1. Two antennas met on a roof, fell in love and got married. The ceremony wasn’t much, but the reception was excellent.

2. A jumper cable walks into a bar. The bartender says, “I’ll serve you, but don’t start anything.”

3. Two peanuts walk into a bar, and one was a salted.

4. A dyslexic man walked into a bra.

5. A man walks into a bar with a slab of asphalt under his arm, and says: “A beer please, and one for the road.”

6. Two cannibals are eating a clown. One says to the other: “Does this taste funny to you?”

7. “Doc, I can’t stop singing The Green, Green Grass of Home.”
“That sounds like Tom Jones Syndrome.”
“Is it common?”
“Well, It’s Not Unusual.”

8. Two cows are standing next to each other in a field. Daisy says to Dolly, “I was artificially inseminated this morning.”
“I don’t believe you,” says Dolly.
“It’s true; no bull!” exclaims Daisy.

9. An invisible man marries an invisible woman. The kids were nothing to look at either.

10. Deja Moo: The feeling that you’ve heard this bull before.

11. I went to buy some camouflage trousers the other day, but I couldn’t find any.

12. A man woke up in a hospital after a serious accident. He shouted, “Doctor, doctor, I can’t feel my legs!” The doctor replied, “I know, I amputated your arms!”

13. I went to a seafood disco last week…And pulled a mussel.

14. What do you call a fish with no eyes? A fsh.

15. Two fish swim into a concrete wall. The one turns to the other and says, “Dam!”

16. Two Eskimos sitting in a kayak were chilly, so they lit a fire in the craft. Not surprisingly it sank, proving once again that you can’t have your kayak and heat it too.

17. A group of chess enthusiasts checked into a hotel, and were standing in the lobby discussing their recent tournament victories.

After about an hour, the manager came out of the office, and asked them to disperse.
“But why,” they asked, as they moved off.
“Because,” he said. “I can’t stand chess-nuts boasting in an open foyer.”

18. A woman has twins, and gives them up for adoption. One of them goes to a family in Egypt , and is named ‘Ahmal.’ The other goes to a family in Spain ; they name him ‘Juan.’ Years later, Juan sends a picture of himself to his birth mother. Upon receiving the picture, she tells her husband that she wishes she also had a picture of Ahmal. Her husband responds, “They’re twins! If you’ve seen Juan, you’ve seen Ahmal.”

19. Mahatma Gandhi, as you know, walked barefoot most of the time, which produced an impressive set of calluses on his feet. He also ate very little, which made him rather frail and with his odd diet, he suffered from bad breath. This made him (oh, man, this is so bad, it’s good)…A super-calloused fragile mystic hexed by halitosis.

20. A dwarf, who was a mystic, escaped from jail. The call went out that there was a small medium at large.

21. And finally, there was the person who sent twenty different puns to his friends, with the hope that at least ten of the puns would make them laugh. No pun in ten did.

American militants like Anwar al-Awlaki are placed on a kill or capture list by a secretive panel of senior government officials, which then informs the president of its decisions, according to officials.

There is no public record of the operations or decisions of the panel, which is a subset of the White House’s National Security Council, several current and former officials said. Neither is there any law establishing its existence or setting out the rules by which it is supposed to operate.

The panel was behind the decision to add Awlaki, a U.S.-born militant preacher with alleged al Qaeda connections, to the target list. He was killed by a CIA drone strike in Yemen late last month.

The role of the president in ordering or ratifying a decision to target a citizen is fuzzy. White House spokesman Tommy Vietor declined to discuss anything about the process.

Current and former officials said that to the best of their knowledge, Awlaki, who the White House said was a key figure in al Qaeda in the Arabian Peninsula, al Qaeda’s Yemen-based affiliate, had been the only American put on a government list targeting people for capture or death due to their alleged involvement with militants.

The White House is portraying the killing of Awlaki as a demonstration of President Barack Obama’s toughness toward militants who threaten the United States. But the process that led to Awlaki’s killing has drawn fierce criticism from both the political left and right.

In an ironic turn, Obama, who ran for president denouncing predecessor George W. Bush’s expansive use of executive power in his “war on terrorism,” is being attacked in some quarters for using similar tactics. They include secret legal justifications and undisclosed intelligence assessments.

Liberals criticized the drone attack on an American citizen as extra-judicial murder.

Conservatives criticized Obama for refusing to release a Justice Department legal opinion that reportedly justified killing Awlaki. They accuse Obama of hypocrisy, noting his administration insisted on publishing Bush-era administration legal memos justifying the use of interrogation techniques many equate with torture, but refused to make public its rationale for killing a citizen without due process.

Some details about how the administration went about targeting Awlaki emerged on Tuesday when the top Democrat on the House Intelligence Committee, Representative Dutch Ruppersberger, was asked by reporters about the killing.

The process involves “going through the National Security Council, then it eventually goes to the president, but the National Security Council does the investigation, they have lawyers, they review, they look at the situation, you have input from the military, and also, we make sure that we follow international law,” Ruppersberger said.

LAWYERS CONSULTED

Other officials said the role of the president in the process was murkier than what Ruppersberger described.

They said targeting recommendations are drawn up by a committee of mid-level National Security Council and agency officials. Their recommendations are then sent to the panel of NSC “principals,” meaning Cabinet secretaries and intelligence unit chiefs, for approval. The panel of principals could have different memberships when considering different operational issues, they said.

The officials insisted on anonymity to discuss sensitive information.

They confirmed that lawyers, including those in the Justice Department, were consulted before Awlaki’s name was added to the target list.

Two principal legal theories were advanced, an official said: first, that the actions were permitted by Congress when it authorized the use of military forces against militants in the wake of the attacks of September 11, 2001; and they are permitted under international law if a country is defending itself.

Several officials said that when Awlaki became the first American put on the target list, Obama was not required personally to approve the targeting of a person. But one official said Obama would be notified of the principals’ decision. If he objected, the decision would be nullified, the official said.

A former official said one of the reasons for making senior officials principally responsible for nominating Americans for the target list was to “protect” the president.

