Category Archives: Venezuela

Twilight for social democracy


Ironically, at a time when American politicians are flirting with social democratic concepts, their historic parties are fading in Western Europe where those political slogans originated.
The prime example is Spain. There the PSOE [Partido Socialista Obrero Español], the Party of the Spanish Worker, the country’s oldest, has weathered many crises. During the 40-year-long Franco dictatorship, it maintained its role as the principal anti-Communist left opposition operating among refugees in France.
After governing in Madrid 21 of the last 39 years, the PSOE will probably lose its commanding position in this month’s elections, even losing role as leader of Spain’s left where the majority of the voters self-identify. Shorn of their old Soviet attachment and command structure, a revolutionary movement on the left, Podemos, and a right of center party, are likely to reduce the PSOE to less than 20% of the vote. Spanish political theory is highly influential throughout the whole Ibero-American world, and Latin American styles are almost certain to follow – as already demonstrated in Brazil, Argentina, Peru, and soon in Venezuela, where left-wing regimes are being ousted.
The loss of popularity of the social democrats in Spain echoes throughout Western Europe where for more than a half century they have played a dominant role. In Germany, the original home of social democratic concepts, the socialists are polling new lows. The ruling French Socialists have become increasingly unpopular under their Pres. François Holland, in part because he has adopted a program of economic and labor reforms ignoring traditional socialist nostrums.
In the early 90s, Italy’ socialists – in the early postwar years with a Soviet line by far the largest party, an ally of the Communists — under their first prime minister, Bettino Craxi, was almost wiped out by corruption. Three Socialist deputies committed suicide as a result of the scandals. Splinters of the early socialist parties, from anti-Communist to those fellow-traveling in the Soviet era, have joined forces forming the Socialist Party (PS), renamed Italian Socialist Party (PSI) in 2011. But many former social democrats have deserted the socialists for four-time Prime Minister Silvio Berlusconi’s bigger tent, largely a right-of-center grouping.
Europe’s social democrats have become discredited through their growing association with the policies of the moderate right — austerity, deregulation, liberalization and free trade. Virtually the whole technocratic community has seen these as necessary economic measures to restore prosperity. These have been increasingly seen by the media and among many younger politicians as the cause of Europe’s present economic decline.
But as voters of the traditional left have grown bitter as they saw their party of the welfare state, the public sector and of the blue-collar workers, reverse its governing strategy. That feeds a growing separation between social democratic politicians who view these policies as the only options as jobs have disappeared and economies flattened and the street, always ready to find leaders for protest and violence..
In Spain, an inconclusive general election last December left the socialists in a dilemma: either adopt the centre-right promises of tax cuts and more supply-side reforms, or bend to a new left that calls for an end to austerity and channels the anger of the mob.. In the U.K., this dilemma has produced a new leftwing leadership in the Labor Party, But whether, even with the conservatives in disarray over the question of withdrawal from the European Union, they have a formula to gain power is dubious.
It seems unlikely that this paradox won’t be present for the European socialist movement for the indefinite future. Whether it has application to the American scene – current political fashions to the contrary – seems highly unlikely. The U.S. economy, while not roaring forward, still is the envy of most of the Western world, with few calls even from the “progressives” for the nationalization and “socialization” of the major industries.
sws-06-22-16

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The pathology of American socialism


If you are 20 and not a socialist, you have no heart. But if you are 40 and are a socialist, you have no brain. That old French aphorism describes better than more learned tomes the appeal and the reality of more than a hundred years of seeking to find the ideal society through either Christian socialism based on appeal to the Scriptures or “scientific” socialism based on Karl Marx’s writings.
It’s not clear when Sen. Bernie Sanders espouses “democratic socialism” he knows this long tortured history or is ignoring the fulminations of European socialism including its American versions. Most Americans are unaware that socialism had a thrust toward power in the early part of the 20th century when Eugene V. Debs, a trade union radical and his colleagues traded on social problems of the rapid U.S. industrialization. Even though Pres. Woodrow Wilson, “a progressive”, sent Debs to prison for his ironclad pacifism and opposition to American entry into World War I, he garnered more than a million votes in the 1920 presidential election.
But the socialists faded, shorn of their Communist radicals who bolted the party, in the enormous prosperity of the 1920s. They left one important addition to the national scene, the income tax, which could only be implemented with the Sixteenth Amendment to the Constitution which was deemed to have excluded all such direct taxes. When the Great Depression struck in 1929, much of the socialist rhetoric [along with proto-fascist ideas as well] were adopted in the wildly heterogenic New Deal of Pres. Franklin Delano Roosevelt.
Norman Thomas, a former pastor from the Christian socialist tradition — a tall, handsome man, a splendid orator with a booming voice — took over the rump of the movement. Thomas, although a respected figure to whom thousands of European and Asian refugees came with notes of introduction during the turbulent 30s, was a failure as a politician. The Party dwindled under a series of crises; the first in 1936 when most oldtime socialists supported FDR against Thomas for the presidency. Thomas also followed the Europeans in their Popular Front, a partnership with the Communists aimed at halting the rise of Adolph Hitler’s Nazis and Benito Mussolini Italian Fascists. The anti-Communist socialist splinter, mostly New York Jews, broke away taking the famous old Rand School which had educated immigrants and a Borsch Belt resort. But here and here old memories remain: a Young People’s Socialist League on the University of Missouri campus in 1946 formed to end racial segregation on their campus.
Although the Party continued in name, maintaining a New York headquarters and continuing to publish a weekly version of its once powerful The Call, it played no role in U.S. politics. It was not until post-World War II when some old stragglers from the movement successfully persuaded Washington to wean the West European parties away from neutralism against the high tide of Communism in France, Italy and West Germany. On the Continent as in the British Labor Party, the European socialists came to brook no rival in their opposition to Moscow where the Communists had developed a totalitarian state, ready in the postwar period as one of the victors to absorb most of Central Europe.
Although the socialists blossomed in power in Scandinavia – in Sweden building a highly sophisticated industrial base, not least by collaborating with Hitler in WWII as a ostensible neutral – increasing social and political problems of their own making have undermined their hold on power. Mistaken references in the American debate to Denmark ignore its steady move away from socialism today.
Sanders calls himself a “democratic socialist”, presumably in the Thomas and European anti-Communist traditions. But in Israel he chose to live for two years among kibutzim [members of communal settlements] with ties to Moscow. His flirtation with the Castros’ Cuba and their allegiance to the Soviet Union until its demise as well as the pro-Communist Sandinistas in Nicaragua puts the question what he really believes. Like so many other self-proclaimed socialists before him – currently it is the case in Venezuela –in power they have had to choose backtracking toward more conventional positions or trying to institute “socialism” with dictatorial regimes.
Just where is Sen. Sanders?
sws-05-31-16

