention than it often receives.

Yet the research also relates to a larger phenomenon. The declining response rate to surveys of almost all kinds is among the biggest problems in the social sciences. It’s complicating our ability to understand how people live and what they believe. “It’s a huge issue,” says Alan Krueger, a Princeton economist and one of the new paper’s three authors. (Mr. Krueger, who recently spent two years as the chairman of President Obama’s Council of Economic Advisers, founded the Princeton University Survey Research Center in the 1990s.)

Why are people less willing to respond? The rise of caller ID and the decline of landlines play a role. But they’re not the only reasons. Americans’ trust in institutions – including government, the media, churches, banks, labor unions and schools – has fallen in recent decades. People seem more dubious of a survey’s purpose and more worried about intrusions into their privacy than in the past.

“People are skeptical – Is this a real survey? What they are asking me?” Francis Horvath, of the Labor Department, says.

In 1997, the response rate to a typical telephone poll was a healthy 36 percent, according to Pew. By 2012, it had fallen to 9 percent. Fortunately, many surveys appear to be doing a good job of weighting the answers of people who do respond, to make up for those who don’t. Still, the long-term reasons for concern are clear: People who are more likely to avoid polls, such as anyone born after, say, 1980, are different from those who answer them.

 The response rate of the Labor Department’s monthly jobs survey is far higher (about 89 percent) than that of a political poll, but it has also fallen (from 96 percent in the 1980s). Not surprisingly, the people who do not respond have different experiences in the job market than those who do.

The trouble with the unemployment rate revolves around a technical concept known as “rotation-group bias,” explain the paper’s three authors, Mr. Krueger, Alexandre Mas and Xiaotong Niu. The government surveys people for four consecutive months, gives them eight months off and then surveys them for four more months. This pattern allows the Labor Department to track people’s experiences for more than a year in a way that is less burdensome than 16 months of monthly surveys would be.

Over time, the kinds of answers that people give — or the kinds of people who respond — change. In later months as part of the survey panel, people who aren’t working are less likely to report being available to work and having looked for a job in the previous four weeks, which is the definition for unemployment. The differences are big, too.

The unemployment rate in the first half of 2014 among people in the first month of being interviewed was 7.5 percent. Among people in the final month of being interviewed, it was only 6.1 percent. Because the Labor Department weights later panelists – for whom there is historical data – more heavily, the official unemployment rate during this period was 6.5 percent.

That number seems too low. The authors note that the higher jobless rate among early-month panelists correlates more strongly with some other economic indicators than the rate among later-month panelists.

If you’re tempted to blame President Obama for this situation, Jack Welch-style, you should dig into the data. The problem has existed, and been growing, for decades. A redesign of the survey in 1994, to move it from paper-based to computer-based, seems to be one cause. The full reasons aren’t clear, but something about the redesign seems to have changed the way people answer questions. The gap in jobless rates between early and later panelists starting spiking in 1994 and is now about twice as large as it was then.

Of course, survey response rates have also been dropping over that same period. And there may indeed be an Obama effect here. The response rate to the unemployment survey fell noticeably in 2009, shortly after Mr. Obama took office, when the Tea Party was forming. Since then, it has continued falling more steeply than pre-2009. In the Obama era, some Americans simply trust the government less.

Tea Party aside, the main factor is technology. It’s a major cause of today’s response-rate problems – but it’s also the solution.

 For decades, survey research has revolved around the telephone, and it’s worked very well. But Americans’ relationship with their phones has radically changed. It’s no surprise that survey research will have to as well.

Maybe people in coming years will answer questions about their employment status (and political views) by text message on their iPhones – or through Google glasses. Or maybe they’ll do so on their televisions, when they once would have been watching commercials.

In the future, we are unlikely to live in a country in which information is scant. We are certain to live in one in which information is collected in different ways. The transition is under way, and the federal government is among those institutions that will need to adapt.


More Workers Are Claiming ‘Wage Theft’

August. 31, 2014

by Steven Greenhouse  

New York Times


MIRA LOMA, Calif. — Week after week, Guadalupe Rangel worked seven days straight, sometimes 11 hours a day, unloading dining room sets, trampolines, television stands and other imports from Asia that would soon be shipped to Walmart stores.

Even though he often clocked 70 hours a week at the Schneider warehouse here, he was never paid time-and-a-half overtime, he said. And now, having joined a lawsuit involving hundreds of warehouse workers, Mr. Rangel stands to receive more than $20,000 in back pay as part of a recent $21 million legal settlement with Schneider, a national trucking company.

“Sometimes I’d work 60, even 90 days in a row,” said Mr. Rangel, a soft-spoken immigrant from Mexico. “They never paid overtime.”

 The lawsuit is part of a flood of recent cases — brought in California and across the nation — that accuse employers of violating minimum wage and overtime laws, erasing work hours and wrongfully taking employees’ tips. Worker advocates call these practices “wage theft,” insisting it has become far too prevalent.

Some federal and state officials agree. They assert that more companies are violating wage laws than ever before, pointing to the record number of enforcement actions they have pursued. They complain that more employers — perhaps motivated by fierce competition or a desire for higher profits — are flouting wage laws.

Many business groups counter that government officials have drummed up a flurry of wage enforcement actions, largely to score points with union allies. If anything, employers have become more scrupulous in complying with wage laws, the groups say, in response to the much publicized lawsuits about so-called off-the-clock work that were filed against Walmart and other large companies a decade ago.

Here in California, a federal appeals court ruled last week that FedEx had in effect committed wage theft by insisting that its drivers were independent contractors rather than employees. FedEx orders many drivers to work 10 hours a day, but does not pay them overtime, which is required only for employees. FedEx said it planned to appeal.

Julie Su, the state labor commissioner, recently ordered a janitorial company in Fremont to pay $332,675 in back pay and penalties to 41 workers who cleaned 17 supermarkets. She found that the company forced employees to sign blank time sheets, which it then used to record inaccurate, minimal hours of work.

David Weil, the director of the federal Labor Department’s wage and hour division, says wage theft is surging because of underlying changes in the nation’s business structure. The increased use of franchise operators, subcontractors and temp agencies leads to more employers being squeezed on costs and more cutting corners, he said. A result, he added, is that the companies on top can deny any knowledge of wage violations.

“We have a change in the structure of work that is then compounded by a falling level of what is viewed as acceptable in the workplace in terms of how you treat people and how you regard the law,” Mr. Weil said.

His agency has uncovered nearly $1 billion in illegally unpaid wages since 2010. He noted that the victimized workers were disproportionately immigrants.

Guadalupe Salazar, a cashier at a McDonald’s in Oakland, complained that her paychecks repeatedly missed a few hours of work time and overtime pay. Frustrated about this, she has joined one of seven lawsuits against McDonald’s and several of its franchise operators, asserting that workers were cheated out of overtime, had hours erased from timecards and had to work off the clock.

“Basically every time that I worked overtime, it didn’t show up in my paycheck,” Ms. Salazar said. “This is time that I would rather be with my family, and they just take it away.”

Business advocates see a hidden agenda in these lawsuits. For example, the lawsuit against Schneider — which owns a gigantic warehouse here that serves Walmart exclusively — coincides with unions pressuring Walmart to raise wages. The lawyers and labor groups behind the lawsuit have sought to hold Walmart jointly liable in the case.

Walmart says that it seeks to ensure that its contractors comply with all laws, and that it was not responsible for Schneider’s employment practices. Schneider said it “manages its operations with integrity,” noting that it had hired various subcontractors to oversee the loading and unloading crews.

Business groups note that the lawsuits against McDonald’s have been coordinated with the fast-food workers’ movement demanding a $15 wage. “This is a classic special-interest campaign by labor unions,” said Stephen J. Caldeira, president of the International Franchise Association. In legal papers, McDonald’s denied any liability in Ms. Salazar’s case, and the Oakland franchisee insisted that Ms. Salazar had failed to establish illegal actions by the restaurant.