Officials confirmed that a second American, Samir Khan, was killed in the drone attack that killed Awlaki. Khan had served as editor of Inspire, a glossy English-language magazine used by AQAP as a propaganda and recruitment vehicle.

But rather than being specifically targeted by drone operators, Khan was in the wrong place at the wrong time, officials said. Ruppersberger appeared to confirm that, saying Khan’s death was “collateral,” meaning he was not an intentional target of the drone strike.

When the name of a foreign, rather than American, militant is added to targeting lists, the decision is made within the intelligence community and normally does not require approval by high-level NSC officials.

‘FROM INSPIRATIONAL TO OPERATIONAL’

Officials said Awlaki, whose fierce sermons were widely circulated on English-language militant websites, was targeted because Washington accumulated information his role in AQAP had gone “from inspirational to operational.” That meant that instead of just propagandizing in favor of al Qaeda objectives, Awlaki allegedly began to participate directly in plots against American targets.

“Let me underscore, Awlaki is no mere messenger but someone integrally involved in lethal terrorist activities,” Daniel Benjamin, top counterterrorism official at the State Department, warned last spring.

The Obama administration has not made public an accounting of the classified evidence that Awlaki was operationally involved in planning terrorist attacks.

But officials acknowledged that some of the intelligence purporting to show Awlaki’s hands-on role in plotting attacks was patchy.

For instance, one plot in which authorities have said Awlaki was involved Nigerian-born Umar Farouk Abdulmutallab, accused of trying to blow up a Detroit-bound U.S. airliner on Christmas Day 2009 with a bomb hidden in his underpants.

There is no doubt Abdulmutallab was an admirer or follower of Awlaki, since he admitted that to U.S. investigators. When he appeared in a Detroit courtroom earlier this week for the start of his trial on bomb-plot charges, he proclaimed, “Anwar is alive.”

But at the time the White House was considering putting Awlaki on the U.S. target list, intelligence connecting Awlaki specifically to Abdulmutallab and his alleged bomb plot was partial. Officials said at the time the United States had voice intercepts involving a phone known to have been used by Awlaki and someone who they believed, but were not positive, was Abdulmutallab.

Awlaki was also implicated in a case in which a British Airways employee was imprisoned for plotting to blow up a U.S.-bound plane. E-mails retrieved by authorities from the employee’s computer showed what an investigator described as ” operational contact” between Britain and Yemen.

Authorities believe the contacts were mainly between the U.K.-based suspect and his brother. But there was a strong suspicion Awlaki was at the brother’s side when the messages were dispatched. British media reported that in one message, the person on the Yemeni end supposedly said, “Our highest priority is the US … With the people you have, is it possible to get a package or a person with a package on board a flight heading to the US?”

U.S. officials contrast intelligence suggesting Awlaki’s involvement in specific plots with the activities of Adam Gadahn, an American citizen who became a principal English-language propagandist for the core al Qaeda network formerly led by Osama bin Laden.

While Gadahn appeared in angry videos calling for attacks on the United States, officials said he had not been specifically targeted for capture or killing by U.S. forces because he was regarded as a loudmouth not directly involved in plotting attacks.

(Mark Hosenball, Reuters, 5 October 2011)

As he stood in the opulent marble foyer of a Fifth Avenue mansion late last month, greeting the coterie of prominent guests arriving at his private art gallery, Ronald S. Lauder was doing more than just being a gracious host.

To celebrate the 10th anniversary of the Neue Galerie, Mr. Lauder’s museum of Austrian and German art, he exhibited many of the treasures of a personal collection valued at more than $1 billion, including works by Van Gogh, Cézanne and Matisse, and a Klimt portrait he bought five years ago for $135 million.

Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code. By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.

The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person. From offshore havens to a tax-sheltering stock deal so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has for decades aggressively taken advantage of tax breaks that are useful only for the most affluent.

The debate over whether to reduce tax shelters and preferences for the rich is one of the most volatile in Washington and will move to the presidential campaign, now that repeated attempts in Congress to strike a grand bargain over spending cuts and an overhaul of the tax code have failed.

A handful of billionaires like Warren E. Buffett and Bill Gates have joined Democrats in calling for an elimination of the breaks, saying that the current system adds to the budget deficit, contributes to the widening income gap between the richest and the rest of society, and shifts the tax burden onto small businesses and the middle class. Republicans have resisted, saying the tax increases on the wealthy would harm the economy and cost jobs.

An examination of public documents involving Mr. Lauder’s companies, investments and charities offers a glimpse of the wide array of legal options for the world’s wealthiest citizens to avoid taxes both at home and abroad.

His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.

And earlier this year, Mr. Lauder used his stake in the family business, Estée Lauder Companies, to create a tax shelter to avoid as much as $10 million in federal income tax for years. In June, regulatory filings show, Mr. Lauder entered into a sophisticated contract to sell $72 million of stock to an investment bank in 2014 at a price of about 75 percent of its current value in exchange for cash now. The transaction, known as a variable prepaid forward, minimizes potential losses for shareholders and gives them access to cash. But because the I.R.S. does not classify this as a sale, it allows investors like Mr. Lauder to defer paying taxes for years.

It was a common tax reduction strategy for chief executives and wealthy shareholders a decade ago, but in 2006 the I.R.S. said it appeared to be an abusive tax shelter and issued tighter restrictions to regulate the practice. That ruling was enough to persuade most wealthy taxpayers to abandon the technique, according to tax lawyers and records at the Securities and Exchange Commission.

Advisers to Mr. Lauder maintain that his deal “was made in compliance with published I.R.S. guidance on these types of transactions and was fully reported as required by S.E.C. rules,” said his spokesman, Gary Lewi.

In theory, Mr. Lauder is scheduled to pay taxes on the $72 million when the shares are actually delivered in 2014. But tax experts say wealthy taxpayers can use other accounting techniques to further defer their payment.

The tax burden on the nation’s superelite has steadily declined in recent decades, according to a sliver of data released annually by the I.R.S. The effective federal income tax rate for the 400 wealthiest taxpayers, representing the top 0.000258 percent, fell from about 30 percent in 1995 to 18 percent in 2008, the most recent data available.