Obama’s Cuban fiasco


The absurdity of the Obama Administration’s flirtation with the Castro Communist dictatorship in Cuba has no limits.

The United States in the past year has removed Cuba from its list of state sponsors of terrorism, reestablished diplomatic relations and opened an embassy in Havana. Last week Obama announced he will be the first American president to visit Cuba in nearly 90 years.

There was good reason. The Castro dictatorship alliance with the Soviet Union was an important factor in the Cold War. Indeed, it produced a tense, 13-day political and military standoff in October 1962 over the installation of nuclear-armed Soviet missiles in Cuba, just 90 miles from U.S. shores, that could have ended in World War III. All the while, the Cuban regime has attempted to subvert democratic governments in the Hemisphere and organize anti-U.S. cabals.

But this week the Administration sent up to Congress a bill to continue restrictions on American ships entering Cuban waters. The bill arrived on the 20th anniversary [Feb. 24th] of the downing of two Brothers to the Rescue planes by a Cuban air force fighter jet. . The pilots were helping to locate and rescue Cubans fleeing the dictatorship for the U.S., and were shot down in international waters. It came as families of four Brothers to the Rescue volunteers were marking two decades since their loved ones’ deaths

“These are the same waters that have witnessed record numbers of Cubans risking their lives to reach freedom because of the oppression they are facing under the Castro regime – a regime that has found an ally in President Obama,” Rep. Ileana Ros-Lehtinen, [R-Miami], protested..

It is symptomatic of the lack of knowledge and strategic finesse that an Administration spokesman said the arrival of the legislation on the Hill on this anniversary was an unintended unfortunate coincidence. That statement exemplifies, as nothing else could, the total ignorance of the longstanding U.S. Cuban conflict which is the foundation of the President’s current policy of courting the Cuban dictatorship.

The President’s attempt to redress relations between Washington and Havana rests on total false assumptions. The negotiations which led to the reinstating formal ties with Raul Castro’s government were a completely one-sided affair. On the morrow of the initialization of the agreement, Castro tossed more political prisoners in jail. So-called economic reforms have turned out to be as false. Restrictions with new regulations and the continuing dominance of government-owned entities has made a mockery of attempts to initiate new small business. American business interests who backed the Obama approach are largely those either already receiving or asking for subsidies from Washington. They are pushing, of course, for a lifting of the embargo on trade with the dictatorship.

It is unlikely that the President’s forthcoming visit will produce new concessions from Castro. And, indeed, the prestige of the visit – and Havana’s seeming victory in the long-standing disputes with Washington – are a desperate attempt of a bankrupt and failing regime. Whether, indeed, Washington’s new found love affair for the Cuban dictatorship will salvage it remains problematical. More than likely, it will end with the U.S. embracing a corrupt and equally oppressive traditional caudillo regime when Raul Castro [84] soon passes from the scene.

State Department proponents of the Obama policy are those concerned with the supposed animosity the U.S. Cuban policy has incurred in Mexico and the leftist regimes in Latin America. Indeed, Obama’s message to the Hill contained the phrase “Longstanding U.S. policy toward Cuba had, at times, tended to isolate the Untied States.” .

