Sunday, January 27, 2008

Going with the flow

Some plants need more water than others and some plants more shade and some plants will prosper under the harshest elements. It is not for the plant to decide which one they want to be.

So it is with humans except that those who can weather the elements better have a responsibility towards those who need a helping hand. Those who can provide shade to the thirsty and weary must provide the shade. Those with enough strength must allow the vine to take their support even to live off them.

The winds will take care of our seeds, the sun will help us to grow towards the light, the elements will conspire to take us where we need to go, if only we will let them.


Thursday, January 24, 2008

Faith and knowledge

Worldly knowledge by itself does not bring faith. It does bring arrogance. This is a huge problem for knowledgeable people. It is the humility to know that you know nothing after knowing a lot that brings about faith. It is the submission to a higher knowledge that brings faith.


Wednesday, January 23, 2008

The Age of Certainty Part I

"Amid growing fears of a worldwide recession, the Federal Reserve slashed a key interest rate by three-quarters of a percentage point on Tuesday, the biggest single cut in nearly a quarter of a century. Meanwhile, President Bush and congressional leaders pledged to work together on a stimulus measure that would inject about $150 billion in additional money into the economy. But many economists are skeptical over whether any measures can turn around a severe slump in the housing market and the subprime mortgage crisis, signs of growing unemployment and weakening consumer spending and the added blow of record high oil prices. "

The causes of the current crises

failure to manage the trade deficit
failure to address the housing bubble.
broader financial deregulatory failure,
failure to regulate in the housing market ...Robert Weissman

Unregulated free markets bring about inequality, they ruin the environment and they ruin the economy..... Robert Kuttner

Editorial Comment

The frightening thing for the American public is that the Administration and the Fed are in denial about how serious this crises is and what its causes are. The media is directing questions based on conventional wisdom. and every one is focused on a short term fix in an election year. Even people who have an idea of how serious this is don't trust the public with this information.

The decoupling of the world from the US has just started and it is still too early for the world to not feel the impact of a Recession in the US. So the drama being played out in the US is of strong interest to every one.

It is taking too much time for people in positions of leadership to recognise that it is the System that has broken down. I anticipate that world leaders in Davos will skirt the issue and barring people like Bill Gates, there will be far too much conventional wisdom bandied about. What makes me think that I can see what the smartest people in the world can't? I certainly have no monopoly on insight and I am sure to find others who agree with me but the main hurdle for people is fascination with "mainstream media". No media will predict it's own demise and not be able to have an answer to stop that demise. No media will give importance to people who predict this scenario. The challenge to the media is not rising to the occasion and explaining how a crashing stock market, exploding oil prices , falling dollar and increasing food prices is a temporary phenomenon.

It is not a bad thing that the leaders are in denial, because they are part of the problem. They need to be replaced, but unfortunately that will not happen without economic chaos.
There is no smooth transition out of this mess because the people who want to replace them are also part of the broken system.

For a year now , I have been predicting that the Dow will fall to 11,000. For more than four years that the dollar will equal 2 euros and for the last six months that there will be a major shift of wealth from the West to the East. What is happening today is not a bolt from the blue, it has been building up for some time now. There have been a lot of red flags on the way ( Enron was just one of them). The subprime loan crises is an even bigger red flag. If we ignore these red flags, we do so at our own peril. The response to Enron was Sarbanne/Oxley. It was like sweeping all the dirt under the carpet. The response to sub prime is likely to be to stick everyones head in the sand.

When people talk about volatility and uncertainty, they are talking in the language they have been taught. This is the age of certainty. What is happening today and will happen over the next decade is almost certain and very predictable. When great powers decline, they don't go without a lot of kicking and screaming. The kicking will come in the form of blood shed and the screaming in the form of Economic panic.

The Financial crises has just started. The Feds remedy is a panic response and the market can sense this. The Europeans are horrified. All indications are that there are more losses on the books of Financial Institutions in America but the Institutions themselves cannot calculate these losses. The fact that the Institutions cannot know the losses speaks to the complexity of the issue. Are there another 50 billion or another 100 billion? We are not talking small change here. This is after 100 billion have already been recognised.

To all those who are thinking the bottom of the market is almost there and equities are looking cheap, I say sit on your cash. The market has another 1000 points to go ( at least).

There is a re examination of risk taking place. Investments considered risky in the past have suddenly become risky and vice versa. Risk was evaluated by looking at the regulatory structure in place. The US was considered less risky because it was regulated and Emerging markets more risky because of poor regulations. We now know that the US was regulated only on paper. The regulators were put to sleep by going to bed with the people who they were supposed to regulate. In the Emerging markets while the regulations continue to be sparse, they are getting better but more importantly the values have outstripped the lack of regulations.

The role of Currencies has also become important. With the dollar no longer the stablising currency , investors must factor in currency risk even if they are investing within the US. A declining interest rate will batter the dollar even more.

There can be no more reliance on the rating agencies. AAA means AA now. The agencies have pegged their standard to US Govt. paper which they rate AAA. This paper by their own admission may no longer be AAA. The rating agencies have become part of the problem. They too have gotten into the same bed as the people they were rating. When the Regulators, the Rating agencies, the Media, the elected representatives and the Corporations are eating out of the same plate, none of them will want to drill a hole in that plate. The first person to even think about it will be called a traitor. There you have the problem. Who amongst the rats is going to bell the cat?


"We’re talking to Robert Weissman, co-director of Essential Action, editor of Multinational Monitor magazine; and Robert Kuttner, veteran economic journalist, author of the book The Squandering of America. " ... Amy Goodman

For a more detailed account go to .

Tuesday, January 22, 2008

Aid and the unravelling of Pakistan

Although Newsweek is not a quality publication, for a change, it gives an analyses which is half right. The effect of Aid on Pakistan has been crippling. It is like a lot of people I know who are waiting for their parents to die so that they can come into a big inheritance and not have to do any work.

For a long time the Pakistanis did not invest any money in their country but kept their money in foreign banks abroad. The so called black market was bigger than the official white market. Large commissions on the purchase of arms and aeroplanes were received outside the country and then brought inside to invest in Real Estate.

During Musharraf's eight years there were no investments made in infrastructure, Industry or any thing other then what was already in the pipeline like Port Qasim. The FX reserves grew only because of Aid or Remittances brought in by the fact that Pakistan was not regarded as a Pariah nation by the West. Valuable assets of the Govt. were sold at throw away prices.

For 60 years Pakistan has built up a tradition of begging bowl in hand. They shamelessley queue uo for hand outs and then live a life of luxury for the few. There are no colleges, Universities or any other investment in the future that will break this viscious cycle.

