The American Bear


Foreign Aid Is Afghanistan's Resource Curse | FPIF

Rebellious American colonists once proclaimed that “taxation without representation is tyranny.” A corollary is more significant in the modern world: “government without taxation results in tyranny.”

This phenomenon is primarily observed in developing countries afflicted by the “resource curse,” in which the discovery of valuable natural resources has tended to exacerbate cronyism and repression, rather than sowing democracy or spreading prosperity. What is the mysterious incompatibility between natural wealth and democracy?

It appears that part of the answer is taxation. When government requires resources that can only be obtained from taxing its citizens, it must be ultimately responsive to those citizens. Force might work until the government coffers run out, but eventually citizens will put up with only so much. On the other hand, when a government has all the resources it needs—say, through oil or diamond wealth—it is free to ignore or oppress its citizens. A government with its own resources also has the wherewithal to suppress the population by force.

An analogous incentive structure is at play in many developing and post-conflict countries. Afghanistan, which manages to generate only about $2 billion per year of customs revenue and taxes and depends on international donors for the rest of its budget, is a prime example. With plenty of cash and no accountability to citizens—as well as minimal oversight by donors—Afghan officials are free to rip off donor resources and ignore or extort their fellow citizens with relative impunity.

In Afghanistan, as Astri Surkhe has pointed out, international donors have created a classic rentier society. Officials are busily engaged in rent seeking, not in applying resources to local needs. Even conscientious officials have no institutional reason to take local desires into account, and in any case have no representative structures for ascertaining these needs.

The lesson? Transplanting dollars does not transplant democracy. [++]

We Are So Disappointed With the Corrupt Afghan Government | A Tiny Revolution

I’m sure it’s tough for many reasons to work for the Sulzbergers and Carlos Slim at the New York Times. But I’d have an especially hard time coming into the office every day and being forced to write paragraphs like this in today’s story about Afghanistan:

American and NATO officials in Kabul…said that [development] aid would continue, although the amounts given were likely to be reduced over time. And the Afghan government would have to live up to its commitments to battle corruption and run a more open government for the aid to keep flowing.

It’s not just that the New York Times itself uncovered the story of the CIA giving the Karzai government millions in bags of cash one week ago. It’s that the bags of cash article was written by the same reporter, Matthew Rosenberg.

Yet here he is today, faithfully passing along the news about how anonymous American officials sincerely want Karzai to be less corrupt. It’s like breaking the Eliot Spitzer prostitution story, and then quoting him a week later explaining how he’s going to continue paying Ashley Dupré as long as she lives up to his longstanding demand that she be less of a prostitute.

(I have much more sympathy for the payee in both situations. In Karzai’s case, he likely remembers that after the Soviets left, their last puppet was castrated, dragged through the streets of Kabul behind a jeep, and then publicly hanged. So you can understand if he wants to keep some cash on hand.) [read]

I WAS very excited to read, last week, about the “ghost money” that the C.I.A. is paying to the president of my country, Hamid Karzai. I’d like to know: would it be possible for the C.I.A. to give me some, too? We do not know what President Karzai has done with this cash that arrives each month in suitcases and plastic shopping bags. Not even the C.I.A. — which every Afghan believes knows everything — can say. But I will tell you exactly what I will do with mine: I will do the things we thought the Americans were going to help us do when they came to Afghanistan nearly 12 years ago. Qais Akbar Omar (via azspot)

(via azspot)

Karzai: CIA vows cash payments will continue despite scandal | The Hill

Afghan President Hamid Karzai said Saturday he’s been assured by the CIA’s Kabul station chief that regular cash payments to his government will continue after a New York Times exposé created a scandal in his country and the United States.

Karzai told the Associated Press he’s been receiving monthly payments from the CIA for more than a decade as part of U.S. assistance to his government. He said he’s been told that regular source of funding will not be cut off.

“The help and assistance from the U.S. is for our National Directorate of Security. That is state-to-state, government-to-government regular assistance,” Karzai said, according to the AP. “So that is a government institution helping another government institution, and we appreciate all this assistance and help, all this assistance is very useful for us. We have spent it in different areas (and) solved lots of our problems.”

The New York Times first brought the payments to light last weekend. The newspaper estimated that the cash transfers, which were brought in plastic bags and suitcases and referred to as “ghost money” by Karzai aides, totaled tens of millions of dollars since the U.S. invasion of 2001.