But the courtship of Cuba comes at a time of crises for the anti-American regimes which are Castro’s friends – in Venezuela, Brazil, Ecuador and Peru. In fact, with a new pro-American and reforming government in Argentina, the most important of the Spanish-speaking countries, there is hope that Latin America is turning away from corrupt statist economic policies which have sabotaged development. The President’s exceedingly brief stopover in Argentine on this Latin American tour, unfortunately, appears to be an indication of just how seriously warped is the whole policy of this Administration toward our own hemisphere.

sws-03-03-16

Venezuela, the world – and the U.S.


 

Another chapter in the long and tortured history of Venezuela is being written.

But this time, given the new digital world of communication and interdependence, what happens there is not just a spectacle for occasional American Marine intervention to keep the peace. Not only are U.S. firms being clobbered in a hapless manipulation of currency by government now rapidly going toward chaos. [Goodyear Tire & Rubber reported a $646 million loss against fourth-quarter earnings, mostly the result of the collapse of the Venezuelan Bolivar.]

Most observers expect the Venezuelans will meet the $1.5 billion in debt payment due later this month But after that, the picture gets murky. With oil prices a third of what they were just a few months ago, and apparently to rock along the bottom for some time, the will await a worldwide economic upturn and increasing world consumption. All out Saudi pumping of its super low-cost Gulf reserves has made a dent in the new American shale technologies playing a big role in the lower world wide energy prices. But new technology there has mitigated the blow. And now Iranian [and additional Iraqi oil] is about to enter the market as Pres. Obama’s deal on nuclear weapons with Tehran lifts sanctions, especially for the Europeans and the Chinese.

A Venezuelan default on its $120 billion in government and state oil company loans from overseas investors during the past decade.would go a long way toward creating a new world financial crisis.

Meanwhile, Veneuela’s 32 millions are taking it on the chin. The latest is government trimming electricity to a 100 malls which have been sanctuaries for escaping the growing discomfort and violence in the tropical country. In this latest crisis to hit the country, El Nino has caused a drought and shortages from hydro plants. This, of course, is taking place in a county with some of the largest reserves of fossil fuels in the world, The fact is that Venezeuela has suffered brownouts for decades. One of the reasons is that electricity is virtually free in the country leading to incredible waste. Meanwhile, unlike other oil producers, in the good times Venezuela did not set up a rainy day fund and has now had to dig into its vurrency reserves.

The electricity crisis is only the latest in a bundle of incompetencies and ideological perversions inherited by the Maduro government from its predecessor, the charismatic Hugo Chavez. Chavez ran a regime o bread and circuses, destroying among other things the efficiency of its oil industry which he nationalized.  Now the country’s economy after decades of mismanagement has been one of the worst hit worldwide by oil price fall, accounting 95 per cent of the country’s trade revenue. At the moment, Caracas  has four exchange rates: three official ones and the black market which has been trading at some 1016 a dollar against official rates a quarter of less of that..

Before Chavez took the Caribbean country of 32  millions down the road toward state capitalism, it for many years after the second world war one of the richest in the region, with a vibrant economy buoyed by oil exports, much of this heavy oil to Texas refineries.

But were it to default in the months ahead, its debt failure would ripple through emerging-market economies, many of which borrowed heavily when commodity prices were soaring. China had provided Venezuela with a steady source of financing in exchange for oil but as its economy slows and it tries to staunch a hemorrhage of capital outflow, Beijing is reluctant to lend more.

Venezuela’s story, by and large, is being repeated in the oil-dependent countries scrambling for funding. Nigeria and Angola are already seeking help from international institutions to plug their deficits.

For the moment, the U.S. Treasury appears to be listening and cringing. But here too the world is waiting for an Obama initiative.

sws-2-11-16

 

 

