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Jeffrey Sachs’ Grab for the World Bank

By LAURA FLANDERS | CounterPunch | March 20, 2012

There may be worse candidates for the presidency of the World Bank than Jeffrey Sachs (Larry Summers, also a candidate, comes to mind,) but Sachs is well worth raising an alarm about. He combines a new fangled profile as a progressive with policies that amount to full steam ahead for global growth. And he’s running as the candidate of “change”  clearly hoping no one looks too closely at his record as an economic hit-man.

In the US (if not in much of the rest of the world and certainly not CounterPunch) Sachs’s closeness with the singer/crusader Bono bestows a liberal glow. He directs the Earth Institute at Columbia University, advises the UN and the Congressional Progressive Caucus, and he’s winning endorsements from among others, Congressman John Conyers and economist Mark Weisbrot.  He’ll attract predictable opposition from the Right who bristle at any mention of foreign aid, but although his media pals like to forget it now, Sachs was once evangelist number one for exactly the heavy-handed “fly-in-fly-out” development tactics that have made the world financial institutions so passionately hated.

Last week, John Cavanaugh of the Institute for Policy Studies and American University development professor Robin Broad laid out a raft of concerns to which Sachs responded thus: “I would be the first-ever development practitioner and anti-poverty professional to be World Bank President, just what is needed given the bank’s mission of a “world free of poverty.”

In Europe’s post-Soviet “transition” years, Sachs’s professional poverty expertise was mostly in increasing it. Russia, following Sachs’s callous “shock therapy” prescription, sold off state companies, suspended public subsidies and drove employment and life expectancy into the ground, with brutal long-term consequences, exacting the most savage costs in terms of death and suffering since the Second World War and the results of the Sachs experiment in Poland, Estonia and Slovenia weren’t much better.  While a handful of global gamblers got rich off the disaster, former World Bank economist David Ellerman, said of Sachs “Only the mixture of American triumphalism and the academic arrogance of neoclassical economics could produce such a lethal dose of gall.”  If Sachs could double suicide rates in Russia as a cocky young Harvard advisor, it’s hard to imagine what he could do to the world as World Bank President.

In recent years, Sachs has taken a few turns. He embraces debt forgiveness (some) and has some nasty things to say about world military spending in his book “The End of Poverty.” But the business of “poverty reduction” is a complex one. The World Bank’s calculations have been incisively discussed here by Adam Parsons. Suffice to say, there’s extreme poverty and there’s just getting by. In the same way when it comes to development, there’s total exclusion from the world economy — and there’s becoming a cog in it. Sachs’s vision of a “world free of poverty” has more cogs in more wheels, but it’s the same deadly machine driving the planet to the same nasty brink.

To cite one example. in his 2007 Reith lecture series “Bursting at the Seams” Sachs pushes new agricultural technology and commercial fertilizers to increase yields in low-life expectancy countries. “Africa can and must have a Green Revolution as India initiated nearly forty years ago.” He celebrates increased yields and dismisses concerns about environmental damage and rising debt, claiming that “Older techniques for replenishing soil nutrients, such as the rotation of farm lands, allowing the replenishment of nutrients on land left to fallow for 10 or 20 years, are no longer feasible.”  To top things off, there’s a dose of “population control” in Sachs’s mix.  “The evidence is overwhelming that it’s possible and necessary to have a rapid demographic transition on a voluntary basis to greatly reduce fertility rates in poor countries,” said Sachs.

Old arguments linking high population with high poverty are back in vogue in the context of contemporary planet-panic, but really, they miss the point. While growing population in poor countries has its environmental impacts, high-level consumption lifestyles in rich countries are much more of an immediate threat. Listen to the small scale farmers of countries like Mali and Burkina Faso who gathered at the World Social Forum in Kenya a few years back and they report that traditional farming techniques like fortifying soil with manure and mixing the crops grown on the same piece of land are rehabilitating degraded farms and farmers, both. Lying fallow for a generation doesn’t come up.

It’s here that one sees the “old” Sachs in the new. To return to Ellerman– the analysts of “shock therapy” have long gotten it wrong, he writes in an essay, Lessons from Eastern Europe’s Voucher Privatization. In the post-Soviet states, the crucial distinction wasn’t so much between the fast-shockers and the incrementalists, rather, Ellerman points out, “Reform-mongers, in their strategies and even more so in their rhetoric, could be divided into those who take an ideological, fundamental, and root-and-branch approach versus those who take an incremental, piecemeal, home-grown, and adaptive approach.”  From what he says now about global agribusiness and it seems that not much has changed in Sachs’s approach to the adaptive, home-grown initiative — even as the sane world is increasingly convinced that those are the only strategies with any chance of heading

The fact that he’s campaigning for the World Bank job as the candidate of the new regime makes all this particularly hard to take. Since Paul Wolfowitz resigned under a cloud in 2007, new rules at the World Bank are finally permitting countries other than the US and Europe to determine who heads the world’s financial institutions (since world war two it’s been the World Bank for the US, and a European at the IMF). Europe nominated Christine Lagarde for IMF president last year. She won over other candidates. For the World Bank post, the U.S. has quietly floated names like Susan Rice, John Kerry and Larry Summers to replace Robert Zoellick when he steps down June 30. Predicting he won’t be the US’s official pick, Sachs has gotten seven countries to endorse him, including Haiti, Jordan, Kenya, Malaysia and east Timor.

By March 23, we’ll know how all this plays out. Meanwhile, according to the open-source website, WorldBankPresident.org which is tracking these developments, a slate of countries with new financial capacity to compete with the US are taking steps to form a World Bank alternative. Quite possibly, at a meeting in India later this month, Brazil, Russia, India, China and South Africa may set up their own development bank with the goal, they say, ”to escape the dollar and the euro hegemonies and, if Chinese plans go well, making the yuan a global currency.” We’ll see what Sachs has to say about that adaptive initiative.

LAURA FLANDERS is the host of The Laura Flanders Show coming to public television stations later this year. She was the host and founder of GRITtv.org. Follow her on Twitter: @GRITlaura.

March 20, 2012 Posted by | Economics, Malthusian Ideology, Phony Scarcity, Timeless or most popular | , , , , | Leave a comment

Muslim Brotherhood wary of Egypt IMF loan

Al Akhbar | March 20, 2012

Egypt’s Muslim Brotherhood, the country’s largest political force, on Tuesday held off from backing a request for a loan from the International Monetary Fund, urging more government transparency.

