Irresponsible Trump – Part I

Irresponsible Trump – Part I

Howard Adelman

Donald Trump praised the extreme right-wing blogger, Mike Cernovich, who labeled DT’s own security adviser, General H.R. McMaster, as a puppet of George Soros who in turn allegedly owed his allegiance to the Rothschilds. No wonder that the violent demonstrators in Charlottesville Virginia in turn openly insisted that they were there in support of Donald Trump and what he stood for. So why did Donald Trump take two days to read from a teleprompter the following?

“Racism is evil, and those who cause violence in its name are criminals and thugs, including the KKK, neo-Nazis, white supremacists, and other hate groups that are repugnant to everything we hold dear as Americans. We are a nation founded on the truth that all of us are created equal. We are equal in the eyes of our creator, we are equal under the law, and we are equal under our Constitution. Those who spread violence in the name of bigotry strike at the very core of America.

We must love each other, show affection for each other, and unite together in condemnation of hatred, bigotry, and violence. We must rediscover the bonds of love and loyalty that bring us together as Americans.”

However, as Martin Luther King Jr. once said, “Loose and easy language about equality, resonant resolutions about brotherhood, fall pleasantly on the ear, but for the Negro, there is a credibility gap he cannot overlook. He remembers that with each modest advance the white population promptly raises the argument that the Negro has come far enough. Each step forward accents an ever-present tendency to backlash.”

No wonder that many remained dissatisfied with DT’s clarification, and correctly so as we saw with extreme clarity yesterday. First, the statement was greeted as too little and much too late. Second, it appeared only to be the result of DT feeling cornered, given the widespread criticism from his own party. Third, though he had promised to hold one of the rarest events in his presidency, a press conference – a promise which he eventually kept yesterday – he did not keep his promise the previous day. Fourth his statement was read and, to many, came across as disingenuous because it lacked the personal voice and conviction he conveyed when he condemned Mexican illegals as rapists and Muslims as terrorists and that was part of yesterday’s rant which took back everything he read the previous day and went back to equating the thugs who, DT claimed, were mixed in with the good people protesting the taking down of the statue, with violent protesters on the other side.

Fifth, he did not include the “alt-right” in the groups he explicitly mentioned; yesterday he pointedly demanded that a reporter define the alt-right – a phrase he deliberately refused to use, but, as I indicated in my previous blog, the white supremacist, Richard Spencer coined and defined in terms of racism. Sixth, instead of highlighting the neo-fascist and racial issue, in his five-minute speech, he made his anti-racist comments as a footnote to the success of his economic policies (without, of course, noting that the success was the continuation of the upward curve of the Obama administration or acknowledging that the news was not all positive, and without DT noting that he was using the same evidential sources that he once condemned as phony.)

But, sixth, Trump only presented a very partial truth as he does on just about everything. The Dow Jones industrial average passed the 22,000 mark for the first time, possibly partly related to Trump’s initiatives in deregulation. Unemployment fell from 4.8% when Obama left office, to 4.3%, and is threatening to close in on Bill Clinton’s record of 3.9% unemployment. But wages and GDP growth both remain flat, though DT, against common practice, rounded up the GDP rate upwards. Disparities continue to grow and the labour force participation rate has actually fallen. If DT is not lying about the economy, he still repeats his habit of ignoring evidence that fails to support a claim he is making.

Seventh, DT did the typical blaming, condemning the media for fake news in its coverage of the Charlottesville violence: “Made additional remarks on Charlottesville and realize once again that the #Fake News Media will never be satisfied … truly bad people!” Eighth, when Ken Frazier, an African-American and CEO of Merck Pharma, dissociated from Trump’s failure to condemn the racists by resigning from the President’s Manufacturing Council (“America’s leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry and group supremacy, which run counter to the American ideal that all people are created equal.”) Trump, instead of trying to empathize and understand and holding an open hand for Frazier to return, instead of being penitent and seek to heal the wounds he had opened, instead of being contrite, he was hostile and turned on Frazier and bitterly tweeted, “he will have more time to LOWER DRUG PRICES.” (In a second tweet, he said, “Merck Pharma is a leader in higher & higher drug prices while at the same time taking jobs out of the U.S.”) So why had he appointed him the Manufacturing Council? Why did he not rebuke the two, and, subsequently, five white members who resigned following these rebukes and following rather than preceding his effort to correct the record?

Ninth, Trump never apologized (but he never does) for his initial failure to condemn the neo-Nazis; Trump does not do atonement. Instead of bending on his knees for forgiveness, Trump boasts. Tenth, he announced no new actions to gather intelligence on the alt-right and to prepare for government intervention and prevention. Finally, he did not announce that he would fire policy adviser, Stephen Miller, and especially chief strategist, Steve Bannon, who once headed Breitbart News which allowed the alt-right a voice.

The Trump failure to vocalize his condemnation of white supremacists, the small vocal and demented faction of a larger though minority part of racist America, stood out more boldly because of what other members of his team stated. Attorney General Jeff Sessions said that the alt-right attack on counter-protesters fit the Justice Department’s definition of “domestic terrorism,” even though he had instructed his department to investigate, not the alt-right, but American universities for discriminating against white applicants. Sessions is now investigating the Charlottesville violence. If the violence entailed the use of weapons, including the car, to deliberately hurt the counter-protesters, then a charge of domestic terrorism might be appropriate.

In contrast to DT, Senator Cory Gardner of Colorado repudiated the white supremacists: “We don’t want them in our base, they shouldn’t be in a base, we shouldn’t call them part of a base.” Gardner urged DT to call this white supremacism “evil” with the same kind of conviction that DT used in “naming terrorism around the globe as evil.”

Sen. Orrin Hatch (R-Utah), with a moral clarity that Trump clearly had not displayed, said, “My brother didn’t give his life fighting Hitler for Nazi ideas to go unchallenged here at home.” Former Arkansas Governor Mike Huckabee condemned the torch-bearing and gun-toting and the 20-year-old James Alex Fields Jr. of Maumee, Ohio driving a Dodge Challenger, in imitation of radical Islamicism, into civilians. “The person who drove the car is a murderer when he ran over and killed 32-year-old Heather D. Heyer and injured 19 others. “That is simple murder. There is nothing you can do besides condemn that action. That is not politics, that is not America. That is evil, sinful, disgusting, behavior.” And DT.’s own daughter, Ivanka Trump, after the violence immediately and clearly stated, “There should be no place in society for racism, white supremacy and neo-Nazis.” As a convert to Judaism, she possibly was particularly incensed at the Jew-filled hate speech directed at Charlottesville’s Jewish mayor, Mike Signer and on display at the torch-lit neo-fascist march on this past Friday evening in Charlottesville.

What would she have thought if she had tuned into the news coverage by the VICE reporter embedded within the alt-right? What would she have said or even thought if she watched the torch bearers repeatedly chant, “Jews will not replace us” and the Nazi phrase, “Blood and Soil” with absolutely no evidence of “good people amongst them simply there to protest taking down the Lee statue. What would she have thoughts if she had been with the Jewish congregants who fretted through the shabat service in Charlottesville as “Several times, parades of Nazis passed our building, shouting, ‘There’s the synagogue!’ followed by chants of ‘Sieg Heil’ and other anti-Semitic language. Some carried flags with swastikas and other Nazi symbols… Soon, we learned that Nazi websites had posted a call to burn our synagogue… but we had already deemed such an attack within the realm of possibilities, taking the precautionary step of removing our Torahs, including a Holocaust scroll, from the premises.”

America in 2017!

Inconceivable only two years ago, and even in the 1930s, white supremacists without hoods and sheets foment race conflict and congregate in a small American college town in Virginia to spew their hatred. Did DT with his personal hate speech, with his anti-Muslim and anti-Mexican rhetoric, with his reluctance to condemn white supremacists except when forced into a corner, create the atmosphere that emboldened these white supremacists? Is DT reverting to his insistence of executing the five innocent young Blacks falsely accused of raping a white woman. He had served as the voice of the birther movement, insisting that Barack Obama was not born in America. All of this helped prepare the ground for the emergence of white supremacism into the light of day?

Perhaps what disturbs me most was not how Donald Trump responded, but how some anti-liberal Jews dealt with the issue. One of the men I have esteemed for years, a Holocaust survivor, emailed me just after I left for Israel and which I read on my return: “Trump certainly is a better friend to Israel than Obama who while President visited every country in The Middle East except Israel. Thank god for TRUMP.” Would he say the same after Charlottesville?

On the other hand, Rabbi Rick Jacobs, President of the Union for Reform Judaism, said that “once again, hate has killed.” He issued a statement: “The vile presence and rhetoric of the neo-Nazis who marched this weekend in Charlottesville is a reminder of the ever-present need for people of good will to stand strong, to speak loudly against hate, and act both to delegitimize those who spread such messages and to mitigate the harm done to the commonweal of our nation and to those that are the targets of hate messages.” While commending the opening of DT’s 12^th of August statement, he said that we (speaking for the Reform movement) are deeply troubled by the moral equivalence evident in President Trump’s statement. If our leaders cannot name the culprits, then America will fail to stop it.” However, hate may motivate but an action is only criminal when the intention was to harm a specific group as defined in law.

Donald Johnston and his Hairy Twin, Donald Trump

Jun1

Donald Johnston and his Hairy Twin, Donald Trump

Howard Adelman

Donald J. Johnston (2017) Missing the Tide: Global Governments in Retreat, McGill-Queens University Press.

The evening before last, I attended a book launch at Massey College of Donald J. Johnston’s new book chastising the international community for missing the opportunities over the last quarter of a century and for failing to take advantage of unprecedented opportunities to significantly advance both global social and economic progress. The book is a lamentation with a very loud wail. For there were many opportunities, Johnston argued. ALL were missed. It is also a paean, not so much to freedom from the classical laws of economics, but a cri de coeur to impose an ethical regime in control of the economic realm.

That regime required offsetting any rise of a monolithic dominant state in favour of a newborn vision of a balance of power among states using the leverage of international institutions, but without any international agreed-upon economic standard, such as the now ancient international gold standard. The “self-regulating market” with its unprecedented record of wealth creation had to be wedded to national and international political regulation which had produced “unheard-of material welfare.” Johnston want to update the moral economics of Karl Polanyi, but with a full acceptance of the market without its neo-classical lack of moral boundaries.

For Johnston, global free trade is in retreat and, with it, the chance to extend increased prosperity to the developing world. Further, since both economic growth and social cohesion rest on a foundation of proper respect for mother earth that provides the wherewithal for both prosperity and social cohesion, the failure to adequately reduce the dangers of climate change may be the most serious missed opportunity.

Thus, the wreckage is economic. The wreckage is social. And the wreckage is environmental. But Donald Johnston is both a small “l” and a large “L” liberal and Liberal. If you do not know who he is, chances are that you have not yet reached your sixtieth birthday. In 2008, the Honourable Donald J. Johnston could add OC after his name for he was made an Officer of the Order of Canada, both for his contributions to public service within in Canada and as the first non-European secretary general of the Organization for Economic Cooperation and Development (OECD), a position he held for ten years from 1996 to 2006, just before the great economic crash of 2007-08. He not only played a signal role in those so-called missed opportunities, but had a bird’s eye view of what happened in that fateful decade.

Further, he came to that position with enormous accomplishments behind him – as a gold medalist in law from McGill in 1958, as a founding partner of the legal firm, Heenan Blaikie, in 1964, where he worked alongside my next door neighbour, also a tax and business law specialist. Johnston was first elected to the Canadian Parliament in 1978 and quickly assumed a place in the sun as President of the Treasury Board, Minister of State for Science and Technology and subsequently for Economic and Regional Development. In addition to these positions between 1980 and 1984 in the Trudeau government, he was named Minister of Justice and Attorney General in the short-lived Turner Liberal government. For, if you are old enough, you might best remember him as the candidate who ran third in the leadership race behind John Turner and Jean Chrétien in 1984 and then broke ranks when his friend and colleague, John Turner, then leader of the opposition, opposed Brian Mulroney on free trade, specifically the Canada-U.S. free trade agreement, but supported the PCs on the Meech Lake Accord. Johnston supported free trade and opposed Meech; he resigned from caucus and became an independent Liberal.