Lee Schreter, co-chairwoman of the wage and hour practice group at Littler Mendelson, a law firm that represents employers, said wage theft was not increasing, adding that many companies had become more vigilant about compliance. But that has not stopped lawyers from bringing wage theft complaints because of the potential payoff, Ms. Schreter said. “These are opportunistic lawsuits,” she said.

Michael Rubin, one of the lawyers who sued Schneider, disagreed, saying there are many sound wage claims. “The reason there is so much wage theft is many employers think there is little chance of getting caught,” he said.

Commissioner Su of California said wage theft harmed not just low-wage workers. “My agency has found more wages being stolen from workers in California than any time in history,” she said. “This has spread to multiple industries across many sectors. It’s affected not just minimum-wage workers, but also middle-class workers.”

Many other states are seeing wage-theft cases. New York’s attorney general, Eric T. Schneiderman, has recovered $17 million in wage claims over the past three years. “I’m amazed at how petty and abusive some of these practices are,” he said. “Cutting corners is increasingly seen as a sign of libertarianism rather than the theft that it really is.”

In Nashville last February, nine housekeepers protested outside a DoubleTree hotel because the subcontractor that employed them had failed to pay a month’s wages. “The contractor said they didn’t have the money, that the hotel hadn’t paid them,” said Natalia Polvadera, a housekeeper. “We went to the hotel manager — he showed receipts that they had paid the contractor.”

Nonetheless, the protests persuaded DoubleTree to pay the $12,000 in wages owed.

Mr. Weil said some executives had urged him to increase enforcement because they dislike being underbid by unscrupulous employers.

His agency has begun cracking down on retaliation against workers who complain, suing a Texas company that fired a janitor when he refused to sign a statement that falsely said he had already received back wages due him from a Labor Department investigation

“This is just not acceptable,” Mr. Weil said. “You can’t threaten people to lose their jobs because they are asserting rights that go back 75 years.”

Dabrali Jimenez contributed reporting from New York.

Merkel: arming Kurds in Germany’s interest


September 1 2014



BERLIN (AP) Chancellor Angela Merkel has told German lawmakers that arming Kurdish fighters battling Islamic extremists in Iraq wasn’t an easy decision but is in her country’s interest.

The government decided Sunday to deliver rifles, tank-busting weapons and armored vehicles to forces fighting the Islamic State group, breaking with Germany’s previous reluctance to send weapons into conflicts.

Lawmakers were to hold a nonbinding vote Monday in a special session of parliament, which was recalled from its summer break.

Merkel said the decision was “very carefully weighed.” She said officials faced a choice between “taking no risks, not delivering (weapons) and ultimately accepting the expansion of terror” or supporting those fighting the extremists.

Merkel said: “The immense suffering of many people cries out, and our own security interests are threatened.”


Keynes is dead; long live Marx

August 29, 2014

by Ismael Hossein-Zadeh

Asia Times


Many liberal economists envisioned a new dawn of Keynesianism in the 2008 financial meltdown. Nearly six years later, it is clear that the much-hoped-for Keynesian prescriptions are completely ignored. Why? Keynesian economists’ answer: “neoliberal ideology,” which they trace back to President Reagan.

This study argues, by contrast, that the transition from Keynesian to neoliberal economics has much deeper roots than pure ideology; that the transition started long before Reagan was elected President; that the Keynesian reliance on the ability of the government to re-regulate and revive the economy through policies of demand management rests on a hopeful perception that the state can control capitalism; and that, contrary to such wishful perceptions, public policies are more than simply administrative or technical matters of choice – more importantly, they are class policies.

The study further argues that the Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view, which attributes the plague of unemployment to the “misguided policies of neoliberalism.” Likewise, the Marxian theory of subsistence or near-poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized predominance of misery, can go hand-in-hand with high levels of profits and concentrated wealth than the Keynesian perceptions, which view high levels of employment and wages as necessary conditions for an expansionary economic cycle. [1]


Deeper than ‘Neoliberal ideology’


The questioning and the gradual abandonment of the Keynesian demand management strategies took place not simply because of purely ideological proclivities of “right-wing” Republicans or the personal preferences of Ronald Reagan, as many liberal and radical economists argue, but because of actual structural changes in economic or market conditions, both nationally and internationally. New Deal- Social Democratic policies were pursued in the aftermath of the Great Depression as long as the politically-awakened workers and other grassroots, as well as the favorable economic conditions of the time, rendered such policies effective. Those favorable conditions included the need to invest in and rebuild the devastated post-war economies around the world, the nearly unlimited demand for US manufactures, both at home and abroad, and the lack of competition for both US capital and labor.

These propitious circumstances, along with the pressure from below, allowed US workers to demand respectable wages and benefits while at the same time enjoying higher rates of employment. The high wages and the strong demand then served as a delightful stimulus that precipitated the long expansionary cycle of the immediate post-war period in the manner of a virtuous circle.

By the late 1960s and early 1970s, however, both US capital and labor were no longer unrivaled in global markets. Furthermore, during the long cycle of the immediate post-war expansion US manufacturers had invested so much in fixed capital, or capacity building, that by the late 1960s their profit rates had begun to decline as the enormous amounts of the so-called “sunk costs,” mainly in the form of plant and equipment, had become too high. [2]

More than anything else, it was these important changes in the actual conditions of production, and the concomitant realignment of global markets, which occasioned the gradual reservations and the ultimate abandonment of the Keynesian economics. Contrary to the repeated claims of the liberal/Keynesian partisans, it was not Ronald Reagan’s ideas or schemes that lay behind the plans of dismantling the New Deal reforms; rather, it was the globalization, first, of capital and, then, of labor that rendered Keynesian-type economic policies no longer attractive to capitalist profitability, and brought forth Ronald Reagan and neoliberal austerity economics. [3]

It should be emphasized that Keynesian stabilization policies were not abandoned for purely ideological reasons; i.e., because, as many critics of neo-liberalism argue, a laissez-faire animus spread from Chicago, infecting politicians of all parties and persuading them of the benefits of free markets. … Keynesian systems of financial regulation (capital controls and managed exchange rates) could not withstand the growing pools of unregulated international credit, the Euromarkets, which came to dominate international finance. [4]

When financial regulations, capital controls and a new international monetary system were established at the Bretton Woods Conference in the immediate aftermath of World War II, international financial or credit markets were effectively non-existent. The US dollar (and to lesser extent gold) was, by and large, the only means of international trade and credit. Under those circumstances, international credit took place largely through the International Monetary Fund (IMF) and the central banks of the lending/borrowing countries – hence, the enforceability of controls.

This picture of international credit/financial markets, however, gradually changed; and by the late 1960 and early1970s, those markets had grown to the tune of hundreds of billions of dollars, thereby allowing international credit transactions outside of the IMF- central banks channels. The two major factors that significantly contributed to drastic inflation of international financial markets were (a) the computer-generated international credit, and (b) the immense proliferation of eurodollars, ie US dollars deposited in overseas banks. The footloose-and-fancy-free global finance/credit has grown so big during the past several decades that it has made domestic or national controls and regulations virtually ineffectual:

Critics of international finance have made various proposals to stabilize the system and make it more appropriate to the purposes of economic and social development. The most common suggestion has been a return to the cross-border capital controls that existed during the 1940s and the 1950s. Such controls, in many cases, were not eliminated until the 1990s. However, international bank deposits and financial assets held abroad are now so large that it would be difficult to enforce such controls. Indeed, the main reason for getting rid of such regulations was precisely because they could not be enforced. [5]

It is obvious, then, that the weakening or undermining of control and/or regulatory safeguards was brought about not so much by purely ideological tendencies of certain politicians or policy makers as it was by the actual developments in international financial markets.