The Brotherhood’s Freedom and Justice Party said it met with an IMF delegation in Cairo to discuss the loan which has raised fears of strangling Egypt’s economy to mostly Western lenders.

“The loan will be a burden on the shoulders of Egyptian people, who have the right to know how it will be spent and how it will be paid off,” its head Mohammed Mursi said in a statement.

The Muslim Brotherhood said it did not object to the IMF or assistance from abroad, but cautioned that it needed to meet Egyptian interests.

The party “would certainly accept any help from these institutions in any way that would serve public interests,” Mursi said.

The Islamist party, the largest in parliament, said the government “has not yet submitted a plan of economic measures relating to the loan” and did not say “how this loan will be used, or how it will be paid off.”

The IMF is seeking assurances from the Muslim Brotherhood that it would back the loan, diplomatic sources told AFP.

Egypt had spurned an IMF loan last year but reversed its decision amid a stalling economy.

The IMF loan has come under fierce criticism in Egypt, with many fearful that it will allow Western powers to gain control of the country’s weakened economy.

Egypt’s foreign currency reserves have fallen while the budget deficit increased due to public spending.

In addition to the IMF loan, Egypt has sought US$1 billion from the World Bank and US$500 million from the African Development Bank.

(Al-Akhbar, AFP)

March 20, 2012 Posted by | Economics | , , , , , , | Leave a comment

‘Iran-Pakistan trade rises despite US sanctions’

Press TV – March 17, 2012

A Pakistani minister says trade levels with Iran have increased over the past few years despite US sanctions imposed against the Islamic Republic over its nuclear energy program.

“The balance of trade USD 410.438 million remained in favor of Iran [in 2010-2011]. During the last few years there has generally been a positive trend in trade relations between Pakistan and Iran,” Pakistani Federal Minister for Commerce Makhdoom Amin Fahim said.

Islamabad exports to Tehran stood at USD 161.941 million in 2010-11, whereas imports from Iran accounted for USD 572.379 million, Pakistan’s biggest financial daily Business Recorder reported on Saturday.

Amin Fahim said Pakistan’s major exports to Iran in 2010-11 include rice, fruit, chemical material and products, cotton fabric, and manufactures of non-ferrous metals.

Pakistan’s major imports from Iran during the same period were petroleum, chemical compounds, chemical material and products, machinery and its parts, and ores and concentrates of iron, he said.

Earlier in January, Pakistani President Asif Ali Zardari said Islamabad would not limit trade relations with Iran “because of the political whims of any outside power.”

Pakistan has no choice but to seek greater ties with its neighbors – Iran, China, India and Afghanistan – “because the economies of the West are in trouble and not in a position to help us,” Zardari added.

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March 17, 2012 Posted by | Economics | , , , | Leave a comment

Dealing With Iran

By ISMAEL HOSSEIN-ZADEH | CounterPunch | March 16, 2012

Dr. James Zogby, president of the Arab American Institute and brother of the well-known pollster John Zogby, recently published an article on “Dealing with Iran” in Huffington Post  that is problematic on a number of grounds.

To begin with, Dr. Zogby claims that Iran harbors “aspirations for regional hegemony,” and it is therefore a “threat” to its neighbors: “Make no mistake, the regime in Tehran is a meddlesome menace and their aspirations for regional hegemony do pose a threat, not to Israel . . . but to the Arab Gulf States.” Dr. Zogby goes even one step further, arguing that Iran is more than just a threat; it is “the real danger to its … neighbors.”

Israel’s Education Minister Gideon Sa’ar recently admitted (boastfully) that the Israeli government had succeeded in distracting the attention of the entire world away from the Palestinians to the Iranians. Dr. Zogby’s argument that Iran is “the real danger to its neighbors” shows that Mr. Sa’ar is, indeed, justified in boasting about the fantastic success of Israel’s policy of distraction. Instead of blaming the US-Israeli axis of aggression for the never-ending and escalating turbulence in the Middle East, Dr. Zogby blames Iran!

But let us examine Dr. Zogby’s allegation in light of reality: (1) Iran has not invaded (or threatened invasion of) any country for over 250 years. (2) Iran was invaded in 1980 by Saddam Hussein, which culminated in the devastating 8-year war—a war that was instigated, supported and sustained by Western powers and their proxy regimes in the Persian Gulf region. (3) The “Arab Gulf States,” headed by the Saudi kingdom, are collaborating with the US-Israeli axis of aggression in their efforts to destabilize and overthrow the Iranian government. (4) The “Arab Gulf States,” not Iran, serve (literally) as military bases of Western powers that support Israel and its policies of settlements and occupation.

Against this background, Dr. Zogby’s claim that Iran is a “meddlesome menace” is obviously counterfactual and preposterous.

Ironically, Dr. Zogby’s claim that Iran poses “the real danger to its neighbors” is flatly rejected by the Arab people. Public opinion polls have consistently shown that the overwhelming majority of the Arab neighbors of Iran view the U.S. and Israel as the real threats, not Iran. For example, the most recent recent (2011) and most comprehensive public opinion survey to date, which covered 12 Arab/Muslim counties and 16,731 face-to-face interviews, and which was conducted by the Arab Center for Research and Policy Studies (ACRPS), found that “by a 15-1 ratio, Israel and the US are seen as more threatening than Iran.”

Since Dr. Zogby does not tell his readers why or how Iran is “the real danger to its neighbors,” let me offer an explanation for his allegation. The “threat” he is talking about is not a military threat. Nor is it a threat to Arab people or their territory—Iran has no territorial ambitions. It is, rather, the threat to the autocratic Arab rulers; a threat that results from Iran’s example or model of national sovereignty, not its “aspirations for regional hegemony,” as Dr. Zogby claims. As Iran’s policies of national independence and resistance to external pressure make the client Arab regimes look bad in the eyes of the Arab people, they tend to discredit and threaten their dictatorial rulers. And as those policies earn respect from the Arab people, they also earn the wrath of the Arab leaders. This means that Dr. Zogby’s arguments against the Iranian government reflect the views of the dictatorial Arab leaders, and their imperialist backers, not those of the Arab people.

One salutary point in Dr. Zogby’s article seems to be his advice against military threats against Iran. Unfortunately, he does so for the wrong reasons; he opposes military actions against Iran not because such actions would be unlawful and immoral, but because (a) military threats “only serve to embolden Iran,” which is not clear why or how; and (b) “continued targeted sanctions… are having a real impact.”