However, it is for his term as OECD Secretary-General that he will be best known. What a bird’s eye view! What an opportunity to influence the direction of history! But if you are looking for an account of his failure, forget it. For the failures were not his. They were the international community’s. There was George W. Bush’s misbegotten invasion of Iraq which initiated the undermining of the U.S. as the world’s leader with the initiation of positions and policies that were frugal on truth, disrespectful of science, expansive on pride and hubris, and thoroughly permeated by corruption and a disrespect for the small “l” liberal values of human rights.

From reading Johnston’s book, the politics of salesmanship, once slick versus the current display of vulgarity, the economics of favouring the 1% and ignoring the well-being of the remainder, promoting the military and foreign adventurism while undermining the welfare needed to hold society together, began much earlier than the ascension of Donald Trump as President. If the slick version of chicanery missed the opportunity to make Russia a full partner in liberal progress, the contemporary much crasser version is nostalgic with its outreach to a kleptocratic and autocratic Russia.

In the nineteenth century, the poor were severed both from the land and their access to charity. Trump will strip them of any possibility of realizing the dream of home ownership and, at the same time, of any right to access state welfare while promising the opposite. In contrast, for Johnston, good governance on both the national and international level was and remains needed as an offset of once vibrant communities of reciprocity.

What happened? The U.S. was only ostensibly a proponent of free trade, but actually promoted bilateral trade and investment agreements, the forerunner of Trump’s policies without his frank openness. Why did this happen? Because the U.S. was a behemoth which operated to promote its own advantage. (p. 11) Why take on the Lilliputians collectively when you could pick them off one at a time? However, if that is the explanation – the inevitability of the exercise of uneven power – why declaim opportunities missed? If that norm was truly a universal law of behaviour, then there were really no opportunities. It was all a chimera.

Therein lies the contradiction. Forces are at work that overwhelm the liberal agenda of uniting economic growth and wealth creation with policies promoting social stability and cohesion through good governance at the top and a respect for nature at the base. The laws of “power corrupts and absolute power corrupts absolutely” were reinforced by national predispositions. “Americans would never (my italics) accept the taxation levels of many European countries where there is a cultural tolerance for higher taxation to support public funding for education, health, and social safety nets.” (p. 14) But that meant the trajectory in the U.S. would always favour the rich at the expense of the middle and under class and would need foreign adventures to distract the populace through patriotic appeals and circuses.

The book is permeated with various versions of this contradiction between the inevitable power of social forces and the faith in choice and taking advantage of opportunities to forge what my son, the Henry Charles Lea Professor of History and Director of the Global History Lab at Princeton University, calls the doctrine of moral economics, which he identifies with Karl Polanyi. (See Jeremy Adelman, “Polanyi, the Failed Prophet of Moral Economics,” Boston Review, 30 May 2017.) The connection need not be inferred. It is totally evident in the accomplishments at the OECD for which Johnston is lauded: establishing the world standard for the Principles of Corporate Governance, the revised Guidelines for Multinational Enterprises enunciating the norms of corporate social responsibility, correcting harmful international tax practices; the international harmonization of competition policy, fostering sustainable development, and, as well, establishing the Education Directorate and the Program of International Student Assessment (PISA) for assessing educational comparisons. For unlike Karl Polanyi, an intellectual father, Johnston strove to institutionalize morality and not leave it as a moral cloud haunting the economic market.

Without apology or any self-critical analysis, Johnston was and remains a champion of one version of Polanyi’s moral economics and moral norms, that in both their moral and institutionalized iterations proved to be as weak a barrier to the floods produced by raw capitalism as the levees that promised to hold back the waters of the Gulf of Mexico in Hurricane Katrina from drowning New Orleans. For a number of years, I used Karl Polanyi’s classic, The Great Transformation: The Political and Economic Origins of Our Times (1944) in the general education courses that I taught at York University. As it turned out, it was my marked-up copy that Jeremy used in writing his article.

As Jeremy writes, Polanyi’s book is a “sacred text” for liberals unable to stomach the laws of inevitability espoused by both Marxists, on the one hand, and the worshippers of untrammeled markets and the invisible hand, on the other hand. Could liberalism counter “the iron broom of the classical economists”? He wrote a sacred text against a background when capitalism met its most profound economic crisis of the twentieth century, the Great Depression, and its most horrific political crisis, the rise of populist Nazism with its accompanying antisemitism in Europe.

Like Polanyi, Johnston is an “ethical stepchild of nineteenth-century liberalism, quick to condemn its shortfalls and determined to create a new moral order without the odor of Marxist class conflict.” However, unlike Polanyi, Johnston wanted to embed economic moralism in international institutions, for he accepted rather than rejected the globalization of consumption. Polanyi was a Puritan; Johnston is an Anglican or Episcopalian, at least in the secular economic religion. The market was not just a source of plutocratic enrichment at the expense of workers. It was the arena for creating wealth and it had to be tamed by rules and umpires and not treated as a circus for distraction.

Thus, Johnston’s book is timely and is part of a revivalist movement to beat back “the era of walls, visas, Eurofatigue, and slumping global trade.” He offers a moral counterpoint. Johnston writes about using good (my italics) governance to ensure the transfer of the benefits of growth to society as a whole. Could the OECD serve as an offset to the cult of stable money which was administered by states under a doctrine of state sovereignty, but where the forces at work lay “outside national boundaries, beyond the reach of community regulators”? Polanyi argued that markets had to be “embedded” within social norms to ensure the benefits served communal purposes.

I have written previously about the role of assimilated Jews who tried to address current economic and political issues with the moral lessons of the Torah, but where the Torah was only a silken thread connecting these modern “protestants” to their historic roots. Today is Shavuot that celebrates God’s giving of the Torah on Mount Sinai. Since I did not stay up this year to study Torah all night, it is convenient to refer to Julie Nathan’s essay, “The Gift of the Law: Civilisation, Shavuot and the Hatred of the Jews” (Religion and Ethics, 29 May 2017) Nathan wrote that the Jewish nation, which has had a lasting influence and impact on the human heart and mind rather than its institutions, unlike the great civilizations of the ancient world that grew up along major waterways, “did not develop along a major river or amid lush vegetation, but was born in an arid desert, in a no-man’s land, and was founded not by kings and conquerors but by pastoral nomads and runaway slaves.” Polanyi may have left his shtetl Judaism behind, but he carried forward its emphasis on ideas, on values, on ethics and on laws to serve as a vision for humanity, but in a Christian form.

Look at Polanyi’s norms: human brotherhood, the sanctity of life, respect for individual dignity, the role of conscience, the upholding of social responsibility, respect for human rights, equality before the law, and a vision of the world guided by justice in pursuit of peace. Jeremy was named after Jeremiah, the prophet of peace. Nations “shall beat their swords into ploughshares and their spears into pruning hooks. Nation shall not take up sword against nation. They shall never again know war” (Isaiah 2:4). More generally, “Justice, justice shall you pursue” (Deuteronomy 16:20) and, “Love your neighbour [and] the stranger as yourself” (Leviticus 19:18, 19:34)

These were the values of Karl Polanyi. These remain the basic values of Donald Johnston. For Nathan, “Jews are targeted because they are the bearers of these values, the living affirmation of a universal message of a humanitarian and ethical world. Will Donald Johnston also be reproved for trying to revive this ancient message? Or will he be ignored and his analysis relegated to the dust heap of history because it fails to engage self-critically to truly understand why those norms could not succeed against the forces of Mammon?

Assimilated Jews cast adrift from their moral bearings, tried to resurrect and concretize them in international institutions. Donald Johnston, an archetypal WASP and visionary Canadian, emerges as an honorary Jew. As Larry Zolf used to say, “When you are in love, the whole world is Jewish.” Alternatively, one could be Jewish like Polanyi who eschewed knowledge of his origins and opted for resurrection without history. Polanyi claimed that Jews “were guilty, not for the death of Jesus, but for ‘rejecting the teachings of 4520885018036092Jesus, which are superior’.” Polanyi championed a new Christian unity superimposed on free markets and expressing the importance of a political balance, in the Aristotelian sense, set in place by these overarching values.

This is self-evidently a romantic view of Judaism and of the world. Polanyi was an heir to that romanticism. Whereas, both are proselytizers of a sacred secular economic and political religion wherein liberals in a confessional mode flagellate themselves for the failures of their liberalism, Johnston is an Orthodox rabbi in comparison. But both were blind to the real dangers of populist nationalism. “Now, will the Trump administration correct this crumbling once-great democracy or will it, like others, be seduced by the extraordinary wealth of some Americans instead of being motivated to address the poverty and disillusionment of millions who supported Trump?” (p. 16) To even pose this as a question, to even ask whether Trump and Trumpism will be seduced by money, to even hold out the possibility that Trump will convert to the religion of economic moralism, is to expose the emptiness of this economic dream world and suggest why it stood powerless in the face of opposing forces.

Further, there is a failure to grasp Trump’s policies of railing against currency manipulation, implicitly favouring managed currencies, his national protectionism opposed to globalized economic forces, and make-work in industries such as coal mining. All these policies merely demonstrate that Trump, rather than Johnston, was not the usurper of Johnston’s birthright, but rather the true wished-for heir of the small “l” liberal tradition, Jacob (Johnston) longed to steal the birthright of Esau (Bush/Trump), but without Jacob’s mother’s wile. Polanyi was Johnston’s intellectual father, but Trump was the natural heir, not moral economic globalism embedded in institutions.

Johnston ends with this assertion, “I think it will happen.” It reveals the triumph of hope over reality, belief over facts, faith over skepticism, in fact, the very same foundation of charlatan Trumpism’s cynical evangelism based on faith rather than truth, founded on a lavish lifestyle, the Benny Hinn of American secularism. As Jeremy asked, is the search for the middle but a cover for the intellectual, economic and political misery of a muddle?

Lamentations focus on the gore of history. Charlatans nostalgically appeal to past glory. But both were conceived in the same womb.

To be continued.

With the help of Alex Zisman

The Irrationality of Humans

May21

The Irrationality of Humans

Howard Adelman

In this series of blogs I began a week ago, I tried to sketch the deep philosophical assumptions underlying a variety of approaches to comprehending and managing the polis. How do we organize our political lives and to what end? The blog on last week’s Torah portion offered a moral approach, as set out in the Book of Leviticus, essentially setting up rules for redistributing wealth in the economy. The presumption was that religious laws could be imposed on the polity and used to counteract the built-in propensities encouraging economic inequality.

A variation of this approach is currently being applied in Iran which just witnessed the landslide re-election of an ostensible reformer, President Hassan Rouhani, against his challenger, the hardliner, Judge Ebrahim Raisi. I call Rouhani an ostensible reformer because his program differs markedly from the puritans who want to close off Iran to Western influences versus the Rouhani position of greater flexibility and interaction with the rest of the world. Rouhani has a more tolerant perspective on the role of domestic individual behaviour and external foreign interests in dealing with the policies of the polis. But both the reform and the conservative leadership remain committed to the precepts of Islam framing the polity. The conservatives want to control it as well.

The previous two blogs analyzed a book that won the Donner Prize last week (Alex Marland’s Brand Command) which documented the Stephen Harper government’s method of centralized control and the use of branding to manage the polity. My critique insisted that the book had inverted the roles of framing and branding, and that the key issue was framing. Branding was simply a method of covering up the contradictions within the Tory base between free enterprise conservatives, who oppose any moral frame for the polity, and community conservatives who believe the polity should conform to historically predominant Christian norms.

The analysis also implied that, as long as Liberals (or Democrats in the U.S.) covered up the divisions on their own side between economic liberals who believe, on the one hand, that a light touch of liberal tolerance and justice can be used to manage the polity, its inequalities and injustices, versus a more radical wing that sees the need for a greater role of the state in managing competing interests to ensure greater equality, then a well-disciplined opposition with a clear brand can disguise and, indeed, repress those fundamental differences, and then win. The brand can be the disciplined command and control that Stephen Harper employed or the anarchic populist appeal used by Donald Trump. Branding is a tool used to manage contradictions and manipulate constituents either by means of control and command or by populist appeal.