It started long before Reagan


The claim that the abandonment of Keynesian policies in favor of neoliberal ones began with the 1980 arrival of Ronald Reagan in the White House is factually false. Indisputable evidence shows that the date on the Keynesian prescriptions expired at least a dozen years earlier. Keynesian policies of economic expansion through demand management had run out of steam (ie, reached their systemic limits) by the late 1960s and early 1970s; they did not come to a sudden, screeching halt the moment Reagan sat at the helm.

As Professor Alan Nasser of Evergreen State College points out, arguments that “policies of economic equity represented costly trade-offs in terms of efficiency” were made by economic advisors of the Democratic administrations long before Reaganomics solemnized such arguments. Arthur Okun and Charles Schultze had each served as chair of the Council of Economic Advisors to Democratic presidents. In his Equality and Efficiency: The Big Tradeoff, Okun (1975) argued that “the interventionist goal of greater equality had inefficiency costs that injured the private economy.” Schultze (1977) likewise claimed that “government policies which impact markets in the name of fairness and equality are necessarily inefficient,” and that such policies were “bound to disadvantage the very people policymakers intended to protect, and to destabilize the private economy in the process”. [6]

Jerome Kalur also points out, “Chamber of Commerce and Business Roundtable efforts to gain control of government regulatory decision-making were initiated at least nine years before” the election of Ronald Reagan to presidency, “when corporate attorney Lewis Powell submitted to the Chamber his now well-known memorandum ‘Attack of American Free Enterprise System.” [7] In concert with Powel’s legal offensive against labor and regulatory standards, big business moved swiftly to “impede union organizing” and “to eliminate regulatory controls via streams of think-tank propaganda from the likes of The American Enterprise Institute (1972), The Heritage Foundation (1973), and the Cato Institute (1977)” [8]. Kalur further writes:

When Powell handed his memorandum to the Chamber, American business had 175 registered lobbyist firms at its service. By 1982, the number of K Street corporate financed arm-twisters had grown to 2,500. Corporate supported PACs numbered 400 in the early 70s and 1,200 by 1980. In short, big business was already causing a decline in union memberships, strongly influencing federal agencies and laws, and mastering the SEC long before the advent of the Reagan presidency. With Powell elevated to the Supreme Court corporate America was by 1978 advancing toward its goal of un-restricted campaign contributions through clandestine vehicles. [9]

While theoretical turnaround from New Deal- Keynesian economics by the luminaries of the Democratic Party pre-dated President Carter, policy implementation of such theories began under the Carter administration. Reagan picked up the Democrat’s copy of gradual agenda of neoliberalism and ran with it, replacing the rhetoric of capitalism-with-a-human-face with the imperious, self-righteous rhetoric of rugged individualism that greed and self-interest are virtues to be nurtured. Neither President Clinton eased the supply-side economic policies of the Reagan years, nor is President Obama hesitating to carry out such policies.


The role of the state


The Keynesian view that the government can fine-tune the economy through fiscal and monetary policies to maintain continuous growth is based on the idea that capitalism can be controlled or manipulated by the state and managed by professional economists from government departments in the interest of all. The effectiveness of the Keynesian model is, therefore, based largely on a hope, or illusion; since in reality the power relation between the state and the market/capitalism is usually the other way around. Contrary to the Keynesian perception, economic policy making is more than simply an administrative or technical matter of choice; more importantly, it is a deeply socio-political matter that is organically intertwined with the class nature of the state and the policy making apparatus.

The Keynesian illusion has been nurtured or masked by two major myths. The first myth stems from the perception that attributes the implementation of the New Deal and Social Democratic economic reforms that followed the Great Depression and Word War II to the genius of Keynes. Evidence shows, however, that implementation of those reforms, and therefore the rise of Keynes to prominence, were more a product of the fierce class struggles and overwhelming pressures from the grassroots than the brains of experts like Keynes. Indeed, beyond narrow academic circles, Keynes was not even heard of in the United States when most of the New Deal reforms were put in place.

The second myth stems from the view that attributes the long economic expansion of the 1948- 68 period in the US to the efficacy or success of Keynesian policies of demand management. While it is certainly true that expansive government policies of the time played a big role in the fantastic economic developments of that period, additional favorable conditions or factors also contributed to the success of that expansion. These included the need to invest and rebuild the devastated post-war economies around the world, the need to supply the vast post-war global demand for consumer as well as capital goods, lack of competition for US products and capital in global markets – in short, the fact that there was enormous room for growth and expansion in the immediate post-war period.

Harboring these myths and illusions, Keynesian economists envisioned a silver-lining in the 2008 financial meltdown and the ensuing Great Recession: an opportunity for a new dawn of Keynesian economics. Nearly six years later, it is abundantly clear that Keynesian policy prescriptions are falling on deaf ears

             Shunned, Keynesian hopes and illusions have turned into disappointment and anger. For example, using his New York Times’ column, Professor Paul Krugman frequently lashes out at the Obama administration for ignoring the Keynesian policies of economic expansion and job creation:

The truth is that creating jobs in a depressed economy is something government could and should be doing. … Think about it: Where are the big public works projects? Where are the armies of government workers? There are actually half a million fewer government employees now than there were when Mr. Obama took office. [10]

At the heart of Keynesian economists’ frustration or disappointment is the unrealistic perception that economic policies are intellectual products, and that policy making is primarily a matter of technical expertise and personal preferences. What these economists overlook is the fact that economic policy making is not simply a matter of choice, that is, of “good” versus. “bad” policy. More importantly, it is a matter of class policy.

It is not enough to have a good heart or a compassionate soul; it is equally important not to lose sight of how public policy is made under capitalism. It is not enough to repeatedly bash Ronald Reagan as a wicked king and praise FDR as a wise king. The more important task is to explain why the ruling class ousted the wise king and ushered in the wicked one. As Professor Peter Gowan of London Metropolitan University puts it, “Keynesians make an essentially false argument in favor of re-regulation when they fail to see the oneness of the State and the Wall Street”. [11]


Growth and employment: Keynes versus Marx


Not only is the liberal economists’ account of the actual developments that led to the demise of Keynesianism and the rise of neoliberalism inaccurate, so is their explanation of the ongoing problems of unemployment and economic stagnation. By blaming the persistently high rates of unemployment on “neoliberal capitalism,” instead of capitalism per se, proponents of Keynesian economics tend to lose sight of the structural or systemic causes of unemployment: the secular and/or systemic tendency of capitalist production to constantly replace labor with machine, and to thereby create a sizeable pool of the unemployed, or a “reserve army of labor,” as Karl Marx put it.

The fundamental laws of demand and supply of labor under capitalism are heavily influenced, Marx argued, by the market’s ability to regularly produce a reserve army of labor, or a “surplus population.” The reserve army of labor is therefore as important to capitalist production as is the active (or actually employed) army of labor. Just as a regular and timely adjustment of the level of a body of water behind an irrigation dam is crucial to a smooth or stable use of water, so is an “appropriate” size of a pool of the unemployed critical to the profitability of capitalist production:

The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active labour-army; during the periods of over-production and paroxysm, it holds its pretensions in check. Relative surplus population is therefore the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient to the activity of exploitation and to the domination of capital. [12]

In the era of globalization of production and employment, the reserve army of labor has drastically expanded beyond national borders. According to a recent report by the International Labor Organization (ILO), between 1980 and 2007 the global labor force grew by 63%. The report further shows that, due to worldwide urbanization and/or de-peasantization, the ratio of the active to reserve army of labor is less than 50%, that is, more than half of the global labor force is unemployed. [13]

It is this vast and readily available pool of the unemployed, along with the relative ease of moving production anywhere in the world – not some “evil intentions of right-wing Republicans or wicked neoliberals,” as many Keynesians argue – that has forced the working class, especially in the core capitalist countries, into submission: going along with the brutal austerity schemes of wage and benefit cuts, of layoffs and union busting, of part-time and contingency employment, and the like.