Dr. Zogby is either uniformed about the sanctions on Iran, or uses a peculiar definition of targeted sanctions. The brutal sanctions imposed on Iran are way beyond targeted sanctions; they are a most comprehensive sanctions, designed to be “crippling” as they include Iran’s oil exports and its banks, which, in effect, means its international trade. Targeted sanctions are almost always expanded to broader, comprehensive sanctions, as has been the case with Iran. Furthermore, sanctions are essentially a disguised and an insidious form of war whose primary victims are the poor, the children, the elderly, and the infirm. And when sanctions fail to bring about “regime change,” military actions follow logically “to do the job.”

In his article Dr. Zogby also writes (with a dash of sarcasm): “What, one might ask the leaders of Iran, will they do with their nuclear program and their provocation? Can it feed their people, rebuild their neglected and decayed infrastructure, give hope to their unemployed young, or secure their role in the community of nations? . . . As the Gulf States make significant progress, providing a model for development and growth, Iran remains trapped in an archaic system which feeds off of fear and anger, and goes nowhere.”

It is only fair to ask Dr. Zogby: how can “Arab Gulf States provide a model of development for Iran” when they are essentially consumer markets for foreign products? What product line, manufacturing process or technological know-how can Iran learn from these states? Dr. Zogby seems to confuse financial services, extravagant consumerism (made possible by abundant oil and smaller populations), unrestricted import of luxury goods from abroad, glossy shopping malls, ballooning  skyscrapers, and man-made islands with manufacturing, industrialization, labor productivity and real development. With the exception of oil, which is produced, processed and managed largely with the help foreign experts, Persian Gulf kingdoms do not produce much of what they consume.

By contrast, Iran produces much of what it needs or consumes. It has made considerable progress in scientific research and technological know-how. It has taken advantage of the imperialist sanctions and boycotts to become self-reliant in many technological areas.

For example, Iran is now self-sufficient in producing many of its industrial products such as home and electric appliances (television sets, washers and dryers, refrigerators, washing machines, and the like), textiles, leather products, pharmaceuticals, agricultural products, processed food, and beverage products. The country has also made considerable progress in manufacturing steel, copper products, paper, rubber products, telecommunications equipment, cement, and industrial machinery. Iran has the largest operational stock of industrial robots in West Asia.

Iran’s progress in automobile and other motor vehicle production has especially been impressive. Motor vehicles, including farming equipment, now count among Iran’s exports. Most remarkable of Iran’s industrial progress, however, can be seen in the manufacture of various types of its armaments needs. Iran’s defense industry has taken great strides in the past few decades, and now manufactures many types of arms and equipment. Iran’s Defense Industries Organization (DIO) now produces its own tanks, armored personnel carriers, guided missiles, radar systems, military vessels, submarines, fighter planes, and more. Despite these achievements, Iran’s military spending is relatively modest. For example, while Iran’s military spending is currently about $7 billion, or nearly 2% of its GDP, that of Saudi Arabia is about $43 billion, or nearly 11.2% of its GDP, and that of Israel is about $13 billion, or 6.3% of its GDP. And while Iran produces most of its military equipment at home, Saudi Arabia imports its military hardware.

Contrary to Dr. Zogby’s claims, Iran’s military preparedness and its nuclear program, have not meant neglect of its infrastructure. Iran has, indeed, invested considerably in both physical infrastructures (such as transportation and communication) and soft/social infrastructures (such as education and healthcare services). Health care is free for those who can’t pay. All public education, including university, is free.

Although women are required to comply with the official dress code, they are encouraged (both by their families and the government) to excel in educational and professional pursuits. The results have been quite impressive. Women now constitute the majority of university students. Despite the very high level of unemployment, which is largely due to the criminal economic sanctions and military threats from abroad, more and more women are joining the workforce. They are doctors, engineers, teachers, scientists, writers, artists, business owners, salespersons, firefighters and taxi drivers. Working women in Iran are entitled to 90 days of maternity leave at two-thirds pay, with the right to return to their previous jobs. Women in the US do not have these benefits. Sex change operations and abortion under certain circumstances (and before the ensoulment, i.e. during the first four months of pregnancy) are legal.

In a number of the “Arab Gulf States,” by contrast, women can’t hold public office, are denied the right to vote, cannot get a university education, drive a car, or even leave home without a chaperone. How or why Dr. Zogby thinks that these states can “provide a model of development and progress for Iran” is unfathomable.

Dr. Zogby also chides Iran for not supporting the ongoing efforts by the US and its allies, including the “Arab Gulf States,” to overthrow the Syrian regime. Yet, there is undeniable evidence that the Syrian opposition is hatched largely by NATO, Israel and their cringing allies in the Arab League. “The Free Syria Army (FSA) fighting against Assad inside Syria is a creation of NATO. Sources indicate 600 to 1,500 fighters from the Islamic Fighting Group in Libya, now known as al-Qaeda in Libya, are working with the FSA to topple the Assad regime. An Arab League report revealed last month that Mossad, MI6, the CIA, and British SAS are in Syria working with the Free Syrian Army and the Syrian National Council.” It is a shame that Dr. Zogby would allow himself to support this orgy of mercenary forces, benignly called the “Syrian opposition.”

In his Article Dr. Zogby refers to the Persian Gulf simply as the “Gulf,” without the word “Persian.” I suspect this omission is not fortuitous. Let me explain why. As mentioned earlier, Iran’s resistance to US-Israeli axis of aggression infuriates the autocratic Arab rulers as such resistance to injustice, which Dr. Zogby calls Iran’s “provocations,” exposes the complicity of these rulers with the imperialist-Zionist powers in the occupation and militarization of their lands. To counter this “problem” and to turn the Arab public opinion against Iran, the Arab client regimes (with the help of their imperialist patrons) have in recent years cooked up a scheme that is based on a harebrained idea that the word “Persian” should be dropped from the name of Persian Gulf and replaced with the word “Arab,” that is, it should be the Arab Gulf, not the Persian Gulf! The scheme is, obviously, part of an insidious strategy that is designed to pit the Persians/Iranians against the Arabs and the Shias against the Sunnis. Regrettably, Dr. Zogby seems to have fallen for this age-old divide-and-conquer ploy.

~

Ismael Hossein-zadeh is Professor Emeritus of Economics, Drake University, Des Moines, Iowa. He is the author of The Political Economy of U.S. Militarism (Palgrave – Macmillan 2007) and the Soviet Non-capitalist Development: The Case of Nasser’s Egypt (Praeger Publishers 1989). He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press.

