Counting the Cost of Iraq (2)

Is it, or is it not? This seems to be the question on everyone’s minds, but as yet, it seems that economists are divided over the answer.

Whether or not America is already in recession is something that people may still be debating about, but really purely on semantics. In reality, the slowdown is already very much upon the economy, and signs of it are everywhere.

Whoever has not heard of the sub-prime mortgage market before has surely been well educated about it by now. Already claiming a number of iconic American financial institutions like Bear Stearns, it has also caused the downfall of Northern Rock, one of the United Kingdom’s most trusted names in mortgage lending.

Of course, weakness in the financial system is never good, at least not for an economy that relies on borrowed money (and time) to finance itself. America -- as is all too familiar to most of us who have lived or visited there -- does not dwell in the present, as far as financing its consumer spending goes. Not in the least do consumers think about how much they earn before succumbing to that temptation to spend, but only about how much their credit limit can afford. Thus it is not uncommon for someone who subsists on survival wages to own expensive goods, all financed by plastic, and paid monthly in instalments so insignificant that in reality, it will take the borrower’s entire lifetime to ever repay.

As long as things stay on the up and up, living dangerously – in the financial sense – seems to be sustainable. Since the Clinton years, Americans have enjoyed an unprecedented period of economic prosperity that has made their economy the envy of those in the rest of the world. Set against the backdrop of economic confusion in the European Union, the stagnation of the Japanese economy, and fiscal mismanagement just about everywhere else, it seems the United States could do no wrong.

Clearly, with such a buoyant mood comes a certain sense of invincibility, and inevitably, recklessness. It is probably unwise to blame the financial community for causing the problem in its entirety, but it is not totally without basis to say that not-so-prudent instruments such as risky sub-prime mortgages and questionable asset-backed securities saw their heyday during the boom years.

Enter the “shock and awe” of George Bush’s Iraq adventure.

Without question, the decision to invade the Middle Eastern country was also spurred on by the same sense of American dominance that prevailed in the economic arena. After all, prosperity is power, and America certainly was feeling pretty powerful in those days.

Those days, unfortunately, are now long gone.

However little you remember of your economics classes all those many years ago, this you must not forget – psychology and economics are inseparable twins. The failure of the U.S. to impose its will on Iraq, the seeming hopelessness of the American occupation forces in the face of their enemies’ hit and run tactics, and the uncertainty of global oil supplies as a consequence of the protracted conflict, have all but depressed the American consumer into thinking that all cannot be well for the future. And as we already said, whatever the mind thinks, the economy mirrors. The result is an impending economic slowdown that now threatens to derail the global economy.

George W. Bush may have been motivated by dreams of historical immortality when he invaded Iraq – to be remembered like the war-time presidents who are forever worshipped in America's collective memory. But all he has managed so far is to awaken the nation’s most harrowing nightmare – that of an economy waking up to the fact that all along, it has been living on borrowed time – and the payback is drawing nigh.

Published in the Sun Star Daily, Saturday, April 12, 2008

Counting The Cost of Iraq

Whatever it was that George W. Bush must have been thinking when he decided to sponsor the invasion of Iraq, at the recent passing of its fifth anniversary, all those thoughts would have long been part of his distant memory. For never perhaps in his most pessimistic estimates would Bush have envisioned that Iraq would turn out the way it has—the killing fields not only of American soldiers, but the burial ground of its economy as well.

As far as casualties go, it is not quite on the scale of America’s previous engagements, such as the Great World War, the Second World War or even the more confined Vietnam conflict just yet. Those campaigns cost the United States whole generations of men and women—killed or wounded, with the latter both in physical and psychological terms. The Iraqi war has so far eluded the high body counts of Vietnam, but the impact it has had on the country cannot be underestimated.

They called Vietnam “a war made for television,” and unlike any other before it. It was responsible for exposing the horrors of armed conflict to the average family in middle America. It coincided, of course, with the rise of television as the medium of choice for news and information, and TV made sure that every twist and turn of that conflict made their way to America’s living rooms every evening, without fail.

The result was a generation of politicized Americans so horrified by the images of war that played out before their eyes, it took the US many years to even consider intervening in other countries’ troubles ever again.

History, however, has a way of glossing over the horrors of the past, especially once the generation that saw those horrors firsthand are no longer as traumatized with the experience. This was especially true with the administration of the current President Bush.

Unlike his father—who was a World War II fighter pilot—and even latter-day political stalwarts like John Kerry and John McCain, Bush did not fight in any conflict America was involved in, preferring instead to serve his country through the relatively safer duties of the Texas Air National Guard. Without demeaning the service, nor the patriotism of those who serve in the Guard, Bush was able to avoid actual conflict, and as a result, was probably less horrified by the prospect of waging war, and its deadly consequences.