No one mentions the agency’s money at cabinet meetings. It is handled by a small clique at the National Security Council, including its administrative chief, Mohammed Zia Salehi, Afghan officials said. Mr. Salehi, though, is better known for being arrested in 2010 in connection with a sprawling, American-led investigation that tied together Afghan cash smuggling, Taliban finances and the opium trade. Mr. Karzai had him released within hours, and the C.I.A. then helped persuade the Obama administration to back off its anticorruption push, American officials said. After his release, Mr. Salehi jokingly came up with a motto that succinctly summed up America’s conflicting priorities. He was, he began telling colleagues, ‘an enemy of the F.B.I., and a hero to the C.I.A.’ C.I.A. Delivers Cash to Afghan Leader’s Office

C.I.A. Delivers Cash to Afghan Leader’s Office | NYT

For more than a decade, wads of American dollars packed into suitcases, backpacks and, on occasion, plastic shopping bags have been dropped off every month or so at the offices of Afghanistan’s president — courtesy of the Central Intelligence Agency.

All told, tens of millions of dollars have flowed from the C.I.A. to the office of President Hamid Karzai, according to current and former advisers to the Afghan leader.

“We called it ‘ghost money,’ ” said Khalil Roman, who served as Mr. Karzai’s deputy chief of staff from 2002 until 2005. “It came in secret, and it left in secret.”

The C.I.A., which declined to comment for this article, has long been known to support some relatives and close aides of Mr. Karzai. But the new accounts of off-the-books cash delivered directly to his office show payments on a vaster scale, and with a far greater impact on everyday governing.

Moreover, there is little evidence that the payments bought the influence the C.I.A. sought. Instead, some American officials said, the cash has fueled corruption and empowered warlords, undermining Washington’s exit strategy from Afghanistan.

“The biggest source of corruption in Afghanistan,” one American official said, “was the United States.”

The United States was not alone in delivering cash to the president. Mr. Karzai acknowledged a few years ago that Iran regularly gave bags of cash to one of his top aides.

At the time, in 2010, American officials jumped on the payments as evidence of an aggressive Iranian campaign to buy influence and poison Afghanistan’s relations with the United States. What they did not say was that the C.I.A. was also plying the presidential palace with cash — and unlike the Iranians, it still is. [continue]

Jim White adds:

Perhaps the most disturbing aspect of these cash payments is that they seem to have been designed in large part to pay off Afghan warlords:

Moreover, there is little evidence that the payments bought the influence the C.I.A. sought. Instead, some American officials said, the cash has fueled corruption and empowered warlords, undermining Washington’s exit strategy from Afghanistan.

And it’s not just any warlords who are being funded by this cash. We learn in the article that the current corruption pay for Rashid Dostum, who committed the largest single war crime in the Afghan war, is now $80,000 per month.

And in the funding of warlords, keep in mind that they form the backbone of David Petraeus’ Afghan Death Squads Local Police under the “direction” of US special operation forces and the CIA.

All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation’s GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it’s increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system. If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it’s no secret. You can stare right at it, anytime you want. The Biggest Price-Fixing Scandal Ever | Rolling Stone (via gonzodave)

(via gonzodave)

Obama Signs Bill Gutting Transparency Provisions in Insider Trading Law

President Obama has signed into law a measure critics say guts key transparency provisions from a law designed to combat insider trading by members of Congress. The new bill repeals a requirement in the Stop Trading on Congressional Knowledge Act that high-level federal officials disclose financial information online. But, according to the Center for Responsive Politics, it also removes requirements for the searchable and electronic filing of information related to potential conflicts of interest by the president, vice president, Congress and other officials. On its website, the Center wrote: "Without the provisions, the STOCK act is made toothless. Insider trading by members of Congress and federal employees is still prohibited, but the ability of watchdog groups to verify that Congress is following its own rules is severely limited because these records could still be filed on paper — an unacceptably outdated practice that limits the public’s access.”

How the Pentagon Corrupted Afghanistan | Dilip Hiro

Washington has vociferously denounced Afghan corruption as a major obstacle to the U.S. mission in Afghanistan. This has been widely reported. Only one crucial element is missing from this routine censure: a credible explanation of why American nation-building failed there. No wonder. To do so, the U.S. would have to denounce itself.