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March 16, 2012 Posted by | Deception, Economics, Mainstream Media, Warmongering | , , | Leave a comment

SWIFT cuts financial ties with Iran over EU sanctions

Press TV – March 16, 2012

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) says it has decided to discontinue services to Iranian banks which are subject to financial sanctions imposed by the European Union.

“Disconnecting banks is an extraordinary and unprecedented step for SWIFT. It is a direct result of international and multilateral action to intensify financial sanctions against Iran,” the Associated Press quoted SWIFT CEO Lazaro Campos as saying on Thursday.

The Financial Times described the service as “one of the key bits of plumbing in the world’s interbank payment systems,” adding that 30 Iranian banks will be cut off from the service as of Saturday, March 17.

The US and EU charge Iran with pursuing military goals under the cover of its civil nuclear energy program and have imposed several rounds of international and unilateral sanctions against Iran to force the country give up its nuclear energy program.

On January 23, the EU foreign ministers approved new sanctions on Iran’s financial and oil sectors, which ban member countries from importing Iranian crude or dealing with its central bank.

Experts believe that SWIFT’s new action is meant to fully enforce EU sanctions, as global financial transactions are impossible without using SWIFT.

Despite tightening sanctions, some analysts have noted that Iran is still able to skirt the sanctions in a few ways. The country, they say, may exchange oil for cash, gold or other commodities directly. Also, Iranian banks that have not been targeted by EU sanctions can still sell oil.

“Throughout the history of the oil trade, someone always gets around trade embargoes one way or another,” said Jim Ritterbusch, a veteran oil trader and analyst.

SWIFT is a clearing system, which oversees the network used by most of the world’s largest banks to conduct financial wire transfers.

SWIFT handles cross-border payments for more than 10,000 financial institutions and corporations in 210 countries. It enables users to exchange financial information securely and reliably, thereby lowering costs and reducing risks.

Established in 1973, the system has been overseen by major central banks, including the US Federal Reserve and the European Central Bank.

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March 16, 2012 Posted by | Economics, Wars for Israel | , , | Leave a comment

India, South Korea increase oil purchases from Iran: IEA

Press TV – March 15, 2012

India and South Korea have increased oil imports from Iran despite the United States’ plea for the two countries to reduce their dependence on the Iranian crude, says the International Energy Agency (IEA).

According to an IEA report, released on Wednesday, both Seoul and New Delhi sharply raised their oil purchases from Iran in January.

The rise in the purchase of the Iranian crude comes despite Washington’s appeals for a reduction of oil imports from Iran by around 15 percent in volume.

The White House is now concerned that it may have to impose sanctions on New Delhi for its refusal to cut back on crude purchases from Tehran.

Earlier on Tuesday, Turkey’s Minister of Energy and Natural Resources Taner Yildiz announced that Turkey is continuing to purchase crude oil from the Islamic Republic.

Oil prices have remained high following Iran’s decision to cut oil sales to some European countries in response to the EU’s sanctions on the country.

On January 23, EU foreign ministers approved sanctions against Iran, including a ban on Iranian oil imports, a freeze on the assets of the Central Bank of Iran within the bloc’s states and a ban on selling diamonds, gold, and other precious metals to Tehran.

The US, Israel and some of their allies accuse Tehran of pursuing military objectives in its nuclear energy program.

Iran has repeatedly refuted the Western allegations regarding its nuclear energy program, arguing that as a signatory to the nuclear Non-Proliferation Treaty and a member of the International Atomic Energy Agency, it is entitled to develop and acquire nuclear technology for peaceful purposes.

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March 15, 2012 Posted by | Economics, Wars for Israel | , , | Leave a comment

A Toxic System

An Inside Glimpse Into the Nefarious Operations of Goldman Sachs

By DARWIN BOND-GRAHAM | CounterPunch | March 15, 2012

Goldman Sachs employee Greg Smith’s very public resignation, replete with a pointed letter published in the New York Times yesterday, has landed upon the investment bank like a bomb. Slamming a “toxic and destructive environment” within Goldman Sachs, Smith says the firm’s internal culture has devolved to the point where the entire staff not only tolerates, but expects workers at all levels, from senior partners to associates, to pursue nothing but ever-more sophisticated means of “ripping their clients off.”

Apologists for the financial sector —including the editors of the major business newspapers and television networks— predictably have shot back with a flurry columns and reports, mostly designed to discredit the former vice president by making fun of Smith and his concerns. If you strip away the ad hominem layers to these responses though, the core problems raised by Smith remain, and the reaction of the business press seems all the more absurd, for Goldman’s pesky turncoat isn’t saying anything that’s news to the public: Goldman Sachs is characterized by a toxic culture of greed? Stop the presses!

There is much more to be said about Goldman Sachs’ derivatives operation, however, and Smith’s provocative resignation provides an opportunity because he was working in the belly of it.

At the center of Smith’s critique are derivatives, the arcane financial instruments that transformed the world’s splintered national economies and regional banking systems into a single, if complicated, global system. Evangelists of derivatives claim they have made new heights of economic growth, trade, and prosperity possible. Critics have pointed out since the beginning of the derivatives boom in the 1980s how perfectly suited they are to fraud and systemic catastrophe via the greed of the few and the powerful.

Derivatives, many close observers have reminded us, were at the center the Enron meltdown, the demise of Long Term Capital Management, the Asian Financial Crisis, and most recently the Great Recession and its various flares, from the housing bubble that exploded from junked collateralized debt obligations, to the current Greek debt imbroglio and the credit default swaps haunting the background. In each case, and many less-known fiascos, derivatives traders in Wall Street’s leading banks played key roles either as the major villains, or enabling partners in vast crimes of information, leverage, and risk. Time and again we find derivatives at the center of scandalous greed. Now we have a high-profile banker denouncing not just some bad apples in his firm, but the firm’s entire culture.

There’s a deeper and more disturbing truth still further below the surface though. To get there it’s instructive to know a little more about Goldman’s derivatives operation, and the wider industry of which Goldman is a small part.

Who are the clients on the receiving end of Goldman’s “toxic and destructive” tendencies? Many times the victims have been other corporations, industrial firms with less sophisticated and perhaps naive financial officers. Quite often though the victims of Goldman’s derivatives operation have been cities, counties, and local government agencies. A key client category for derivatives has been large local governments and agencies that issue hefty sums of long-term debt.