Framing, however, has priority, for if we fail to understand the warfare over principles, in despair a divided polis can easily turn democratic representative and responsible government into a populist system run by a demagogue. The warfare is not simply over principles, but over the role those principles are permitted to play in the polis. To understand the tension between various sets of moral principles wanting to provide the frame, and the behaviour of humans within the polis, it is necessary to acquire a better grasp on that behaviour and the nature of the tension and tribulations between the frame of the polity and the behaviour of its members. In this blog, I concentrate on the latter. In the next blog, I will analyze the civic religion in Canada that provides Canadians with a generally dominant overarching frame.

Conservatives are divided between free enterprise and community conservatives. For free enterprisers, humans are rational actors who make choices to maximize their own individual interests, but their interests are determined by a deeper human nature driven by a need to survive at a minimum, and by greed and acquisitive drives that build on and enhance the survival mode. Humans may be driven by greed, where the principles of survival play a commanding role, but they also may be driven by passions that have an inherent propensity to undermine interests. The predominant Christian ethos was based on the need to control passions that could wreak havoc in our individual and collective lives. Is life or desire fundamental? Neither is rational.

Daniel Kahneman and Amos Tversky, two Israelis who worked in the United States for years, won the 2002 Nobel prise in economics for documenting and explaining individual economic behaviour and demonstrating that it was fundamentally irrational. Their proofs also undermined the rational choice assumptions of the high priests of monetary policy whose behaviour Juliet Johnson described in Priests of Prosperity, a nominee for the Donner Prize. The sacred religion of rational choice was upended in the economic crisis of 2007-2008. Imprinting and unconscious embodiment explain to some degree why survival and desire dictate choices more than any rational deliberation over alternatives to determine which one will best satisfy our individual interests.

The work of both men in behavioural psychology and their articulation of prospect theory undermined totally the Kantian assumption that judgement was simply the process of rational reconciliation between our moral values and our understanding of the world in accordance with the laws of nature, between practical and pure reason, between morality and nature. In 2011, Kahneman published a volume with great popular appeal, Thinking Fast and Slow, which contrasted our predominant predisposition for fast thinking, for thinking that I have described in my writing as searches for congruencies between one’s own inscribed views of the world and priorities in dealing with it, and rational deliberative decision-making.

If you are a free enterprise conservative, you are steeped deeply in the frame set out by both John Hobbes and John Locke that humans are interest maximizers and possessive individualists determined to secure their futures by seeking to acquire and own goods ad infinitum. Humans were inherently possessive individualists driven by the natural laws of survival. Kahneman, using his original work on complex correlational structures and studies of how attention, more than the actual observed world, was correlated with actual behaviour. Influenced by Richard Thaler’s pioneering work on consumer choice and hedonic psychology, in 1982 Kahneman published with Amos Tversky Judgement Under Uncertainty: Heuristics and Biases.

Both men were Israelis. Kahneman in particular had served in the intelligence service. The IDF, the politicians and Mossad in 1973 had all ruled out the possibility of a massive assault by the Arab forces. After all, Syria and Egypt had both suffered enormous psychological and physical defeats in the 1967 war. Any rational assessment would have indicated that initiating a war with Israel would be self-defeating. The failure of the intelligence operation to anticipate the possibility of an attack, the failure to look at worst possible scenarios, ignoring or misinterpreting data the IDF itself had collected of an imminent attack – that Russia advisors had withdrawn – failing to recognize that Egypt was currently driven by a sense of shame and a need to recover some honour, even at the risk of another great defeat, had, together with other forms of mindblindness, produced a situation in which the fate of Israel had been risked and almost sacrificed to this immersion in preconceptions that made both the state and much of society blind to the motives and actions of others. Even at its most fateful level of survival, irrationality had framed and limited rational deliberation. And Kahneman and Tversky went on to demonstrate how this mindblindness and irrational choice revealed itself in the most mundane of subjects, consumer choice.

Thus, began the tectonic shift undermining rational choice theory based on interests. Choice was seen to be rooted, not in survival and life, but desire and the assessment of whether an experience will be pleasurable rather than painful. While life emphasizes the needs necessary for the body to survive, desire is something else. It is the effort to see ourselves projected into the world and recognized by another, usually another seen as superior in some respect, for who we have become and what we have accomplished. The individual suffers discomforts and even pain when that recognition does not come. Desire is not material, even as it is manifested in material things. God is portrayed in the Torah as motivated to create the world in the first place to become manifest and to be recognized through projections into the world. Humans were created with the ability to provide that recognition. In contrast to God, humans had the benefit of being embodied.

Humans are not so much possessive individualists as troubled personalities making mistake after mistake about what satisfied their interests, mistakes made precisely because they are governed in their judgments and decisions by a commanding illusion that develops mindblindness, an incapacity to take into account a variety of other factors as they focus on a specific one perceived as crucial to realizing who they are. Humans are not so much possessive as obsessive individualists.

If not for obsessive individualism, how else can you explain why Israelis living in an environment in which neighbours threaten your very existence and when personal allies argue endlessly over every triviality, they nevertheless perceive themselves as extremely happy? They do so certainly in comparison to members of Nordic countries who have created polities that do far more than any other on earth to ensure both that needs are satisfied and that long-term security is achieved. Israelis were indoctrinated to believe in Jerusalem of Gold, that Israel was the Promised Land, even though the external evidence to the contrary was overwhelming. On the other hand, in one study by Kahneman and Gilbert, Midwesterners in the U.S. experienced themselves as deficient in comparison to Californians because they suffered from a much harsher climate; they became convinced that good weather would solve their discontent. Any study of the experience of Californians would show it would not.

Cain and Abel were not driven by possessive individualism. They clearly demonstrated this by their willingness to sacrifice the best products of their labour so that God would recognize them as the best. When one received the recognition and the other did not, the latter was driven, not just to distraction, but to murder the other, not because of the superiority of the other’s nomadic life, nor because of all the herds the other had collected that he as a farmer had not, but because this nostalgic way of life seemed to be recognized as superior by the same God of judgement. There would always be a bias to the status quo called nostalgia or, in modern economic and political theory, status quo bias.

Kahneman and Tversky pioneered in developing an understanding of base rate fallacies and cognitive, optimist and conjunction biases, in attribution substitution and the economic conception of loss aversion that undergraduates find so entrancing in undermining rational choice theory. Together they built the structure of prospect theory and established the primacy of framing, but have thus far had only a marginal impact on the economic religion of rational choice. Their own work could be used to predict how difficult it would be for the status quo of economic rational choice theory to absorb the lessons that emerged from their research.

They provided a solid empirical basis for undermining rational choice theory that has been reinforced by the research of neuroscientists on imprinting and on more contemporary versions of the theory of the unconscious than Freud offered. We are, to a great extent, our genes and the environmental imprinting in our lives.

In the contest between genetic determinants and environmental cues, we learn independently of the consequences, not only because of the genes we have inherited, but because we can only really learn some things when we reach different stages of life. Learning is phase-sensitive. It works through genomic imprinting: DNA methylation and post-translational modification of DNA-associated histone proteins. The 1,000+ transcripts in our brain – particularly in the subgranular zone of the dentate gyrus of the hippocampus – is where memory is imprinted and learning takes place in a process of neurogenesis. Thus, it is not only our organ development, the development of our muscular-skeletal system and organs as imprinted in the subventricular zones and lateral ventricle of the brain that stage our physical development, but our mental development is, to a large degree, also determined by imprinting.

Alongside these developments, in the actual field of politics, efforts were initiated to select politicians who could perform. Hillary supposedly lost because she was so stiff. It was only after she had lost and gave her first interview that she seemed to relax. The goal became to groom politicians to match biases in the populace and to appeal to those biases through controlling the brand or, more demonstrably in the U.S. in the last election, deal with the incongruence of the candidate and both the needs of the populace and the needs of the nation with a more fundamental emotional appeal, even if originating in the chaotic mind of a populist candidate versus the chaos in the beliefs of the populace.

Thus far, Canada has avoided that fate because it has a strong civic religion. But dangers are evident concerning the fragility of the faith.

With the help of Alex Zisman

Undercutting or Reinforcing Canada’s Civic Religion

May19

Undercutting or Reinforcing Canada’s Civic Religion

Howard Adelman

In the previous blog, I wrote about the philosophic underpinnings of our current Canadian value system, what I call our Canadian civic religion. The positive spirit of our time and place is well expressed in the values and morals that have become dominant in Canada. They express the Absolute as revealed in our history that is articulated in the religious and moral consciousness of our age. There is possibly no better place to observe this spirit at work than at an interfaith conference held in Canada’s capital to commemorate the country’s 150^th birthday as those in attendance searched for solidarity in diversity. The conference focused on Islamophobia, social inequalities, the plight of aboriginal peoples and on immigrants and refugees. In the final blog of this series, I will address the key elements of that civic religion, but today, tomorrow and the next day, I want to describe the conditions of our time that threaten it.

This past week, I attended the awards ceremony of the Donner Prize, a $50,000 award given to the best book published in Canada or by a Canadian on a public policy issue. The criteria for the award include the topicality of the issue covered, its significance (in the sense of importance) and the skill in communicating the subject matter. When the chair of the jury described the criteria and the process, he did not mention the depth, breadth and quality of the research and analysis entailed, but these factors could possibly have been included in the third criterion. A discussion of the five books on the short list offers a convenient portal to explore core Canadian values.

The five nominees for the prize, with my short form of reference included in square brackets, were:

L’intégration des services en santé:une approche populationnelle[HIS – health services integration] (Yves Couturier, Lucie Bonin & Louse Belzile);
Priests of Prosperity: How Central Bankers Transformed the Postcommunist World[Priests] (Juliet Johnson);
A Good Death: Making the Most of Our Final Choices[Good Death] (Sandra Martin);
A Field Guide to Lies: Critical Thinking in the Information Age[Lies] (Daniel J. Levitin);
Brand Command: Canadian Politics and Democracy in the Age of Message Control[Political Branding] (Alex Marland).

HIS is about efficiency and efficaciousness, values widely held, applied to the delivery of health services. Since it is about organization and administration rather than the values themselves, I will not discuss this book as offering a source of critical reflection on the spirit of our time. Priests, the most thoroughly researched book, as well as the one from which most could be learned that was new, was the one I favoured for the prize. But I was the only one at my table to do so and it did not win.

Priests is not about a civic religion rooted in the practices and values of the people, but about a priest-centered one. It is about the holy of holies in a materialist society: the World Bank, the International Monetary Fund and, most of all, the consensus developed among Western bankers on how the globalized international economy operates and the consensual neoliberal rules governing international monetary policy. Price stability, limited inflation targets, credibility and transparency were its central idols rather than employment, growth and social security. What better way to understand the priesthood than by examining the priests of another religion, a mercantilist one, converted and indoctrinated between the fall of the Berlin Wall and 2007.

The sacrificial goats in the West were those who had to absorb the impact of obsolescence and the home owners, particularly in the United States, who found the values of their homes underwater when the U.S. asset bubble suddenly deflated and Lehman Brothers collapsed. Unlike the banks, commoners were not bailed out by the neo-economic policies of the Obama program to save the Western financial system when the crisis became full-blown in 2008. And the crisis remains with us as Europe faces one crisis after another as the 2007-08 collapse turned into a sovereign debt crisis for some members of the EU. The priestly religion had lost its absolute authority and saintly status as the two elder children of the system (a puzzle for my readers) took their own lives as martyrs to save the system but, note, not reduce the suffering.

For no longer were monetary and financial policy to be left in separate silos to prevent the former from contamination by the latter. The priests, on the defensive, blamed the crisis on excessive risk-taking in financial policies by the politicians. The high priests were not to blame but, rather, the political commoners forbidden entry to the holy of holies who stormed the holy gates and, helped by a few wayward priests who betrayed their calling by innovating and not using consensual monetary policy to reign the upstarts in, contaminated the holy of holies. The temple was not destroyed. Its ramparts were reinforced as central bankers eased up on the strict monetary code with quantitative easing and other measures.

This book, however, unlike my treatise, is about priests and not commoners, and the conversion and indoctrination of the priests of an alien mercantilist religion in Eastern Europe. The losers and the victims in the West are not the subject of this volume. In the final chapter, the book is also about the god that failed. The result, faith in globalization, in the international priesthood and its values and norms, suffered a drastic blow. One of the results – the rise of protectionism and mercantilism along with populism in the West. Juliet Johnson does not overtly deal with the irony of this outcome in her final chapter, but it haunts that whole chapter as the effort to salvage the role of the central banks rested, not on reducing their functions, but expanding them into micro-level financial regulation and supervision, thereby politicizing the banking system and removing its immunity from day-to-day politics.