The only thing that promises to break it is to cut off all relationship with the USA, the main Tenant that occupies Pakistan's allegiance by paying it "rent". The only people who want to do this is the Islamic Parties. The refusal to take aid also means that Pakistan will be forced to stand up on it's own feet. This is what we teach our children to do but this is not the legacy that we are leaving behind for the youth of Pakistan.

This is the part that Newsweek misses out on. The logical conclusion is not that the US has no choice but to support Musharraf. The logical choice for the US is to stop corrupting a nation who has stood by it for sixty years. It is not Democracy that Pakistan needs, it is more schools, more jobs, more infrastructure, more energy, more Industrial Investment, more participation of it's people in it's own governance. Musharraf stands for none of this. The US stands for none of this. Do the Islamic parties stand for any of this? Probably not but cutting Pakistan from the US and it's agents may be a good start.


Aid And The Unraveling Of Pakistan
By Devesh Kapur and Arvind Subramanian NEWSWEEK
Jan 21, 2008 Issue Updated: 12:37 p.m. ET Jan 12, 2008

Democracy suffered a string of setbacks in 2007, many thanks to oil. Gushing oil revenues helped Vladimir Putin consolidate authoritarian rule in Russia, Hugo Chávez expand populism in Venezuela and Mahmoud Ahmadinejad confront the West. All the while, an analogous force was at work in Pakistan. For more than 50 years, Pakistan has reaped its own unearned manna, which has filled its coffers and kept its fragile state afloat. In this case, however, the money didn't come from the ground, but from massive military and other forms of aid, largely from the United States, China and Saudi Arabia. Yet while the source may be different, the impact of all this cash on Pakistan has been just as destructive as oil wealth elsewhere: bloating the military and creating a culture of violent instability, in which assassinations like that of Benazir Bhutto are sadly inevitable.
It's impossible to understand Pakistan's current woes without examining the massive volume of aid it's amassed over the past half century—and that aid's deeply corrosive effects. Since its inception, Pakistan has strived desperately to counterbalance India, cultivating ties with any state willing to help it. This has never been hard: in the 1950s, Washington contributed generously in exchange for Pakistan's anti-Soviet military stance. Then, beginning in the 1960s, China, which also saw India as an enemy, came calling. Still more money flowed in from rich Middle Eastern governments, especially Saudi Arabia's.
The 1980s brought the Afghan war against the Soviets, with Pakistan as the main conduit for supplies and support to the mujahedin; the United States alone chipped in $5.3 billion during this period. The CIA and Saudi intelligence also poured money and sophisticated technology into Pakistan's ISI, or Inter-Services Intelligence agency, helping turn it into the most notorious and destabilizing actor in the country. Altogether, Pakistan accumulated a whopping $58 billion in foreign aid between 1950 and 1999, allowing it to become one of the biggest military spenders in the world. After 9/11, Washington's generosity redoubled; it's since given Pakistan more than $10 billion in assistance.

The consequences have been devastating, for reasons similar to those at work in the so-called natural-resource curse. Extensive research shows that when governments luck into unearned cash (which economists call "rents") from oil or other resources, the healthy links that bind them to their citizens are often severed. Freed from relying much on taxes, governments spend the money arbitrarily. Citizens, left untaxed, feel less motivation to monitor things carefully. The result is corruption, misrule and a host of other ills.
Rents paid for natural resources are bad enough. But "strategic rents"—earned by a country for its role in the foreign policies of other states—are even more damaging. Military aid by definition entrenches the militaries that get it, making them less responsive to civilian control. Pakistan's military has grown enormously powerful over the years, resistant to democratic checks and highly entrenched in every aspect of the country's commercial, civil and political life. From banking to insurance, cereals to cinnamon, the military's presence and influence can be felt everywhere. Strategic rents have also helped radicalize Pakistan, since some of the Saudi aid money for jihad in Afghanistan has gone instead to fund extremist madrassas in Pakistan itself.
Strategic rents are also susceptible to manipulation. Gen. Pervez Musharraf, for example, has consistently avoided foreign criticism and kept the money coming by arguing, essentially, that while he may be imperfect, the alternative—the Islamists—is far worse. To support this case, Pakistan's leaders have resorted to trickery at times. For example, according to the Pakistani journalist Ahmed Rashid, prior to last year's confrontation at the Islamabad Red Mosque, the government stood by idly as militants poured into the compound—though it could have easily flushed them out in the early days—in order to highlight the Islamic "threat" Pakistan supposedly faced, and the need for more aid.
Can Pakistan escape this vicious cycle? An obvious solution would be to divert some military aid to civil society and to tie other aid to specific objectives such as counterterrorism. Yet this obviously is very unlikely to work. It would require the Pakistani Army to comply, and why should it? After all, the generals know that even if Washington cuts them off, China and Arab states will pick up the slack.

What, then, should Washington do? Given the deadly combination of nuclear weapons and rabid jihadist groups in Pakistan, the United States can't simply stop supporting Musharraf and his generals. But backing them as the lesser of evils would also be a mistake. Unquestioning military aid has stunted the growth of civic institutions. Pakistan's mullahs and its military are also more closely linked than is widely appreciated. The West's top goal must thus be to get the military out of Pakistan's politics and economy. This won't be easy, and it won't solve all the country's problems. But it's the best hope in a bad situation, and Pakistan's only shot at real stability.
Kapur is director of the Center for the Advanced Study of India at the University of Pennsylvania. Subramanian is senior fellow at the Peterson Institute for International Economics in Washington, D.C.
© 2008 Newsweek, Inc.

The Bush/Osama partnership

Back in 2001, when a middle aged man sitting in a cave in Afghanistan, influenced the bombing of the World Trade Center in New York, he got the Government of George Bush very excited. For almost ten years prominent cabinet members even while out of Government had been advocating an attack on Iraq and Iran. In fact they had written a working paper on it which is available to the public. This was the perfect opportunity for a pretence to such an attack. The rest is History.

From then onwards, Osama and Bush became partners. Bush would not capture Osama, because he wanted the "threat " to be out there. Osama would not attack America, because Bush was doing his job for him. The goal of both people was to somehow invoke the name of Islam to further their aims. From Bush's point of view it would be Muslim blood and not American blood that would be spilled. From Osma's point of view, the spilling of Muslim blood was essential to wake up the Muslims.

After eight years the fact that although Iraq has been occupied, Iran and Afghanistan are still out there and not in Bush's control, means round 1 to Osama. Bush has another ten months to reverse his fortunes, but his economy has taken a big hit and his hands are getting tied. The next President is sure to take on where Bush left because ultimately the Israelis call the shots.