Goldman, and the handful of other global banks that dominate the derivatives industry, sold local governments on the idea that a particular set of derivative products could provide wondrous solutions to hedge against the risks inherent in issuing long term debt. The banks claimed that interest rate swaps could shield counties, cities, and agencies from possible spikes in floating interest rates attached to their bonds. Thus many governments agreed to complex, multi-decade deals involving the swapping of payments on fictive amounts of money associated with real debt. In no time at all interest rate swaps became the single largest category of derivatives, dwarfing all others.

Today interest rate swaps make up 82% of the total market in derivatives, measured by total notional amounts. This is partly the result of governments all over the world entering into interest rate swaps, agreeing to tie cash flows to trillions of notional dollars. What’s key is that none of this has required duplicity or reckless greed on the part of bankers at Goldman Sachs or other firms. Let’s be clear; this is a structural transformation of capitalism on a global scale, and it has sucked up all corporate and government entities into the new logic of hedging and efficiency. That a few powerful financial corporations have placed themselves in strategic positions to benefit from this structural shift should come as no surprise.

In California’s Bay Area, multiple governments have come to find themselves on the paying end of Goldman’s derivatives department where apparently traders referred to clients as “muppets.” The most obvious example is the city of Oakland where a chronic budget crisis has led to the shuttering of schools and cuts to elder services, housing, and public safety. Oakland signed an interest rate swap with Goldman in 1997. The terms of the deal, revised once in 2003, were typical of interest rate swaps except that Oakland’s financial officers, based on this author’s research and impressions, seem to have agreed to a somewhat higher fixed rate obligation than most other cities that signed swap deals for similar amounts of debt with comparable ratings. Oakland partly did this, I am guessing, to receive upfront payments of roughly $5 and $10 million from Goldman Sachs, cash that the city wished to have on hand immediately. The bank seemed eager to do this because the original terms, and renegotiated terms in 2003, were much to its favor. It would earn the $15 million back, and then some over the twenty-four year life of the swap.

Across the Bay, Goldman Sachs signed an interest rate swap agreement with the San Francisco International Airport in 2007 to hedge $143 million in debt. Today this agreement has a negative value to the Airpot of about $22 million, even though its terms were much better than those Oakland agreed to. The Airport, like Oakland, must now pay millions each year to Goldman Sachs until the agreement expires, or until the floating LIBOR interest rate rises enough to offset the net balance of payments. Goldman sold derivatives up and down California and across the United States to cities, counties, and agencies, promising them a means of reducing debt payments over the long haul.

Business press pundits who are now slamming Smith say it’s absurd to expect that Goldman Sachs was doing anything less than trying to make money off these deals, and that counter-parties to the firm’s dealings knew well what they were signing up for. This mischaracterizes the entire problem, however, and threatens to steer the conversation into a narrow, and politically irrelevant one about whether Goldman Sachs is or isn’t a den of fraud.

When governments signed up for interest rate swap deals with Goldman Sachs they certainly did know that the bank would be making money off the agreement, first in the form of up-front fees, and then off of savings produced by the pairing of comparative advantages in debt markets that interest rate swaps are designed to achieve. If you don’t understand that last point, don’t worry. What it means simply is that Goldman Sachs sold interest rate swap products to governments by promising to both protect a government against interest rate volatility, and to also likely reduce the overall long-term cost of borrowing money. It was supposed to be a win-win game.

The truly impressive thing about the whole derivatives market is that it is supposed to ratchet up the efficiency of the entire global economy, making dollars go much further, protecting all parties from volatility, transcending previous market barriers and smoothing flows of cash… at least in theory. The theory seemed to be working in the 1990s and through most of the 2000s. Goldman didn’t have to convince anyone of this for the results were plain to see.

That it hasn’t panned out in practice, that the whole derivatives-based economy nearly collapsed in 2008 and continues to falter, isn’t so much the result of Goldman’s toxic culture of greed as it is the outcome of a much more troubling feature of our economic system. While I agree with Smith’s observation —which is important because it’s based on insider knowledge— that Goldman Sachs is an especially predatory corporation, I see a larger pattern of power relations embodied in the new economy, structured as it is by derivatives, that isn’t based on any specific firm’s internal culture or corruption, or the supposed naivety and stupidity of financial officers in government and less profitable sectors of the economy.

Consider the fact that Goldman Sachs isn’t even the biggest fish in the pond, nor is it profiting the most from the blizzard of derivative products that structure the capitalist economy today. Of the five financial corporations that “dominate in derivatives,” as the U.S. Office of the Comptroller of the Currency puts it, Goldman Sachs ranks fourth, behind by Bank of America, Citibank, and far behind the absolute king of derivatives, JP Morgan Chase.

In February JP Morgan Chase let slip that it cleared $1.4 billion in revenue on trading interest rate swaps in 2011, making these instruments one of the bank’s biggest sources of profit. According to some reports, JP Morgan Chase made billions more in 2008 and 2009 when the financial crisis and federal response combined to make floating-to-fixed interest rate swaps into extremely profitable assets for the banks on the floating side of the deal. Similar things can be said for Mogan Stanley, HSBC, Wells Fargo, Bank of America, Bank of New York, and the dozens of smaller interest rate swap peddlers currently profiting from direct transfers of public dollars.

Are all these banks poisoned by toxic cultures of greed? Surely there are similarities in the internal cultures of large banks, and greed and a little sociopathic ability to profit from another’s loss is a professional asset in these sorts of organizations. In contemporary corporate culture the euphemism for this is “competition.”

Toxic culture and greed, or “competitiveness” if you prefer, in the investment banks isn’t a sufficient answer to why derivatives have become the foundation of today’s global economy, however. The criminal activities of some bankers, driven by these more pervasive cultures, can’t explain the economic crisis and the vast injustices that are being perpetrated still in the name of “economic recovery.” The interest rate swap crisis stinging local governments and enriching the banks is a case in point.

The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero. These political decisions have determined that virtually all interest rate swaps between local and state governments and the largest banks have turned into perverse contracts whereby cities, counties, school districts, water agencies, airports, transit authorities, and hospitals pay millions yearly to the few elite banks that run the global financial system, for nothing meaningful in return. These perfectly legal cash flows measuring globally in the hundreds of billions, from the public to the banks, dwarf anything that is the result of fraud.

Back when the economy was in a “normal” stasis of growth, the early and mid-2000s, interest rate swaps and other derivatives promised security against risk, and a new vista for capitalism and public finance. Tellingly, when the crisis struck, swaps were allowed to become a one way flow of funds from the public to the banks. This shadow bailout for the banks has done considerable damage to already cash-strapped local governments suffering from declines in tax revenues and federal aid.