He was thus able to rationalize his intentions as being purely motivated by America’s national security interests, and divorce himself from the emotions that the likes of Kerry and McCain would have, by definition, brought into the decision. In a manner of speaking, it was easier for him to send young Americans “in harm’s way,” because he himself had no idea what “in harm’s way” really meant to those soldiers on the ground.

Today, however, his memory vividly aided by the seemingly endless chain of flights ferrying back the dead and wounded from the battlefields of Iraq, George Bush must be one well-informed man indeed—well informed that is on the true horrors of war.

As it is, the scene of grieving widows and orphans must be enough to give any president sleepless nights over the propriety of his actions. But that is just one aspect of the cost of this terrible war—the other dimensions are just as damaging, and perhaps, even more damning for the legacy of this two-term president about to end his turn in power.

More next week.

Published in the Sun Star Daily, Saturday, March 29, 2008

Economic Diet (Part 2)

America, certainly, is a land of the obese and overweight.

Despite the obsession with Size Zero among the anorexic Hollywood crowd, the average American is a great deal many sizes more than your waif-like A-lister. Years of supersizing on burgers, fries and shakes tell their toll on a population that is probably, pound for pound, among the most overweight in the world.

What is going on in their physical state is exactly mirrored in their economic affairs as well.

Maxed-out credit cards—the financial equivalent of obesity—seems to be the norm among most Americans these days. The availability of cheap credit to people who are not used to financial prudence has given rise to this phenomenon, and fuelled what could yet be a time-bomb waiting to explode on the world.

One of the problems with our modern eco-nomy is that it has become too complicated for most of our consumers to understand. And one of the most misunderstood elements is personal credit—manifested by the now ubiquitous plastic credit card.

As they were conceived, credit cards were meant to replace cash in financial transactions. Convenience was its key feature, in that consumers no longer had to carry and count cash and change whenever and wherever they shopped. The operative word here, however, is “replace.”

The assumption is that the card holder still has the “cash” to purchase something with, just that payment is not actually made with the physical cash during the actual transaction.

Herein lies the big problem.

Today, credit cards are not looked at as replacements for cash transactions anymore, but as “supplements” to one’s actual cash funds. In other words, with an income of $2,000 per month, and a credit card with a $10,000 limit, most would assume that they could spend more than their monthly cash income.

But how could this be sustainable. If one consistently spent $2,000 plus per month on credit card purchases, and yet earned only $2,000 per month in income, how could one possibly hope to pay for all of his or her debt?

The answer is—one cannot.

Many Americans carry perpetual credit card balances, which they just transfer from credit card to credit card, without any prospect of ever paying for it in full. In good times, this practice is OK for a while, but when credit tightens in the event of an economic slowdown, all hell breaks loose.

What America, and indeed most of the West, now need is a re-education in personal financial prudence. People need to get back to basics and understand what personal financial responsibility is all about.

Before the invention of credit cards, this huge debt problem that now plagues America did not exist in this magnitude. With the plastic economy that we have today, somehow the issue seems to be spiraling well out of control.

I certainly would not advocate banning all personal credit altogether, because it has its important place in a functioning modern economy. What I would suggest, however, is moderation from consumers in spending with credit, as well as from financial institutions in extending that credit.

With a little bit more responsibility from both sides, whilst we still will not be able to avoid economic cycles altogether, it will be one hell of a smoother ride, I can guarantee you.

Published in the Sun Star Daily, Saturday, March 15, 2008

Economic Diet

Watching the Academy Awards ceremony last week, one would be forgiven for thinking that all is well in the United States of America. The endless parade of the Hollywood glitterati through the red carpet—in their designer frocks and million-dollar blings—would never give away the fact that storm clouds are a-brewing in the American economy.

And dark storm clouds they seem to be as well too.

Yes, for ordinary Americans, 2008 would seem to be a very difficult year indeed. The housing market is in the doldrums, unemployment is on the rise, and business confidence is at an all-time low. To compound the situation further, fuel prices show no sign of coming down, just as the war in Iraq seems to go on forever and ever.

One need not be an economist to tell that all is not well indeed!

It is amazing how today we know so much more about our health and well being. It used to be that in the past, dieting and exercise was the preserve of either the idle rich, or movie stars who need it to continue earning a living. Today, the general population is quite aware of their lifestyle habits, and most people know what they need to be doing to stay physically healthy.

Funny enough, we are being told now that the best diet is a no-diet. In other words, if one ate sensibly, exercised regularly and stayed away from excessive drinking and smoking, this lifestyle would benefit our health much better than indulging in excess, and then going on starvation diets to burn off the excess poundage afterwards. The latter not only stresses the heart but harms other vital organs as well, such as our liver.