When Mr. Lauder ran unsuccessfully for the Republican nomination for mayor of New York and released his tax return to the public, he reported paying 30 percent in total federal, state and city taxes on about $30 million in income in 1988. At the time, his net worth was estimated at nearly a quarter of a billion dollars.

Mr. Lauder’s more recent tax returns remain private, and he declined to make them available for this article.

The Family Fortune

Mr. Lauder, now 67, was born into a storied American fortune. His mother, Estée Lauder, the daughter of Eastern European immigrants, began selling homemade beauty creams at a few New York City hair salons in the 1940s and built her product line into a multibillion-dollar global empire.

As the son of a fabulously wealthy fashion icon, Mr. Lauder developed aristocratic tastes — and grand aspirations — at an early age. He summered in Vienna as a boy, developing a passion for Austrian art and medieval armor. At age 13, he bought his first Schiele with money from his bar mitzvah. Mr. Lauder grew so enthralled by politics as a young man that he told friends he dreamed of becoming the first Jewish president of the United States.

After studying in Brussels and Paris and at the Wharton School at the University of Pennsylvania, he joined the family business in 1964 and served in a variety of limited roles. While his older brother Leonard rose to become Estée Lauder’s chief executive, Ronald engaged in a variety of pursuits: becoming a major Republican fund-raiser; serving a rocky tenure as ambassador to Austria; running for mayor, an unsuccessful bid in which he spent $363 for each vote he received; and starting an assortment of business ventures in Eastern Europe, one of which went bankrupt during the technology bubble.

While the family’s wealth was created by hard work and ingenuity, it was bolstered by aggressive tax planning, a skill that has become Ronald Lauder’s specialty. When Mr. Lauder’s father, Joseph, died in 1983, family members fought the I.R.S. for more than a decade to reduce their estate tax. The dispute involved a block of shares bequeathed to the family — the estate valued it at $29 million, while the I.R.S. placed it at $89.5 million. A panel of judges ultimately decided on $50 million, a decision that saved the estate more than $20 million in taxes.

Estée Lauder Companies went public in 1995, and Ronald Lauder and his mother cashed in hundreds of millions of dollars in stock but managed to sidestep paying tens of millions in federal capital gains taxes by using a hedging technique known as shorting against the box.

Together, Mr. Lauder and his mother borrowed 13.8 million shares of company stock from relatives and sold them to the public during the offering at $26 a share. Selling borrowed shares in this way is referred to as a short position. Since the Lauders retained their own shares, the maneuver allowed them to have a neutral position in the stock, not subject to price swings. Under I.R.S. rules at the time, they avoided paying as much as $95 million in capital gains taxes that might otherwise have been due had they sold their own shares.

Such transactions allowed investors to cash in their shareholdings without paying taxes. But the Lauders’ use of the technique was so aggressive that Congress enacted a law afterward that limited the length of the tax deferral. And the Lauders eventually paid tens of millions in stock from the transaction.

Still, the family’s tax planning was effective enough that after Estée Lauder died in 2004, she passed down nearly $4 billion to her heirs, according to tax experts who studied the case and estimated that the estate was taxed at an effective rate of 16 percent — about a third of the top estate tax rate at the time.

Ronald Lauder has not been a director of the company since 2009, but he still serves as the president of its Clinique Laboratories subdivision. He also sublets a full floor of office space from Estée Lauder, on the 42nd story of the General Motors Building in Manhattan, which serves as the hub for the matrix of foundations, investment funds, partnerships and trusts used to control his businesses and personal finances.

His stake in Estée Lauder Companies, according to regulatory filings, is valued at more than $600 million. Nearly $400 million of that stock is pledged to secure various lines of credit. Many financial planners consider it imprudent for principal shareholders in a company to borrow against their stock. But it remains a popular way for wealthy taxpayers to get cash out of their holdings without selling and paying taxes.

There is a certain irony that Mr. Lauder has used $72 million worth of his Estée Lauder shares to carry out his latest state-of-the-art tax reduction tactic. These contracts emerged as a popular tool about a decade ago and were developed by accountants and tax planners after Congress closed down the loophole on the Estée Lauder public offering. The I.R.S. began cracking down on these contracts in 2008, and has pursued a prominent case against the billionaire Philip Anschutz, who used one to avoid more than $140 million in federal taxes.

Whether or not the I.R.S. agrees with Mr. Lauder’s contention that his contract is legitimate, some tax policy experts say the deal illustrates how the wealthy take advantage of the system.

“There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent,” said Victor Fleischer, a law professor at the University of Colorado. “Any taxpayer lucky enough to have appreciated property is usually put to a choice: cash out and pay some tax, or hold the property and risk the vagaries of the market. Only the truly rich can use derivatives to get the best of both worlds — lots of cash and very little risk.”

While Mr. Lauder’s stock holdings in publicly traded companies show some of his tactics, much of his wealth is harder to examine because it is controlled by a maze of privately held trusts and companies. Court documents, S.E.C. filings and property tax records spotlight a few of the more ordinary tax breaks used by affluent people.

Significant portions of his inherited stock are held in family trusts, which reduce the ultimate estate tax. Mr. Lauder and his wife have also established their own family trusts, allowing them to bequeath their wealth to their heirs with minimal taxes.

Other trusts and partnerships control his real estate properties in Palm Beach and the Hamptons and at 740 Park Avenue, a building that was once home to John D. Rockefeller, and is known as one of the world’s wealthiest apartment buildings.

United States tax law allows taxpayers to deduct mortgage interest on one’s homes up to $1.1 million in debt. Households with more than $1 million in income claimed more than $27 billion in such deductions from 2006 to ’09, according to a report this month by Senator Tom Coburn of Oklahoma, who said some wealthy taxpayers even deducted mortgage interest on their yachts.

And there is no limit on the amount of property taxes that can be deducted from federal income. So Mr. Lauder is entitled to deduct the $400,000 he pays annually on his Palm Beach mansion as well as what he pays on his home on Park Avenue and his holdings in the Hamptons.