Disguising the enemy


It apparently isn’t enough that the Obama Administration is going out of its way to try to reset relations with some of our longstanding enemies, but the State Department is muddying the picture.
It is what the French call deformation professionelle, the tendency to judge problems solely on the basis of your professional skills. If you are a lawyer, you want to litigate them away, a physician, you want to prescribe medicines to wipe them out, a surgeon to cut them away, and if a diplomat, to bargain them away – whatever the sacrifice and cost to reach a “successful negotiation”.
It’s not enough that Washington has made a deal with a bankrupt Cuban regime, actually throwing them a line of support when their last Sugar Daddy, Chavez of Venezuela and his heirs, can no longer afford to give them oil. At the very moment, the agreements were being initiated, Raul Castro, ageing dictator once-removed, was throwing new political prisoners in jail.
There’s a good deal of ballyhoo about how Cuba has now opened up to foreign [that is U.S. if the embargo is lifted] investment, and will turn into another China. What’s forgotten is that our allies, including the Canadians, have had open sesame to the Cuban economy and its supposed markets for decades but unable to do much because of the restraints of the Castros’ incredibly incompetent Soviet economic policies. Now, of course, in sheer desperation, some small business ownership is being permitted. And soon there will be a few more luxury hotels and boutiques only available to foreigners and Cubans with dollars remitted from their kith and kin in the U.S.
If all that weren’t enough, now the cookie-pushers at State have decided to mask the continuing human rights cruelties of the regime with whom they have chosen to sup. In this year’s annual report by the Office to Monitor and Combat Trafficking in Persons – or J/TIP [read slavery in non-diplomatese], Cuba was removed from the “Tier 3” blacklist. There was the claim, even though the Department’s own trafficking experts laid out evidence to the contrary, that it had made notable improvements in its sorry record of kidnappings and imprisonment without cause.
The State Department’s own Western Hemisphere Affairs Bureau completely refuted these claims that Havana is making any progress toward decency. Nor is there any attempt to show the incredible lengths to which the regime goes to indenture its citizens. The Castros’ highly touted extension of medical services – again of questionable quality – to other Latin and African nations is not as presented a voluntary activity by its medical community but a carefully disguised penal servitude for its medical students and graduates in which the Cuban regime rakes in most of their earnings. Meanwhile, an epidemic of dengue fever has broken out in the city of Trinidad on the south coast of the Island, a UNESCO Heritage site and tourist mecca, apparently as a result of a virtual breakdown in sewage facilities.
The careful exposure of the very complexity of the Cuban tyranny, developed over a half century, which has impoverished the nation and driven much of its elite abroad, is all the more necessary if the President’s grandiose initiative to improve relations is to have meaning. Instead, it is impossible to find a single concession that the Castros have made in return for the offer of respectability that the Obama Administration has given them with the diplomatic interchange.
Unfortunately it is one more instance of the inability – or is it unwillingness – of the Obama Administration to defend American interests and those of subjugated peoples such as the Cubans – in its foreign relations. No one asks for the Johnny-one-note of on human rights of Jimmy Carter’s foreign policy, but there is some limit to what the U.S. should tolerate when it extends the prize of diplomatic relations to a foreign regime.
A new Administration in 2016, whatever its party and personal affiliations, will have a huge diplomatic mess to clean up.
sws-08-04-15

No aid for a Cuban dictatorship


After 50 years, later this month an American flag will again fly over the old U.S. Embassy in Havana and the Cubans will open their diplomatic representation in Washington.
Pres. Obama has justified the move because it was time to change a policy that has not worked. That, not to put a fine point on it, is not true. Over five decades Washington was able – sometimes with direct intervention as with the Contras in Nicaragua – to prevent the spread of the Castros’ Communism in Latin America. And it wasn’t for lack of trying by Fidel Castro with Soviet inspiration and help. The list of by Cuban Communist attempts to subvert other governments in the Hemisphere, sometimes with actual military infiltration, is too long to list here.
That, of course, poses the next question coming up quickly.
There are already demands that Washington lift the Cuban “embargo”, a misnomer for the refusal of the Castro government in the 1960s to compensate American investors for the seizure of their properties. Of course, Cuban propagandists – with their chorus of supporters on the American left and among some U.S. business interests. – argue that it was the American blocking of economic relations with Havana which brought on the Cuban disaster. And, they argue, there are all sorts of mutual economic opportunities for American business as well if the U.S. takes the next big leap forward and authorizes investment and trade – including economic aid.
The answer to that pitch, of course, is that the Obama Administration got nothing in return for resuming diplomatic relations. In fact, what has happened is that a dying regime is being given a helping hand in its final moment of crisis. Cuba, after all, has relations with 190 other countries. The Europeans and Canada have tried to invest and trade and have had near zero success. [One suspects, aside from those in Ottawa always ready to tweak Uncle Sam’s beard, it was Canada’s historic investment in one of Cuba’s few mutually held resources, nickel, that has kept that relationship alive.]
It’s hard to exaggerate how diffcult Cuba’s situation is as it comes back into the real world. A large portion of its traditional elite long since fled, and while interested and perhaps willing to cooperate, will not go back. Its former special quotas for sugar in the U.S. are an historic anomaly. Not only will its sugar industry have to be rebuilt almost from scratch, but Cuban cane sugar faces a completely changed world now competing with subsidized beet sugar, corn syrup and all the other sweeteners developed while Havana slept as well as favored sugar industries around the world..
No one would argue that we shouldn’t do what we can to help impoverished Cubans sitting on our doorstep. Leaving humanitarian generosity aside, it is in the interest of U.S. security to contribute to a more prosperous and stable Cuba. When the Castro regime finally collapses – as seems inevitable – a freed but impoverished more than 11 million will be swimming toward Miami.
There is a lot of hot air being spread about the economic prospects for American business in Raul Castro’s Cuba, some of it coming from the President himself. Not a little of it comes from American businesses which profit from export subsidies. But lifting the sanctions before Raul Castro makes the concessions necessary for economic and political progress on the Island would be, among other things, a waste of the taxpayers’ money.
sws-07-02-15