In other words, for our health, the key is moderation.

A bit amazing therefore that what we know to be good for our physical health, we still haven’t quite figured out would be good for our economic health as well. One only needs to look back a few years ago at the American economy to understand what we mean.

During the good years, money, it seemed, was no object to the American consumer. Fuelled by the availability of cheap credit, everyone went on spending sprees, buying everything in sight—from fancy houses, expensive cars, flashy jewelry, designer clothes and grand vacations.

This orgy of spending, in turn, benefited a lot of businesses while it lasted. Companies expanded to meet the demand, employing more people to support their growing businesses. The newly employed, in turn, took it upon themselves to fuel the spending spree even more, creating still more demand and feeding a growing cycle of prosperity that seemed to go on and on.

But as the unhealthy soon find out about their condition, so does the economy realize that all is not well.

Like a chronic disease slowly manifesting itself over time, certain triggers eventually lead to a correction. High fuel prices tell their toll first. Rising business costs compel some to save money elsewhere, often by reducing their workforce. Sometimes they outsource a number of their processes overseas, for the same financial benefits, and also with similar consequences to their employees.

Of course, people without jobs lose the capacity to buy, and also the ability to pay for their past purchases.

More next week.

Published in the Sun Star Daily, Saturday, March 01, 2008

Origin Of Crime

Sometime back, we wrote about one of the most horrify ing crimes Britain had ever seen.

In the English town of Ipswich, five women had been senselessly murdered. All had one thing in common, apart from being victims of a sadistic maniacal killer — they were all hard drug users — addicted to narcotic substances like cocaine and heroine. And in order to fund their expensive but unbreakable habit, they all turned to the one thing that women in desperate situations have sometimes resorted to over the ages — selling themselves for cash.

Although all of them had once been normal young ladies — with a few even coming from privileged backgrounds — their situations had invariably led them to prostitute themselves just to support their addictions. Addictions that, in the end, eventually cost them their lives.

Just this week, justice was finally served on the perpetrator of this most heinous of crimes. A forklift truck operator by the name of Steve Wright has been found guilty by a jury of his peers, and is expected to be sentenced to life, without possibility of parole.

Or possibly — not.

Because in the United Kingdom today, the subject of crime has become what many hardliners and conservatives would call “kindergarten justice” – where criminals, including even the most violent ones, often get away with literally just slaps on the wrist.

Mr. Wright’s offence, however, is something else entirely.

In a show of anger that seems quite out of character with British stoicism, calls for the restoration of the death penalty have come from many quarters, including those who have in the past been quite liberal in terms of their attitudes towards criminals and their punishment.

In this instance, people feel that the gravity of the offences ought to merit something that is beyond the normal range of sentencing norms — a price that the perpetrator should feel is the just retribution for his act — and that should equate the callousness and cold-blooded nature of his crimes with the severity of the punishment. And in a lot of people’s minds, he ought to pay with his own life, just as he had taken those of his victims’.

Reinstating the death penalty in Britain, however, is a feat that is perhaps as difficult to achieve as abolishing the monarchy, though ironically it was the latter who had used the former to such effect in ensuring that its subjects stayed in line and obeyed their majesties’ every word and command.

Modern Britain, and indeed much of Western society, now believes that the answer to preventing crime is rehabilitating, not punishing the criminal. In today’s view of the criminal mind, the main motivations seem to be more circumstances beyond the criminal’s control, such as poverty, child abuse, social neglect, drug abuse, and mental illness.

There is very little room for believing that perpetrators are genuinely aware of their crimes, and take pleasure from committing it. In many people’s minds, the criminal is as much a victim of his crime as the actual victim is.

But could this view to the origins of crime really be sustainable? And could this attitude in fact deter criminals from perpetrating their dastardly deeds on the rest of us in society?

Time will tell. For in the West today, many are increasingly of the belief that society’s lax attitudes towards criminals and criminality is partly to blame for helping to fuel the rise in violent crime that seems to have become the biggest scourge of our time.

Published in the Sun Star Daily, Saturday, February 23, 2008

Are You Ready For This?

NO, it’s not an excerpt from the Queen song.

I am referring to the path-breaking choice that Americans may have to make in the presidential elections in November.

Never has the world’s most powerful democratic nation been confronted with as unprecedented a choice — in fact two choices — at least concerning one half of the electoral process.

Would they elect a white woman or a black man to the presidency of the most influential nation on earth?

Never before have the gender and color barrier ever been breached in the contest for the American presidency. The Rev. Jesse Jackson tried and failed to secure his party’s nomination for the presidency, and Geraldine Ferraro, although managing to gain her party’s confidence, was only running for the post of vice president.