Whether Goldman Sachs is or isn’t an organization gripped by a toxic culture isn’t all that important when one considers the destructive impact that derivatives have had, and continue to have upon society. Capitalism as it functions today is completely dependent upon derivatives. Interest rate swaps are the single largest type of derivative, measured by notional amount, because they achieve an integration of different national, regional, and sectoral financial markets into one global financial system. It’s in the genetics of the project of financial globalization, fueled by derivatives, that the real problem lies, not in the internal culture of Goldman Sachs, or the illegal behaviors of some bankers across many firms. The real crime lies in perfectly legal and legitimated activities whereby a few powerful corporations design a system that puts the welfare of the world’s vast majority at grave risk. It’s the system that’s toxic. Goldman Sachs merely operates well within the toxicity.

Nevertheless, Greg Smith’s effort to pull back the curtain on one of the most nefarious and powerful corporations in history is most welcomed, especially for the deeper conversations it can stoke about the origins of the current crisis.

Darwin Bond-Graham is a sociologist and author who lives and works in Oakland, CA. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press.

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March 15, 2012 Posted by | Corruption, Deception, Economics | , , , | Leave a comment

Obama approval ratings fall despite improving jobs data: Poll

Press TV – March 14, 2012

The results of a new poll show US President Barack Obama’s approval ratings have plunged to 41 percent despite improving jobs data.

The last Monday survey, carried out by The New York Times newspaper and CBS News TV channel, show Obama’s approval rating has hit 41 percent, down nine percent from the 50 percent threshold, which an incumbent president generally needs to win a reelection, AFP reported.

With 47 percent of respondents disapproving of Obama’s overall performance, the poll results have cast doubt on his prospects for the upcoming November presidential election.

An earlier poll conducted by The Washington Post newspaper in conjunction with ABC news network also registered a drop in Obama’s approval rating, though the decrease was not quite so severe.

Only 46 percent of the surveyed individuals approved of Obama’s handling of his presidential duties and 50 percent disapproved due to rising gas prices.

The situation, the AFP report said, was a reversal from early February when 50 percent approved of the president’s performance and 46 percent disapproved.

Two-thirds of the respondents said they disapproved of the way Obama was handling rising pump prices which now average nearly four dollars a gallon (3.8 liters).

Meanwhile, another poll conducted by the University of Maryland’s Program on International Policy Attitudes, whose results were published on Tuesday, indicated that three out of four Americans are opposed to an attack against Iran’s nuclear facilities by the Israeli regime.

Moreover, 69 percent of American respondents stated that the US should pursue the policy of negotiations with Iran, with a large majority, adding that such talks should primarily take place through the United Nations Security Council.

According to the poll, the opposition of the Americans to a military strike against Iran was expressed by 79 percent of Democrats, 58 percent of Republicans, and 67 percent of independents.

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March 15, 2012 Posted by | Economics, Militarism, Progressive Hypocrite | , | Leave a comment

As “Blockbuster Drug” Bubble Bursts, Big Pharma Takes Jobs Overseas

By Martha Rosenberg | Dissident Voice | March 12th, 2012

It is no consolation to the roughly one out of 600 families who lost their homes in the U.S. but Wall Street made a lot of money slicing and dicing mortgages it knew would implode, while hiding risks. Financial giants, like AIG, are still buzzing along and neither penalties or new laws will prevent a future crash, say financial analysts, because the risky business models have not really changed.

A similar Big Pharma bubble, leavened with risky blockbuster drugs that also blew up, is now bursting. Like Wall Street’s bundled high risk loans, the “tide” created by Big Pharma’s high risk drugs raised many ships during the 2000s from advertising, public relations and medical communication agencies to TV and radio stations, medical journals and doctor/pitchmen who shoveled in its marketing budgets. But now the joy ride is over and Pharma is shedding jobs and settling billions in claims without changing its risky business model, like Wall Street.

In Europe, governments are no longer willing to pay the high prices for drugs that they once did say published reports and some countries are drafting laws making drug makers “prove their drugs are effective or risk having them dropped from the coverage list, or covered at a lower rate.” Imagine!

Germany has already saved 1.9 billion euros in 2011 by refusing to pay higher prices for drugs unless they are clearly superior to existing medicines, and Pharma worries that other countries will also get tough and want scientific proof for drug effectiveness instead of marketing and spin. In the U.S. and elsewhere, a drug only needs to be superior to no drug (placebo) to be approved by regulators — yet “new” is conveyed as “better than any drug to date” in advertising.  Some clinicians say Haldol, an inexpensive antipsychotic, and lithium, a similar affordable bipolar drug are better than blockbuster antipyschotics and bipolar drugs that created Pharma’s 2000 bubble.

Before the Vioxx scandal and major settlements over blockbuster drugs like Zyprexa, Bextra, Celebrex, Geodon and Seroquel, being a Pharma rep was probably the next best thing to working on Wall Street. Direct-to-consumer advertising did your pre-sell for you, and all you had to do was show up with your snappy Vytorin tote bag and samples case. Some Pharma reps had their own reception room with ice water, swivel chairs, and laptop ports at medical offices, and most waltzed in to see the doctor right in front of waiting and sick patients. (It didn’t hurt that reps were usually “hotties,” both men or women).

But, by 2011, the bloom had fallen off Pharma reps’ roses. The number of prescribers willing to see most reps fell almost 20 percent, the number refusing to see all reps increased by half, and eight million sales calls were “nearly impossible to complete,” reported ZS Associates. Blockbuster drugs that were found to be unsafe after their big sales push or even withdrawn altogether, did not help the reps’ credibility with doctors. After the aggressively marketed hormone therapy was linked to high incidences of cancer, stroke and heart attack, Wyeth (now Pfizer) announced it was eliminating 1,200 jobs and closing its Rouses Point, New York plant where Prempro products were manufactured.

As government and private insurers increasingly say, “You want us to cover what?” about expensive, dangerous drugs that are not even proven effective, Pharma bubble jobs are evaporating. Almost 20,000 jobs have vanished at AstraZeneca, Novartis and Pfizer in the last 12 months alone. (AstraZeneca scrapped 21,600 more since 2007). Meanwhile, Pharma is outsourcing more of its operations to poor countries.