This also explains why repeated Keynesian calls of the recent years for embarking on Keynesian-type stimulus packages in order to help end the recession and alleviate unemployment continue to sound hollow. Under the changed conditions of production from national to global level, and in the absence of overwhelming political pressure from workers and other grassroots, there are simply no refills for Dr Keynes’s prescriptions, which were issued under radically different socioeconomic conditions, under national circumstances or frameworks, not international or global ones.

Theoretically, the Keynesian strategy of a “virtuous circle” of high rates of growth and employment is both simple and reasonable: massive government spending in the face of a serious economic downturn would raise employment and wages, inject a strong purchasing power into the economy, which would, in turn, spur producers to expand and hire, thereby further raising employment, wages, demand, supply … ad infinitum. But while the strategy sounds relatively simple and fairly reasonable, it suffers from a number of flaws.

To begin with, it implicitly assumes that employers and government policy makers are genuinely interested in bringing about full employment, but somehow do not know how to achieve this goal. Full employment production, however, may not necessarily be the ideal or profit-maximizing level of capitalist production; which means it may not be a real objective of business and/or government decision makers.

As noted earlier, a sizeable pool of the unemployed is as essential to capitalist profitability as is the number of workers needed to be actually employed. In its drive to keep the labor cost as low as possible, by keeping the working class as docile as possible, capitalism tends to often prefer high unemployment and low wages to low unemployment and high wages.

This explains why, for example, the stock market often tends to rise when there is a report of rising unemployment, and vice versa. It also explains why, taking advantage of the long (and ongoing) recessionary cycle, the ruling business-government policy makers in the core capitalist countries have embarked on an unprecedented austerity program of spending cuts and public-sector downsizing whose main objective is to weaken the labor and reduce the labor cost.

Secondly, the Keynesian argument that a “virtuous circle” of high employment, high wages and high growth is relatively easily achievable only if it were not due to the “bad” policies of neoliberalism or opposition of employers is based on the assumption that employers/producers are somehow oblivious to their own self-interest. If only they were mindful of the benefits of the proverbial “Ford wages” to their sales, the argument goes, could they help both themselves and their workers, and bring about economic growth and prosperity for all. The well-known liberal professor (and former Labor Secretary under President Clinton) Robert Reich’s view on this issue is typical of the Keynesian argument:

For most of the last century, the basic bargain at the heart of the American economy was that employers paid their workers enough to buy what American employers were selling. . . . That basic bargain created a virtuous cycle of higher living standards, more jobs, and better wages. . . . The basic bargain is over. . . . 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. [14]

There are two major problems with this argument. The first problem is that it assumes (implicitly) that US producers depend on domestic workers not only for employment but also for sale of their products-as if it were a closed economy. In reality, however, US producers are increasingly becoming less and less dependent on domestic labor for either employment or sales as they steadily expand their production and sales markets abroad: “On both the supply [employment] side and the demand side, the US worker/consumer is perceived as incrementally inessential.” [15]

The second problem with the argument is that wages and benefits are micro- or enterprise-level categories that are decided on by individual employers or corporate managers, not by some macro or national level planners of aggregate demand (as in a centrally-planned economy). Individual producers (large or small) view wages and benefits first, and foremost, as a major cost of production that needs to be minimized as much as possible; and only secondarily, if ever, as part of the national aggregate demand that may (in roundabout ways) contribute to the sale of their products.

Marx characterized capitalism’s willingness and ability to create a big pool of the unemployed (in order to create a largely poor and meek working class) as “immiseration” and submission of labor force – a built-in mechanism that is essential to the “general law” of capitalist accumulation:

It follows therefore that in proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. The law, finally, that always equilibrates the relative surplus population, or industrial reserve army, to the extent and energy of accumulation, this law rivets the labourer to capital more firmly than the wedges of Vulcan did Prometheus to the rock. It establishes an accumulation of misery, corresponding with accumulation of capital. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital. [16]




The Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view that attributes the plague of unemployment to the “misguided” or “bad” policies of neoliberalism. Likewise, the Marxian theory of subsistence or poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized or nationwide predominance of misery, can go hand-in-hand with high levels of corporate profits and/or stock markets than the Keynesian perceptions, which view a high level of wages as a necessary condition for an expansionary economic cycle.

Perhaps more importantly, the Marxian view that meaningful, lasting economic safety-net programs can be carried out only through overwhelming pressure from the masses – and only on a coordinated global scale – provides a more logical and promising solution to the problem of economic hardship for the overwhelming majority of the world population than the neat, purely academic and essentially apolitical Keynesian stimulus packages on a national level.

No matter how long or loud or passionately the good-hearted Keynesians beg for jobs and other New Deal-type reform programs, their pleas for the implementation of such programs are bound to be ignored by governments that are elected and controlled by powerful moneyed interests. The fundamental flaw of the Keynesian demand-management prescription is that it consists of a set of populist proposals that are devoid of class politics, that is, of political mechanisms that would be necessary to carry them out. Only by mobilizing the masses of workers (and other grassroots) and fighting, instead of begging, for an equitable share of what is truly the product of their labor can the working majority achieve economic security and human dignity.




1. This article is essentially a (significantly) shortened version of Chapter 2 of my book, Beyond Mainstream Explanations of the Financial Crisis: Parasitic Finance Capital. (Routledge 2014).

2. Anwar Shaikh, “The Falling Rate of Profit and the Economic Crisis in the US,” in The Imperiled Economy, Book I, New York, NY: Union for Radical Political Economy (1987).

3. Harry Shutt, The Trouble with Capitalism: An Enquiry into the Causes of Global Economic Failure, London: Zed Books (1998).

4. Jan Toporowski, Why the World Economy Needs a Financial Crash and Other Critical Essays on Finance and Financial Economics, London: Anthem Press, 2010, p 18.

5. Ibid, p 25.

6. As quoted in Alan Nasser, New Deal Liberalism Writes Its Obituary.

7. Jerome S Kalur, Review of Andrew Kliman’s The Failure of Capitalist Production.

8. Ibid.

9. Ibid.

10. Paul Krugman, No, We Can’t? Or Won’t?.

11. Peter Gowan, “The Crisis in the Heartland,” in M. Konings (ed.) The Great Credit Crash, London and New York: Verso, 2010.

12. Karl Marx, Capital, vol. 1, New York: International Publishers, 1967, p 639.

13. International Labor Organization (ILO), The Global Employment Challenge, Geneva, 2008; as cited in John Bellamy Foster, Robert W McChesney and R Jamil Jonna, The Global Reserve Army of Labor and the New Imperialism.

14. Robert Reich, Restore the Basic Bargain.

15. Alan Nasser, The Political Economy of Redistribution: Outsourcing Jobs, Offshoring Markets.

16. Karl Marx, Capital, vol. 1, New York: International Publishers, 1967, p 645.


Ismael Hossein-zadeh is Professor Emeritus of Economics (Drake University). He is the author of Beyond Mainstream Explanations of the Financial Crisis (Routledge 2014), The Political Economy of U.S. Militarism (Palgrave- Macmillan 2007), and Soviet Non-capitalist Development: The Case of Nasser’s Egypt (Praeger Publishers 1989). He is also a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press 2012).