The commoners were entering the holy of holies. Donald Trump was elected on a protectionist platform. He became a partner of Vladimir Putin in the effort to resurrect mercantilism, including the kleptocracy that accompanied such policies as Trump himself had been a beneficiary of the $500 billion Russia had accumulated in foreign reserves during the oil boom. Russian money was laundered through Western capital investments. If Putin and his cronies helped Trump, then Trump would return the favour now that the Russian economy was in dire straits. In turn, the Trump brand would directly benefit from the resurrection effort and the U.S. currency as the stabilizing factor of last resort was about to be put on the altar for sacrifice in the holy of holies, thereby contaminating it forever.

The fight for control of the Holy Temple is now in full swing. It is important background to my concern with civic religion.

Four of ten people at my table voted for Good Death to win the prize, but, like HIS and Priests, it also did not win. Good Death, like most of the other books on the short list for the award, is ultimately about social ethics. The book focuses on the right to die at a time of one’s choosing in the search to find the correct balance between compassion for the suffering and protection of the vulnerable, between individual choice and social responsibility. As Sandra Martin wrote, “Baby boomers, reared on choice and autonomy, are radically restructuring the landscape of death, not only for themselves but for their elderly patients and the children coming up behind them.”

I mention her book as the first of the three dealing with civil society values because it affirms the critical importance of the leading cohort in society changing the ethics and practices in dealing with how and when a person chooses to terminate personal suffering. For the book is more about suffering than death. A good death comes with a minimum of suffering; this is the semi-Aristotelian premise of the volume.

Choice. Autonomy. In contrast to those values, Daniel J. Levitin in Lies contrasts the bad data, half-truths and outright lies in our current information age with the need to evaluate rational arguments, assess statistical data and recognize the meanings of words used in communication. Donald Trump demonstrates daily how limiting access to information – about workplace violation of norms and corporate disregard of environmental regulations that offer the new norm – has undermined Moses’ (Obama’s) political leadership in moving towards the Promised Land. While the financial crisis seriously weakened the sacred authority of monetary policy as set by central bankers, Trump was busy attacking the legitimacy of the polis itself by deregulating its role in every field as he issues ethical wavers to allow the profiteers and outright crooks to enter the political palace.

Levitin offers up the rabbinic codes of the information age, defining the proper use of statistics and how they are to be read, the role of clear and distinct language to replace obfuscation, and the role of informal logic to construct rational arguments and spot fallacies. The book is particularly strong on statistics but somewhat weak in its discussion of language while providing a clear and concise introduction to informal logic. However, it is like reading a nostalgic longing for the enlightenment, for rationality and for the scientific method in the face of a rise in philistinism and irrationality in public discourse.

Alex Marland, in the book that won the Donner prize, took an opposite tack and focused on the Canadian polity to uncover the role of unreason and control – in contrast with Sandra Martin’s celebration of choice and autonomy – in managing information and spreading a message. But it was the most moralistic book of them all, upholding a rationalism in public discourse, not as a standard as Levitin did, but as a “rational” populist political counter to the sustained effort to desecrate autonomy and choice in favour of collective thought on a niche level and the control over what people choose.

Branding is not inherently bad. The effort in marketing and selling an idea or a product by controlling images and messages from a central point of authority offers concision, simplicity and efficacy in communication. However, in his analysis, institutional weaknesses and the current digital media environment – not illogic, innumeracy and lack of literacy – are the culprits.

I end with Marland’s very sincere and spontaneous acceptance speech (he was truly surprised at winning). It dwelt with how to keep the threatening ghouls away from your door. The priests, evidently, will not protect you. Neither will simple good management. Presumably, confronting the sources of irrationality with logic, statistics, logical arguments and precision in one’s use of language will not keep the zombies at bay. In the age of messaging and mass manipulation, any emphasis on choice and autonomy might be a side show. What does Marland suggest in dealing with the outright lies, distortions and distractions of Donald Trump?

Turn the messaging mechanism off whenever Trump is discussed. Become a silent and distanced protester. Spend your considerable time on helping to forge Canadian policy where, in my words, a more compatible civic religion and political institutions exist. Will heeding the voice of a superego to ensure purity and immunity from contamination save us?

With the help of Alex Zisman

Emotional Responses to Donald Trump’s Victory

Nov21

Recap on the Donald Trump Victory and our Emotional Responses

Howard Adelman

I previously disparaged three options, first, relying on hope for Donald Trump to change his spots or be confined by Congress, second, hoping for failure for Trump, and, third, taking refuge and moving psychologically, and a few even physically, into exile. The main emphasis was on hope for change in Donald Trump.

When Obama says that he is “cautiously optimistic” that transitioning from candidate to president-in-waiting would force Trump to focus and get serious about “gaining the trust even of those who didn’t support him,” where is the evidence? As Obama said one test will be “not only in the things he says, but also how he fills out his administration.” Look who he has named initially to positions of power: Steve Bannon as chief strategist, though not an anti-Semite, is a man who is quite willing to play to the alt-right and promulgate conspiracy theories; Jeff Sessions (Sen. Alabama), nominated as Attorney General, has a habit of making racist remarks, though possibly not a racist, expressing a strong anti-immigration position and insisting that grabbing a woman’s genitals is not assault; retired General Michael Flynn has been nominated as Defense Intelligence Agency chief, an adviser who believes that fear of Muslims is rational, that Islam is a political ideology and not a religion, and, further, he is a distributor of “Flynn facts” to compete with Donald Trump’s mendacity; Mike Pompeo (Kansas Rep.) as CIA director had aligned himself with the Tea Party and reprimanded Muslims on their silence about terrorists. How can one still hope that Trump will not embrace torture methods and not fulfill his plan to turn towards Putin whom he so admires for his strength? How could Obama say, “my hope is that (moderation) that’s something he is thinking about.”?

Trump’s appointees, as well as himself, are men who live in a fabulist universe of their own making. Donald Trump provided a half hour interview with Alex Jones characterized as “the foremost purveyor of outlandish conspiracy theories.” Alex broadcasts his radio program in Austin, Texas, from which I recently returned. (As one example, and only one of very many, he insisted that the United Nations intends to release plagues; those plagues will kill off 80 percent of the people in the world and the remaining population will be pushed into crowded cities where they will be enslaved by the elite.) Trump told Alex that he had no intention of apologizing for promoting the story that large numbers of Muslims in New Jersey celebrated in the streets at the destruction of the Twin Towers on 9/11. Further, he told Alex that he liked and appreciated the number of T-shirts that Alex had produced and sold at his rallies that had inscribed on them, “Hillary for Prison.”

Obama advised Donald Trump “to take responsibility. Rise to the dignity of the office of the president of the United States instead of hiding behind your Twitter account. … Show America that racism, bullying and bigotry have no place in your White House.” Fat chance! All the indications, especially his initial appointments, are that Trump will govern in line with the populist, hardline positions of his election campaign. Mike Pence, the Vice-President-elect was in the audience of the hit musical, Hamilton. Halting the applause at the end, Brandon Victor Dixon, one if the actors, read out a statement directed at Mike Pence. “We, sir — we — are the diverse America who are alarmed and anxious that your new administration will not protect us, our planet, our children, our parents, or defend us and uphold our inalienable rights. We truly hope that this show has inspired you to uphold our American values and to work on behalf of all of us.”

Brandon was applauded while Pence snuck out, though he evidently stayed in the lobby long enough to hear the full statement. In response, Donald Trump tweeted, “Our wonderful future V.P. Mike Pence was harassed last night at the theater by the cast of Hamilton, cameras blazing. This should not happen! The Theater must always be a safe and special place. The cast of Hamilton was very rude last night to a very good man, Mike Pence. Apologize!” A polite expression of hope interpreted as harassment? Insisting this expression of free speech “should not happen”! Suggesting that speaking out politely and with civility in this way made the theatre an unsafe place! The cast was not rude. Trump was when he asked for an apology. And Pence himself later said that he had not been bothered by the statement of the cast member.

And look at Mike Pence himself whom Trump chose to be his Vice-President and currently serves as the head of his transition team. Mike Pence is an ardent climate change denier. He opposes egalitarian treatment of women – he supports the repeal of Roe vs Wade and is one of the most extreme anti-abortion advocates in the country. He is homophobic. He supports lower taxes and relief from gun restrictions. He is a ‘get-tough-on-crime’ guy and erroneously believes that violent crime is on the increase, He does not trust drug rehabilitation programs. Three times, Pence voted against the Lilly Ledbetter Fair Pay Act that called for equal pay for women.

Donald Trump himself has not changed. On Friday, Donald boasted that he had persuaded “his friend, Bill Ford,” to keep the Ford plant in Louisville, Kentucky and not transfer it to Mexico. However, Ford had no plans to transfer the plant there and, in any case, if it did, it could not implement such a plan because of its agreement with the Autoworkers Union. Only the production of the Lincoln, as previously announced, was to be moved, probably to Chicago, (only 21,000 per year are assembled compared to 259,000 Ford Escorts) to make room for increased production of the latter, their most popular model. There would be no loss of jobs. Further, Ford continues to implement its plans to move the assembly of the Ford Focus to Mexico as announced during the campaign, a move which Trump denounced, but one on which he is now silent. Carrier too is going ahead with moving its plant that employs 1,400 to Mexico. Trump is silent on both moves but is a master at practicing diversion.

The biggest danger by far is putting Climate Change Deniers in the White House. According to Reuters, during the campaign for the presidency, Donald Trump would take a “You’re fired” approach to the upper echelons of the Environmental Protection Agency (EPA), even possibly “burrowing” and seeking Congressional approval to “clean house” at a much deeper civil service level than the usual pattern of a successive presidency from an opposite party. Whatever the extent and depth of blowing up EPA, Donald Trump will immediately rescind the Obama regulations to fight climate change, especially those on fossil fuel development.

Trump appointed Myron Ebell to head EPA. Ebell, like Trump, is a “sound-bite artist” and has been a mouthpiece for the fossil fuel industry insisting totally falsely that the scientific community is in disarray over whether climate change in its rate and direction has been overwhelmingly induced by human interventions. Ebell has insisted that human induced global warming is a myth not backed up by economic, scientific and risk analysis. The little global warming has been well within the range of natural cyclical climate variability. And northern climes, including Canada, will benefit disproportionately.

War will be declared on the “Clean Air Act,” which incidentally had overwhelming bipartisan support when it was passed in 1990. Then, the Act addressed acid rain, ozone depletion and toxic air pollution. Standards and enforcement procedures were imposed. Auto gasoline formulations were revised. Yet Donald Trump branded the Act as “Obama’s” Clean Air Act. But it was the Supreme Court in Bush’s term in 2007 that ruled that the anti-pollution legislation aimed at mercury and sulphur emissions could apply to greenhouse gases. Thus, the revised strict carbon reduction standards set by the EPA in the Obama administration in place of a cap and trade or carbon tax, which the Republican-controlled Congress would not pass, were legal as well.

As I have noted previously, Ebell is a notorious climate change denier. To him, the regulations on climate change were just an excuse to advance and expand government. The EPA will be deliberately and massively dismantled. Ebell will open more federal lands for fracking and permit long-stalled pipelines to be built. Ebell will advise Trump to opt out of the 2015 Paris Accord, advice which The Donald will accept. The Koch brothers’ investment in Ebell’s research institute, the Competitive Enterprise Institute, will have paid off. But, as I wrote previously, the war will be against regulations and bureaucracy, not against the use of renewable energy. And, as I tried to argue, there is enough of a head of steam behind the development of renewable energy sources that it will, ironically, be able to compete on the economic level with fossil fuels, even more so if there is a level playing field and all the direct and indirect subsidies for fossil fuel are removed.