“This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and i.o.u.’s to be paid off by future generations,” said Senator Coburn, a Republican, who has called for limits on tax breaks for high earners.

Mr. Lauder deducts property taxes on all of his holdings, his spokesman said. Mr. Lauder declined to say how much that reduced his federal taxes, but said he did not receive tax benefits in some years because of the alternative minimum tax and other limits.

Charity and Tax Breaks

A week before the opening at the Neue Galerie last month, Mr. Lauder appeared at another gala, 40 blocks south, at the New York Public Library, to receive the Carnegie Foundation’s Medal of Philanthropy.

The program honored people who have given profusely to charities, including Mr. Lauder’s brother Leonard and his wife, Evelyn (who died Nov. 12), whose causes include the Whitney Museum and the pink ribbon campaign for breast cancer awareness.

Ronald Lauder and his wife, Jo Carole, were honored for a variety of contributions: the work of their joint foundation supporting hospitals, rebuilding monuments and refurbishing American embassies around the world — more than a quarter of a billion dollars over the last five years, according to his spokesman.

The Ronald S. Lauder Foundation has donated tens of millions of dollars to rebuild Jewish communities devastated by the Holocaust and communist rule. Mr. Lauder has also given to a variety of Jewish and Israeli organizations, including the World Jewish Congress, where he has served as president since 2007. Richard Parsons, the former Time Warner chairman, presented the award, calling Mr. Lauder and his wife two of “the nation’s pre-eminent supporters of the arts and civic causes.”

Mr. Lauder said his life was changed 25 years ago when he visited a kindergarten in Austria and met a classroom full of Jewish children who were refugees from Russia. Still, he said he found it odd to be referred to as a philanthropist.

“I did what I wanted to do,” he said. “What I thought was right.”

A Passion for Art

In the United States, Mr. Lauder has focused on what he calls his greatest passion — art.

In 1976, at age 32, his generous donations helped him become the youngest trustee of the Metropolitan Museum of Art. He later served as chairman of the Museum of Modern Art and remains an honorary chairman. He has donated and lent artwork to an assortment of museums. Part of his collection of lavishly decorated ceremonial armor is on display at the Met, in a gallery named for him.

As all art collectors may, Mr. Lauder is entitled to deduct the full market value of artworks donated to museums. (For years, Mr. Lauder availed himself of a quirk in the tax code that allowed donors to take a deduction for donating a portion of an artwork, without actually turning over the art. That break, known as fractional donation, was eliminated in 2006.) The tax code also allows artwork in offices to be deducted as a business expense.

Unlike some wealthy collectors who are criticized for using tax breaks to underwrite private collections that offer little access to the public, Mr. Lauder is widely praised for making his artwork a community asset.

The Neue Galerie, created by Mr. Lauder and Serge Sabarsky, who died in 1996, in a mansion once owned by Cornelia Vanderbilt, offers public viewing of an exquisite collection, worth more than $200 million even before Mr. Lauder added dozens of pieces for its 10th anniversary.

Sheldon Cohen, a former I.R.S. commissioner, said that when used as intended, the tax code’s breaks for art collectors balance private interests with the public good.

“If an art collector makes significant contributions, and the public actually gets access to the works they are donating, then the major thing the collector gets is prestige and social status,” said Mr. Cohen, now a lawyer in Washington.

At times, Mr. Lauder’s efforts to enhance his art collection have coincided with tax avoidance techniques.

In 2006, three months after he agreed to pay $135 million, a record at the time, for the Klimt painting “Adele Bloch-Bauer I,” Mr. Lauder sold a $190 million stake in his broadcast network CME.

When asked about the sale, Mr. Lauder’s spokesman said the proceeds were taxable in the United States at the full capital gains rate. Even then, though, CME’s complex corporate structure — it operates in Central Europe, is organized as a Netherlands holding company, keeps its headquarters in Bermuda and routed the $190 million sale through two Cayman Island companies — allowed Mr. Lauder to minimize taxes in countries outside the United States where it does business.

Some tax reform advocates say that it is unfair that the wealthiest can subsidize their lifestyles using myriad offshore maneuvers and complex accounting strategies.

“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity. “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”

(David Kocieniewski, New York Times, 26 November 2011)

After Scott Ely and his father talked with salesmen from an energy company about signing the lease allowing gas drilling on their land in northeastern Pennsylvania, he said he felt certain it required the company to leave the property as good as new.

So Mr. Ely said he was surprised several years later when the drilling company, Cabot Oil and Gas, informed them that rather than draining and hauling away the toxic drilling sludge stored in large waste ponds on the property, it would leave the waste, cover it with dirt and seed the area with grass. He knew that waste pond liners can leak, seeping contaminated waste.

“I guess our terms should have been clearer” about requiring the company to remove the waste pits after drilling, said Mr. Ely, of Dimock, Pa., who sued Cabot after his drinking water from a separate property was contaminated. “We learned that the hard way.”

Americans have signed millions of leases allowing companies to drill for oil and natural gas on their land in recent years. But some of these landowners — often in rural areas, and eager for quick payouts — are finding out too late what is, and what is not, in the fine print.

Energy company officials say that standard leases include language that protects landowners. But a review of more than 111,000 leases, addenda and related documents by The New York Times suggests otherwise:

Fewer than half the leases require companies to compensate landowners for water contamination after drilling begins. And only about half the documents have language that lawyers suggest should be included to require payment for damages to livestock or crops.

Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.

In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.

Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.

The leases — obtained through open records requests — are mostly from gas-rich areas in Texas, but also in Maryland, New York, Ohio, Pennsylvania and West Virginia.

In Pennsylvania, Colorado and West Virginia, some landowners have had to spend hundreds of dollars a month to buy bottled water or maintain large tanks, known as water buffaloes, for drinking water in their front yards. They said they learned only after the fact that the leases did not require gas companies to pay for replacement drinking water if their wells were contaminated, and despite state regulations, not all costs were covered.

Thousands of landowners in Virginia, Pennsylvania and Texas have joined class action lawsuits claiming that they were paid less than they expected because gas companies deducted costs like hauling chemicals to the well site or transporting the gas to market.