Corruption in Afghanistan today is acute and permeates all sectors of society. In recent years, anecdotal evidence on the subject has been superseded by the studies of researchers, surveys by NGOs, and periodic reports by the United Nations Office on Drugs and Crime (UNODC). There is also the Corruption Perceptions Index of the Berlin-based Transparency International (TI). Last year, it bracketed Afghanistan with two other countries as the most corrupt on Earth.

None of these documents, however, refers to the single most important fact when it comes to corruption: that it’s Washington-based. It is, in fact, rooted in the massive build-up of U.S. forces there from 2005 onward, the accompanying expansion of American forward operating bases, camps, and combat outposts from 29 in 2005 to nearly 400 five years later, and above all, the tsunami of cash that went with all of this.

Last month, when an Afghan court sentenced Sher Khan Farnood and Khalil Ullah Ferozi, the chairman and chief executive of the Kabul Bank, for looting its deposits in a gigantic Ponzi scheme, the event received some media attention. Typically, however, the critical role of the Americans in the bank’s murky past was missing in action.

Founded as a private company in 2004, the Kabul Bank was promptly hailed by American officials in Afghanistan as a linchpin in the country’s emerging free market economic order. In 2005, action followed words. The Pentagon, paymaster for the Afghan National Security Forces (ANSF), signed a contract with the bank to disperse the salaries of ANSF soldiers and policemen.

With that, the fledgling financial institution acquired an impressive cash flow. Moreover, such blatant American support generated confidence among better-off Afghans. Soon enough, they were lining up to deposit their money. Starting in 2006, the surging inflow of cash encouraged Farnood and Ferozi to begin skimming off depositors’ funds as unsecured loans to themselves through fake front companies. Thus was born the world’s largest banking scam (when calculated as a percentage of the country’s gross domestic product) with the U.S. Embassy in Kabul acting as its midwife. [continue]

HR933 "Monsanto Protection Act" | Not the Singularity

HR 933 was signed into law on Tuesday, called the ”Monsanto Protection Act”. This bill was suppose to be a simple spending bill but section 735 of the bill made it impossible for you or me to sue Monsanto if we get sick from their genetically modified crops. I want to scream at the Republicans for sending Sen. Roy Blunt, Republican of Missouri, to craft the provision with the help of Monsanto itself. I want to kick the ass of the Democrats like Maryland Sen. Barbara Mikulski who turned her “back on consumers” according to Andrew Kimbrell, executive director of the Center for Food Safety,

“In this hidden backroom deal, Sen. [Barbara] Mikulski turned her back on consumer, environmental and farmer protection in favor of corporate welfare for biotech companies such as Monsanto. This abuse of power is not the kind of leadership the public has come to expect from Sen. Mikulski or the Democrat Majority in the Senate.”

250k+ people signed a petition opposing the provision and Food Democracy Now protesters even took to the streets on Pennsylvania avenue but this did nothing to disuade President Barack Obama from signing HR 933 into law.

[Nominee for Treasury Secretary, Jack] Lew is a member of a protected class. The rules that apply to little people, including giving accurate, as opposed to strained-at-best, answers to Congressmen, just don’t apply to him. The idea that his pay package was basically a huge option payment by Citi on the pretty good odds that he’d land another big deal official post, doesn’t seem to occur to him. And why is that worth so much to Citi? Well, as we know, corruption in the US does not (often) take the form of briefcases full of cash being left in an office. It’s an ugly combination of intellectual capture, of mutual backscratching, and ‘don’t rock the boat,’ of accepting norms of discourse, behavior, and action, that circumscribe the range of possible actions. Lew no doubt believes he was paid according to merit, despite the blindingly obviously evidence to the contrary. And that sense of entitlement is what will enable him to kill old people without a second thought. Because that is what winning cuts to Social Security and Medicare will do, given that Obama punted on his chance to tackle the health care cost problem. I had predicted Lew would have us wanting Geithner back. At least Geithner would get twitchy when grilled. That means, somewhere inside, he actually knows right from wrong. Lew is such a bland technocrat that I wonder whether he has any compunctions. … Lew is indeed perfect for his new role, just not in the way ordinary Americans expect him to be. Yves Smith, Jack Lew’s Grotesque Citi Employment Deal and the Institutionalization of Corruption | naked capitalism

The Honduran People under a Permanent Coup d'Etat | Upside Down World

The latest Coup d’Etat perpetrated in the early hours of December 12 in Honduras, when the National Congress voted to remove four Supreme Court justices, places front and center once again the dictatorship the country has experienced since June 28, 2009. The ultra-right of Honduras has been offering up to us for the last three years lessons on their cannibalistic practices.