In the meantime all sorts of fringe groups have taken up the crises to forward their own agenda. Prominent amongst them the Christian right in America and General Pervez Musharraf in Pakistan. It has also become an opportunity for the Iraqi Shia and the Kurds.

Who would have thought that an act of terrorism on 9/11/2001 would change the course of History for ever. It was an act of terrorism that caused World War II, but truly the act was just an excuse for what followed. 9/11 was also an excuse and not the cause. If 9/11 had not happened, it would have needed to have been created.

There is an undeclared World War III. When the worlds most powerful nation sets out to spill Muslim blood in the guise of killing terrorists, no one can stop it neither should they. After a few million more Muslims have been killed, both sides are bound to ask the question, what have we achieved?

Americans will find that they have achieved nothing except the undying hatred of one billion Muslims. The Muslims will find that they have become more invested in Islam because they have suffered a personal tragedy in which each one of them will get personally affected. Like the Jews before them, what is going on right now will be remembered as the Muslim Holocaust. As obvious as this analyses seems, it is not that clear to the people wanting to be the next President of the US. Each one of them is committed to the "War on Terror" code named for killing more Muslims.

In hind sight the US Foreign policy in Iran was opportunistic, shortsighted and immoral. To carry on with these same policies in Pakistan shows the bankrptcy of US Foreign policy and the refusal to call past disasters a mistake.

The point is not that in Pakistan like in Iran they are supporting a dictator who is repressive towards dissent or that these policies go against the wishes of the vast majority of Pakistanis, the point is that like in Iran, these policies will lead to the rise of Radical Islam.

Whether the rise of Radical Islam is good or bad is again not the question. The question is that if your stated policies are primarily designed to discourage the rise of radical Islam then why would you pursue policies which are guaranteed to have the opposite effect?

Like in Iran, the failure of these policies will not just lead to the rise of radical Islam but a lot of blood shed, when the Islamists gain control and purge the old guard. The chances of this happening today are better than in the Shah's time because today we have a very weakened US. It is not only bogged down in Iraq and Afghanistan but 2008 is the year of a lame duck President who is today the least popular President the US has had for a long time. In addition the US is Economically weakened and cannot afford to make another mistake.

If Pakistan goes, the US will go with it. The stakes are very high.

Today is Martin Luther King Day. In his “Beyond Vietnam” speech delivered at New York’s Riverside Church on April 4, 1967—a year to the day before he was murdered—King called the United States “the greatest purveyor of violence in the world today.”
Time magazine called the speech “demagogic slander that sounded like a script for Radio Hanoi,” and the Washington Post declared that King had “diminished his usefulness to his cause, his country, his people.”

No one wants to hear criticism. King had to be silenced rather than be allowed to carry his thesis to the next level. Had he been alive today, he would have had a lot to say about American Terrorism. Even after a humiliating defeat at the hands of the Vietnamese, America has learnt nothing from that defeat. Unlike Vietnam, there is no exit from the latest adventure. Simply put there is no one to negotiate with. The enemy is invisible, Osama never spoke for the whole of Islam. The Sunni Arabs of Iraq are not the enemy, the Shia non Arabs of Iran are not the enemy. The Deobandi Pustun of Afghanistan are not the enemy.

The enemy can only be Islam and no one speaks for Islam. This battle has to go on until a victor emerges and like Vietnam, victory will go not to the most powerful but to the one who has the most to lose.


How capitalism works


"I’ve got the documents. President Bush, who will go down in history as the great tax cutter, owes almost all of his fortune to a tax increase that was funneled into his pocket. "

Editorial Comment

The Capitalist system is built upon exploitation. In the US the system is owned by the Government who exploits in own people in the interest of wealth creation. In China and India, the Governments there will be well advised to stay away from becoming representatives of the Capitalist rather than the people. ( They can try but it will not happen ).

" Free Lunch" gives specific examples of how the exploitation is taking place. I can give many more. Systemic fraud is now built into the system, so that it is in the interest of Professionals , Accountants, Lawyers, Real Estate Agents, Management Consultants, Trainers , Investment Bankers to make sure that the "fraud " continues, otherwise their own livelihood will be seriously impacted.

As in any third world country, where corruption is rampant, the choice in the US is, join the system and make a lot of money or stay away and just survive.

The subprime loan crises in the US is a tip of the Iceberg, which along with Global Climate, is beginning to melt.


“Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill)”
Pulitzer Prize-winning journalist David Cay Johnston joins us to talk about his new book, “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill).” Johnston reveals how government subsidies and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected. [includes rush transcript]

David Cay Johnston, Pulitzer Prize-winning investigative journalist for the New York Times. His latest book is titled Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill). He is also author of the bestselling book Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else.