Some industry officials say the criticism of their business practices is misguided. Asked about the waste pits on Mr. Ely’s land in Pennsylvania, for example, George Stark, a Cabot spokesman, said the company’s cleanup measures met or exceeded state requirements. And the door-to-door salesmen, commonly known as landmen, who pitch the leases on behalf of the drilling companies also dismiss similar complaints from landowners, and say they do not mislead anyone.

The Sales Pitch

“There are bad leases out there, and, as with any industry, there have also been some unscrupulous opportunists,” said Mike Knapp, president of Knapp Acquisitions and Production, a company in western Pennsylvania that brokers deals between landowners and drilling companies. “But everyone I know who does this work is on the up and up, and most of the bad actors that there may have been before are no longer in business.”

He said that his company’s leases ensure that landowners will get replacement water. The company also encourages landowners to visit an existing drilling site before signing a lease to get an idea of the potential noise and truck traffic. Some of the complaints about leases, he said, are just sour grapes from landowners who are envious about the amount of money they believe their neighbors are earning in bonuses and royalties.

To be sure, many landowners have earned small fortunes from drilling leases. Last year, natural gas companies paid more than $1.6 billion in lease and bonus payments to Pennsylvania landowners, according to a report commissioned by the Marcellus Shale Coalition, an industry trade group. Chesapeake Energy, one of the largest natural gas companies, has paid more than $183.8 million in royalties in Texas this year, according to its Web site.

Much of the money has gone to residents in rural areas where jobs are scarce and farmers and ranchers have struggled to stay afloat. Mr. Ely once worked for a company owned by Cabot on drilling sites in his area, until he was fired shortly after publicly complaining about Cabot’s drilling practices.

But many landowners and lawyers say that gas companies are intentionally vague in their contracts and use high-pressure sales tactics on landowners.

“If you’ve never seen a good lease, or any lease, how are you supposed to know what terms to try to get in yours?” said Ron Stamets, a drilling proponent and a Web site developer in Lakewood, Pa., who started a consumer protection Web site, PAGasLeases.com, in 2008 so that he could swap advice with his neighbors as he prepared to sign a gas lease. Others have also taken steps to better inform landowners about the details in leases. In the past several years, the attorneys general in New York, Ohio and Pennsylvania have published advisories about the pitfalls of leasing land for drilling.

State regulations also provide protections to landowners above and beyond what is in their leases.

At least eight states specifically require companies to compensate landowners for damage to their properties or to negotiate with them about where wells will be drilled, even if the lease does not provide those protections.

Asked about the leases, officials from Exxon Mobil, the largest natural gas producer in the United States, declined to comment.

Protecting Landowners

Jim Gipson, a spokesman for Chesapeake Energy, said any claims of damage can be investigated by the state and federal authorities and, he added, noise or other disturbances that may come with drilling tend to be brief.

“The most frequently asked question we receive from our mineral owners is, ‘When are you going to drill my well?’ ” he said.

Mr. Gipson said that most leased properties do not end up having a well placed on them, so those leases do not need added protections. But some consumer advocates and lawyers say that protections are needed for all leased properties, even those without wells, because drilling may occur underneath them. These advocates also say that landowners’ eagerness to start earning royalties has made them vulnerable to deceptive tactics by landmen.

“We’re in town until tomorrow,” the landmen typically say, according to interviews with more than two dozen landowners in Ohio, Texas and Pennsylvania. “We have already signed up all your neighbors.”

The landmen then claim that if you do not sign right away you will miss out on easy income because other drillers will simply pull the gas from under your property using a well nearby.

Some landmen show up in poorer areas shortly before the holidays, offering cash on the spot for signing a lease. They might offer thousands of dollars per acre as a bonus to be paid shortly after the lease is signed. Royalties, which usually run between 12.5 percent and 20 percent of what the companies make for selling the gas, can mean tens of thousands of dollars per year for landowners.

Jack Richards, president of the American Association of Professional Landmen, said his members follow a strict code of ethics. His organization also encourages landowners to ask questions before they sign leases, he said.

“We promote open and honest communication between the landman and landowner before signing the lease,” he said, adding that the standard lease forms are written with some protections for landowners.

Some leases, however, also include language that comes back to haunt landowners.

“I thought I knew what the sentence meant,” said Dave Beinlich, describing a section that said that “preparation” to drill was enough to allow Chief Oil and Gas to extend the duration of his lease.

In 2005, Mr. Beinlich and his wife, Karen, signed a lease for $2 an acre per year for five years on 117 acres in Sullivan County in north-central Pennsylvania. They soon realized they had gotten far less money than their neighbors, so they planned on negotiating a new lease when theirs expired in 2010.

A day before their lease term ended, no well had been drilled on their land, but the gas company parked a bulldozer nearby and started to survey an access road. A company official informed them that by moving equipment to the site, Chief Oil and Gas was preparing to drill and was therefore allowed to extend the lease indefinitely.

The Beinlichs have sued. Kristi Gittins, a vice president at Chief Oil and Gas, says that the company does not comment on pending litigation, but that its goal is to produce gas and it makes an honest attempt to develop the land it leases.

“Lease contracts work both ways,” she added. “Chief honors the terms of its lease contracts, and we expect the landowners who have signed the lease contract to honor the terms of the contract as well.”

But lawyers say that drilling leases are not like other contracts.

“You’re not buying a refrigerator or signing a car note,” said David McMahon, a lease lawyer in Charleston, W.Va., and co-founder of the West Virginia Surface Owners’ Rights Organization, adding that once a well is drilled, it can produce gas for decades, locking landowners into the lease terms.

“With a gas lease, you’re permitting industrial activity in your backyard, and you’re starting a relationship that will affect the quality of living for you and your grandchildren for decades,” he said.

Mr. McMahon and other lease lawyers say that unlike many contracts, oil and gas leases are covered by few consumer protection laws, in part because drilling has been most common in states with less regulation.