The Cuban fiasco


In that simplistic jargon characterizing Pres. Barack Hussein Obama’s worldwide “transformation” of U.S. foreign policy, the chief argument for his Cuban shift has been “[T]hese 50 years have shown that isolation has not worked.”
In the facts of history, in this as in so many other instances, Obama is wrong.
The fact is that U.S. policy toward Cuba, with its ups and downs, has been generally successful.
First, of course, the outcome of the Cuban Missiles Crisis of October 1962 prevented the Soviet Union from obtaining an advanced offensive weapons base just off the U.S. southern coast. The confrontation was a turning point in the Cold War. Moscow’s victorious march through control of Central and Eastern Europe and its threat to Western Europe began to be reversed when JFK backed off Nikita Khrushchev’s gamble.
Secondly, the Soviet Union’s Cold War effort, using the Castros’ regime, to infiltrate and create other Communist states in Latin America was beaten back – in Costa Rica, Haiti, Nicaragua, Panama, Bolivia, Dominican Republic, Colombia. Indeed almost every Latin American government at one time or another was a target, if unsuccessfully.
That is not to say, of course, that American policy toward Habana was a string of unbroken successes, or that, in fact, it was always clear-headed.
It was, after all, American support for the Castros which brought down the Batista dictatorship in 1959 and installed the Communists. With the help of the American media, Washington was lulled into the trap that Fidel Castro was a reformer and not a Soviet model for his new regime.
Indeed, the settlement with Khrushchev of the Missiles Crisis resulted in a U.S. commitment to end its active efforts to bring regime change in Habana, whether through aid to such abortive military adventures as the ill-fated Bay of Pigs Cuban émigrés invasion or plots directed against eliminating the Castros themselves. But the continued presence of the Castro regime posed a constant threat to American interests – as far away as Africa, where the Soviets employed Cuban forces in Angola to install a Marxist regime [still in power]. That was despite Ronald Reagan’s elimination in 1983 of the Caribbean stepping stone of a Cuban-supported regime on the Caribbean island of Grenada.
First Soviet and later Chinese intelligence and subversion operations as well as listening posts in Cuba, before the digital revolution and new long-range communications, provided a continuing important base of operations by Washington potential enemies.
But by 1970, a combination of U.S. pressure [and, ironically, opposition from the more orthodox Communists not only in Moscow but among the other Latin American parties] forced Castro to withdraw his more active support for the overthrow of other regimes.
Left behind was an impoverished island – Cuba had among the highest standards of living in Latin America when Castro came to power – and a corrupt and oppressive regime, a potential source of instability and intrigue. More recently Habana’s transfer of its allegiance from Moscow to Caracas is the result of the emergence of an anti-American regime in Venezuela. But the growing economic difficulties of the Caracas regime, despite the largest proven oil reserves in the world, have put a kibosh on its aid to the Castros, the lifeblood of the regime.
In effect, the Obama Administration has now thrown a lifeline to the increasingly endangered Habana dictatorship. Not only is Obama at least temporarily saving a collapsing tyranny, he has done so without demanding that in return Raul Castro make concessions to the U.S. and the Cuban people. Instead, it has reinforced its nefarious activities: for example, new political persecutions were initiated at the very moment Obama was making his overtures to the Castros. Cuba still remains a sanctuary for fugitive American criminals. Only this month Castros’ thugs brutally attacked peacefully demonstrating anti-Castro activists at the Summit of the Americas in Panama.
Obama’s announcement he is considering removing Cuba from the list of sponsors of state terrorism will strengthen Habana’s relations with leftwing totalitarians throughout the Hemisphere.
However limited the real possibilities for economic development given the present state of the Cuban economy and the regime’s continuing restrictions on private initiative, just the hope of investment and trade – including tourism – from the U.S. is seen as rescuing the regime.
That, indeed, will be the end of what has been, whatever its inadequacies, American policy for half a century, a successful strategy to isolate a threatening totalitarian regime in the Hemisphere. And it comes at the very moment when there was every prospect that the regime might implode, a victim of its own contradictions, leading to a new democratic Cuba.
sws-04-12-15

