Fissiparous Iraq. Was Quayle right? Raisins and government. Great recession or grand illusion? And other important stories.

View 768 Tuesday, March 26, 2013

Today has been partly devoured by locusts, including a pair of skillful plumbers who replaced my kitchen sink disposal grinder. I had thought the one we had was new, but they showed me the installation sticker from 2005. I gather that for modern appliances, even those requiring professional installation, eight years is quite old. Nothing is intended to last now. I bought our first microwave oven after Robert and Ginny Heinlein showed me just how handy theirs was. Roberta and I came home and bought one immediately, an Amana, and it lasted for something like twenty years before Roberta had to report that a family friend had died: the Amana had to be replaced.

We have had two since.

Anyway the plumbers came early , before I had left the breakfast table, so I had plenty of time to read the papers this morning; which is as well because there was an unusual number of important stories. At least important to me. I probably can’t comment on them all, but I’ll try to give links to them and make a few remarks. The subjects are different but they’re all important, or at least I thought so.

Iraq’s great divider

Prime Minister Maliki’s actions may lead to the country’s breakup, as the U.S. stands idly by.

Henri J. Barkey

http://www.latimes.com/news/opinion/commentary/la-oe-barkey-iraq-dissolution-20130326,0,1208434.story

Iraq is on its way to dissolution, and the United States is doing nothing to stop it. And if you ask people in Iraq, it may even be abetting it.

With very few exceptions, an important event in Iraq went unnoticed in the U.S. media this month. Prime Minister Nouri Maliki sent a force that included helicopters to western Iraq to arrest Rafi Issawi, the former finance minister and a leading Sunni Arab opposition member. Issawi, who was protected by armed members of the Abu Risha clan, one of post-2003 Iraq’s most powerful Sunni tribes, escaped capture.

This action came on the heels of Maliki’s telephone conversation with Secretary of State John F. Kerry and took Washington by surprise. Had a confrontation ensued, the results would have been calamitous. It could even have provided the spark for the beginning of a civil war. Still, Maliki’s actions represent another nail in the coffin for a unified Iraq. Maliki, a Shiite Muslim, had previously accused Vice President Tariq Hashimi, a leading Sunni political figure, of terrorism, forcing him to flee Iraq in 2011. Hashimi was subsequently tried in absentia and sentenced to death.

Maliki’s policies have significantly raised tensions in the Sunni regions of Iraq. There are demonstrations in many of the Sunni provinces that seek to emulate those of the Arab Spring. They are one reason Maliki has targeted Issawi. He wants to contain the dissent before it spreads.

Maliki’s confrontational and increasingly dictatorial style has also alienated Iraqi Kurds, who, unlike the Sunnis, have succeeded in having the Iraqi Constitution recognize their federal region and the Kurdistan regional government. The Kurds, for all intents and purposes, run an autonomous area with its own defense forces. However, the relationship between Baghdad and the Kurdish regional capital of Irbil has become severely strained as the central government has made cooperation difficult, if not impossible. Baghdad, ostensibly, is angry at the Kurds’ attempts to make independent deals with foreign oil companies.

There is considerably more all worth your attention.

When the US first went into Iraq I pointed out that there was no such thing as the nation of Iraq. There were three provinces of the Ottoman Empire which were put together into a Kingdom for the displaced Hashemite clan being displaced because of promises made to Ibn Saud by Lawrence of Arabia. The Hashemites had long been Protectors of Mecca and had always been important since a Hashemite uncle became the guardian of the man who would become the Prophet. If Saud got Mecca, the two senior Hashemite patriarchs must have kingdoms, so the Kingdom of TransJordan was created for the one, and Iraq was glued together out of Turkish provinces to accommodate the other. TransJordan became a success, more or less, building the Arab Legion which triumphed over the Zionist founders of Israel in the Foundation Wars, taking Jerusalem and what is now known as the West Bank. Iraq was more dependent on the British government. TransJordan became Jordan when the king incorporated the West Bank territories into his realm. When he lost Jerusalem and the West Bank in the Six Day War, Jordan became in effect TransJordan again but the name didn’t change.