Clauses With Consequences

“When it comes to negotiation skills and understanding of lease terms, there is a gaping inequality between the average landman and the average citizen sitting across the table,” said Chris Csikszentmihalyi, a researcher at the Massachusetts Institute of Technology who created a Web site last year called the Landman Report Card that allows landowners to review landmen’s professionalism and tactics.

Some lawyers also say that there are major differences between what drilling companies tell landowners and what they must disclose to investors.

Under federal law, oil and gas companies must offer investors and federal regulators detailed descriptions of the most serious environmental and other risks related to drilling. But leases typically lack any mention of such risks.

In New York, the duration of leases has been an especially contentious issue.

As leases near expiration, some gas companies try to extend them, often by invoking “force majeure,” a legal term referring to an unforeseen event that prevents the two sides from fulfilling an agreement.

In these instances, gas companies say the unforeseen event is the state’s repeated delays in releasing environmental regulations and issuing drilling permits.

Force majeure clauses appear in as many as half the roughly 3,200 New York leases reviewed by The Times.

Another important lease term is the Pugh Clause, said Lance Astrella, a lease lawyer in Denver. It is named after Lawrence Pugh, a Louisiana lawyer who started adding it to leases in 1947 to ensure that they would not be extended indefinitely without wells being drilled.

Fewer than 20 percent of the more than 100,000 Texas leasing documents reviewed by The Times include such a clause, and very few of the leases from Maryland, New York, Ohio, Pennsylvania and West Virginia include the language. While the leases collected by The Times represent a small fraction of the more than 8 million oil and gas leases in the United States, experts said they illustrated issues that landowners need to understand.

Mr. Astrella said that leases also typically lacked a clause requiring drillers to pay for a test of the property’s well water before drilling started, and landowners often do not think to do the tests themselves. If drilling leads to problems with drinking wells, landowners have few options if they want to prove that their water was fine before drilling started.

For some landowners, it can be a costly mistake.

“It’s been one expense after another since our water went bad, and the company only has to cover part of it,” said Ronald Carter, 72, of Montrose, Pa. Mr. Carter and his wife, Jean, said they signed a lease in 2006 for a one-time fee of $25 per acre on their 75 acres and annual royalty payments of 12.5 percent.

The Carters live on $3,500 a month, including the $1,500 per month they average in gas royalties. But they had to spend $7,000 to install a water purifier when their drinking supply became contaminated in 2009 after drilling near their property.

The Carters joined a lawsuit with about a dozen neighbors, including Mr. Ely, accusing Cabot Oil and Gas of contaminating their drinking water.

Mr. Stark, the Cabot spokesman, said that his company was not responsible for any water contamination in the area and that Cabot’s studies showed that the gas seepage into the drinking water was occurring naturally.

“All the testing we have been able to conduct show the water meets federal safe drinking water standards,” Mr. Stark said.

In 2009, Pennsylvania ordered Cabot to provide the affected residents with water. For the Carters, the company has paid for bottled water and for the installation of a water buffalo next to their trailer. Mr. Stark added that his company had offered to pay for treatment systems to remove gas if it leaked into their drinking water.

Mr. Carter said that even though Cabot had paid to provide him with bottled water and a water buffalo, he can barely afford his electricity bill, which doubled because he has to heat the water buffalo to make sure it does not freeze.

Those expenses may soon go up.

On Wednesday, Cabot stopped delivering water to the Carters, the Elys and others in Dimock after state regulators said the company had satisfied requirements of a settlement agreement with the state.

“It’s a little late now,” Mr. Carter said. “But there are a lot things I’d like to have done different with that lease.”

(Ian Urbina and Jo Craven Mcginty, New York Times, 1 December 2011)

The euro is the common currency used by 17 of the 27 members states of the European Union. It was introduced as a so-called unit of account — i.e. currency used only in financial transactions on paper — in 1999 and as actual circulating banknotes and coins in January 2002.

Any country that enters the EU must commit to eventually adopting the euro once it is able to meet the necessary criteria. Only Denmark and the U.K. have been granted exemptions to this rule and have opted out of the euro completely. Sweden has committed to adopting the euro in the future, but it hasn’t yet made the necessary legislative changes and exchange rate adjustments required for entry into the “eurozone” — the countries using the euro.

Eurozone countries include: Germany, France, Italy, Spain, Portugal, Ireland, Austria, Finland, Netherlands, Greece, Belgium, Luxembourg, Slovenia, Cyprus, Malta, Estonia, Slovakia. The Eurozone population is 332 million, with a population of 503 million.

In the countries that make up the eurozone, the euro has replaced the national currency. Some national banks will allow you to exchange the old currency indefinitely, but others have set an expiration date on how long they will accept it. The Bank of France, for example, will exchange francs only up until Feb. 17, 2012.

Countries that don’t use the euro generally don’t accept it for regular cash transactions, although some large department stores and tourist-dependent businesses in the U.K., for example, have been accepting payment in euros.

How to join

There are five main criteria countries must meet to join the eurozone. These are often referred to as the Maastricht criteria after the Maastricht Treaty, the 1993 agreement that established the European Union, laid out its integrated structures and set a timetable for the adoption of a single currency.

Maastricht criteria

1.Inflation: the rate of inflation may not be more than 1.5 percentage points above the average rate of inflation of the three EU member states with the lowest inflation over the previous year.
2.Budget deficit: national budget deficits must be at or below three per cent of GDP.
3.Public debt: national public debt must not exceed 60 per cent of GDP. A country can still join if its debt exceeds this level provided it is falling steadily.
4.Interest rates: long-term interest rates must not vary by more than two percentage points from the average interest rates of the three EU member states with the lowest inflation over the previous year.
5.Exchange rates: exchange rates must remain within the accepted margin of fluctuation laid out in the Exchange Rate Mechanism (ERM) for two years prior to entry. (The ERM is the mechanism by which EU members linked their currencies in order to prevent large fluctuations prior to the adoption of the euro.)
The reality is that many current eurozone members do not meet all the Maastricht requirements, and many blame Europe’s current debt problems on a failure to take swift enough action against countries that failed to adhere to the debt and deficit ceilings.