Workers and people willing to be trial subjects are both a bargain in poor countries where many can’t understand drug risks or refuse them if they did (and most can’t afford the very drugs they help sell). In January the Argentinian Federation of Health Professionals accused drug maker GlaxoSmithKline of misleading participants and pressuring poor families into joining a trial for the Synflorix vaccine, which the company says protects against bacterial pneumonia and meningitis, reported CNN. In 2010, 10 deaths occurred during Pfizer and AstraZeneca drug trials at the Bhopal Memorial Hospital and Research Centre which was ironically built for survivors of the 1984 Bhopal gas disaster, reports MSNBC. 3,878 workers perished in Bhopal when chemicals leaked at a Union Carbide pesticide plant.

Outsourcing drug manufacturing to cheap venues also contributes to Pharma’s cascade of “quality control” problems in which drugs are mislabeled, contaminated or otherwise made dangerous. It is speculated that Johnson & Johnson’s CEO William Weldon “was pushed to retire because of all of the quality issues at McNeil as well as with the company’s hip implant products, which have resulted in a raft of litigation,” reports FiercePharma.

Like the Wall Street bubble, the Pharma bubble was built on products that industry, but not the public, knew were risky, sold for quick profits. Now regulators are examining some of these “assets” more closely and with disturbing findings. The FDA now warns that bestselling statin drugs like Lipitor and Crestor, even approved for children, are linked to memory loss and diabetes associated with. The equally well selling proton pump inhibitors like Nexium and Prilosec for acid reflux disease (GERD) are now believed to increase the risk of bone fractures by 30 percent.

In March, the FDA even rejected a Merck drug that combines the active drug in Lipitor with the active drug in Zetia and Vytorin, a drug that Forbes calls Son of Vytorin. Vytorin (the father) was advertised to treat both food and family “sources of cholesterol” until results from a study that Merck and Schering-Plough appeared to withhold from regulators showed the drug had no effect on the buildup of plaque in the arteries (believed to correlate with heart attack and stroke). There was such a gap between marketing and science, Sen. Chuck Grassley (R-Iowa) asked the General Accounting Office to investigate why the FDA was approving “drugs that appear to have little to no effect in protecting lives and increasing health.”

Yet even as clouds develop over Pharma’s top-selling drugs, some say the FDA is too hard on new drugs, not too easy. “The FDA is impeding useful innovations in the U.S.,” says former FDA deputy commissioner Scott Gottlieb in the a Wall Street Journal oped and lagging behind other countries. Former FDA commissioner Andrew Von Eschenbach, also writing in the WSJ, agrees. The FDA should improve U.S. drug competitiveness by allowing drugs “to be approved based on safety, with efficacy to be proven in later trials,” while the public is already taking the drugs. Isn’t that what’s happening now?

~

Martha Rosenberg is a columnist/cartoonist who writes about public health. Her first book, titled Born with a Junk Food Deficiency: How Flaks, Quacks and Hacks Pimp the Public Health, will be published in April 2012 by Amherst, New York-based Prometheus Books. She can be reached at: martharosenberg@sbcglobal.net.

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March 12, 2012 Posted by | Corruption, Deception, Economics, Science and Pseudo-Science | , , , , | Leave a comment

Iran oil ban to hit 10 main crude importers hardest

Press TV – March 10, 2012

The Business Insider news website says in an article that if the flow of Iran’s oil exports is disrupted, the main importers of the country’s crude will be hit hardest.

According to the article, main importers of Iran’s crude including China, India, Japan, South Korea, Turkey, Italy, Spain, Greece, South Africa and France will be adversely affected by any disruption in Tehran’s oil exports.

The article says when European Union (EU) sanctions are put into place on July 1, nearly 600,000 barrels of oil per day will come off the market as a result of which the price of Brent Crude would rise to about USD 138 per barrel.

If Iran’s crude exports are halted entirely as a result of an attack against the country, 2.5 million barrels per day of supply will be lost and Brent Crude prices will reach USD 205, the report adds.

Global oil prices have continually climbed this year following Iran’s move to cut oil sales to British and French firms in reaction to the EU’s anti-Iran embargos. Tehran has also announced it may halt oil exports to more European countries.

EU foreign ministers approved sanctions against Iran on January 23, including a ban on Iranian oil imports, a freeze on the assets of the country’s Central Bank within EU states and a ban on selling diamonds, gold, and other precious metals to Tehran.

The move is aimed at putting pressure on Iran to force the country into abandoning its nuclear energy program based on allegations that Tehran is seeking to weaponize its nuclear technology.

Iran has refuted the allegations, arguing that as a signatory to the nuclear Non-Proliferation Treaty and a member of the International Atomic Energy Agency, it has the right to develop and acquire nuclear technology for peaceful purposes.

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March 10, 2012 Posted by | Economics, Wars for Israel | , , , , , , | Leave a comment

Obama Can Do More on Oil Prices

By Ralph Nader | March 6, 2012

Gasoline and heating oil prices are ratcheting up. In California, some motorists are paying over $5 per gallon. President Obama declared that “there is no quick fix” for this problem. Meanwhile, the hapless but howling Republicans are blaming him for the fuel surge as if he is a price control czar.

Indeed, President Obama has some proper power to cool off retail petroleum prices. David Stockman, President Ronald Reagan’s Budget Director, said it plainly on CNN last week, “Stop beating the war drums right now [against Iran], and Obama could do that, and he could say the neocons are history.” Having done his stint on Wall Street, Stockman knows that war talk by the war hawks inside and outside of our government is just what the speculators on the New York Mercantile Exchange want to hear as they bid up the price. Your gasoline prices are not charging up due to strains between supply and demand. Speculation, with those notorious derivatives and swaps, is what is poking larger holes in your fuel budget, according to Securities and Exchange Commission enforcement lawyers. The too-big-to-fail Wall Street gamblers – Goldman Sachs, JP Morgan Chase, Bank of America, Merrill Lynch, and Morgan Stanley – are at it again.

Dr. Mark Cooper of the Consumer Federation of America documented that speculation added $600 to the average family’s gasoline expenditures in 2011. Earlier, the head of Exxon/Mobil estimated that speculation was responsible for over $40 per barrel in price increase at a time when oil was more than $100 per barrel.

Last June, the Commodity Futures Trading Commission (CFTC) Chairman, Gary Gensler, declared in New York City that “huge inflows of speculative money create a self-fulfilling prophecy that drives up commodity prices.”

Mr. Gensler and the CFTC received more legislated authority to police these Wall Street gamblers, but key members of Congress refused to give him a budget to, in his words, “be a more effective cop on the beat,” at a time of sharply-increasing trading volume. Congressional campaign budgets are being swelled by campaign contributions from those very Wall Street gamblers. This is called “cash-register politics.” Meanwhile, you the people pay and pay at the pump and wonder why no one is doing anything about it.