JUAN GONZALEZ: As voters head to the polls in Nevada and South Carolina Saturday, the economy remains one of the top issues for voters across party lines. Today, we’re going to spend the rest of the hour examining the growing income gap in the United States.
Economic figures show that in 2005, the wealthiest 0.1 percent of the country’s population had nearly as much income as all 150 million Americans who make up the lower economic half of the country. Of each dollar people earned in 2005, the top ten percent got 48.5 cents, the highest percentage since 1929, just before the Great Depression.
AMY GOODMAN: Pulitzer Prize-winning journalist David Cay Johnston has been closely tracking the nation’s income gap in the pages of the New York Times. In 2004, he published the bestselling book Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else. David Cay has just published a new book. It’s called Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill). He joins us now from the PBS station WXXI in Rochester.
Welcome to Democracy Now!, David.
DAVID CAY JOHNSTON: Thank you for having me, Amy and Juan.
AMY GOODMAN: Explain the wealth transfer.
DAVID CAY JOHNSTON: Well, I was struck, listening to the program from Kenya, where they talked about the president and his power to give money to people, give land, and that’s why many people identify with it. We have created in the United States, largely in the last thirty years, a whole series of programs—a few of them explicit, many of them deeply hidden—that take money from the pockets of the poor and the middle class and upper middle class and funnel it to the wealthiest people in America. And among the biggest recipients of these subsidies are the wealthiest family America, the Waltons; George Steinbrenner; Donald Trump; a whole host of healthcare billionaires. And these are policies that either have not been reported on or the news reporting on them generally has not informed people about what they really are.
JUAN GONZALEZ: Well, I was struck—you have numerous chapters in the book on the various aspects of this transfer, but I was especially struck by your material on the New York Yankees and Steinbrenner and Joyce Hogi, who you mention in the book, who I know well, and this whole issue of sports teams across America and how the public is subsidizing them. Could you elaborate on that part of it?
DAVID CAY JOHNSTON: Sure. George Steinbrenner is getting over $600 million for the new Yankee Stadium in New York. The New York Mets are getting over $600 million. In fact, the City of New York gave them money to lobby against the taxpayers to get more money. Rudy Giuliani gave $50 million to the two teams for that purpose.
The new owners of the Washington Nationals baseball team in Washington, D.C., paid $450 million for the team. But, in fact, they got the team for free, because the subsidy they’re getting for the new stadium is worth $611 million. We actually paid these people to buy the team.
Now, in this country right now, we are spending $2 billion a year subsidizing the big four sports: baseball, basketball, football and hockey. It accounts for all of the profits of that industry and more. Now, there may be individual teams that make money, but the industry as a whole is not profitable. And that’s astonishing because the big four leagues are exempt from the laws of competition. By the way, irony is not dead, because here are people who are in the business of competition on the field who are exempted by law from the rules of economic competition.
If you go to England and you want to start a soccer team, they have to let you join the soccer league. There are thirteen commercial soccer teams in the London area. New York City, the biggest city in the country, there are two baseball teams, because there’s no free entry into the market. In Los Angeles, there’s no football team. And the owners use this power to prevent others from owning teams, to prevent municipal governments from owning teams, to prevent nonprofits from owning teams, to extract money from the taxpayers to build them new stadiums.
At the same time that we’re doing this, we are starving our public parks for money. And I show in Free Lunch how the rise of urban gangs and now suburban gangs is connected to this. We used to have all sorts of programs in this country after World War II for young men and young women on Saturdays and during the summer and school holidays, where even if you didn’t have any money—didn’t matter that your parents didn’t have any money, because—and I know this because I did it as a child—you could go to any one of a half-dozen different places, and there were organized activities to keep you out of trouble. After all, idle hands are the devil’s workshop is not exactly a radical new idea. Well, we’ve cut and cut and cut those programs to fund two different subsidies: one to sports teams’ owners, one that goes to Tyco, General Electric, Honeywell and some other big companies. And, lo and behold, we’ve had a big rise in urban violence because of the vacuum being filled by young people who no longer have these organized activities.
AMY GOODMAN: Speaking of sports teams, talk about President Bush and where you believe, really, ultimately, he got his wealth.
DAVID CAY JOHNSTON: Well, it isn’t a function of belief, Amy. I’ve got the documents. President Bush, who will go down in history as the great tax cutter, owes almost all of his fortune to a tax increase that was funneled into his pocket. What happened is, an oil man named Eddie Chiles wanted to sell his money-losing Texas Rangers baseball team. They played in a little stadium, smaller than the one we have here in Rochester, New York, and of course couldn’t make any money. So George Bush put together a group of very wealthy investors to buy the team. He put up himself $600,000 of borrowed money. The partners then gave him a 10 percent stake as the managing partner. That’s a very common arrangement in business. Then they held a special election in January of the year in question to increase the sales tax in the town of Arlington, Texas, by one half-cent. That money was used to build a new baseball stadium. It’s an incredibly nice baseball stadium.
Then the power of government to seize land by eminent domain—and I go back to what was talked about in Kenya, the leader there can give you land, he can presumably therefore also take it away—the government used its power of eminent domain to seize land from people, not for a public purpose—not for a military base, for a school, for a highway, for a sewer plant—but because it was coveted by President Bush and his friends, and they were unwilling to go into the market and buy it through market economics. So the government seized this land. People were paid far less than they were owed, and we know that because one family fought back, and a jury, after being out just a matter of minutes, awarded them about six times what they had been offered by the government of Arlington.
The value of this subsidy, according to Ray Hutchison, who is the husband of Senator Kay Bailey Hutchison, is a prominent Republican insider in Texas and is the leading authority on municipal bond finance in Texas, was $202.5 million. The profit that President Bush and his partners made when they sold the team was $164 million. What does that tell you? Every single penny of additional money President Bush got from that investment, his gain, came from the taxpayers. He did not add one cent to the value of that team through his skill as an MBA manager. This gets repeated all over the country.
And then when President Bush filed his tax return, he should have reported that the 10 percent share he had, the one that was given to him as compensation for being general manager, was wage income. And, of course, we tax wages at a higher rate than we do capital income, like capital gains. President Bush therefore shorted the government $3.4 million. Under our system, you sign your tax return subject to audit. If you’re not audited and you don’t pay the government the right amount, if it’s too much, the government keeps it, if it’s too little, you short the government, but nothing happens to you.
AMY GOODMAN: We’re talking to David Cay Johnston, Pulitzer Prize-winning investigative journalist. His new book is called Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). We’ll come back to David Cay Johnston in a minute.
AMY GOODMAN: Our guest is David Cay Johnston, Pulitzer Prize-winning investigative journalist, has written the book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). Juan?
JUAN GONZALEZ: Well, David Cay Johnston, the American home subprime crisis has been much in the news and the enormous impact it’s having on the economy. You’ve got a few chapters here where you talk about the home and home robbery, and you even delve on an issue that very few people have ever talked about: title insurance companies and the enormous wealth transfer that have gone on there. Could you talk about that?
DAVID CAY JOHNSTON: Oh, sure. You know, when you buy a home—and I remember the first time I did it as a young man—you have this enormous sense of accomplishment, and you sit down in a room, and they throw all these papers at you—“Sign this, sign this, initial this page, OK, sign this.” So when you’re all done, you get a little sheet listing all the costs you have, and you get dinged for $15 here and $25 there. But there’s one big item called land title insurance. If you buy a $200,000 house, it will probably cost you close to $1,000. Well, it turns out that ninety cents out of every dollar you are forced to pay for this goes to pay commercial bribes. And this goes on all throughout the industry all across the United States, and nobody is prosecuted for it.
And here’s what happens. Well, you wrote the check for the $1,000, the land title insurance companies, who are insuring the risk that someone will come along and say, “That’s really my piece of land,” or “I have the right to put an oil well in your backyard. Here’s this document from 1848,” or your new outbuilding encroaches one inch onto the neighbor’s land, supposedly. That’s what you are insuring against. These companies’ real customers are the real-estate agent that you thought was representing you or the lawyer you paid to represent you or the mortgage broker who arranged to get you the mortgage, because they steer you to the title company. And in return, they get kickbacks.
The state insurance commissioners of California and Washington wrote very detailed reports about this, because one of the land title companies tried to spear the insurance commissioner of Colorado. And there’s emails and tape-recorded conversations about a very Machiavellian plot to use the news media to a plant a question that would smear this woman. And what did the insurance commissioners say should be done after they found that 90 percent of this money is paid in kickbacks? And by the way, one of the big title companies, in its report to shareholders, says that its customers aren’t you and me, when we buy a house; it says its customers are the bankers and the brokers and the lawyers. Well, the insurance commissioners said what we need is an education program. We need to make sure that the land title companies know that they can’t pay these kickbacks and referral fees, as they’re politely called. Well, if the education program worked, the cost of land title insurance would have dropped 90 percent. It hasn’t. So it’s another example of the kind of institutionalized corruption that I write about in Free Lunch that takes money from the many and concentrates it in the hands of the politically connected few.