The latter is unlikely. Nevertheless, even if still handicapped, the use of recyclables now has the economic advantage even in a political atmosphere promoting “energy independence,” which the U.S. has largely achieved already, There will be a spate of licenses issued for more onshore and offshore drilling. But fossil fuel developers are not stupid. They will tie up those licenses at the same time as they buy into the recyclable industry, not just to hedge their bets, but because that is where not only the future but the present development of energy is heading. Ironically, I expect deregulation to assist the recyclable fuel industry more than the fossil fuel one because of the current underlying economics. So although Trump has declared war on the environmentalists and virtually the entire scientific community in that field, and determined that, “America’s environmental agenda will be guided by true specialists in conservation, not those with radical political agendas,” this will in many ways be a setback for the environment, but in other ways will be an ironic godsend as firms working on applying recyclable technology will be freed up from the burden of an enormous number of environmental regulations.

Thus, I do not hope for any fundamental change in approach. I also do not hope for failure. Trump is a winner. Has he not demonstrated that sufficiently? His transition will not fall apart through infighting. Neither will his government, as much as bloodletting can be expected from among the victors. Further, he will in one sense succeed beyond anyone’s expectations. He will both lower taxes, impede free trade, and go on a binge of spending on massive infrastructure programs while cutting regulations. Trickle-down economics will be in the driver’s seat, but with a populist and very popular building program that will provide well-paying jobs while inflating economy enormously. Economists expect inflation to go back up to between 2.25 and 2.75 percentage points. It will get much higher than that, but more of that in another blog. Donald Trump might even introduce a universal child care program as advocated by his daughter and even fix Obama care – rebranded as Trumpcare – by introducing a single payer system alongside private country-wide insurance schemes. By the end of Trump’s term, the American debt will spiral towards the heavens. But so will the value of Trump’s assets. Trump will go from being a few billionaire to over a fifty billionaire, for inflation is always on the side of those who own property.

For the first few years, the Trump regime, like the one by Chavez in Venezuela, will be very popular and the Trump support will grow even if it is at the expense of refugees who will be largely ignored, the Arabs who will have lost any leverage over Trump, minorities, human and women’s rights and those caught up in a renewed law-and-order regime. Putin will be given carte blanche in the Crimea and possibly in other parts of Eastern Europe. Obama had begun to draw down America’s role as the world’s policeman. Donald Trump will send Pax America to death row. If Trump can stave off hug increases in inflation for four years, he will, at the age of seventy-four, be re-elected with an even larger mandate.

If this is true and if you oppose this agenda, why not withdraw emotionally from a huge investment in the public sphere and retreat into private concerns? Many will, both to avoid the threatening atmosphere as well as to keep one’s sanity. But to the degree there is a withdrawal – and there will be at least some – Donald Trump will accumulate more power in his hands than any previous president in U.S. history.
I already argued that our greatest fear – the cessation of the effort to replace fossil fuels by recyclables – will proceed ahead because, given the accelerating lower costs combined with a degree of deregulation, the conversion will proceed at an even faster rate in spite of the cackle of climate change deniers in positions of power in Washington.

Will we end up with WWIII? Highly unlikely. Trump is not a warrior president. He will pick on and pick off the little guys, the small fry – the terrorists – but he will not get into a military war with the powerful rivals of the U.S. even as he builds the American military force even more. Donald Trump will end America’s war as a protector of human rights and a challenger, however inconsistent and half-hearted, to the repression of rights and freedom for journalists. He will get along, not only with Putin, but with many other populist dictators around the world – Recep Tayyip Erdoğan (Turkey), Rodrigo Duterte (Philippines) and will further prop up Abdel Fattah el-Sisi in Egypt. He will befriend the right wing governments popping up all over Europe as Trump progenitors –Beata Szydio in Poland from the Law and Justice Party, Viktor Orbán and János Áder of the Jobikk Party in Hungary, Rumen Radev (president) from the Independent Party and Tsetska Tsacheva (VP) from the GERB Party in Bulgaria. Trump may desert Netanyahu for an even more right-wing regime in Israel. The range of moves in this area is unknown, but the pattern can be anticipated. And the pattern indicates little likelihood of moving the minute hand on the atomic doomsday clock closer to midnight. I do not believe WWIII is on the horizon.

What is?

Domestic Policy Issues in Turkey

Nov10

Domestic Policy Issues in Turkey

Howard Adelman

As we approach the G20 Summit to be held on November 15-16 in southwest Turkey in Antalya, it is important to understand not only the outcome of the Turkish election, but the various foreign policy issues with which Obama and other leaders will have to wrestle. The war in Syria, the threat from IS, especially its control of one-third of Iraq, and other crises in the Middle East, are bound to be high on the agenda. Domestic policy in Turkey also cannot be ignored since police continue to arrest people – 18 IS suspects in Antalya (2 are Russian) – in the lead up to the G20. Moreover, there is an intimate connection between domestic and foreign policy since foreign threats, at the very least, are used to rally support for the President.

Economics

Though Turkey’s economic crisis was the main issue of the June election, Erdoğan almost singlehandedly shifted it entirely aside for the 1 November election. In June, 53% of voters put Turkey’s economic downturn as the number one priority. In September, only 12% insisted that economic problems were Turkey’s foremost issue. This was in spite of the fact that Turkey’s economic performance had not improved one iota since June. This seemed to belie Prime Minister Ahmet Davutoğlu’s own statement twelve months ago, in anticipation of the Antalya summit and his role as chair, of the inseparability of economics and politics, and the depiction of the G20 as “the premier platform for economic and financial issues.”

The Great Recession in 2008-09 taught us that the solution to global challenges rests in global actions. The rise of the G20 is a manifestation of this spirit. As the major economies of the world, we adopted a more integrated, coordinated and effective approach to the challenges we have been facing. During these difficult times, the G20 has clearly demonstrated its capability as a global crisis resolution forum.

As the OECD Report on Turkey noted at the time, although, “GDP growth is projected to increase from 3% in 2015 to above 4% in 2017, as political uncertainties are assumed to fade, employment continues to rise, and the exchange rate depreciation and the gradual strengthening of global markets support export growth. The geopolitical crisis at the southern border and the associated influx of refugees pose challenges. Currency depreciation until October has strengthened price competitiveness, but has also weakened household confidence, created pressures on corporate balance sheets and added to already high inflation.”

Economic improvements in Turkey were premised on a further decline in the political troubles in the southeast. Those troubles increased as the war with the PKK was resumed. Turkey is now more involved in the military conflict in Syria than ever before. IS now poses an internal domestic threat to Turkey. Employment has not continued to rise. Trade imbalances persist. Inflation rates remain above targets. In this context, currency depreciation that led to weakened household and corporate confidence continued, and the very factors that usurped the focus on the economy of voters exacerbated the economic problems.

Rule of Law

The prosperity of Turkey cannot be separated from the status of the rule of law. As described in my last blog, the government seized the assets of Koza ĺpek Holdings and placed the assets in a trusteeship. While such seizures are sanctioned by law in cases of mental incompetence and in the case of minors, there is no legal sanction in Turkey – or in the rest of the developed world – for the arbitrary seizure of commercial assets without legal due process. In modern Turkey, even when under a military dictatorship, this seizure of private property was unprecedented. When a company is implicated in criminal activity, Article 133 of the Turkish Criminal Procedures Code is applicable requiring a trial and a definitive judgment before an asset seizure can proceed. There was not even any presentation or even an allegation of intention to commit a crime. There was not even a hint that Koza ĺpek was engaged in narcotics, money laundering, human trafficking, prostitution, embezzlement, or espionage.

Once, the AKP was closely allied with the Gülenists who had been disproportionately represented among judges, prosecutors and the police. Erdoğan now considers them the enemy and he has been systematically purging the criminal justice system of Gülenists, especially ever since prosecutors began pursuing the AKP government for corruption. Ali Babacan, Turkey’s Deputy Prime Minister with an MBA from Northwestern earned with a Fulbright scholarship, put it very well just before the June elections: “Public trust in the justice system is in steady decline.”

In January of last year, the Turkish police stopped and searched three trucks in southern Turkey traveling towards the Syrian border. The trucks were accompanied by officers from Turkey’s military intelligence. They contained missiles, rockets, mortars, ammunition in crates with Russian Cyrillic markings. Bizarre! But perhaps not for the world of international espionage. What was truly bizarre was the subsequent purging of the police which had stopped the trucks. Those police and four prosecutors were even charged with espionage. The widespread belief was that the arms were intended for IS of all parties. Not so strange since the NYT just before the June election reported that tens of thousands of kilograms of ammonium nitrate fertilizer used for explosives were being transported from Turkey into IS-controlled sections of Syria.

Education

The purges in the criminal justice system and the attacks against the media documented yesterday were complemented by attacks against the universities, especially universities close to the Gülen community, such as ĺpek University in Ankara. University assets have been seized by amending regulations governing the Higher Education Board (YOK). On 2 November, a pro-government journalist listed, as next in line for seizure, Fatih, ĺpek, Zirve, Süleyman Sah, Mevlânâ, Turgut Özal and Istanbul Şehir universities as well as other media outlets – the Zaman daily, Samanyolu TV and Samanyolu Haber TV. YOK was evidently being empowered to close down and seize the assets of any private university if and when the university becomes “the focal point of acts against the state.”

Part of the reason for these seizures, and for the introduction of Arabic language training in Turkish schools from Grade 2 onward announced immediately after the AKP won the 1 November elections, has been the need to supply employment for the increasing numbers of graduates from Islamic universities, virtually the only graduates equipped to teach Arabic other than Syrian refugees. There was also an ideological issue of religion versus secularism in the public realm. Kemel Atatürk, the founder of modern secular Turkey had introduced the Latin alphabet 87 years earlier to the date of the 1 November election, and that change was made part of the Turkish constitution in Article 174.

Minorities and Rights

One of the positive outcomes for education, property as well as minority rights was the final success, after decades, of the Armenian community in Turkey getting back control and ownership of its children’s camp, Camp Armen. The Armenian Evangelical Church of Gedikpaşa was assigned the deed after an interminable court case. Whether this was simply a gesture for Westerners, and particularly Americans, to sell the image of the AKP as a party of tolerance and a protector of rights or not, it was a good first step. The real test will be whether all the other properties seized from Armenians will be returned or whether this restitution was merely a publicity stunt.

However, though non-Muslim minorities have realized this benefit, other Muslim groups have certainly not. The other major group under attack, besides the Gülenists, have been the Kurds. Not just members of the PKK. According to Ferhat Encű, a Kurdish MP for the Peoples’ Democratic Party (HDP), after the AKP victory, members of the Turkish gendarmerie went on the warpath against Kurds. “Many people throughout Kurdistan have been arrested wholesale lately. Some of them participated in the election campaigns for our party.” He claimed that the police “started the violence and conflicts… they murdered civilians knowingly and intentionally.” Seyfettin Aydemir, the co-mayor of Silopi, accused the police of firing on ambulances that raced to help the wounded. Young men were gunned down by Turkish snipers. Kurdish towns, such as Cizre, have even been bombed from the air.

The HDP may have made a strategic error in the five months leading up to the 1 November elections by supporting the young Kurds who put up barricades against the police, but those activities in no way justified the systematic military attacks against Kurdish areas in south-eastern Turkey and the widespread abuse of human rights. For many, the unending curfews, arrests of politicians, attacks, torture and murder by Turkish security forces seemed to be an effort to intimidate voters who supported the HDP and signal the instability to follow if the AKP was not returned to power with a majority. After the military attack on Cizre, the 21 dead were all civilians; none were members of the PKK. This number does not include the large numbers who were arrested and tortured. Yet in Cizre, which in June had cast 97% of its votes for the HDP, the government decided for the 1 November elections, out of ostensibly safety concerns, that there would be no ballot boxes provided in the Nur, Cudi and Sur quarters of Cizre district in the province of Şırnak. 65% of Cizre’s Kurdish population lived in those quarters.

Domestic Terrorism

There are three sources of terror in Turkey: the PKK, IS and, the most dangerous and extensive, the state security apparatus. The biggest attack within Turkey, was the bombing of the largely Kurdish-led protest for peace in Ankara on 13 October. It was the largest terrorist attack in the history of the Turkish republic, Turkey’s 9/11. IS was blamed together with the PKK. But the PKK and IS are sworn enemies. Further, why would the PKK attack a mainly Kurdish rally? Why even would IS? And if the latter did, why did it not behave according to its own norms and broadcast its responsibility for the attack? Why, again, were security forces so absent from the demonstration? Why were ambulances impeded from aiding the wounded? Why had Turkey not classified IS as a terrorist organization until the courts ordered it to do so on 15 July?