King Faisal, brother of the King Abdullah who got Jordan, first became King of Syria, but that didn’t work for a number of complex reasons having as much to do with Anglo-French politics as anything else, so Faisal became King of Iraq. At one point after the founding of Israel, Jordan and Iraq federated as the United Arab Kingdom, as Egypt and Syria briefly became the single United Arab Republic. Neither federation lasted.

The Hashemites were overthrown in Iraq, and after some unrest the secular Ba’ath Party took control. One of its officials was Saddam Hussein, who eventually became head of the party and chief of state, remaining until the United States threw him out.

The Hashemites are important because of their unbroken history back to the time of the Prophet. They are Sunni. This presents no problem in Jordan, where about 90% of the population is Sunni, but in Iraq it’s a different story. The majority of the Arab population of Iraq is Shia. The Kurds, however, are Sunni, which is one reason the non-Arab Saladin was able to unite much of the Muslim world after he defeated the Latin Kingdom of Jerusalem established by the First Crusade, and become “The Light of the World” in the time of King Richard Lionheart. If you have never read Scott’s The Talisman it is a quite readable novel of the time. The Kurds are thus a double minority: they are not Shia and they are not Arabs. They are Aryan. Iraqi Kurds are overwhelmingly Sunni, and many supported the Hashemite monarchy. Note that Iran is Shiite, but most Iranians are not Arabs; they too are Aryan and more closely related to Kurds than to other Iraqis.

The point being that Iraq never was a nation, and the dream of building a stable democratic republic in a land divided by race and religion was never well founded in reality. The Sunni Hashemites ruled Iraq with the cooperation of the Sunni but not Arab Kurds. Note that across the border in Syria, most of the population is Arab, and most of the people are Sunni, but the non-royal dictator is Shiite.

Finally, the only ally the United States has in that region is Iraqi Kurdistan. The Kurds love us. They also have a stable government – but of course they dream of a Kurdistan that includes several regions now part of the nations of Iran and Turkey, neither of whom have any intention of letting them go.

The essay cited above concludes

The answer is for Iraq to further develop its federal structures, make Baghdad a federal district and devolve power to the provinces. Then it needs to create a stake for all to want to remain within such a federation. Decentralization with a promise of equitable sharing of the country’s oil revenue is the only glue that will hold the country together.

Not everyone agrees that this is possible. Europe’s religious wars didn’t end until the Peace of Westphalia ended the Thirty Years War, and it was a peace of exhaustion. Of course I said all this before we invaded Iraq.

 

Mortimer Zuckerman: The Great Recession Has Been Followed by the Grand Illusion

Don’t be fooled by the latest jobs numbers. The unemployment situation in the U.S. is still dire.

http://online.wsj.com/article/SB10001424127887323393304578364670697613576.html?mod=googlenews_wsj

The Great Recession is an apt name for America’s current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.

The country isn’t really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.

And last year’s anemic growth looks likely to continue. Sequestration will take $600 billion of government expenditures out of the economy over the next 10 years, including $85 billion this year alone. The 2% increase in payroll taxes will hit about 160 million workers and drain $110 billion from their disposable incomes. The Obama health-care tax will be a drag of more than $30 billion. The recent 50-cent surge in gasoline prices represents another $65 billion drag on consumer cash flow.

February’s headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be "outstanding" and "amazing." But if you account for the people who are excluded from that number—such as "discouraged workers" no longer looking for a job, involuntary part-time workers and others who are "marginally attached" to the labor force—then the real unemployment rate is somewhere between 14% and 15%.

There is a great deal more, all depressing, but all important. One may quarrel with the analysis, but if you are not aware of the facts it presents you may be reasoning from false premises.

A Commission for the Fed’s Next 100 Years

The central bank’s centennial offers a valuable opportunity to rethink its mandate.