Financial Chinoiserie


A most peculiar crisis is developing for the Chinese economy – and, indeed, for the regime — while the world’s attention is riveted on the chaos and terror in the Mideast and Russian aggression in Ukraine.
Not the smallest element is the clever manipulation by Beijing’s strategists of the world’s hopes for continued remarkable Chinese growth as a last call instrument to bail out a dawdling world economy.
That misapprehension of China’s economic capacities may well forestall, again, at least for a time, an inevitable coming to grips with basic problems of it vast society under the Communist Party monopoly. But there is growing evidence that China’s financial problems have reached a crescendo that Beijing can no longer manage.
In that marvelous game of speculation on one of the world’s oldest cultures, I have always joked that the Chinese have two “extra” genes to others’ DNA: one is an inordinate capacity for hospitality, and the other for unlimited risk at gambling. Both are in full flower at the moment.
In effect this has led to foreign Old China Hands increasingly coming around to a pessimistic view of the outcome of events that some of us have held for years. The spectacular growth of China with the release of the unique energy of its people with the collapse of Maoism was nevertheless jerry built. Some of us have argued that it inevitably would crack – although as so many times in similar historical situations, what would be the final straw and when it will happen was unpredictable. As a result, I have had to suffer my friends continued scorn with “Yeah-yeah-yeah! you have been saying that for years” — and I have. But there is no doubt now that that moment of decision is rapidly coming closer.
Still, a continuing element in the Chinese equation is the rush of its trading partners to either help camouflage the actual situation, or, indeed, scurry to its aid. That is the case now with their acceptance of a proposal by China for a multibillions-dollar multinational bank to be directed by Beijing, ostensibly lending for Asian infrastructure. It would rival the Bank for International Reconstruction [the World Bank] and its financial sister the International Monetary Fund.
The World Bank, after a more rapid than anticipated completion of the post-World War II European reconstruction for which it originally was created, almost accidentally turned under U.S. direction to financing longer-term infrastructure projects in the undeveloped world, And then, having met much of that challenge, under Robert S. McNamara it again turned to social welfare projects. There is a substantial argument that in a world of incredibly sophisticated international lending enhanced by the digital revolution, its mission is long since over.
Now Beijing comes along, proposing that it head a copycat international banking operation, which would fund infrastructure. But Beijing running a multinational financial operation for “good works” is hardly parallel to that task undertaken by the U.S. and its allies in the post-World War II world.
The Chinese are notorious for corruption in their international lending as in all their economic transactions – and ignoring such ephemeral but important concepts such as environmental concerns and credit safeguards. But at the moment Beijing faces a series of collapsing overextended binational international lending problems. Tens of billions in loans, many of them swap credits against a now deteriorating energy market, include Angola, Venezuela, Nigeria and Brazil. They will now have to be refinanced, although how is far from clear.
In the face of Beijing’s growing overseas debt, foreign banks have begun demanding collateral even for loans to its highly favored huge state corporations, apparently preparing for a rise in defaults in the world’s second-largest economy. This is all overhung with an economy growing at its slowest pace since its dramatic opening to foreign capital and technology, and with an unknown downward trend which Beijing is desperately trying to disguise.
If the Chinese were successful with their new venture calling for a new international infrastructure bank under their direction, it would be an operation in reality to refund Beijing’s failing overseas lending and another attempt to boost its highly subsidized exports, already wrenching the world economy out of shape but faced with rapidly rising costs and intense competition from other low wage producers. That there are willing partners in this situation for such an obvious strategy among its trading partners goes back to the continued wishful thinking about the Chinese economy.
The Obama Administration, increasingly notorious for its foreign policy gaffs, opposed the new Chinese bank. But its campaign of opposition to the participation of its allies has, for the moment at least, collapsed. The lure of the Chinese growth mirage has been just too powerful even for London, with its famous City expertise notwithstanding, not to succumb. And it remains to be seen whether such already hard-pressed economies such as Australia’s – ironically suffering from that precise downturn in commodities prices, its principal exports, brought on by the drop in speculation on Chinese continued high growth rates.
Underlying all these decisions is the incredible Chinese lack of transparency and outright counterfeiting of its statistics. There is no end to what we don’t really know about the Chinese economy, whether shadow-bank lending, local-government financing, intra-local-government borrowing, unfunded pension and health-care liabilities. household finances, etc. There is considerable doubt that even the most studious and independent economic observers in and out of the Chinese government know themselves.
What we do know is that in all these issue, debt has been rising at a phenomenal rate. That means, as Michael Pettis, a finance professor at Peking University, has warned: “The problem in China is not the stock of foreign debt but the commitment to a growth model that requires an unsustainable rise in debt simply to keep the engine running.”
sws-03-29-15

Obama Losing his war on the American Economy


Whether the fourth quarter 5% growth of the U.S.gross development product [GDP] is a fluke, another wave of the troubled sea of the longest recovery in recent American history, it is evidence of the miraculous strength of the U.S. economy.
Some are predicting it means a return to 3% annual growth rates next year, still not what is required to reduce both cyclical and the new digital revolution induced structural unemployment, but back to “normal” trends..
The war the Obama Administration has been waging against business, private initiative, and historical American innovation hasn’t been able to stifle the basic American entrepreneurial spirit. Nowhere is that more apparent, of course, than in energy.
For the energy revolution which has come about as a result of the private sector pursuing new technologies to develop shale gas and oil, of course, are at the center of the miniboom. And, the chutzpah of the Obama Administration’s claiming credit for something it fought as vigorously as its amateur planners could – promoting higher energy costs to encourage their vaunted shift to new fuels — is even by the standards of this Administration, outrageous. It remains to be seen whether a new administration in 2017 might open government including offshore lands and reinforce the U.S.’ position already as the number one oil producer in the world and a potential major gas exporter.
Whether it is recreational drivers enjoying the new, lower gasoline prices, or the petrochemical industry moving back from overseas to use as throughput cost a price for gas a quarter of deliveries in East Asia, the domestic economy is getting a shot in the arm. Not even the threat of an unconstitutional Obama’s Environmental Protection Agency all-out attack on all American electrical production and manufacturing can stymie the trend.
The international impact of this remarkable and relatively sudden development is still playing out.
The world energy price, however much markets are segregated by political concerns, is still in the throes of being threshed out. But lower energy prices, even in the fickle oil market, are obviously with us for several years. That’s the result of the American shale revolution, but also – despite all the feuds and guerrilla in the Mideast – the coming on market of more and more production. Boycotts and sanctions have only increased the black-markets nipping and tucking through all the back alleys of the world economy to market more oil.
It’s hard to know where to begin with what we already see as the immediate results of the world energy goldmine:
Saudi Arabia, hoping to impede the American and foreign shale revolution with its higher costs, is pumping more oil than ever from its low-cost resources. It hopes not only to have an effect on a possible competitor as the U.S. moves to becoming, again, a gas [liquefied natural gas, LNG] and oil exporter, but to deal a blow to its Mideast rivals.
Venezuela’s two-bit caudillos are in trouble with their heavy oil. [They will have new competition as the Keystone XL Pipeline finally overcomes Obama’s opposition to deliver similar Canadian tar sands oil to the Houston where one of the few refineries which can handle Caracas’ goo exists]. Nor can the collapsing Venezuelan regime continue to feed subsidized energy to its leftwing anti-America playmates. It remains to be seen if Obama’s life preserver thrown to a Castro regime, the first victim of such a shutoff, can save that crumbling dictatorship which has brought infinite misery to its people.
Lower world oil prices may be able to restrain an aggressive Tehran. They may do what American sanctions and a less than dedicated Obama negotiation to block the mullahs’ drive for nuclear weapons has not done. Lower oil prices for its relatively high cost production is tearing the guts out of an economy already in trouble on a variety of scores.
The Chinese are also on a downward spiral as their two big economic props – massive infrastructure development and exports – are being undermined, the first by a crippling debt crisis and the second by a dawdling world economy and growing competition from other low wage producers. But new cheaper worldwide energy will help as they are unable to turn to their own shale resources [mismanagement and lack of technology] as they become larger importers.
Japan and South Korea’s stagnating economies, too, will profit from their lower energy import costs, especially Abemomics in Japan which has had to suffer cutbacks in its heavy reliability on nuclear power as a result of the 2011 earthquake and tsunami catastrophe.
There are going to be groans and yelps from the great international oil conglomerates, too, who have Veneuzle=been riding high in the stock markets on high prices and profits. That may discombobulate some of the financial crowd and some of their kept media, but cheaper worldwide energy is bound to move the world economy forward – and in the process cripple some of the worst corrupt regimes. Not a bad way to enter the New Year, all things considered.
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Funding the Castros’ tyranny