AMY GOODMAN: I wanted to ask you about Barack Obama’s comments, David Cay Johnston, who praised—
DAVID CAY JOHNSTON: Well, one thing, Amy, I don’t do, Amy, I don’t talk about the presidential campaign, because—
AMY GOODMAN: Oh, you don’t have to—you don’t have to talk about them—
AMY GOODMAN: —but just the substance of what he had to say, which was very interesting, as he talked about former President Ronald Reagan. He was in an interview with the Reno Gazette-Journal, appearing to express admiration for what he called Reagan’s “clarity” and “optimism” and overcoming “excesses” of the ’60s and ’70s. This is what he said.
SEN. BARACK OBAMA: I think Ronald Reagan changed the trajectory of America in a way that, you know, Richard Nixon did not and in a way that Bill Clinton did not. He put us on a fundamentally different path, because the country was ready for it. I think they felt like, you know, with all the excesses of the ’60s and ’70s and, you know, government had grown and grown, but there wasn’t much sense of accountability in terms of how it was operating. And I think people just tapped in—he tapped into what people were already feeling, which was we want clarity, we want optimism, we want, you know, a return to that sense of dynamism and, you know, entrepreneurship that had been missing.
AMY GOODMAN: In response, rival candidate John Edwards said Reagan “did extraordinary damage to the middle class and working people, created a tax structure that favored the very wealthiest Americans and caused the middle class and working people to struggle every single day.” He said, “I can promise you [this: I will] never use Ronald Reagan as an example for change.” So, David Cay Johnston, without getting into presidential politics, you write extensively about Ronald Reagan in this book.
DAVID CAY JOHNSTON: Yes. Well, Ronald Reagan, whether you love Ronald Reagan or you hate Ronald Reagan, was a great leader. He did, in fact, dramatically change the country.
Between 1945 and the election of Ronald Reagan, we had a government that was focused on creating and nurturing the middle class. When I was a young man, I was able to go to college only because it was free. It didn’t matter that I didn’t have any money—my dad was a 100 percent disabled veteran, and I went to work when I was ten years old and full time since I was thirteen—because it was free.
Today, the cost of a college education, a state college education, is about $10,000 a year. The average income of the bottom half of taxpayers—that’ s not families, that’s taxpayers—is about $15,000. Think you can go to college if two-thirds of your income would have to go to college? I don’t think so.
Well, Mr.—what Mr. Reagan did in 1980 was he asked a question that had a very powerful effect. He said, “Are you better off than you were four years ago?” And Americans said no, they weren’t. And they elected him to office, and they set in motion a major change in government policy, a change that I think has been perverted. I do not believe Reagan intended all of the things that have been done since he started this happening.
But I’m asking the question in Free Lunch: Are you better off than you were in 1980? And on the surface, America is much better off. The country is more than twice as wealthy in real terms as it was in 1980. Per person, adjusted for inflation, the economy now puts out $1.70 for every dollar that it put out in 1980. Those are absolutely tremendous economic numbers.
So how come we’re not all really well-off? Why is it one-in-seven families has filed bankruptcy in the last twenty-five years? Why is it people are so mired in debt that television ads are just full of debt relief and take on more debt ads, sometimes at 99 percent interest? Why is it that so many people don’t have health insurance and so many people no longer have a retirement plan?
And by the way, the average income of the bottom 90 percent of Americans, what I call the vast majority, is smaller today than it was in 1980. And since the year 2000, when we really got serious about this tax cut business, the average income of Americans every year—2001, ’02, ’03, ’04, ’05—has been smaller than it was in 2000. There have been some gains in 2004 and ’05, but they haven’t gotten up to equal 2000. And of those gains in the year 2000—it’s either ’05 over ’04 or ’04 over ’03—half went to people who make over a million dollars a year. What’s happened is—
AMY GOODMAN: Didn’t that wealth transfer massively begin—I mean, accelerate with Reagan?
DAVID CAY JOHNSTON: Oh, yes. No, that’s—I’m sorry, that’s exactly my point, Amy, is that what happened is that we put in place all sorts of new programs, many of which were never written about in the news media, that got no attention whatsoever. We created healthcare billionaires while making healthcare unavailable to one-in-seven Americans. And we did this with government money. We allowed people to buy public assets for, in some cases, a fraction of a penny on the dollar and then poured government money into them.
And, you know, our national myth that Ronald Reagan ran for office on was that there were all these welfare queen Cadillacs—welfare queens driving Cadillacs out there. I think there was, in fact, one scam artist who went to prison. But what’s really going on is welfare at the top, and way beyond what’s been reported in the news media as corporate welfare. We have built into the scaffolding of the new economy rules that funnel money to the top.
And that this has happened really shouldn’t surprise us, because under our campaign finance system, which has gotten worse and worse and worse with campaign finance reform that hasn’t worked, politicians running for high office spend a great deal of their time talking not to you and me and school teachers and police officers and firefighters and factory workers, but to rich people and their paid representatives. And they hear about their concerns and what they say they need to make things fair.
JUAN GONZALEZ: You also delve into this whole phenomena across America of the big box stores, the Targets and the Wal-Marts and the Kmarts. And obviously they’ve—to some, they at least offer cheaper goods, cheaper consumer goods. Your analysis of their impact?
DAVID CAY JOHNSTON: Well, first of all, they say they offer cheaper goods. I don’t accept that that’s necessarily true.
But here’s what happens. And this is a good example of where the news media hasn’t done a good job. I have tons of news clips that say, oh, this new shopping mall is coming or a new Wal-Mart or a new Cabela’s store, and thanks to tax increment financing, this store is going to be built. Well, what is tax increment financing? I’ll tell you what it is. You go to the store with your goods, you pay for it at Wal-Mart, and there’s a very good chance that that store has made a deal with the government that the sales taxes you are required to pay, that government requires you to pay, never go to the government. Instead, those sales taxes are kept by Wal-Mart and used to pay the cost of the store. And typically in those deals, the store is tax exempt, just like a church.
Now, there are two ways that it’s important to think about this. One is, that means your kid’s schools, your police department, your library, your parks are not getting that money. And you’ll notice we keep saying we’re starved for money. We’re twice as wealthy as we were in 1980, but we’ve got to close hospitals, and we’ve got to close schools, and we don’t have money for all sorts of things like after-school programs, even though we’re twice as wealthy. The second thing to think about is, imagine that you own Amy Goodman’s or Juan’s department store across the street. You suddenly have to compete with people whom the government is giving a huge leg up on. You think you would go broke after a while? Well, in fact, you will.
And I tell about a man named Jim Weaknecht who owned a little store in the Poconos of Pennsylvania. He sold fishing tackle, hunting gear, stuff like that. And the way he made his living in his little tiny store, enough that he was able to have his wife stay at home and raise their three kids full time, was by charging less than a company called Cabela’s. Well, then Cabela’s came to town. This little city of 4,000 people made a deal to give Cabela’s $36 million to build a store. That’s more than the city budget for that town for ten years. It’s $8,000 for every man, woman, and child in that town to have this store. And even though he charged lower prices, he was pretty quickly run out of business.
That’s not market capitalism, which is what Ronald Reagan said he was going to bring us. He said, you know, government’s the problem, we need markets as a solution. Well, that’s not the market. That’s corporate socialism. And what we’ve gotten is corporate socialism for the politically connected rich—not all the rich, the politically connected rich—and market capitalism for everybody else.
JUAN GONZALEZ: And, of course, many of those folks need lobbyists to be able to get these kinds of breaks from the government, and you talk about the explosion of lobbyists and their influence on government.
DAVID CAY JOHNSTON: There are twice as many registered lobbyists in Washington today as there were in 1980. If the lobbying community had grown in revenues since the ’70s at the same rate as the economy, there would be one-tenth as many lobbyists in Washington. And those people are not there doing the good of the public. You know, the Constitution’ s Preamble talks about the—
JUAN GONZALEZ: They’re not just in Washington, right? They’re not just in Washington. They’re also at the state level.
DAVID CAY JOHNSTON: No, no, they’re in all the state capitals, they’re in city halls, they’re all over the country. The lobbying business is one of the fastest-growing businesses in America, because—you know why? It’s easier to mine gold from the government’s treasury than from the side of a mountain. Why wouldn’t you go do that if you could get the government to give you money? And Donald Trump—a tax that’s supposed to serve the poor, his company got $89 million for a tax designated for the poor. Somehow, Mr. Trump’s public image suggests to me that he does not think of himself as a poor person.
AMY GOODMAN: David Cay Johnston—we’ll leave it there—Free Lunch is his book, How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill), speaking to us from the PBS station WXXI in Rochester, New York.