But an inadequate budget only explains part of Mr. Gensler’s problems. He is continually undermined by other CFTC Commissioners who do not want real enforcement action. He also seems to be wearing down under the pressure.

Back in the 1970s, a sudden increase in gasoline prices – even a few cents – led to an uproar among consumers and demands for regulation, price controls and other government action. Now that the New York Mercantile Exchange, with its big banking and hedge fund speculators loading up on fat profits and bonuses is right here in the U.S., officials are throwing up their hands saying “there are no quick fixes.”

Yet by the constant Israeli-Obama-Hillary Clinton-Congressional-AIPAC belligerent talk about Iran developing a capability to produce nuclear weapons is provoking Tehran’s warnings about the Straits of Hormuz, and the oil price speculators are having a field day with your gas dollars.

Senator Bernie Sanders (I-Vt.) regularly demands that that Obama’s regulators impose limits on oil speculations. He asserts that the “skyrocketing price of gas and oil has nothing to do with the fundamentals of supply and demand.” Even Goldman Sachs analyst, David Greely, claimed Wall Street speculation in the futures market is driving up oil prices.

In response to such clamorings, President Obama announced in April 2011 a new inter-agency working group to combat fraud. Don’t hold your breath waiting for any action here.

So why doesn’t President Obama invite the various industries such as the trucking and airline companies that are hurt by spiraling oil prices, together with consumer groups, motorist organizations, such as AAA and Better World Society, and the relevant government agencies to generate the pressure on Congress and the recalcitrant members of the CFTC to stop fronting for the Wall Street casino giants?

Mr. Obama and Energy Secretary Chu keep saying that there is enough oil in world markets and that speculatively-driven higher oil prices are undermining the U.S. economic recovery. Yet Mr. Obama seems unwilling to fully use his administration’s existing authority to crack down on the surging speculation.

There is much more action possible under current statutory authority for the regulators to use and earn their salaries. They need to hear louder rumblings from the people. While the people need, whenever possible and safe, to walk short distances instead of drive there, if only to stiffen their determination to fight back in more than one way.

March 7, 2012 Posted by | Economics, Malthusian Ideology, Phony Scarcity, Progressive Hypocrite | , , , , | Leave a comment

No Nuclear Nirvana

By ROBERT ALVAREZ | CounterPunch | March 6, 2012

Is the nuclear drought over?

When the Nuclear Regulatory Commission (NRC) recently approved two new nuclear reactors near Augusta, Georgia, the first such decision in 32 years, there was plenty of hoopla.

It marked a “clarion call to the world,” declared Marvin S. Fertel, president of the Nuclear Energy Institute. “Nuclear energy is a critical part of President Obama’s all-of-the-above energy strategy,” declared Energy Secretary Chu, who traveled in February to the Vogtle site where Westinghouse plans to build two new reactors.

But it’s too soon for nuclear boosters to pop their champagne corks. Japan’s Fukushima disaster continues to unfold nearly a year after the deadly earthquake and tsunami unleashed what’s shaping up to be the worst nuclear disaster ever. Meanwhile, a raft of worldwide reactor closures, cancellations, and postponements is still playing out. The global investment bank UBS estimates that some 30 reactors in several countries are at risk of closure, including at least two in highly pro-nuclear France.

And Siemens AG, one of the world’s largest builders of nuclear power plants, has already dumped its nuclear business.

Recently, Standard and Poor’s (S&P) credit rating agency announced that without blanket financing from consumers and taxpayers, the prospects of an American nuclear renaissance are “faint.” It doesn’t help that the nuclear price tag has nearly doubled in the past five years. Currently reactors are estimated to cost about $6 to $10 billion to build. The glut of cheap natural gas makes it even less attractive for us to nuke out.

How expensive is the bill that S&P thinks private lenders will shun?

Replacing the nation’s existing fleet of 104 reactors, which are all slated for closure by 2056, could cost about $1.4 trillion. Oh, and add another $500 billion to boost the generating capacity by 50 percent to make a meaningful impact on reducing carbon emissions. (Nuclear power advocates are touting it as a means of slowing climate change.) We’d need to fire up at least one new reactor every month, or even more often, for the next several decades.

Dream on.

Meanwhile, Japan — which has the world’s third-largest nuclear reactor fleet — has cancelled all new nuclear reactor projects. All but two of its 54 plants are shut down. Plus the risk of yet another highly destructive earthquake occurring even closer to the Fukushima reactors has increased, according to the European Geosciences Union.

This is particularly worrisome for Daiichi’s structurally damaged spent fuel pool at Reactor No. 4, which sits 100 feet above ground, exposed to the elements. Drainage of water from this pool resulting from another quake could trigger a catastrophic radiological fire involving about eight times more radioactive cesium than was released at Chernobyl.

Ironically, the NRC’s decision to license those two reactors has thrown a lifeline to Japan’s flagging nuclear power industry (along with an $8.3-billion U.S. taxpayer loan guarantee). Toshiba Corp. owns 87 percent of Westinghouse, which is slated to build the new reactors. Since U.S.-based nuclear power vendors disappeared years ago, all of the proposed reactors in this country are to be made by Japanese firms — Toshiba, Mitsubishi, and Hitachi — or Areva, which is mostly owned by the French government. According to the Energy Department, “major equipment would not be manufactured by U.S. facilities.”

For Southern Co., which would operate the Vogtle reactors, the NRC’s approval is just the beginning of a financial and political gauntlet it must run through. Over the strenuous objections of consumers and businesses, energy customers will shoulder the costs of financing and constructing this $17-billion project, even if the reactors are abandoned before completion. If things don’t turn out, U.S. taxpayers will also be on the hook for an $8.3-billion loan guarantee that the Energy Department has approved.

The Congressional Budget Office and the Government Accountability Office estimate that nuclear loan guarantees have a 50/50 chance of default.

Nearly four decades after the Three Mile Island accident, nuclear power remains expensive, dangerous, and too radioactive for Wall Street. The industry won’t grow unless the U.S. government props it up and the public bears the risks.

ROBERT ALVAREZ, an Institute for Policy Studies senior scholar, served as senior policy adviser to the Energy Department’s secretary from 1993 to 1999. www.ips-dc.org

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March 6, 2012 Posted by | Economics, Nuclear Power | , , , , , | Leave a comment

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