From Minsk to Wales, Germany is the key

August 28, 2014
by Pepe Escobar

Asia Times

            The road to the Minsk summit this past Tuesday began to be paved when German Chancellor Angela Merkel talked to ARD public TV after her brief visit to Kiev on Saturday.
            Merkel emphasized, “A solution must be found to the Ukraine crisis that does not hurt Russia.”
            She added that “There must be dialogue. There can only be a political solution. There won’t be a military solution to this conflict.”
            Merkel talked about “decentralization” of Ukraine, a definitive deal on gas prices, Ukraine-Russia trade, and even hinted Ukraine is free to join the Russia-promoted Eurasian Union (the EU would never make a “huge conflict” out of it). Exit sanctions; enter sound proposals.
            She could not have been more explicit; “We Germany want to have good trade relations with Russia as well. We want reasonable relations with Russia. We are depending on one another and there are so many other conflicts in the world where we should work together, so I hope we can make progress”.
            The short translation for all this is there won’t be a Nulandistan (after neo-con Victoria ‘F**k the EU’Nuland), remote-controlled by Washington, and fully financed by the EU. In the real world, what Germany says, the EU follows.
            Geopolitically, this also means a huge setback for Washington’s obsessive containment and encirclement of Russia, proceeding in parallel to the ‘pivot to Asia’ (containment and encirclement of China).

            It’s the economy, stupid

             Ukraine’s economy – now under disaster capitalism intervention – is… well, a disaster. It’s way beyond recession, now in deep depression. Any forthcoming IMF funds serve to pay outstanding bills and feed the (losing) creaking military machine; Kiev is fighting no less than Ukraine’s industrial heartland. Not to mention that the conditions attached to the IMF’s ‘structural adjustment’ are bleeding Ukrainians dry.
            Taxes – and budget cuts – are up. The currency, the hryvnya, has plunged 40 percent since early 2014. The banking system is a joke. The notion that the EU will pay Ukraine’s humongous bills is a myth. Germany (which runs the EU) wants a deal. Fast.
            The reason is very simple. Germany is growing only 1.5 percent in 2014. Why? Because the Washington-propelled sanction hysteria is hurting German business. Merkel finally got the message. Or at least seems to have.
            The first stage towards a lasting deal is energy. This Friday, there’s a key meeting between Russian and EU energy officials in Moscow. And then, later next week, it will be Russian, EU and Ukrainian officials. The EU’s energy commissioner, Gunther Oettinger, who was in Minsk, wants an interim deal to make sure Russian gas flows through Ukraine to Europe in winter. General Winter, once again, wins any war.
            Here, essentially, we have the EU – not Russia – telling Ukrainian President Petro Poroshenko to stuff his (losing) ‘strategy’ of slow-motion ethnic cleansing of eastern Ukraine.
             Moscow has always insisted the Ukraine crisis is a political problem that needs a political solution. Moscow would accept a decentralization solution considering the interests – and language rights – of people in Donetsk, Lugansk, Odessa, Kharkov. Moscow does not encourage secession.
            Poroshenko, on the other hand, is your typical Ukrainian oligarch in a dance of oligarchs. Now that he’s on top, he does not want to become road kill. He might, if he relies on ‘support’ by the neo-Nazis of Right Sector and Svoboda, because then there will never be a political solution.
            The Empire of Chaos, needless to say, does not want a political solution – with a neutral Ukraine economically tied to both the EU and Russia; economic/trade integration across Eurasia is anathema.
            It’s all about NATO
            In parallel, every EU diplomat with a conscience – well, they do exist – knows that the non-stop hysteria about the Russian‘threat’ to Eastern Europe is a Washington-peddled myth designed to boost NATO. Secretary-General Anders ‘Fogh of War’ Rasmussen sounds like a scratched CD.
            It’s hardly a secret in Brussels that larger EU powers simply don’t want permanent NATO bases in Eastern Europe. France, Italy and Spain are forcefully against it. Germany is still sitting on the wall, carefully weighing how not to antagonize both Russia and the US. Needless to say, the Anglo-American “special relationship” badly wants the bases, supported by the hysteria unleashed by Poland and the Baltic states – Estonia, Latvia and Lithuania.
            So Fogh of War is on a predictable roll, talking “rapid reinforcements”, “reception facilities”, “pre-positioning of supplies, of equipment, preparation of infrastructure, bases, and headquarters” and “a more visible NATO presence.”This graphically proves, once again, that the Empire of Chaos couldn’t give a damn about Ukraine; it’s all about NATO expansion – the key talking point next week at the Wales summit.
            The no-holds-barred neoliberal asset-stripping, wild privatization and outright looting of Ukraine, disguised as loans and ‘aid’, is now unstoppable. Yet gobbling up Ukraine’s agriculture and energy potential is not enough for the Empire of Chaos. It wants Crimea back (that future NATO base in Sevastopol…). It wants missile defense deployed in Poland and the Baltics. It would even love regime change in Russia.
            And then there’s MH17. If sooner rather than later is proved the Empire of Chaos fooled Europe into counterproductive sanctions based on the flimsiest ‘evidence’, German public opinion will force Merkel to act accordingly.
             Germany was the secret behind the Minsk summit. Let’s see if Germany will also be the secret behind the Wales summit. In the end it’s up to Germany to prevent Cold War 2.0 getting hotter by the day all across Europe.

As the seas rise, a slow-motion disaster gnaws at America’s shores


September 4, 2014

by Ryan McNeill, Deborah J. Nelson and Duff Wilson




Part 1: A Reuters analysis finds that flooding is increasing along much of the nation’s coastline, forcing many communities into costly, controversial struggles with a relentless foe.



WALLOPS ISLAND, Virginia – Missions flown from the NASA base here have documented some of the most dramatic evidence of a warming planet over the past 20 years: the melting of polar ice, a force contributing to a global rise in ocean levels.

The Wallops Flight Facility’s relationship with rising seas doesn’t end there. Its billion-dollar space launch complex occupies a barrier island that’s drowning under the impact of worsening storms and flooding.

NASA’s response? Rather than move out of harm’s way, officials have added more than $100 million in new structures over the past five years and spent $43 million more to fortify the shoreline with sand. Nearly a third of that new sand has since been washed away.

Across a narrow inlet to the north sits the island town of Chincoteague, gateway to a national wildlife refuge blessed with a stunning mile-long recreational beach – a major tourist draw and source of big business for the community. But the sea is robbing the townspeople of their main asset.

The beach has been disappearing at an average rate of 10 to 22 feet (3 to 7 meters) a year. The access road and a 1,000-car parking lot have been rebuilt five times in the past decade because of coastal flooding, at a total cost of $3 million.

Officials of the wildlife refuge say they face a losing battle against rising seas. In 2010, they proposed to close the beach and shuttle tourists by bus to a safer stretch of sandy shoreline.

The town revolted. Like many local residents, Wanda Thornton, the town’s representative on the Accomack County board of supervisors, accepts that the sea is rising, but is skeptical that climate change and its effects have anything to do with the erosion of the beach. As a result, “I’m just not convinced that it requires the drastic change that some people think it does,” she said.

Four years on, after a series of angry public meetings, the sea keeps eating the shore, and the government keeps spending to fix the damage.

Wallops officials and the people of Chincoteague are united at the water’s edge in a battle against rising seas.

All along the ragged shore of Chesapeake Bay and the Atlantic coast of the Delmarva Peninsula, north into New England and south into Florida, along the Gulf Coast and parts of the West Coast, people, businesses and governments are confronting rising seas not as a future possibility. For them, the ocean’s rise is a troubling everyday reality.

This is the first in a series of articles examining the phenomenon of rising seas, its effects on the United States, and the country’s response to an increasingly watery world. Other stories will show how other nations are coping.

In cities like Norfolk, Virginia, and Annapolis, Maryland, coastal flooding has become more frequent. Beyond the cities, seawater and tidal marsh have consumed farmland and several once-inhabited islands. Here in Accomack County alone, encroaching seawater is converting an estimated 50 acres (20 hectares) of farmland into wetlands each year, according to a 2009 Environmental Protection Agency study.