The European Commission estimates that the average debt burden for the euro area will be 88 per cent of GDP in 2011 and 90.4 per cent in 2012 — far above the required 60 per cent cap. Germany, the largest euro economy, is forecast to have debt equivalent to 81.7 per cent of GDP in 2011 while Greece’s debt is expected to rise to 150.9 per cent of GDP. The average budget deficit for the euro area is expected to be 4.1 per cent of GDP in 2011 and as high as nine or 10 per cent in Greece.

Eurozone enforcers

There are several organizations in charge of keeping Europe’s unified currency and, more broadly, its integrated monetary policies on track.

The ECB is in charge issuing banknotes and setting monetary policy for the eurozone. Alex Domanski/ReutersEuropean Central Bank (ECB) — based in Frankfurt, it sets monetary policy for the eurozone, issues euro banknotes, sets interest rates, keeps inflation low.

European Council — made up of the heads of state of EU member states, it sets the EU’s main policy orientations.

Council of the EU (also known as the Council or the Council of Ministers) — part of the EU legislature, made up of one minister from each member state. There are 10 council configurations based on policy areas. The economic configuration co-ordinates EU economic policy and decides whether a member state may adopt the euro.

European Commission — it is the main body in charge of enforcing EU regulations and policies and also proposes legislation. It monitors eurozone members’ performance and compliance.

Eurogroup — an informal grouping of euro area finance ministers that co-ordinates and monitors economic and budgetary policies and represents the euro area at international forums.

EU member states also adopted a Stability and Growth Pact in 1997 intended to get countries to adhere to the Maastricht Treaty and maintain common EU-wide fiscal policies. It contains something called the excessive deficit procedure, or EDP, that kicks in once a member state exceeds the three per cent debt ceiling and establishes a deadline by which corrective action must be taken.

However, it also says that the procedure won’t be used if the excess deficit is temporary or exceptional and within range of the ceiling. The recent debt crisis has forced the eurozone to adjust the Maastricht criteria and set new debt targets for countries like Greece, whose revised budget deficit target, for example, was upped to 7.5 per cent of GDP.

Advantages and disadvantages of a common currency

Ensures low, stable inflation and low interest rates. Vast differences in economic performance between countries make it hard to implement one-size fits all fiscal policies. For example, the inflation level set by the European Central Bank may not work well for all eurozone counties. This also means that weaker economies can pull down stronger economies, as is the case in the current debt crisis, with heavily indebted countries like Greece negatively impacting the stronger economies of Germany and France.

Eliminates currency exchange costs and fluctuations. Cost of introducing the currency is significant.

Facilitates easier travel and trade between states.

Deficit limits restrict what fiscal tools governments can use to combat recession, unemployment and other economic problems that may be specific to their situation.

Increases price transparency — consumers can more easily compare prices across borders.

Has deflationary effects. Adhering to the strict deficit and inflation caps can force countries to deflate their economies. The spending cuts Estonia, which joined the eurozone in January 2011, had to make to meet the Maastricht criteria resulted in unemployment rising from 5.5 per cent in 2008 to 16.9 per cent in 2010.

A single regional currency gives EU greater weight on world stage.
Better protects against external economic shocks like oil price rises or upheaval in currency markets.

Attracts foreign investment and trade to the eurozone.

Common currency vs. common market

While not all countries in the European Union are part of the eurozone, they are all part of a common market, meaning they have abolished trade barriers, customs tariffs, border controls and other impediments to the free movement of goods, capital, labour and services across national borders.

In some areas, such as product regulation and consumer protection, the EU has adopted a policy of mutual recognition of national rules, meaning products legally sold in one country can be sold in any other member state.

The eyes of the world are on Angela Merkel, the chancellor of Germany, the eurozone’s strongest economy, as she struggles to solve the EU’s debt crisis. While not all EU members are part of the eurozone, they are all part of a heavily integrated common market. While European member states attempt to co-ordinate their broader economic policies, state governments retain control over taxes, government spending, labour, pensions and capital markets.

The raison d’être of the EU has always been some form of common market. The entity itself originated as the European Coal and Steel Community in 1951 as a way of creating a common market for coal and steel among Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands. That evolved into the European Economic Community six years later, which expanded the common market to other goods and services, and by the 1960s, the six countries had abandoned customs duties and adopted common policies on trade, agriculture and in other areas.

It wasn’t until the 1970s that the union expanded beyond economic imperatives to include social and environmental policies and, in 1979, the first elected European Parliament. That year, it also adopted the European Monetary System, which aimed to keep currency fluctuations in check by pegging exchange rates to the European Currency Unit (ECU), a currency that existed only as an accounting unit and was based on a weighted average of the currencies of the by then nine countries that made up the European Economic Community.

Exchange rates had to be changed by mutual agreement and could fluctuate only within a narrow margin established under the Exchange Rate Mechanism the member states had created.

Today, the EU has common policies on everything from air pollution to immigration, but as the recent debt crisis has made all too clear, it still lives and dies on the basis of its economic integration.

(Kazi Stastna, CBC, 9 December 2011)

Last year, the Obama administration vowed to stop for-profit colleges from luring students with false promises. In an opening volley that shook the $30 billion industry, officials proposed new restrictions to cut off the huge flow of federal aid to unfit programs.

Cass R. Sunstein, the White House official who oversees rulemaking, described the industry’s aggressive efforts regarding for-profit schools as “extreme.”

But after a ferocious response that administration officials called one of the most intense they had seen, the Education Department produced a much-weakened final plan that almost certainly will have far less impact as it goes into effect next year.

The story of how the for-profit colleges survived the threat of a major federal crackdown offers a case study in Washington power brokering. Rattled by the administration’s tough talk, the colleges spent more than $16 million on an all-star list of prominent figures, particularly Democrats with close ties to the White House, to plot strategy, mend their battered image and plead their case.

Anita Dunn, a close friend of President Obama and his former White House communications director, worked with Kaplan University, one of the embattled school networks. Jamie Rubin, a major fund-raising bundler for the president’s re-election campaign, met with administration officials about ATI, a college network based in Dallas, in which Mr. Rubin’s private-equity firm has a stake.