By SETH LIPSKY

http://online.wsj.com/article/SB10001424127887324103504578379020635729326.html

As the Federal Reserve approaches its 100th anniversary in December, the focus of monetary reform centers on a bill called the Centennial Monetary Commission Act. Introduced this month in the House of Representatives by Chairman of the Joint Economic Committee Kevin Brady, the bill would "establish a commission to examine the United States monetary policy, evaluate alternative monetary regimes, and recommend a course for monetary policy going forward."

Mr. Brady’s bill is not the kind of direct attack on the Fed that has been launched by, say, Rep. Ron Paul, who has called for eliminating the central bank altogether. But the bill—noting that a National Monetary Commission, established after the panic of 1907, led to the Fed’s creation on Dec. 23, 1913—would set up a new commission at the start of the Fed’s second century.

The Centennial Monetary Commission would start with a formal review of the Fed’s performance across the decades, including how its policies have affected the economy in terms of "output, employment, prices and financial stability over time." The commission would also evaluate a range of regimes, including, in the bill’s language, price-level targeting, inflation-rate targeting, nominal gross-domestic-product targeting, the use of monetary policy rules, and the gold standard.

There is considerably more, including some thoughts on the price of gold, and some of the history of the Federal Reserve. It won’t take long to read.

I wanted you to read the history of the Federal Reserve so that you’d have a bit of context for the next one. It was a letter to the editor in today’s Wall Street Journal.

The Unfortunate Postwar Legacy of Harry Dexter White

Both Benn Steil, author of "The Battle of Bretton Woods," and reviewer James Grant are to be commended for their excellent discussions of the 1944 Bretton Woods conference that resulted in the establishment of the International Monetary Fund and, more importantly, the less-than-stellar outcomes of IMF policies since then ("Review—Books: A Fateful Meeting That Shaped the World," March 16).

Kudos to both for revealing that America’s chief delegate to the conference, assistant secretary of the Treasury Harry Dexter White, was a spy for the Soviet Union. One of White’s most egregious actions—which, fortunately, was never implemented—was recommending that postwar Germany be flooded with counterfeit money in order to destroy its economy.

In 1945, White got another opportunity to betray his country: He was named as senior adviser to the U.S. delegation to the conference in San Francisco that founded the United Nations. In this capacity, he funneled information to his handlers as to how the U.S.S.R. could get veto power and kept them apprised of the U.S. position on significant issues. White’s perfidy was coupled with that of another high-ranking American spy for the Soviets, Alger Hiss, who presided over the U.N. conference. Hiss served as a top adviser to FDR at the Yalta conference, where Roosevelt and, yes, Winston Churchill ceded Eastern Europe to Joseph Stalin.

Another NGO formed at Bretton Woods was the World Bank, which consisted of two major divisions, the International Bank for Reconstruction and Development and the International Development Association. The former is indicative of the World Bank’s initial mission: providing loans to war-torn Western Europe to rebuild its shattered infrastructure. Once that objective had essentially been achieved by the late 1960s, the World Bank decided that it needed to do something to assure its continued existence. The new mission would be eradicating world poverty, to be achieved by providing social services, building schools and hospitals, improving primary education, promoting gender equality, reducing the rate of infant mortality, enhancing maternal health, combating HIV/AIDS and malaria, and promoting environmental stability. (I saw numerous examples of these programs—usually applied to developing nations—when I had the opportunity to peruse a number of publications in the World Bank’s Paris office.)

Richard T. Hise

College Station, Texas

A version of this article appeared March 26, 2013, on page A12 in the U.S. edition of The Wall Street Journal, with the headline: The Unfortunate Postwar Legacy of Harry Dexter White.

http://online.wsj.com/article/SB10001424127887323419104578372540542933804.html

There is more. The point Hise makes is that the Iron Law of Bureaucracy has governed much of the financial structure of the world…

There was more in today’s paper, but this is enough. It’s late and past my bed time. Quayle and the raisins will have to wait until tomorrow.