“It breaks my heart to think about it,” said Grayson Chesser, a decoy carver whose ancestors arrived in the Chesapeake Bay area four centuries ago. He lives outside Saxis, a town that’s losing ground to the water. Some nearby villages have disappeared altogether. “You’ve got to deal with the fact that it’s happening – and what are you going to do with those of us on the edge?”

It’s a question the U.S. government is dodging. More than 300 counties claim a piece of more than 86,000 miles (138,000 km) of tidal coastline in the United States, yet no clear national policy determines which locations receive help to protect their shorelines. That has left communities fighting for attention and resources, lest they be abandoned to the sea, as is playing out in Chincoteague.

“If we can’t make a decision about rising sea level in a parking lot, we’re in trouble as a nation,” said Louis Hinds, former manager of Chincoteague National Wildlife Refuge.

Tidal waters worldwide have climbed an average of 8 inches (20 cm) over the past century, according to the 2014 National Climate Assessment. The two main causes are the volume of water added to oceans from glacial melt and the expansion of that water from rising sea temperatures.

In many places, including much of the U.S. Eastern Seaboard, an additional factor makes the problem worse: The land is sinking. This process, known as subsidence, is due in part to inexorable geological shifts. But another major cause is the extraction of water from underground reservoirs for industrial and public water supplies. As aquifers are drained, the land above them drops, a process that can be slowed by reducing withdrawals.

For this article, Reuters analyzed millions of data entries and spent months reporting from affected communities to show that, while government at all levels remains largely unable or unwilling to address the issue, coastal flooding on much of the densely populated Eastern Seaboard has surged in recent years as sea levels have risen.

These findings, first reported July 10, aren’t derived from computer simulations like those used to model future climate patterns, which have been attacked as unreliable by skeptics of climate change research. The analysis is built on a time-tested measuring technology – tide gauges – that has been used for more than a century to help guide seafarers into port.

Reuters gathered more than 25 million hourly readings from National Oceanic and Atmospheric Administration tide gauges at nearly 70 sites on the Atlantic, Gulf and Pacific coasts and compared them to flood thresholds documented by the National Weather Service.

The analysis was then narrowed to include only the 25 gauges with data spanning at least five decades. It showed that during that period, the average number of days a year that tidal waters reached or exceeded flood thresholds increased at all but two sites and tripled at more than half of the locations.

Since 2001, water has reached flood levels an average of 20 days or more a year in Annapolis, Maryland; Wilmington, North Carolina; Washington, D.C.; Atlantic City, New Jersey; Sandy Hook, New Jersey; and Charleston, South Carolina. Before 1971, none of these locations averaged more than five days a year. Annapolis had the highest average number of days a year above flood threshold since 2001, at 34. On the Delmarva Peninsula, the annual average tripled to 18 days at the Lewes, Delaware, tide gauge.

The flood threshold does not measure actual flooding. It indicates the level at which the first signs of flooding are likely to appear – ponding on pavements and such. The higher the reading, the higher the probability of closed roads, damaged property and overwhelmed drainage systems. Scientists consider the readings to be a reliable indicator of actual flooding.

The Reuters analysis shows that the “impacts of climate change-related sea level rise are increasing frequencies of minor coastal flooding,” said William Sweet, an oceanographer for NOAA who led a team of scientists that released similar findings in late July. The NOAA study examined 45 gauges and found that flooding is increasing in frequency along much of the U.S. coastline and that the rate of increase is accelerating at sites along the Gulf and Atlantic coasts.

The coastal flooding is often minor. Its cumulative consequences are not. As flooding increases in both height and frequency, it exacts a toll in closed businesses, repeated repairs, and investment in protection. In effect, higher seas make the same level of storm and even the same high tides more damaging than they used to be.

In Charleston, a six-lane highway floods when high tides prevent storm water from draining into the Atlantic, making it difficult for half the town’s 120,000 residents to get to three hospitals and police headquarters. The city has more than $200 million in flood-control projects under way.

In Annapolis, home to the U.S. Naval Academy, half a foot of water flooded the colonial district, a National Historic Landmark, at high tide on Chesapeake Bay during rainstorms on April 30, May 1, May 16 and Aug. 12. Shopkeepers blocked doorways with wood boards and trash cans; people slipped off shoes to wade to work in bare feet.

Tropical storm flooding has worsened, too, because the water starts rising from a higher platform, a recent study found.

When Tropical Storm Nicole struck Maryland in 2010, it was no stronger than storms in 1928 and 1951 that were “non-events,” said the study’s author, David Kriebel, a Naval Academy ocean and coastal engineer. Nicole, by contrast, swamped downtown Annapolis and the Naval Academy. “It’s partly due to ground subsidence,” Kriebel said. “Meanwhile, there’s been a worldwide rise in sea level over that period.”

In tidal Virginia, where the tide gauge with the fastest rate of sea level rise on the Atlantic Coast is located, a heavy rainfall at high tide increasingly floods roads and strands drivers in Norfolk, Portsmouth and Virginia Beach.

Coastal flooding already has shut down Norfolk’s $318 million light rail system several times since it opened in 2011. Mayor Paul Fraim said he needs $1 billion for flood gates, higher roads and better drains to protect the city’s heavily developed shoreline.




The nation’s capital isn’t immune. The Potomac River turns into a tidal estuary just north of Washington as it flows toward Chesapeake Bay to the south. The average number of days a year above flood threshold has risen to 25 since 2001, up from five before 1971.

In 2010, the U.S. Army Corps of Engineers began a $4.1 million project to close gaps in the line of flood protection for Constitution Avenue and the Federal Triangle area – home of the departments of Justice and Commerce, the National Archives and the Internal Revenue Service. The corps expects to finish in late autumn a 380-foot-long, 9-foot-tall barrier across 17th Street near the Washington Monument.

It still needs to raise by up to 3.5 feet a massive earthen berm built in the 1930s on the north side of the Lincoln Memorial Reflecting Pool. But Congress – high and dry on Capitol Hill – hasn’t approved the $7.1 million needed to finish that and two smaller projects.

The Army Corps of Engineers, the agency charged with reducing flood and storm damage on the nation’s coasts and inland waterways, recommended the project in 1992. Congress authorized it in 1999. “We’ve been waiting for appropriations for a long time,” said Jim Ludlam, the corps’ civil engineer on the National Mall project.

Congress chooses which corps projects to fund on a piecemeal basis. It has $60 billion in approved but unfunded projects gathering dust on its shelves, including 34 authorized by lawmakers this spring. The sums involved dwarf the $2 billion a year the corps typically receives for construction, aside from disaster funding.

As a result, “we will be constructing water projects to solve past problems for the next 40 years” as the money is slowly made available, said David Conrad, a water resources policy specialist in Washington.

The wait list is symptomatic of a larger problem hindering efforts to deal with rising seas: the U.S. government’s inability to confront the issue head-on.

Engineers say there are three possible responses to rising waters: undertake coastal defense projects; adapt with actions like raising roads and buildings; or abandon land to the sea. Lacking a national strategy, the United States applies these measures haphazardly.

Sea level rise has become mired in the debate over climate change. And on climate change, the politically polarized U.S. Congress can’t even agree whether it’s happening.

The stalemate was on display in May, when the administration of President Barack Obama released its updated National Climate Assessment. The 841-page report was five years in the making, with input from more than 300 scientists, engineers, government and industry officials and other experts, a 60-member advisory committee and more than a dozen federal departments and agencies. It was among the first major assessments of climate change to move from predictions of disaster to point out the effects that can already be seen: record-setting heat waves, droughts and torrential rains.

At or near the top of the list of the most pressing concerns is “the issue of sea level rise along the vast coastlines of the United States,” Jerry Melillo, a scientist at the Marine Biological Laboratory in Woods Hole, Massachusetts, and chairman of the advisory committee, said at a briefing on the report.