The amateur ideologues of the Obama Administration have fallen into another snakepit with their tacit endorsement of the notorious Cuban dictatorship. That’s despite all the nonsense about a blossoming Cuban economy if Washington just relents.
In reality, Washington is buckling in its opposition to one of the world’s most hideous regimes. Now its death throes will be perpetuated for Cuba’s 12 million people with the help of such deep thinkers as Sen. Rand Paul who dreams despite all the evidence in China and Vietnam to the contrary that contagious capitalism will bring down a police state.
Even more shameful is the helping hand – which Pres. Barack Hussein Obama acknowledged – of Canada and the Vatican in this new Obama enterprise. For half a century Canadian nickel interests and the always anti-American wheat lobby have blackened Ottawa’s reputation with its support of the Castros. At the Vatican, whose help Obama also acknowledged, there are echoes of the Church’s tacit support of Franco and other cruel dictatorships, as well as Jorge Mario Bergoglio’s ambiguous relationship with Argentine totalitarians as Jesuit Father Provincial in his native country before mounting the papacy. [Nor is this gesture likely to help stave off the growing influence of Evangelical Christians on the old Roman Catholic monopoly of Christian believers throughout Latin America.]
Despite all the talk of the regime moderating , Raúl Castro holds more than 57,000 political prisoners. And his dungeons have sucked in more new victims in the past year than the five previous years. Conditions are as bad as in the worst days of the Soviet Union and the East Eruopean Communist Bloc, producing hunger strikes in a noble if feeble effort against solitary confinement, beatings, restricted family visits and denial of medical care. There is no redress except for American citizens like the naïve and very lucky Alan Philip Gross who had maximum U.S. support for his release on trumped up charges, but only after five years..
The fiction that Cuba has anything to sell or that investments there could pay off has been refuted by decades of failed efforts by the Europeans – especially Spain – to circumvent the now tattered American embargo. Little Cuba has no hope of repaying some $25 billion it already owes these ambitious “investors”. Prepare yourself for the coming suggestion that the International Monetary Fund and World Bank [with the U.S. carrying its quarter or more of support] to “amortize” these bills.
The destruction of a thriving if troubled Latin American society in the 1950s came with the help of the same cheering section of the current White House strategy [notably The New York Times]. When Cuba left the real world a half century ago, it ranked fifth in the Hemisphere in per capita income, third in life expectancy, second in ownership of cars and telephones with a 76% literary rate. [The fact that it was 11th in the world in the number of doctors per capita gives the lie to the Castros’ claims of creating a new medical miracle.] Cuba’s prosperity then was largely paid for by a guaranteed sugar import quota in the U.S., its principal industry and income producer, and tourism for a glamorous if corrupt nearby tourist capital in Habana..
Now Cuba comes back into the world not only with its sugar industry in ruins, but in a world with a half dozen “new” sweetener competitors [including highly subsidized U.S. domestic beets], no possibility of a guaranteed American market, and a world drowning in subsidized sugar programs. [This week the U.S. has hauled Mexico up on a charge of dumping its subsidized sugar in American markets in violation of the spirit if not the letter of the North American Free Trade Agreement.]
After decades of Communist repression and mismanagement, Cuba has reached a desperate crisis. Its Venezuelan ally which had provided subsidized energy in exchange for Castro assistance in setting up its own police state can nolonger foot the bill for Cuban energy.
That was the situation when Obama and his speechwriters rushed to fill the gap.
Now greedy American exporters – supercharged with their own program of an annual $14 billion in corruption-ridden agricultural and export subsidies – will be bidding with their Canadian taxpaying counterparts for supplying the starving country. Any extension of aid – private or government – will end up in the hands of the regime in its effort to survive by continuing to exploit an impoverished population.
Not only did Raúl Castro not make even the nominal concessions he has made in the past toward a liberalization of the regime, but so-called “reforms” permitting small scale private enterprise are a sham.
To the extent Obama can carry out his tactics despite formidable opposition in the Congress, his strategy will only intensify the implosion when it comes in Cuba. Rather, the American government should be preparing for that day, not the least for the tens if not hundreds of thousands of refugees who will flow toward Miami. Fifty years of dealing with the problems of another small Caribbean tropical island, Puerto Rica, a third Cuba’s size, have taught us just how difficult those problems will be.
sws-12-21-14