The local reality is macabre: Honduras is considered the most violent country in the world with 92 assassination for each 100,000 inhabitants, and at the same time Honduras was the country most impacted by climate change between 1991 and 2010, and to add to these woes, is also the poorest country in the hemisphere. In the meantime, the elite in power is dedicated to the destruction of this weakened democracy to maintain their privilege at any cost.

Leading up to the action taken by the Congress which was pushed through by the majority from the nationalist party, the current “head of state” Pepe Lobo denounced a supposed Coup d’Etat cooked up by Jorge Canhuati Larach, owner of various media outlets that are members of the Inter American Press Society (SIP), which recently conferred to him (Jorge Canhuati) an honorific mention in the category of “Human Rights and service to the community.”

As with Canahuati Larach, along with Pepe Lobo and the illustrative crowd of representatives that demolished the Constitutional Court, they were all implicated in the Coup d’ Etat of 2009. Of course the Supreme Court participated fully in the gutting of democracy in 2009, which was categorized by the Library of Congress in the U.S. as a “Constitutional Succession.”

From Charter Cities to the Application of the Polygraph Test

The Constitutional Court came to be questioned, as with the rest of the Supreme Court, by the Executive and Legislative branches, after having declared unconstitutional the Ley of Special Development Regions (RED), alias Charter Cities, a project cut from neocolonial cloth, that was intended to auction off slices of Honduran territory to U.S. investors known as libertarians and ultra-right. Among other issues, the RED included transferring the application of justice to third parties, located on the island of Mauritius and finally the British Court of appeals.

The furious reaction to the Supreme Court’s decision on Charter Cities, by Pepe Lobo and his protegé Juan Orlando Hernández, President of the Congress and candidate picked to be the future president of Honduras, demonstrated that the independence of the branches of government in Honduras finds itself under attack.

The situation was worsened even more, when the Constitutional Court declared unconstitutional the Law of Purification of the Police, which included psycho-metric, socio-economic, toxicological and polygraph tests, with this last test being questioned as a method that violates national laws as well as international human rights treaties.

The collapse of the National Police, with its absolute corruption and association with organized crime has the country in a sorry state, living under the yoke of security organisms that are implicated in multiple assassinations and sales of weapon arsenals. The so-called “purification” of the police initiated about a year ago has not generated measureable results, and has aggravated the situation with the suspension of aid to the police by the U.S., surrounding evidence about Juan Carlos Bonilla, current director of the police, who was named in having participated in death squads from 1998 to 2002.

When the Constitutional Court voted four to one as to the unconstitutionality of the Law of Purification of Police, the same episode occurred as following the Charter City decision, where the judge Oscar Chinchilla took the side of the Legislative branch. Despite Chinchilla having said that the use of the polygraph test was a violation of fundamental rights, he did not vote for unconstitutionality emitted by the majority of the Court. Lacking a unanimous decision in the Constitutional Court, the plenary of the Supreme Court would meet to take a final decision. Just hours before the Supreme Court plenary was to meet to consider the matter, the National Congress removed the four magistrates who had voted against the law in the Constitutional Court. [read whole]

Obamacare architect leaves White House for pharmaceutical industry job | Glenn Greenwald

When the legislation that became known as “Obamacare” was first drafted, the key legislator was the Democratic Chairman of the Senate Finance Committee, Max Baucus, whose committee took the lead in drafting the legislation. As Baucus himself repeatedly boasted, the architect of that legislation was Elizabeth Folwer, his chief health policy counsel; indeed, as Marcy Wheeler discovered, it was Fowler who actually drafted it. As Politico put it at the time: “If you drew an organizational chart of major players in the Senate health care negotiations, Fowler would be the chief operating officer.”

What was most amazing about all of that was that, before joining Baucus’ office as the point person for the health care bill, Fowler was the Vice President for Public Policy and External Affairs (i.e. informal lobbying) at WellPoint, the nation’s largest health insurance provider (before going to WellPoint, as well as after, Folwer had worked as Baucus’ top health care aide). And when that health care bill was drafted, the person whom Fowler replaced as chief health counsel in Baucus’ office, Michelle Easton, was lobbying for WellPoint as a principal at Tarplin, Downs, and Young.