Within hours of its release, Representative Lamar Smith of Texas, Republican chairman of the House science committee, decried the report as nothing more than “a political document intended to frighten Americans into believing that any abnormal weather we experience is the direct result of human [carbon dioxide] emissions.”

Representative Nancy Pelosi of California, the Democratic leader, responded: “There is no time left to deny the reality of climate change, or to turn a blind eye on the impact it is having on our country.”

Congress actually recognized global warming way back in 1978 with passage of the National Climate Program Act. The law aimed to “assist the Nation and the world to understand and respond to natural and man-induced climate processes and their implications.”

But after three decades and more than $47 billion in direct federal spending on climate change research, Congress hasn’t passed a major piece of legislation to deal specifically with the effects of rising sea levels.

“In the U.S., you have best data set on what’s happening in the world, and yet it’s not used in public policy,” said Robert Nicholls, professor of coastal engineering at the University of Southampton in England and a contributor to the U.N.-sponsored Intergovernmental Panel on Climate Change. “You say you don’t believe in global warming. But sea levels have been rising for 100 years in Baltimore.”




The irony is evident at Wallops Flight Facility.

NASA scientist William Krabill and his team have flown research missions from there aboard aircraft with laser technology to measure changes in the Greenland ice sheet, 1,000 miles long, 400 miles wide and up to 2 miles thick. The data they have collected since 1991 has produced evidence that the ice covering Greenland is melting. “Any glacier we have visited in Greenland over the last 25 years is thinning,” Krabill said. “It’s thinning faster five years ago than when we visited 25 years ago.”

They’ve found the same thing is happening to Antarctica’s ice sheet – seven times larger than Greenland’s. Their discoveries underpin predictions of rising seas for decades to come.

The scientists don’t have to look far to see the consequences of rising seas. Wallops Island is gradually being inundated. Yet this bastion of climate research has been slow to apply the science of sea level rise to its own operations. Officials here are embarking on expansion in the face of increasing assaults from the sea.

The Arctic research program’s aircraft is safely ensconced in a hangar on the mainland. But a billion dollars in assets – 50 NASA structures including three sub-orbital spacecraft launchers, as well as a commercial spaceport and a Navy surface combat training center – cluster on Wallops Island.

The launch pads sit at the south end of the island, “the most vulnerable part,” said Caroline Massey, assistant director of management operations at Wallops. Moving them farther north would put them too dangerously close to the people of Chincoteague, she said.

But Wallops Island has been losing an average of 12 feet of shoreline a year. A seawall three miles long and 14 feet high intended to protect the launch structures hasn’t stopped the flooding. Rather, it has allowed wave action to consume the natural beach that once served as a shoreline buffer.

In January 2009, a federal interagency assessment of the mid-Atlantic coast said that both Wallops and nearby Assateague islands may have crossed a “geomorphic threshold” from a relatively stable state into a highly unstable condition – one in which rising seas could trigger “significant and irreversible changes.” The islands could shrink, move or break apart.

Ten months later, construction started on a $15.5 million rocket assembly building and a $100 million launch pad 250 feet from the pounding surf on the south end of the island.

In early 2010, Wallops officials proposed a $43 million project to extend the sea wall by about 1,400 feet and build a new, 4-mile-long beach to better protect their growing assets on the island. As required by law, they released a draft environmental impact statement on the plan.

Reviewers from state and federal agencies criticized the 348-page document for failing to adequately take rising sea levels into account in the project design and impact, or to temper future plans for expansion. Even NASA’s own technical review team noted the “short shrift” given to the problem.

Wallops officials responded by nearly doubling references to the effects of sea level rise in the impact statement. But in the official record of the decision, which announced Wallops would proceed with the project, sea level rise isn’t mentioned anywhere. Joshua Bundick, Wallops’s environmental planning manager, explained that he distilled the issues “down to only the highest points,” and sea level rise wasn’t among them.

Before work began, Hurricane Irene hit in August 2011. The storm surge did $3.8 million in damage to Wallops and closed it for weeks, Massey said. Work was finally finished in August 2012. Two months later, Sandy ripped out large hunks of the wall, sparing the buildings but washing away a quarter of the 3.2 million cubic yards of new beach sand. An additional 10 percent has eroded away since then, Massey said.  An $11 million redo, paid out of the Sandy relief fund, began in July, and Wallops officials are considering adding another launch pad, she said.

As NASA stays the course at Wallops, the federal Fish and Wildlife Service is sending a different message to the town of Chincoteague next door.

The island community of 3,000 attracts more than a million tourists a year.

The big draw is Chincoteague National Wildlife Refuge on Assateague Island, just east of Chincoteague. Its 14,000 acres of wild beach, wetlands and loblolly pine forest provide habitats for the endangered Delmarva fox squirrel; the piping plover, a threatened beach-nesting bird; and up to 150 Chincoteague ponies, feral animals descended from a herd brought to the island in colonial times.

Most visitors come for the mile of ocean-facing public recreational beach, according to the U.S. Fish and Wildlife Service, which manages the refuge. Visitors can drive with all of their gear right up to the edge of the beach to park in a 1,000-space crushed-shell lot.

The only way to get to the beach is to drive through town, and many visitors eat, shop and sleep there. Tourism accounts for about two-thirds of the jobs in town, state and federal records show.

The problem is that the beach has been retreating at an average rate of 10 to 22 feet a year amid bigger and more frequent storms. The cost to American taxpayers of repeated destruction of the parking lot and causeway from rising sea levels would only increase, Fish and Wildlife officials said.

In 2010, the agency came up with a proposal: close the existing recreational beach and relocate it a mile and a half north, where the shoreline was retreating at a third of the pace. The new site would have a smaller parking lot to limit disturbance to wildlife, and visitors would be shuttled from a satellite lot in town.

“It’s incumbent on us to look further down the road,” said Hinds, the refuge manager at the time.

Chincoteague was incensed. Town leaders pointed to a survey in which 80 percent of visitors said they would not continue coming to the beach if they had to park in town and take a shuttle.

Residents also feared that Fish and Wildlife would let the southern end of Assateague Island erode away if the beach were moved. The southern tip of the island shelters a nascent shellfish aquaculture industry and buffers Chincoteague from storm surges.

A series of angry meetings with local Fish and Wildlife officials resolved nothing.

In 2012, Chincoteague got a hearing on the proposal at the U.S. Capitol. Thornton, the county supervisor, testified that local residents feared for their jobs. In a recent interview, Thornton, who owns a campground in Chincoteague, said she thinks the federal government is using climate change as a ploy in a “long-term plan to get everyone away from the coastline.”

She blames the government, not rising sea levels, for the beach’s flooding problems. The refuge hasn’t taken steps to protect the shoreline, such as replenishing the beach with sand, she said. “There’s going to be nothing left to protect us,” she said.

The agency compromised somewhat, releasing an official draft plan in May that would relocate the beach to the less unstable site, but keep the parking area at its current size, as long as there’s enough land to do so. Building a new parking lot, access road and visitor station would cost $12 million to $14 million. As many residents feared, this plan would not replenish the sand at the southern end of Assateague or at the new site as they erode.

A public hearing in Chincoteague on June 26 failed to settle the matter. Thornton is calling for more study before officials at Fish and Wildlife make a decision. Once a decision is made, Fish and Wildlife will probably have to seek federal funding from Congress to proceed with relocation.

Hinds, the refuge manager who shepherded the original proposal, retired last year. The stalemate over how to cope with the rising tide in this tiny town, he says, doesn’t bode well for the rest of America. “What do you do then,” he said, “when you start talking about New York City?”