Thursday, January 17, 2008

The conflict that will never be resolved

Let us be clear that Bush's trip to the Middle East has nothing to do with resolving the Palestinian/Israeli issue. Although labeled as such it appears more as a way to drum up support for proposed actions against Iran. The resolution of the Palestine/Israel conflict in Bush's mind it to drive out the Palestinians from Gaza and the West Bank.

In this way it is not comparable to what Clinton tried to do at the end of his 8th year. Clinton genuinely wanted to be known as the President who resolved this problem, although Clinton never had the vision to be able to resolve it. He had been too much a part of the problem. In fact the US is identified too closely with Israel to be ever capable of being part of the solution.

The legacy that Bush wants to leave behind is as the man who flatenned Iraq, Iran, Afghanistan and Pakistan. He wants to be known as the man who made Americans safer by fighting the "terrorist" on their home turf instead of on American soil.

The interesting part of the article below is how it is taken as a given that no American President has the guts to follow an even handed policy towards the Israeli/Palestinian conflict. They have to wait until year 8 of their Presidency to even make a token effort.
Harry Truman first recognised the political clout of the American Jew even though his wife hated Jews. Since then the Jewish lobby has gone from strength to strength and now Foreign policy is dictated by them and not the President. These are not my words, this is what the Guardian is saying between the lines.

My words are that this is an understatement. A nation proud of its freedoms is captive to a minority with money. When money is greater than Liberty and money controls who becomes President, then that nation is not a free nation.

That Nation assumes that money can buy it popularity, power, leadership, allies. Such a nation cannot even pretend to stand for principles. When the money runs out, that nation will not know what to do. The cries of those that it terrorizes today will haunt it until eternity.

If ever that nation had the guts to submit itself to an International Tribunal of Justice, the witnesses will stretch from one end of the world to the other. The millions of children killed, maimed or orphaned, the millions of women killed, widowed or raped, the millions of civilian men killed, maimed tortured, made homeless will all be brought on record to point at this nation, that caused it to happen for no other reason than greed.

President Carter is already on record to say that no Senator or any other candidate can win an election if they expressed any intention of being fair to the Palestinians. All the candidates who want to become the next President of the US are staying clear of the subject and except for Obama, no one even wants to talk to the Iranians. This will cost Obama and he knows it. He has very little chance of making it for this one reason.

The US media can't talk about it either. They cannot even ask the candidates for their views on the subject in so called Presidential debates. Enough about the power of the Israeli Lobby. This is a fact and if the next President of the US recognises it then who are we to grumble about it.


For article click link below:,,2239039,00.html


The big news in the Financial Markets is the amazing amounts of money that Sovereign Funds from the Middle East, China and Singapore are pumping into US and European Banks. Regulators and Lawmakers from the US in particular have thrown open their doors for such cash infusion.

Citigroup is raising $14.5bn and Merrill $6.6bn, largely from private investors and governments in the Middle East and Asia, representing the biggest-ever single transfer of capital to US banks from abroad.

Before Tuesday, UBS had raised $11.9bn from the Government of Singapore Investment Corporation and Middle Eastern investors, Citi $7.5bn from the Abu Dhabi Investment Authority, Morgan Stanley $5bn from China Investment Corporation and Barclays $5bn from China Development Bank and Singapore’s Temasek Holdings. If you add just these investments they total $ 50 billion.

The question is not why the US is taking in this money but what is in it for the SFs. In the case of the Arabs, I would have happily said that they are still under the influence of their colonisers but China and Singapore are not fools. In the case of the Arabs there has always been an inferiority complex for the white races but that should not apply to China and Singapore. The economics of these transaction are clearly not great.