Whatever one’s views on Obamacare were and are: the bill’s mandate that everyone purchase the products of the private health insurance industry, unaccompanied by any public alternative, was a huge gift to that industry; as Wheeler wrote at the time: “to the extent that Liz Fowler is the author of this document, we might as well consider WellPoint its author as well.”

[…] More amazingly still, when the Obama White House needed someone to oversee implementation of Obamacare after the bill passed, it chose … Liz Fowler. That the White House would put a former health insurance industry executive in charge of implementation of its new massive health care law was roundly condemned by good government groups as at least a violation of the “spirit” of governing ethics rules and even “gross”, but those objections were, of course, brushed aside by the White House. She then became Special Assistant to the President for Healthcare and Economic Policy at the National Economic Council.

Now, as Politico’s “Influence” column briefly noted on Tuesday, Fowler is once again passing through the deeply corrupting revolving door as she leaves the Obama administration to return to the loving and lucrative arms of the private health care industry:

“Elizabeth Fowler is leaving the White House for a senior-level position leading ‘global health policy’ at Johnson & Johnson’s government affairs and policy group.”

The pharmaceutical giant that just hired Fowler actively supported the passage of Obamacare through its membership in the Pharmaceutical Researchers and Manufacturers of America (PhRMA) lobby. Indeed, PhRMA was one of the most aggressive supporters - and most lavish beneficiaries - of the health care bill drafted by Fowler. Mother Jones’ James Ridgeway proclaimed “Big Pharma” the “big winner” in the health care bill. And now, Fowler will receive ample rewards from that same industry as she peddles her influence in government and exploits her experience with its inner workings to work on that industry’s behalf, all of which has been made perfectly legal by the same insular, Versailles-like Washington culture that so lavishly benefits from all of this.

A Rare Look at Why The Government Won't Fight Wall Street | Matt Taibbi

The great mystery story in American politics these days is why, over the course of two presidential administrations (one from each party), there’s been no serious federal criminal investigation of Wall Street during a period of what appears to be epic corruption. People on the outside have speculated and come up with dozens of possible reasons, some plausible, some tending toward the conspiratorial – but there have been very few who’ve come at the issue from the inside.

We get one of those rare inside accounts in The Payoff: Why Wall Street Always Wins, a new book by Jeff Connaughton, the former aide to Senators Ted Kaufman and Joe Biden. Jeff is well known to reporters like me; during a period when most government officials double-talked or downplayed the Wall Street corruption problem, Jeff was one of the few voices on the Hill who always talked about the subject with appropriate alarm. He shared this quality with his boss Kaufman, the Delaware Senator who took over Biden’s seat and instantly became an irritating (to Wall Street) political force by announcing he wasn’t going to run for re-election. “I later learned from reporters that Wall Street was frustrated that they couldn’t find a way to harness Ted or pull in his reins,” Jeff writes. “There was no obvious way to pressure Ted because he wasn’t running for re-election.”

Kaufman for some time was a go-to guy in the Senate for reform activists and reporters who wanted to find out what was really going on with corruption issues. He was a leader in a number of areas, attempting to push through (often simple) fixes to issues like high-frequency trading (his advocacy here looked prescient after the “flash crash” of 2010), naked short-selling, and, perhaps most importantly, the Too-Big-To-Fail issue. What’s fascinating about Connaughton’s book is that we now get to hear a behind-the-scenes account of who exactly was knocking down simple reform ideas, how they were knocked down, and in some cases we even find out why good ideas were rejected, although some element of mystery certainly remains here.

There are some damning revelations in this book, and overall it’s not a flattering portrait of key Obama administration officials like SEC enforcement chief Robert Khuzami, Department of Justice honchos Eric Holder (who once worked at the same law firm, Covington and Burling, as Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.

Most damningly, Connaughton writes about something he calls “The Blob,” a kind of catchall term describing an oozy pile of Hill insiders who are all incestuously interconnected, sometimes by financial or political ties, sometimes by marriage, sometimes by all three. And what Connaughton and Kaufman found is that taking on Wall Street even with the aim of imposing simple, logical fixes often inspired immediate hostile responses from The Blob; you’d never know where it was coming from. [++]