SAXIS, Virginia – This town on Chesapeake Bay is losing three to five feet (1 to 1.5 meters) of shoreline a year and suffered damage during hurricane Sandy. But like hundreds of rural communities along the coast, it is competing with much larger, more powerful neighbors for public funds to bankroll a response to rising seas.

Coastal engineers say communities have three options for dealing with rising water levels and increased flooding: defend the shoreline with natural or man-made barriers; adapt, such as by raising roads and buildings; or retreat.

New York City is planning a $20 billion mix of defense and adaptation measures – most notably, construction of “The Big U,” a 10-mile (16-km) fortress of berms and movable walls around lower Manhattan. Mayor Bill de Blasio’s office says three-quarters of the money needed over the next decade is already in hand from federal, state and local sources.

For places like Saxis, population 240, the options are more stark:  retreat now or retreat later.

Many Saxis residents – watermen who harvest oysters, crabs and fish, and seafood industry workers – trace their ancestry to settlers in the 1600s and speak a language peppered with Elizabethan inflections. Some don’t hold out much hope for the future.

“Little places like us, there’s not going to be any help for us because whatever resources are available will be sucked up by the big cities to try to defend them,” said Grayson Chesser, a decoy carver, hunting guide and Accomack County supervisor.

Belinda, a nearby village where his grandfather was born, is one of several he cites that no longer exist, abandoned when frequent flooding made them uninhabitable. Families relocated to higher ground, where he resides today, but now it’s flooding, too.

A decade ago, Saxis managed to get federal approval for a $3.2 million U.S. Army Corps of Engineers project to build eight breakwaters that would slow the sea’s advance. But the town couldn’t scrape together its required contribution of nearly $1 million, so the plan was killed.

The 700 residents of Tangier Island, a better-known historic Chesapeake enclave, waited nearly two decades for $4.2 million in state and federal money to build a 430-foot-long seawall, jetty and stone revetment. The project is scheduled to be finished by 2017.

“It’s becoming more and more competitive for federal funds in terms of protecting communities,” said Curtis Smith, a planner with the Accomack-Northampton Planning District. So Saxis is “competing with Miami and New York and Virginia Beach.”

Virginia Beach, with a population of 438,000, has been the recipient of a federally funded seawall and two major sand projects totaling more than $150 million since 1996.

Some Saxis residents have raised their houses to reduce the risk of flood damage. But that’s only a partial solution if the roads that connect them to grocery stores, hospitals and schools become impassable, Smith said.

There, too, rural areas compete for funding with more heavily trafficked urban areas.

Accomack County has more miles of road in jeopardy from rising sea levels than anywhere else in Virginia, a state study found. On the harder hit Chesapeake Bay side, some spots now flood nearly every full moon.

The Virginia Department of Transportation is struggling with the question of how to combat increased flooding in “low-volume, low-population areas,” said Chris Isdell, the department’s representative in Accomack County. “You’re trying to fight back Mother Nature. … How do you do that in a roadway that sits at sea level?”

Saxis residents may eventually have to face up to the same hard fate Chesser’s grandfather’s community did and abandon their homes.

“I wish I could say I thought Saxis would be saved, but there’s no way. It costs so much money,” Chesser said. “And even if you spend the money, I don’t’ think you can do it. I mean you just can’t beat the ocean. You’re going to lose every time.”

Coming next: How U.S. policy promotes development along endangered shores.


Snowden leak exposes US plan to spy on foreign businesses for profit

September 5, 2014



A 2009 intelligence document provided to journalists by former government contractor Edward Snowden suggests the United States weighed someday conducting espionage to prevent losing its economic prowess to other countries.

The document, published first by The Intercept on Friday this week, outlines tactics the American intelligence community may implement in the future in the event of certain scenarios, including one in which “the United States’ technological and innovative edge slips” in the year 2025.

In the event that the US may lose that advantage, the Quadrennial Intelligence Community Review’s final report reads in part, then “a multi-pronged, systematic effort to gather open source and proprietary information through overt means, clandestine penetration (through physical and cyber means) and counterintelligence” could be undertaken by American agencies.

The document, classified as “secret” and supplied along with a trove of other files provided by Snowden,“is a fascinating window into the mindset of America’s spies as they identify future threats to the US and lay out the actions the US intelligence community should take in response,” wrote Glenn Greenwald, The Intercept editor who wrote about the 32-page report this week.

Indeed, David Shredd, then the deputy director of national intelligence, opens the report by describing it as the results of a 10-month study conducted among experts from agencies, academia, think tanks and industry tasked with assessing the implications of the year 2025 for the American intelligence community, or IC.

“If one does not consider the long-range future, one will never cease to be surprised,” Shredd wrote. “QICR 2009 developed alternative future scenarios based on Global Trends 2025 to explore concepts and capabilities the IC may need to fulfill critical missions in support of US national security.”

The contents of the report, Shredd added, “does not purport that any one future will materialize, but rather outlines a range of plausible futures so that the IC can best posture itself to meet the range of challenges it may face.” Speaking to The Intercept, a spokesperson for the Office of the Director of National Intelligence said the report “is not intended to be, and is not, a reflection of current policy or operations.”

Jeffrey Anchukaitis, the DNI spokesperson, told Greenwald that “the United States — unlike our adversaries—does not steal proprietary corporate information to further private American companies’ bottom lines,” and that “the Intelligence Community regularly engages in analytic exercises to identify potential future global environments, and how the IC could help the United States Government respond.”

Nevertheless, the report contains potential plans of action that run counter to previous public admissions made by IC leaders.

“What we do not do, as we have said many times, is use our foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of — or give intelligence we collect to—US companies to enhance their international competitiveness or increase their bottom line,” Greenwald quoted Director of National Intelligence James Clapper as saying previously.

“But asecret 2009 report issued by Clapper’s own officeexplicitly contemplates doing exactly that,” the journalist wrote this week.

“The IC would need the ability to access proprietary sources of information in permissive environments such as foreign universities, industry trade shows and government conferences,” part of the report reads. “This could include cooperating US students, professors and researchers reporting bits of non-public information that by themselves are not sensitive, but in aggregate could help the IC make inferences about breakthrough technological innovations. The key challenge would be working closely with the academic and scientific communities (which would include non-US persons), gaining trust and monitoring potential ‘threats’ while continuing to advance US scientific progress.”

According to the document, human spies and cyber operations alike have been considered as possible tools to implement if spying on foreign targets — and not just students and innovators, but entire research and development operations, as well—is needed to be done in 11 years’ time.

“In denied or more restrictive environments such as state-supported R&D centers, the IC would continue to apply human intelligence (HUMINT) tradecraft and employ HUMINT-enabled close access collection. This would include recruitment of sources and assets, and provision of appropriate technical means to acquire and exfiltrate sensitive information,” reads one part of the document.

Elsewhere, the document’s authors detail one end goal: “Technology acquisition by all means.”

“Exfiltrating intelligence from non-permissive environments will be crucial. A critical enabler would be covert communications with a negligible forward footprint. US intelligence officers and sensitive sources will need to move data in an unattributable and undetected way, sometimes from within commercial entities possessing great technical prowess and robust cyber and electronic security protective procedures. Although the likely advent of transnational, high-bandwidth wireless communications services will offer an environment with ‘lots to hide behind,’ it will also contain many highly competent, and potentially antagonistic, actors.”

An illustrate example included in part of the report provides exactly how such a hypothetical situation may play out: “The IC makes separate clandestine approaches to India and Russia to break up the partnership. It conducts cyber operations against research facilities in the two countries, as well as the intellectual ‘supply chain’ supporting these facilities. Finally, it assesses whether and how its findings would be useful to US industry.”

“Using covert cyber operations to pilfer ‘proprietary information’ and then determining how it ‘would be useful to US industry’ is precisely what the US government has been vehemently insisting it does not do,” Greenwald wrote, “even though for years it has officially prepared to do precisely that.”



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