Yes, they are in the form of convertible Bonds giving above market rates but I am not sure at what price they will convert to equity. Clearly in the case of Citibank, the bonds are being made to a Bankrupt organisation to save it from Bankruptcy. The US Government may have been loath to put in this money and must be delirious that Abu Dhabi and Dubai are willing to do it. Citibank is an institution which could not attract any experienced banker to head it and had to settle for Vikram Pandit who bright as he is supposed to be, has no experience of running such a large organisation.

After the first flush of euphoria over being allowed to own a part of the world's largest Bank is over there are serious questions being asked, certainly in China. It is reported that senior Chinese leaders have decided against backing a deal to invest $ 5 billion in Morgan Stanley. The Investor would have been the China Investment Corp. The earlier Investments of China Investment Corp in the Blackstone Group and Barclays PLC have not done well. In fact their return is reported to be Minus 31%.

Clearly these are intended to be long term Investments and they may turn out to be in the plus, ten years from now. That is not the issue. The Issue is that there are far better Investments to be made outside the US which will be a plus both in the short term and the long term. In fact there are far better Investments even in the US e.g. in the energy Industry but here Congress will raise barriers. There are other Investments which are being made on the assumption that the US is about to go into a recession. The Paulson Credit Opportunities Fund has risen 590 % in one year, just betting that the housing market will slump. Any one shorting Citibank would also have made huge amounts of money. Any one shorting the US equity market will also make a lot of money.

Right now the US Government is pushing to sell their junk to the Sovereign funds, just like in the past they have been selling junked arms, tanks, aeroplanes to third world countries including the Middle East.

An early demise of the US would not be good for the world so if the SF's are trying to save the world then it is a very honourable act and one understands that they do not mind writing off 100 billion dollars out of their trillions. As long as they understand that the US represents the past. A chapter in the History of the world is coming to a close. A world created by the victors of World War II has outlived its usefulness. The future belongs to the East and not the West.


Sunday, January 6, 2008

The Destabilization of Pakistan.


"Economic mismanagement" is a term used by the Washington based international financial institutions to describe the chaos which results from not fully abiding by the IMF's Structural Adjustment Program. In actual fact, the "economic mismanagement" and chaos is the outcome of IMF-World Bank prescriptions, which invariably trigger hyperinflation and precipitate indebted countries into extreme poverty.

Editorial comment

Two magazines had Pakistan on their cover this week. Time and the Economist. Both had similar messages. "The worlds most dangerous place", screamed the Economist. "Why we need to save Pakistan", pontificated Time.

I have never regarded Time as anything but a mouth piece of the American view of the world, but always held the Economist at a higher level of objectivity. Pakistan can either be characterised as the most dangerous place on earth or as the latest "victim of the war on terror". To my disappointment the Economist has joined the bandwagon of people refusing to recognise that American Foreign policy is today the most destabilising thing that the world has known for centuries.

No one wants to ask the question as to who is threatened if Iran gets the bomb or clerics in Pakistan get control of the bomb. The only country at risk is Israel. Not the US, not Europe, not China, not India. not Russia, only Israel. My contention would be that not even Israel would be at risk and yet a "war on terror" has been launched to "protect" a terrorist state.
Western media is fast becoming irrelevant by being subjective about its analyses of events. No one dares to call Israel a terrorist State, while in the same breath they call Iran a terrorist State. They start believing their own propaganda and profess to tell us as to what is really going on.

There is no question that Pakistan is in bad shape. It is on the verge of coming apart and that it's leaders are mainly to blame for where it is today. There is also no question that American money, American bullying, American misadventures in Afghanistan, American Foreign Policy, American meddling are equally responsible for Pakistan's state of affairs. An objective analysis would point out both aspects. An objective analyses would say Pakistan cannot have a free and fair election unless the American Ambassador is sent back to Washington. There cannot be two option for Pakistan. Do the Pakistanis decide or does America decide who will lead Pakistan?

It appears that the world has decided that Pakistan is too important to be left alone and for that reason Washington will decide who will lead Pakistan. It has also been decided that once this decision has been taken and a man or woman installed after going through the motions of an election, then Pakistanis should live with the consequences.

Not to put all the blame on the US or it's allies ( followers) let us look at it from Musharraf's point of view. In eight years, while Bush has spent a trillion dollars on losing a war, Musharraf, has collected eleven billion dollars for pretending to be Bush's ally. Pakistan has never seen the likes of this money. Shut down the factories, why worry about exports, as long as rich uncle is here, Pakistan can glow in the sunshine of his wealth. The FX reserves keep getting healthier and the Finance Minister/ Prime Minister gets feted by US Magazines for his "brilliance" .

I can understand Musharraf's consternation at having lower approval ratings than Bush. It is logical for him to say the Pakistanis are not ready for Democracy. It becomes even more logical when he sees that they want to vote for Benazir/PPP or Nawaz who are known to be both incompetent and corrupt and whose record of getting money from rich uncle is dismal as compared to him. If this is the way they think, Illiterate Pakistanis don't deserve Democracy. The Americans have been right all along. Let us rig the elections. Look at Egypt. This has worked there for Thirty years. Pakistan need stability and not Democracy.

While all this is going on Rich Uncle is quietly planning to attack Iran,take over Pakistan's Nuclear facilities and break up the country to create a foothold against China. Rich uncle is not as stupid as he looks. Eleven Billion is peanuts for achieving this goal.

Musharraf knows this, except he cannot talk about it. His reasoning, eleven billion is just a down payment, give me another four years and see what I can fleece the old geyser for.

This is the story of Pakistan and all others who have prostituted themselves for America. Had Pakistan not developed the Nuclear bomb, their usefulness would have long been over. The Iranians, The Egyptians, The Saudis are watching with interest. You don't develop a nuclear bomb to use it. Just having it has greater benefits.


The Destabilization of Pakistan. Read the article at http://www.globalre index.php? context=va&aid=7705

Who Killed Benazir


"the repeated and prolonged suspension of constitutional processes and the rule of law have created extra-constitutiona l and extra-legal power centres. These shadowy centres, embedded within and around the state apparatuses, have spawned a wide network of criminal and terrorist cells.This is an extremely dangerous situation. If the state allows itself to be manipulated outside the bounds of law, the implication is that it has allowed itself to be criminalised. If such a state closes its eyes to some of its functionaries — or those outside but close to power centres — collaborating with international or local smugglers, criminals, militants or terrorists, it can be suspected that this collaboration will at some future date extend to a wider range of criminal and terrorist activities in the country and abroad. The dangers inherent for civilised society in Pakistan and for the world community at large need to be recognised."