A pipeline to …well, almost …eternity


Follow the money No. 97

A pipeline to …well, almost …eternity

Camouflaged by Congressional political badminton and Pres. Barack Obama’s demagoguery, the Keystone XL Pipeline Project represents solutions to economic and security issues far exceeding its general appreciation.

Half truths on all sides have obscured the project’s underlying fundamentals. Some are only emerging as additional research and technology is applied – most of it, for a change, good news in that it boosts estimates of access to available North American new fossil fuels reserves even if at higher prices.

Contrary to claims of Congressional proponents, the project is not an immediate positive economic bonanza. Like all natural resource development projects, construction employment will be temporary and jobs minimal when the pipeline is actually functional. Of course, given the current environment, any new jobs of any duration not added to the public payroll — the project is funded privately at something over $7 billion — is a godsend.

Its importance lies in its contribution to what should be a longer term U.S. energy strategy, a consideration often missing in heated partisan debate.

First of all, direct access to the Canadian tar sands affords fallback access for the almost bottomless U.S. energy maw – developing rapidly long- term whatever the short-term diminished demand of a temporarily crippled economy. Scandal after scandal is proving the Obama Administration’s so-called green energy strategy corrupt as well as wasteful and ineffectual. Keystone, on the other hand, would put crude into the Texas petrochemical refinery complex already absorbing Venezuela’s similar heavier oil – those reserves recently reestimated upward with spectacular finds on the Orinoco River.

That would give the U.S. not only an emergency alternative to the Venezuelan crude, fourth largest of our import sources, but leverage against the machinations of gringo-baiting Venezuelan Pres. Hugo Chavez. Given that country’s long troubled history, necessary insurance is needed even in a post-Chavez Venezuela [soon perhaps with reports the fiery demagogue may soon fall victim to cancer largely untreated so he could continue exercising his one-man rule].

The expanded pipeline proposal also now would pick up on its way the more attractive sweet crude from the Bakken strike in North Dakota, already one of the largest in U.S. history and apparently linked by new successful prospecting and new shale recovery technologies to huge neighboring regional deposits. With Bakken already having added an estimated 10% to American reserves, these could turn into the largest petroleum find in U.S. history.

As the pipeline travels south, it also aims at untangling a crude gathering traffic jam in Oklahoma and expanding the tanker delivery scene on the Texas coast.

But radical environmentalists had chosen – with the help of the usual Hollywood suspects assuaging their guilt for their gratuitously huge earnings – to make Keystone a major test. That was despite three years research by experts for the State Dept. had not turned up sufficient environmental issues to block the project. When local interests in Nebraska – ignoring the relatively clean record of the country’s vast pipeline networks – argued spills might threaten a critical local aquifer, the Canadian company countered with a $100-million-dollar detour around it.

Washington rumors are Sec. of State Hillary Clinton was not only not consulted but not forewarned when Pres. Obama, anticipating the 2011 election, threw a bouquet to enviromentalistas who had been increasingly jaundiced at his 2008 promises. But with even normally loyal trade unionists joining the outcry against the White House postponement to go ahead until after next year’s election, it was inevitable the issue would become a cudgel for the Republicans.

Canadian threats to transfer their affections to the Chinese market might have some validity – although even Chavez is arranging swaps with Iran for his Chinese sales with Venezuelan crude supposedly sold Beijing flowing into Texas. But level-headed Canadian Prime Minister Stephen Harper – an economist and native of Canada’s provincial giant oilwell, Alberta – may have overestimated American common sense. [Recent hints suggest Ottawa feels it is dealing with an overburdened, troubled U.S. and has to demonstrate inordinate patience for both their sakes. One has to wonder what the two chief executives talk about in frequent and what appear to be pleasant meetings!] But, in fact, Canada’s role as No. 1 foreign energy supplier to the U.S. – something forgotten in much of the talk about “American energy independence” – probably, rightfully, isn’t going away in the near future. The Republicans may be seeing to that.

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