What does seem clear, and as I tried to document yesterday, is that the huge victory of the Justice and Development Party’s (AKP) was in good part a result of the resumption of the war on the Kurdistan Workers Party (PKK) and its alleged threat of terrorism. The AKP won both Kurdish votes and votes from the more right-wing nationalist MHP.

Corruption

In February of last year, one of the most respected international organizations dealing with corruption wrote an important report on Turkey. The Transparency International report indicated that the real catalyst for tackling widespread corruption in Turkey had been the effort of Turkey, beginning in 1999, to acquire full membership in the EU. The Report noted that efforts, both on human rights and in fighting corruption, had improved from the base line. Nevertheless, “the country faces high levels of corruption,” a situation that continues in spite of the adoption of an anti-corruption action plan in 2010 and a series of commitments in June 2012 to cover incrimination and presidential candidate funding. As the Report stated, “the country continues to be confronted with challenges of rampant corruption and existing anti-corruption measures are still in question.” Turkey lacks an overall strategy, coordination in the campaign and a system of transparency and accountability in the political system. Immunity regulations continue to protect high-ranking officials.

Moreover, corruption reaches the highest levels. At the end of 2013, the anti-corruption wolves were at the doors of the Presidential Palace. Erdoğan responded swiftly and decisively, not only by circling the wagons of his supporters, but by launching a counter-attack against his pursuers. 14 high-ranking officials were immediately purged. The judiciary, police forces and prosecutors offices were swept clean of critics and accusers of the government. Thus was the major motive in the general attack against the Gülenists.

One might think that Erdoğan had his hands full with IS now on domestic soil, with his domestic war against the PKK, with the stalled economy, with his efforts to promote Islam in the secular school system, with the increasing revelation of himself at the centre of a large-scale corruption operation, with his rivalry with the Gülenists and with his war against the critical media, that he would avoid any adventurism in foreign policy. In reality, all the domestic problems were interrelated and the distractions of foreign policy were important in diverting attention away from his domestic troubles as we shall see in the next blog.

Playing with Numbers

Sep16

Playing with Numbers

Howard Adelman

Last night I came home and listened to the late night news. The big news: the Harper government had posted a surplus, the first in Harper’s eight years running the government. I had become used to the government playing games with refugee figures – announcing in 2013 that the government would take in 1,300 Syrian refugees in the next 12 months and then taking 20 months to do so. Further, most were privately sponsored refugees. When Canada announced it would take 10,000 Syrian refugees over three years, this really meant that Canada would take in 1,300 government-assisted refugees per year and private sponsors would be allowed to bring in just over 2,000 per year. After the election campaign started, Harper announced that Canada would take an additional 10,000 Iraqi and Syrian refugees and take them in over four years. That meant a total intake of 2,500 additional refugees per year, or 1,250 additional Syrian refugees. Of these, the number of government-assisted Syrian refugees would be about 500. Clearly a pittance. The spin is how to make 500 sound like 10,000 and almost 2,000 sound like 20,000. The basic figures are accurate; the spin given to those figures is misleading.

Was the government doing the same with the budget? According to figures released by the finance department yesterday, after seven years of running deficits, the federal government had a $1.9 billion surplus in the 2014-2015 fiscal year. Canada had produced a surplus one year ahead of Jim Flaherty’s prediction. The original prediction for 2014-2015 had been a $2 billion deficit rather than a $1.9 billion surplus. Further, the April, June and July figures reinforced the picture of the trend towards surpluses.

There is an old saying: figures don’t lie; politicians do. I think this is a misrepresentation. Spin is not lying. But to understand spin you have to unpack the figures. There are a number of ways to produce a surplus. First, you can budget less than the previous year; in effect, cut a department’s budget. Second, you can download expenditures onto the provinces. Third, you can spend less than you even projected in your budget. The options are many.

Let me offer an example. In the Department of Aboriginal Affairs, the projected expenditures for 2014-2015 on primary and secondary education for aboriginal youth was $1,445 billion. In 2015-2016, the projected expenditures were set at $1,431 billion. How could the expenditures possibly go down when the rate of increase of the aboriginal population was much higher than that of the rest of Canada?

When you read the hundreds of pages of documents just in that one department, one policy stands out. There is the noble intention begun in 2014 of bringing success rates of aboriginal children up to those of the rest of the population. How is this to be done? You get bands to vote to join regional school boards so that now the province bears the burden of the costs, not the federal government, and the expenditure on aboriginal children’s education is immediately boosted by about a quarter. This “push” in this direction is helped when you recognize not only that aboriginal children receive at least 20% less support than the equivalent cohort in the provincial school system, but that over the last eight years, the educational support deficit has grown so that the differential is moving towards 30%.

The message to band leaders: you want better education for your children, vote to become part of the provincial educational system, thereby relieving the federal government from the obligation to pay for the education of aboriginal children and teens.

Look at a number of departments where the Harper government was determined to cut. In northern economic development, the main estimates were $53,442,608 in 2013-14; in 2014-15, they were $30,945,766, an enormous cut. In 2012-2013, expenditures for the chief electoral office were 119,580,193. In the 2014-15 estimates, they had dropped to $97,110,432. It is any wonder that we have increased our democratic deficit. In the department that I know best, Citizenship and Immigration, budgeted expenditures dropped from $1,655,418,818 in 2013-2014 to $1,385,441,063 in 2014-15, a 17% cut. No wonder Canada lacks the visa officers on the ground to process Syrian refugee applications to come to Canada.

Monies for the Library and Archives of Canada were reduced from $118,923,232 2013-14 to $95,864,788 in 2014-15. In the arts and research field, the National Film Board, National Museum of Science and Technology and the Natural Sciences and Research Council suffered cuts. Statistics Canada, once upon a time the pride and joy of Canada for the rest of the world – we provided a paradigm for other nations to imitate – expenditures dropped from $519,891,309 in 2012-13 to $379,555,524 in 2014-15. The cuts were so drastic, not only effecting the long form census that was made voluntary, and, therefore, useless for research, but the whole basis for economic and social research in Canada was decimated.

This is a government that is not interested in the knowledge base on which prudent planning depends. The library in the Department of Immigration and Citizenship was packed up and sent to a warehouse in Quebec. The policy unit was eliminated. Harper reduces expenditures through micro-management, requiring the smallest expenditures be approved by his office – except when it comes to his Senate appointees. This government has saved money by running the civil service into the ground in many areas.

I am not saying that some areas should not have been cut or that all expenditures have been sacrosanct. However, the Tories cannot even bring in more refugees if they wanted to; they are unwilling to spend the money even though, in the long run, such expenditures are a tremendous investment in human resources, especially when the population intake consists of skilled tradesmen and professionals who can contribute to economic growth.

When you add to these policies the practice of not even spending the money allocated, it is not that hard to produce a surplus. In 2014-15, actual expenditures were $800 million lower than projected. Some of the costs have little to do with Canadian policy, however important prudent fiscal policies are. Carrying charges on debt are at record lows so that actual expenditures on debt were $100 million lower than projected. But there are other ways to produce a surplus. Focus on the revenue side.

In June, for example, the government brought in $1.1 billion more than it spent following the May/June surplus of $3.9 billion. And this was when we were officially in a recession. One way to increase revenues is to sell off assets. So the Canadian government sold its last block of 73 million shares in General Motors in April, increasing the government coffers by $2.7 billion. So if we sell off assets to increase revenues, and since surpluses are seasonal and the surplus in June dropped from $1.6 billion in the previous year to $1.1 billion, the optimism for this year has to be muted somewhat.

Don’t get me wrong. I am a fiscal conservative. I believe, in normal circumstances, we should stay within our budget. But I also believe that some savings, such as cutting our repairs to infrastructure, is indeed penny wise and pound foolish. Cutting programs that provide valuable service is an imprudent way to balance the budget. Further, there are times, as David Dodge has said, when interest rates are low that it is imprudent not to borrow and invest in infrastructure – roads, sewers, public transit. Spending $125 billion in this area over ten years may be the height of prudence.

Pensions are a case in which taxes and investments get confused. Harper decried the Ontario pension plan for increasing taxes. But these were not tax increases. These were increases in forced savings that in turn could be invested in economic growth. Whereas the Conservatives began their term of office by cutting the sales tax by two points, the government has not reduced the taxes for the employment insurance fund. The employment insurance fund is now in surplus and normally premiums should be reduced. They have not been, providing an important source for ensuring that income exceeds expenditures. An employment insurance cut would benefit both individual workers and businesses, especially small businesses.

So has the Harper government been a prudent manager of our economy? In some ways it has. Some cuts were warranted. But so were increased expenditures in other areas – aboriginal education for example. By cutting two points from the sales tax, government funds for needed areas, such as infrastructure or aboriginal education, were unavailable. The cuts were imprudent. So were many of the cuts in various department budgets.

There is another area where the Harper government has been prudent. Canada’s debt-to-GDP ratio is 40.4 per cent, including the debts of local, provincial and territorial governments, the lowest among G7 nations where the average is 86.8%. This is commendable. However, flying higher and taking a longer overview, Canada really escaped going into recession in the economic shock of 2008 because the Harper government inherited a government with financial surpluses, $13.6 billion in 2006 and $9.6 billion in 2007. It took on an enormous deficit in 2009 of $61.27 billion. Simply cutting expenditures and micro-managing the government is a way to save money, but also to cripple services that Canadians need – especially veterans. Areas requiring investment also suffer.

I do not know why the Harper government has a reputation as a prudent manager of the economy. It has not been. It has operated the government as if tax revenues were like money dropped in a piggy bank and your job was to ensure that you not spend anymore than had been dropped through the slot. The real economic job of a government is to spend and invest money wisely and prudently and allow future generations to inherit a better and better Canada.

The Harper government has been more imprudent than prudent on this scale of measurement.

The Lapid Israeli Budget 12.05.13 by Howard Adelman I have

May16

The Lapid Israeli Budget 12.05.13

Howard Adelman

I have so much to write about and just too little time. Major topics include: (1) Syria; (2) Tzipi Livni, John Kerry and the Peace Process, and (3) Lapid and the Budget. There are also a number of minor topics from Women at the Wall to Stephen Hawking. However, Yair Lapid tabled his budget this past week when I was otherwise preoccupied. The implications are important so I will write on the budget first.

In my blog on February 4th, I asked, “in a budget of NIS 350 billion largely locked into a third for interest payments on debt, another third for salaries and the other third with little room for flexibility, how can any finance minister come up with NIS 15 billion in cuts and additional revenues of about NIS 30 billion? I also wrote that Lapid’s stated priorities were to:

1. Reduce the cost of living by every means at its disposal (part of the coalition agreement);

2. Enhance free market competition and reduce the concentration of power;

3. Reduce economic disparities and launch a fight against poverty.

Finally, I also wrote that Israeli direct income taxes and indirect value added taxes now offer few incentives for any increase. Yet, as we shall see, these became the main sources for extra revenues. More importantly, there are more than sufficient revenues available by simply closing what in North America are called loopholes and in Israel are called incentives; very few of these were att. In preparing for this budget, I only managed to examine seven of twelve areas of the economy in order to understand the possibilities for the Israeli economy. The five areas still not covered include those with the largest expenditures: health, education, housing, defense and the support for the Haredi sector.

The total budget was NIS 296 billion for 2013 and in 2014 it will grow to about 304 billion shekels. Instead of the proposed cuts of NIS 15 billion and additional revenues of NIS 30 billion, the ratio of cuts to expenditures has been reversed. Planned cuts are NIS 30 billion (roughly 1/3rd for 2013 and 2/3rds for 2014. Planned new revenues are NIS 12-14 billion. Because the budgeted cuts run from July 2013 to the end of 2014, 18 months instead of 12 months, the cuts are only about 25% greater than anticipated. The real change is in the revenues which are much less than had been expected. Based on current committed expenditures projected forward, the deficit would have reached 5.5% of GDP by the end of 2014, up from 4.2%. Given the increases in revenues projected as well as the cuts in expenditures, the deficit will still actually increase as a percentage of GDP, up to 4.65 % this year and only reach the targeted 3% by the end of 2014.