Editorial comment

Good comments and brilliant description of "incompetence and connivance". The rise of extra judicial entities who are a part of the Govt and yet independent is equally applicable to the USA. The US is guilty of ignoring International Law, the Geneva Conventions, the UN and unleashing the CIA to assassinate world leaders, topple governments and destabilize Democracy, not to mention cooking up false intelligence to justify their actions. In pretending to be incompetent, the US is conniving to create chaos in the Middle East.
To expect the International Community to resolve Pakistan's issues is like letting loose the fox in the hen house. Pakistan is on it's own and the sooner they realize this the sooner they will come up with a solution. For too long they have looked westward for inspiration. Mr. Bengali may not realize that the "International Communities" solution for Pakistan is to break it up and then blame the Pakistanis for it.


Dawn – January, 6th, 2008

Who killed Benazir Bhutto?

By Kaiser Bengali

BENAZIR Bhutto is dead, martyred by a hired assassins bullets in the cause of the struggle for the rights of the people and in challenging the hegemony of a coterie of vested interests that is feeding itself off the sweat and blood of the people.

State minions have blamed the attack on Baitullah Mehsud, the Taliban Amir in Pakistan , a charge that has been duly denied. Clearly, one side is lying and, under the circumstances, the Musharraf regimes spokesmen do not command any more credibility than Baitullah Mehsuds spokesmen.

However, it cannot be disputed that it is the duty of the state to protect every citizen. And the state failed to protect a citizen who a vast multitude of people regarded as their leader and saviour and who was under threat — by official accounts as well. To this extent, at the very least, the Musharraf regime is responsible and liable. However, the direct responsibility of state functionaries cannot be ruled out altogether. The pattern of attempts at concealment, diversion, contradictions and concoction in the official responses to the October carnage at Karsaz in Karachi and the subsequent murderous attack at Liaquat Bagh in Rawalpindi constitute disturbing pointers.

One clear case of concoction is perhaps discernable, namely the transcript of the ‘conversations between Baitullah Mehsud and his ‘maulviâ field commander. Technology exists to trace calls to its location within seconds. Israel routinely uses such technology to locate Hamas freedom fighters and surgically target the particular vehicle, even while it is moving. It appears that the Pakistan military possesses this technology, as shown by its ability to pick up the ‘conversation.’ That they were not able or willing to locate either the ‘maulvi or Baitullah Mehsud during their alleged minute-long conversation smacks of incompetence or connivance.

Incompetence and/or connivance has now emerged as a hallmark of the Musharraf regime in different areas of policy. Most recent is the case of Mullah Fazlullah in Swat. Media reports of the operation of an illegal radio station by the mullah had been appearing for more than a year. No attempt was made to jam the broadcasts, although the technology to jam radio signals — used even during the Second World War — was available to Pakistani authorities. Possession of this technology is now proved, given that such radio signals have been jammed since the launch of the military operation in Swat. The question arises: is the Swat episode indicative of incompetence or connivance?

Earlier, Pakistani forces battled militants entrenched in the Lal Masjid/Masjid- i-Hafsa complex, suffering several casualties and causing between several score to several hundred deaths among the students. The Lal Masjid episode too simmered for more than a year before coming to a head. The question that arose then, and which no state functionary has cared to answer to date, is: how is it that the Ghazi brothers were able to amass sophisticated weaponry in the heart of Islamabad — a city where it is said that the number of intelligence operatives outnumber the total number of janitors, gardeners and taxi drivers combined? Once again, the question arises: is the bloody Lal Masjid episode indicative of incompetence or connivance?

Earlier still emerged the affair relating to Dr Abdul Qadeer Khan’s clandestine international operations in smuggling contraband nuclear equipment and material. The exposure of his illicit activities was made not by Pakistani authorities but by the United States . The official Pakistan explanation was that he was alone in running the smuggling ring and that Pakistani officials were neither involved nor aware.Dr Qadeer Khan was a high-value national asset, protected by more than one high-powered security agency. Those who have experienced even one day of police escort know that the facility is double-edged. While the escort ostensibly provides protection, it also deprives the protected individual of a degree of privacy. That the nuclear scientist was able to carry out an international operation involving highly sensitive material — and allegedly use Pakistan Air Force C-130 planes to freight his wares around the world — without drawing the attention of his ‘escorts is inconceivable. Once again the question arises: is the Qadeer Khan episode suggestive of incompetence or connivance?

The issue of both, incompetence and connivance, is of critical importance. If incompetence is attributed to the above three cases — and they are by no means exhaustive — the implication is that the country has crossed the threshold of what defines a failed state. The government is unable to enforce its writ; it is unable to control illegal broadcasting stations; it is unable to stop the accumulation of weaponry at any location; it is unable to control individuals engaged in smuggling of dangerous materials; it is unable to protect the life and property of the citizens. By inference it should be considered unable to carry out the assigned task of assisting the United States in its war against terror.

Attribution of connivance is more worrisome. If the events of Swat, Lal Masjid and nuclear smuggling have been allowed to simmer or continue with the connivance of state functionaries, the implication is that there is a coterie of powerful individuals within the corridors of power who consider themselves above the law — national or international — and unaccountable to any principle or institution save their own definition of interests.

The demand for an international investigation into Benazir Bhutto’s assassination needs to be viewed in this context. It would be irresponsible to suggest that extra-legal operations are carried out under formal governmental auspices. However, the repeated and prolonged suspension of constitutional processes and the rule of law have created extra-constitutional and extra-legal power centres. These shadowy centres, embedded within and around the state apparatuses, have spawned a wide network of criminal and terrorist cells.This is an extremely dangerous situation. If the state allows itself to be manipulated outside the bounds of law, the implication is that it has allowed itself to be criminalised. If such a state closes its eyes to some of its functionaries — or those outside but close to power centres — collaborating with international or local smugglers, criminals, militants or terrorists, it can be suspected that this collaboration will at some future date extend to a wider range of criminal and terrorist activities in the country and abroad. The dangers inherent for civilised society in Pakistan and for the world community at large need to be recognised.

Clearly, substantive remedial measures are called for. If the murder of Benazir Bhutto is attributable to incompetence, there emerges an urgent imperative for correcting the failed state syndromes. If it is attributable to connivance, the corridors of power need to be cleaned up. In particular, the cobwebs shrouding sinister Ziaist forces in secret cells have to be cleared and the extra-constitutional and extra-legal power centres dismantled.Full restoration of the rule of law is in the interest of the political community and civil society in Pakistan if other political or civic leaders are not to be subjected to the threat of elimination. It is in the interest of the international community to help the people of Pakistan restore the rule of law if Pakistan is not to become the focal point for lawlessness, criminality and terrorism worldwide.