But a woman or a black man for the highest elected post in perhaps all of the world? Is America ready for this? Is the world even ready for this?

All the way from George Washington to George W. Bush — 43 presidents and 212 years later — there has never been a person of color of any gender or a female person of any color who has managed to occupy the highest office of the land. And even that exclusive club is limited still.

White Anglo Saxon Protestants (WASPs), with the exception only of a few with Irish-Catholic roots, have tended to keep the office of the presidency as a virtual monopoly for themselves.

Only the Americans themselves can really say if they are ready. As a shining beacon of hope, democracy and liberty to the rest of the world, is the nation finally at a stage where it can actually practice what it has preached for so long?

Oh yes, indeed. We forget that among America’s nation-students, many have already breached the gender or color barriers long ago. Even a conservative male-dominated Moslem country has had Benazir Bhutto as prime minister, and an ethnically more homogenous Peru has elected a Japanese-Peruvian, Alberto Fujimori, as its president.

But in America, the land of the free and the home of the brave, where women and persons of color have enjoyed success in almost any field of endeavor, the long line of almost exclusively WASPs has remained unbroken — that is until this year’s election rolls along.

The Democratic Party will certainly break the mould first, for the first time nominating a candidate belonging to either category as its standard bearer for the electoral contest. Because apart from Hillary Clinton and Barack Obama, everyone else in the party has put away his or her presidential ambitions on hold, at least for another four years.

But the bigger question remains — can America go all the way and break the mould as a nation, by choosing whoever it is that the Democrats put up for the public vote?

It all remains to be seen, of course, because America today is saddled with a host of serious problems that have neither to do with race nor gender. Its economy is badly in need of rejuvenation, and issues of security continue to haunt its collective consciousness — both problems which Democrats have not been known to be very good at solving, apart perhaps from the Clinton years being economically prosperous times for the nation.

But the implications for America will be significant if it does go ahead and break new ground. For it will give the rest of the world the unequivocal message that all of us — black or white, male or female — are truly equal as people on this earth.

Published in The Sun Star Daily, Saturday, February 09, 2008

Corruption Western-Style

CORRUPTION has got to be one of the major challenges of our time.

Along with the issues of sustainable economic development, global warming, the elusive peace in the Middle East and the new pandemics affecting large swathes of our population, solving the problem could prove to be a critical turning point in our modern age.

What makes it so crucial is that it affects the solution to almost any other issue of significance that we are trying to solve. Take for example the Aids problem in the developing world.

Already as it is, there is a major funding shortage to finance new research, and the production of cheaper drug formulations that would benefit the majority of sufferers. As it happens, most of the affected areas are also in places where corruption is at its most rampant. As a result, millions of dollars that would otherwise have gone to combating the disease goes to the pockets of crooked bureaucrats, who care not if their countrymen continue to die by the thousands so long as they get their share of the largesse.

The same thing could be said with the care of refugees displaced by frequent conflicts in the world’s troubled hot spots. They too are frequent victims of corrupt practices in the places where they are, with funds supposed to be for their welfare continuing to be siphoned to the bank accounts of the very people who are supposed to be looking after them.

There has always been the belief, and perhaps this is mainly accurate, that corruption affects less developed economies more than they do countries in the West. After all, research and evidence shows that large parts of Africa, many countries in Asia, and a good number of states in Latin America – all less developed regions – lead the world in terms of corruption-related problems.

It is not too difficult to see why.

These countries are also stricken with extreme poverty, in most cases, making the temptation to profit from illicit means very strong indeed. Many of the institutions in these countries tend to be weak and unstable, making corruption cases very difficult to uncover and prosecute. And, of course, a strong and independent media is almost always non-existent, and therefore scandals are that much harder to investigate.

But the events of last week show that even in the advanced economies of the West, corruption is still very much alive and well.

Take the case of Derek Conway, a Conservative member of the British Parliament. Not unlike the practice of some Filipino politicians, Conway stands accused of improperly including his son in his staff payroll, without the latter having any clear official duties to back up his designation of researcher.

And the story only gets more interesting.

It seems another son may have also been paid in the same way, and even a Canadian friend of their sons could also have been on the receiving end of some payments.

What does this prove?

Nothing perhaps that we Filipinos, so used to seeing corruption within our midst, do not already know.

Integrity, and thus the ability to resist the temptation to engage in corruption, is not only enforced by systems of good governance, such as Britain has, but rather starts much earlier than that – during a person’s formative years when he learns the good old fashioned values of honesty, truthfulness and fair play.

Leave it any later than this, and it all remains just a matter of time, and the right opportunity to come along.

Published in The Sun Star Daily, Saturday, February 02, 2008