Last year, Israel spent $US15.5 for defense (NIS 55.5 billion), almost 7% of its GDP, but that budget excluded US$3.1 in US aid. The largest single cut was expected to come from the defense budget – NIS 4 billion, but this was, in fact, a smaller cut than expected and smaller than cuts elsewhere. A cut of NIS 4 billion from a budget of NIS 55.5 billion is a cut of 7.2%. Part of the spanner thrown into the defense budget was sequestration in the United States which has meant an automatic US$300 million cut or one-quarter of the Israeli cut. Excluding the US cut, the actual cut is only about NIS 3 billion. Further, the American portion of the cut could come from the Dome and Arrow defense missile system (total value $US 429 million) that seems to be increasingly necessary given the build up of rockets by Hamas and especially Hezbollah, but President Obama seems to have gone out of his way to earmark that part of the US$3.1 billion allocated to Israel. Today, Israel’s security cabinet will discuss those proposed cuts to defence. Given the visible threats from Syria, Hezbollah, Gaza and Iran, do not expect those cuts to stay firm.

As far as I have been able to make out, the cuts will be as follws – please offer corrections. Infrastructure and transportation support will be cut by NIS 2.75 billion in this year alone and 5 billion next year. There is no costs included for the additional number of accidents due to bad roads. Education will be cut by NIS1 billion. The amount of the cuts from welfare and health was not known but is expected to be another NIS 2 billion. But a separate cut of a staggering NIS 3 billion shekels was scheduled to come from child allowances and support for day care programs. At the same time, child benefits will be cut from NIS 175 shekels per month to NIS 140 shekels per month, an enormous almost 17.5% cut. These cuts, if they hold, will be expected to total NIS 2.75 billion in 2013 and an additional NIS 3 billion in 2014. Cuts to settlers and haredim are expected to total NIS 2 billion. The wage freeze plus NIS 2 billion cut in public sector wages is on hold until Treasury negotiates a deal with Histradut.

Total Cuts Year NIS in billions

Defense 2013-14 3

Transportation and infrastructure 2013 2.75 2014 5

Education 2013-2014 1

Child Welfare 2013 2.75

2014 3

Health 2013-2014 3

Haredi and settler support 2013-2014 2

Bureaucratic Fat 2013-2014 3.5

Technology Sector 2013-2014 .6

Sundry incl. wage cuts 3.4

Total 30

If NIS 2+ billion more came from cuts in a 12 month budget, NIS 10 billion less came from revenues, NIS 20 billion instead of NIS 30 billion. Since revenues were also calculated over 18 months instead of 12 months, though some come into effect only in 2014, the target is less than half of the amount anticipated. So the distribution between expenditure cuts and revenues is made much more even and the target for revenues is lowered effectively by one-third. The total anticipated increase in revenue by the end of 2014 is expected to be NIS 4 billion in 2013 and NIS 14 billion in 2014.

The Value Added Tax (VAT) is increased from 17 to 18% expected to yield about NIS 20 billion over 18 months. Additional VAT income is expected to come from a number of exclusions, especially in the tourist industry that will significantly affect the incentives for going to Eilat. Israel already enjoys a single-rate VAT with very few exemptions and this step will reduce them further. Another source of revenue is to come from tax increases set to come into effect in January 2014, an increase of 1.5% for those earning NIS 5000 shekels a month. That means not only that that everyone with a gross income of more than US$15,000 per annum will be paying an increased tax of 1.5% but that the greatest percentage increase, from 14% to 15.5%, will fall on middle income earners paying taxes. Their increased tax burden goes up by 7%. Since half of Israelis earn under NIS 5,812 a month and half of those earn less than NIS 3,451 per month. On the other hand, health taxes will only be increased for those in the highest income bracket, over NIS 40,000 a month, or an upper middle income tax bracket. The increase will be .5%. Increased revenues will also come from pleasure taxes, namely tobacco and alcohol. Further, a new 25% land betterment tax, or speculative residential property tax will be levied on those who own second apartments with a minimum monthly revenue. The tax will be 25% of the profits, and profits are not discounted for inflation. There will also be a tax of 35% on pension income of over 15,000 shekels per month.

The distribution of those cuts is even more interesting. Consider the technology sector first, the growth engine for a start-up nation and a knowledge economy. Netanyahu cut the technology sector support budget 10 years ago and Lapid cut it again. As a result of the ten year old cuts, the hi-tech sector stagnated, employment in the hi-tech sector also stagnated both in the sense of failing to grow at or above the rate of the Israeli economy in general. Further, the enrolment in hi-tech university programs has also not increased. In 2001, the hi-tech budget was NIS2.3 billion. In 2007 it was NIS 1.4 billion. Last year it was up again to NIS1.57 billion but Lapid cut the hi-tech budget by just over a third to only NIS1 billion.

Revenue could have been obtained by increasing the corporate tax rate by more than 1% but this would have run counter to the shelved plans to reduce corporate tax rates from 24% to 18%. Similarly, plans to reduce the top rate of income tax from 45% to 39% have also been shelved (the Trajtenberg Commission). The surcharge on incomes over NIS 1 million has been retained but not increased. It is not clear how efforts to enhance Arab women and Haredi participation in the work force are calculated in the budget in terms of enhanced revenues as well as reduced expenditures. I also do not know how the increased taxes on second apartments are factored into the budget.

Israel has also been unique in having a two year budget cycle since 2009 instead of a one year budget presumably allowing better planning but accomplished only through greater rigidities and less flexibility. This 18 month budget may create more benefits and put less emphasis on rigidities, but we will have to see. However, I consider this a disastrous budget for the poor and almost as bad for the lower middle classes totally contradicting the goal of reducing economic disparities and launching a fight against poverty. VAT increasingly weighs heaviest against the lower income groups in society; it is a regressive tax. The next target is the lowest tax bracket of earners. These are the income earners who will suffer most. When one adds the significant tax cuts planned to child benefits and to support for day care, as well as other cuts not so much in the public eye, such as cuts to paying for dental treatment, then it is clear who is hit worst. In contrast, corporations only have to bear an additional 1% in corporate taxes and the option of closing the vast majority of loopholes has been lost.

Note, unlike Canada, this is a proposed budget – other Ministers will jockey for changes. Expect changes before a final proposal goes for debate before the Knesset. My own suspicion is that the 18 month cycle is meant to make it harder to calculate comparisons rather than for either planning or flexibility considerations. Nevertheless, whatever changes are made, there is no indication that the budget will reduce the cost of living, enhance free market competition or reduce economic disparities in the fight against poverty.

Tomorrow morning I will be in the hospital to have a stent put in a coronary artery so my next blog may have to wait until Tuesday.

Tycoons and Monopolies III: Dan Gertler.22.04.13

May6

Tycoons and Monopolies III: Dan Gertler 22.04.13

Howard Adelman

Dan Gertler is a 40 year old Israeli billionaire president of the DGI (Dan Gertler International) group of companies who became involved in Africa and, in particular, the resources in the Democratic Government of the Congo (DRC formerly Zaire). Steeped for his whole life in the family diamond business, he was only 23 years old when he founded DGI after completing his IDF service in Israel. He had learned the diamond trade from his father and famous grandfather, Moshe Schnitzer, who initiated and was the first President of the Tel Aviv Diamond Exchange. He set up his own firm because he believed the big profits were not to be found in the labour intensive part of the business, cutting and polishing raw diamonds, but acquiring and selling the raw diamonds themselves.

Though I never met him, our paths crossed in 1997. At the end of 1994, I and a Norwegian colleague, Astri Suhrke, had been commissioned by an international consortium of governments, humanitarian and devlopment agencies to research and write a report on the international community’s role in the 1994 Rwandan genocide in which 800,000 Rwandan Tutsis and moderate Hutus were slaughtered in ten weeks by Hutu Rwandans led by an extremist group, the Akasu, who won control over the Rwandan government on 6 April 1994 in a coup d´état.

We finished our report a year later and it was very widely lauded except by the President of Uganda, Yoweri Museveni, the Belgians, and the French. Yoweri Museveni criticized us for saying that the evidence overwhelmingly suggested that Museveni must have known about the desertion of the Rwandans from his army and the invasion of Rwanda on 1 October 1990 when Museveni kept insisting he had no knowledge. The Belgian complaint was rather mild; they had a harsh judgement of the Canadian General Romeo Dallaire’s role as the head of the United Nations Peacekeeping Force and were especially critical of his role when the Belgian peacekeepers were murdred by the military extremists in Rwanda. We, on the other hand, regarded Romeo Dallaire as somewhat of a hero.

The French criticisms were much more serious and of a much higher order and very much stronger that the other two. They were apoplectic about our claim that France continued to supply arms to the extremist regime in Rwanda even after the genocide had commenced on 6 April 1994. The disagreement led the French government to cancel a high level trip to Paris from Sweden, withdraw its financial support for the commission (which Finland volunteered to make up) and to denounce us in the most vociferous way. We offered to reconsider and offered to travel to Paris to see the French evidence; we agreed to rewrite if the evidence contradicted our findings, including findings we had from French government sources in our previous trips to Paris. The Canadian ambassador at that meeting in Copenhagen came up to me after the brouhaha and told me, “Howard, stick to your guns. I was on the tarmack of Kigali airport after the genocide started and saw French arms being unloaded by a private carrier onto the tarmac.

We went to Paris but the French government was not co-operative and provided no new information. We let the report stand as we had written it. As it turns out, we were incorrect about the claim that the French government continued to ship arms to Rwanda after the genocide started. At the end of 1996, as a result of Paul Kagame’s Rwandan army overrunning the refugee camps controlled by the Hutu extremists then based in Zaire, documents were found by an Italian jouirnalist and sent to us which showed that the arms with French markings were supplied by a British firm based in the Isle of Wight and the arms had come, not from France, but from Eastern Europe supplied via a middleman, an Israeli-Hungarian.

Our involvement in Zaire, still led by Sese Seku Mobutu, began as we followed the plight of the more than a million ex-FAR (old Rwandan army), their families, militias involved in the genocide in Rwanda as well as other civilian refugees inrto Zaire. After failing in their efforts to launch military raids against ther new government, they began a genocide againt Tutsis in Zaire. Paul Kagame, then President of Rwanda, warned the international community that if the invasions and depridations of the ex-FAR and militias in Zaire were not stopped, he would take action. The international community stood by. Kagame in alliance with Museveni of Uganda invaded Zaire. They involved a small number of Congolese and appointed Laurent-Désiré Kabila as the spokeman for the supposedly indigenous uprising against the crimes being committed in eastern Zaire. (This narrative is filled out in our book on the DRC.)

In the process of the invasion, Laurent Kabila, an old Lumumba supprter who for the last twenty years had made a lliving as a smuggler, promoted himself step by step to the military and political leadership of the invading force. Further, not satisfied with overcoming the control of the refugee camps by the ex-FAR and winning military victories over Mobutu’s forces that had been in league with the ex-FAR forces, and against the wishes of his Rwandan and Ugandan patrons, Kabila decided not to stop but to go onto Kisangani, which he overran, and then head for Kinsasha and the complete overthrow of the Mobutu regime.

One set of masters, controllers and expoiters of Zaire’s – now renamed the Democratic Repiublic of the Congo (DRC) – resources, were replaced by a new group – Kabila in competition with Uganda and Rwanda for control. What ensued was Africa’s first continental war in which DRC’s immense mineral resources became the prize. In 1997, Dan Gertler flew to Kinshasha and was introduced to Laurent Kabila through the Lubavitcher rebbe, Rabbi Chlomo Bentolila, based in that city. Without his Rwandan and Ugandan patrons, Kabila was strapped for funds to pay his soldiers. Gertler offered to loan Kabila US$20 million in return for a monopoly control of the diamond production in the DRC. Kabila agreed. Within weeks, Gertler raised the funds that became the foundation of his personal fortune.

Tycoons and Monopolies V: East Europeans – Arcade Gaydamak.23.04.13

May6

Tycoons and Monopolies V: East Europeans – Arcade Gaydamak 23.04.13

Howard Adelman

Five East European Israeli billionaires stand out. I begin with sixty-one year old Arcadi Gaydamak (Arie Bar Lev) who owns residences in Russia, Israel and Canada and has citizenship, not only in Israel and Canada, but in Angola and France as well. Though born in Berdichev, Ukraine, though also reported as Moscow, he had to surrender his Soviet citizenship when he migrated to Israel in 1982 when he was twenty years old. Four years ago, he applied to “regain” his Russian citizenship.

The outline of his life is anything but simple, but I will first offer a potted history. Gaydamak became a kibutznik at first (Beit HaShita), but Israel appeared to be initially only a pit stop to escape Russia. He studied Hebrew in an ulpan but in six months was unable to master the language before he moved to France after six months. Initially, he worked as a labourer and gardener. In 1976, he started a translation service, Gaydamak Translations. He used that business to “migrate” to Canada as a business investor and opened a translation business there. His initial real wealth stake did not come from this business but from the connections he had established through that business with Russian officials to engage in import and export transactions, especially when the Berlin Wall fell and the Soviet Union was imploding.

My path crossed with Gaydamak, though again I never met him, from my work in Africa after 1994. My personal connection was through our study of President Mitterand’s son, Jean-Christophe Mitterand, of the arms supplied to the Rwandan Habyarimana regime mentioned in a previous blog. Mitterand worked out of a separate section located in the Ministry of Cooperation in Paris to supply arms to President Habyarimana of Rwanda, even though we were incorrect that this arms supply continued after the genocide started. Mitterand was involved in shipping arms in other parts of Africa, including Angola where he became intertwined with the Gaydamak/Falcone arms for Angola deal. Pierre Falcone through his British companies linked to Brenco International gave £1.3m in alleged bribes to Jean-Christophe Mitterrand, but Arcadi Gaydamak claimed the money paid in 1998 had nothing to do with the arms deals. Jean-Christophe was found guilty by the French court of tax evasion in relation to the Angolagate scandal and given a 30-month suspended sentence.

Gaydamak became involved in what became known as the Angolgate Scandal, the arms for oil and forgiveness of debt deal between Russia and Angola in 1995 and which I will explore later on in this profile. But let me jump to the end and a sports story that appeared in the Canadian Jewish News at the end of February written by Yair Lootsteen about why he would not let his son, Natan, attend the games of the Beitar Yerushalyim football (soccer) team though he was an ardent fan. At the games, many fans, especially those led by an ardent group called La Familia, booed Arabs on other Israeli teams and would call out, “Death to the Arabs!” and “Muhammad is dead.” Hundreds of police were required to control the “enthusiasm” of these hooligans.

In 2005, Arcadi Gaydamak bought the football club. This year he bought two Muslim players from Chechnya to join the club, Zaur Sadaev and Gabriel Kadiev, as much to combat Beitar’s racist image as to add skills to its roster. Beitar had Muslim players before, namely Viktor Pacha of Albania, but since Nigerian defender Ibrahim Nadala had been harassed by anti-Muslim (and anti-Black) fans and left the team, Beitar had not had any Muslim players in contrast to most Israeli teams.

At the next game, in response to the two new Muslim players on the team, La Familia led the hooligans in chants of “Beitar is Pure Forever” and torched the team’s clubhouse, including its trophy room with the team’s historic relics. At the next game, fans with La Familia sweaters were banned from entry and Gaydamak organized fans to hold up welcome signs to the two new players. When some fans tried to boo Kadiev when he came onto the field, the majority of fans rose to give him a standing ovation and drowned out the boos. Lootsteen offered to take his son to the next Beitar game for the first time.

Gaydamak has taken other bold humanitarian gestures in the past – the two most notable in Israel involved setting up a huge tent city on the beaches of Nitzanim at his own cost for the evacuees who had fled the north to escape the rockets during the Lebanon War in 2006, Gaydamak also offered holidays in Eilat for residents of Sderot who lived under a barrage of rocket attacks from Gaza before the last Gaza War. My own conviction is that these were genuine gestures though clearly also serving to polish his public image in Israel.

In the previous decade, Gaydamak had been awarded the Chevalier de l’Ordre National du Mérite and the Ordre du Mérite agricole ostensibly for contributions to agriculture but for allegedly secretly rescuing two captured French pilots in the 1990s Balkan War and two French intelligence officers captured by rebels in the Caucasus. In 1997, he was also involved in freeing four French aid workers being held in Dagestan. Former French interior minister Charles Pasqua, his co-conspirator charged before the French court (see next section), insisted that the awards had been personally approved by Jacques Chirac. In March 2006, he tried to buy the newwspaper, France Soir.

In February 2007, Gaydamak established Social Justice and converted it into a political party in July in Israel ready for the elections and won three seats. He was also an unsuccessful contender as Mayor of Jerusalem in the November 2008 elections and only won 3.6% of the vote and no seats on the municipal council. In Russia, he gave money to Jewish charities and funded and was president of the Congress of Jewish Religious Communities and Organizations of Russia (KEROOR). In 2004, he also bought the independent Moskoviskie Novosti and converted into a strongy pro-Putin advocacy sheet under his insistence that newspapers should be loyal to the powers in charge of the state. “Newspapers which are responsible for public opinion should not direct the public against the powers that be…If the political and administrative structures in Russia are organised by people elected in free, democratic elections, it is not right to turn public opinion against them.”

Do we have to ask, “Why the enormous effort to polish his public image?”

When Arcadi Gaydamak applied for Russian citizenship in 2009, it was just days before the French court was to hand down its verdict in the “Angolagate” arms-dealing affair to add to his troubles over very recent steep financial losses, largely as a result of former associates double-dealing him, and investigations by the Israel Security Authority of alleged fraud and money-laundering using Bank Hapoalim. Just this past January 2013, The French Court of Cessation upheld the original findings and sentences meted out to 3 of the 24 of the original 36 charged in the Angolagate scandal who had appealed their convictions on 27 October 2009. The French Court of Appeal in April 2011 had reduced Gaydamak’s sentence to 3 years, Falcone’s to 2.5 years and Charles Pasqua was acquitted on his first appeal. The French Court of Cessation upheld the original six year prison sentences as well as one year for former interior minister, Senator Charles Pasqua.

What were their crimes? In 1975, Angola gained its independedence only to become a site for further civil war between factions serving as either South African (American?) or Soviet proxies. With the demise of his Soviet sponsors in 1989, the Angolan government of Jose Eduardo dos Santos wanted to seek western support but encountered two problems – UN sanctions and a huge burden of indebtedness left over from the Soviet era representing two-thirds of its annual GDP. Dos Santos was still in the midst of the civil war as the MPLA tried to finally eliminate its long time opponent, Jonas Savimbi’s União Nacional para a Independência Total de Angola (UNITA). (Savimbi died in 2002 effectively finally ending the long civil war.) At the same time, the 1991 Bicesse Peace Accords forbad the import of additional lethal weapons.

The Angolan government sought to purchase combat helicopters, guns and ammunition from Russia using a Slovak company, ZTS-OSOS to be paid with the exchange of oil. Dos Santos turned to private entrepreneurs to assist him by trading diamonds and oil for armaments just as Joseph Kabila had in the DRC, but using Pierre Falcone in partnership with Arcadi Gaydanak who had the Russian connections to access the arms and get around the UN sanctioned weapons embargo. Arcadi Gaydamak and Pierre Falcone were given authority to control an Angolan bank account in France and authorized to sign contracts on behalf of ZTS. The profits on the oil were estimated at over £50million.

Falcone was born in Algeria, moved to France when he was six when Algeria achieved independence, and began his entrepreneurial life in Brazil, but eventually obtained Canadian citizenship. Falcone and Gaydamak orchestrated the delivery of US$790 million in Russian arms contrary to the sanctions. However, the initial French appeal agreed with the claim that, since the two had Angolan citizenship and were acting as official agents of the Angolan government, they were not bound by French sanction laws.

However, the really big profits were not made through arms sales – though, as you read, those profits were huge – but as agents in reducing, purchasing and reselling of debt instruments at no risk to themselves. In April 1996, Angola owed Russia $US386 million for past arms purchases. Angola also owed Russia $5 billion in debt left from the Soviet era. On 24 April 1996, the Angolan Minister of Economy and Finance, Augusto da Silva Tomás, issued a formal mandate that designated Pierre Falcone and Arcadi Gaydamak as agents empowered to act on Angola’s behalf to settle its $US5 billion debt. Arcadi Gaydamak and Pierre Falcone, joint owners of Abalone Investments, a shell company, negotiated a settlement of the debt. The $US5billion debt was to be reduced by 70% to $US1.5 billion to be repaid after a five year grace period dated from 20 November 1996 and then repayment over fifteen years of the reduced debt plus acrued interest calculated at 6% per annum assessed every six months and secured by a promissory note from the Angolan Central Bank. Andrey P. Vavilov, Russia’s First Vice-Minister for Finance, signed the deal on behalf of Russia. Effectively, Angola was supposed to repay a total of $US2,896,596,000 made up of the reduced capital debt of $US1.5 billion, the accrued interest during the grace period of $US457,160,000 and $US939,437,000 for interest during the fifteen year repayment period.

Abalone earned a “commission” of $US386 million, of which just over $138 million went to Gaydamak and almost $US125 million to Pierre Falcone, and just under $US49 million to Vitaly Malkin, the richest member of Russia’s Duma, who just recently resigned when it was revealed that he held Israeli as well as Russian citizenship and held large amounts of undeclared assets in Canada.. The balance of just over 30% of the funds were used to pay off a wide variety of other players including the Angolans who received $US110 million. The three greatest Angolan beneficiaries were José Eduardo dos Santos, President of Angola, US$36.25 million; Elísio de Figueiredo, Angolan Ambassador to France, $US17.55, Joaquim Duarte da Costa David, Director General of Sonangol until 1998 and then Minister of Industry, $US 13.25 million.

There was another level of profit when Russia decided to sell those notes to Abalone for 50% of their face value in six equal instalments for a further profit to Abalone over the next six years of almost $US500 million when Abalone resold those notes to Sonangol for their full face value in accordance with an agreement dated 30 May 1997. Abalone in the end effectively only paid about $US265 million for them. There were other levels of profits, some to Glencore for making the escrow arrangements and facilitating the pre-financing secured by prospective oil deliveries via Sonangol as collateral on which it undoubtedly made a further large profit. In 1999, Vitaly Malkin, as the representative of Rossiyskiy Kredit Bank (RK) which he owned, bought into Abalone by paying Gaydamak $US60 million and another level of profits were arranged when Russian Principal Notes (PRINS) and Instruments Arrears Notes (IANS) were exchanged at their depressed values for other secured notes at full value to Russia’s benefit by showing a reduced debt and to Abalone’s benefit by obtaining a huge profit since, when the deal went into effect on 23 August 1999, PRINS had a value of only 10.54 per cent of face value and IANS had only a 14.41 per cent face value.

In 2001, facing investigations of all these transactions, Gaydamak shifted the banking to Cyprus through Sherinvest Bank owned by Gaydamak and gave the impression that the debt repayments were going to Russia since Sherinvest Moscow was the name of Russia’s banking agent in Moscow. Since neither Falcone nor Malkin knew anything about this, Gaydamak had effectively double-crossed his partners. Between March and August 2001, Sonangol transferred $618,235,483.25 to Sberinvest. Angola was told that the debt had been repaid but Russia had not received the final eight payments. The deal blew open in 2005 and Angola agreed to pay Russia the balance owed. Gaydamak agreed to pay Angola $206 million which still left him with a profit of $US 181 million on the deal.

As he jockeys back and forth from Israel to Russia and avoids France, France has been unsuccessful in extraditing Gaydamak from Israel. Israeli law did not make his financial matters an extraditable offence. Nor were the other charges of arms dealing an offense at the time the actions were taken. There is, however, an ironic twist to the whole series of shill games. In 2006 and 2007, Joelle Mamane, his long time confidante and micromanager, transferred US$249 million in securities from Gaydamak’s company to the Manatel Foundation evidently without Gaydamak’s approval and evidently not for his benefit. Because there were so many levels of covers, Gaydamak had not been able to establish ownership. The Manatel Foundation gives its money away to Orthodox Jewish causes in Israel and Europe.

For a very long and very detailed dissection of all these deals, see “Deception in High Places: The Corrupt Angola-Russia Debt Deal.”

Click to access The_Corrupt_Russian-Angolan_Debt-Deal-04-11-2013-with_ISBN.pdf

Howard Adelman

Politics, philosophy, film, and other things…

Tag Archives: economics

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