A who’s who of Democratic lobbyists — including Richard A. Gephardt, the former House majority leader; John Breaux, the former Louisiana senator; and Tony Podesta, whose brother, John, ran Mr. Obama’s transition team — were hired to buttonhole officials.

And politically well-connected investors, including Donald E. Graham, chief executive of the Washington Post Company, which owns Kaplan, and John Sperling, founder of the University of Phoenix and a longtime friend of the House minority leader, Nancy Pelosi, made impassioned appeals.

In all, industry advocates met more than two dozen times with White House and Education Department officials, including senior officials like Education Secretary Arne Duncan, records show, even as Mr. Obama has vowed to reduce the “outsize” influence of lobbyists and special interests in Washington.

The result was a plan, completed in June, that imposes new regulations on for-profit schools to ensure they adequately train their students for work, but does so on a much less ambitious scale than the administration first intended, relaxing the initial standards for determining which schools would be stripped of federal financing.

“The haranguing had zero effect,” said Cass R. Sunstein, the White House official who oversees rule making. Rather, he and other administration officials said they listened to what they viewed as reasonable arguments and decided to narrow the scope of the original plan.

But Robert Shireman, a former Education Department official who helped shape that original plan, said the intense politics surrounding the issue played a part in “watering down” the final result.

“From early on, the industry was going to friends inside and out of the administration and saying, ‘They’re out to get us,’ and creating the impression that these regulations were unfair or irrational,” said Mr. Shireman, who left the department before the plan was finished.

“They decided to raise holy hell,” he said in an interview.

Many colleges saw the federal government’s attacks as “Armageddon for the industry,” said Avy Stein, a partner at a private equity fund that owns a network of schools called Education Corporation of America.

The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students — often members of minorities, veterans, the homeless and low-income people — with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans.

In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students’ debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether.

The proposal was aimed at ensuring that the for-profit schools were providing “gainful employment” in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured “gainful employment” for the capital’s Democratic lobbyists and political consultants.

In a coordinated approach that also included Capitol Hill protests, petition drives, newspaper ads and more, industry advocates stressed that jobs that would be lost if the institutions were put out of business. They questioned why nonprofit schools were untouched. And they accused the administration of highlighting some abuses to stigmatize an industry that educates second-chance students shunned by traditional academia.

“It was a demonization of our sector,” said Penny Lee, who leads an industry coalition and has extensive ties to Democratic politics as a former senior aide to Senator Harry Reid of Nevada.

The industry’s mobilization helped produce a record 90,000 public comments to the Education Department — overwhelmingly negative — on the proposed changes.

The battle got so testy that Senator Tom Harkin, the Iowa Democrat who has led Congressional hearings into the colleges, got into a heated exchange with Mr. Stein, the Education Corporation investor.

The senator said that during a hallway conversation after lunch in the Senate dining room, Mr. Stein promised to “make life rough for me” if Mr. Harkin kept up his attacks.

“I took it as a threat — it was one of the most blatant comments ever made to me in my years in the Senate,” Mr. Harkin said.

Mr. Stein, a frequent Democratic donor who had bought the lunch with the senator at a charity auction, would not discuss the details of the conversation. But he said Mr. Harkin’s account was “totally incorrect,” adding: “Under no circumstances would I would ever threaten a U.S. senator.”

Officials at the White House and the Education Department described the industry’s aggressive efforts as unusual even by Washington standards. Mr. Sunstein, the White House official, characterized the intensity as “extreme.”

That response reflected the enormous financial stakes for an industry that has become big business in the last decade, with online schools and traditional campuses offering degrees to about three million students. Schools receive as much as 90 percent of their revenues from federal aid.

Once small, local operations, many of the colleges are now multistate networks owned by Wall Street firms looking for big profits. Consumer groups sought tougher restrictions, but found themselves outmatched. Pauline Abernathy, vice president with the nonprofit Institute for College Access and Success and an industry critic, said: “We always knew that we couldn’t compete with the colleges in terms of money or lobbyists, but we thought we had the facts on our side.”

The colleges pushed back at critics, finding errors, for instance, in conclusions from a Government Accountability Office investigation last year, forcing the office to revise some of its statements about industry practices.

Schools also questioned the motives of a key witness at Mr. Harkin’s hearings, the noted hedge-fund trader Steve Eisman, who blasted the colleges’ sky-high profit margins and likened them to subprime mortgage lenders. After Mr. Eisman acknowledged he held financial positions in the industry, the colleges charged that he stood to make millions by battering their reputations and short-selling their stocks.

Ms. Dunn, the former White House aide hired by Kaplan, played a key role in helping shape the colleges’ message.

In an interview, she said she worked to refute media reports casting the abuse problems as industrywide and to show they were limited to “a few bad actors.”

While some people in the industry pushed to see the regulations killed altogether, she said that most executives realized that there were going to be regulations they had to live with” and aimed to blunt the impact. While Ms. Dunn visited the White House about 80 times since leaving the administration, she said she was careful to avoid talking to former colleagues about the issue because she is not a lobbyist and such contact would violate the ethics policies put in place by Mr. Obama regarding lobbying by former advisers.

Tony Podesta, who met last May with White House officials and sent lobbyists at his firm to other meetings, faced no such restrictions. “The administration realized they had overdone it,” he said, “and, wisely in my view, they took a second look.”

In the end, Mr. Duncan and his department, after working for months with White House budget, economic and domestic policy officials, decided that the initial criteria for determining how effectively schools prepared students for jobs simply went too far.

The original framework “would have unnecessarily eliminated many, many good schools along with the bad,” said Justin Hamilton, an Education Department spokesman.

The final standards leave a maximum of 5 percent of schools facing financial sanctions at the start; the original plan would have meant penalties against an estimated 16 percent.

The rules also pushed back the penalties to 2015 from 2012, while requiring schools to disclose more data about loans, defaults and job placement.

Donald Heller, a Penn State education professor who studied the plan, said the industry did largely what it set out to do.

“This was the beachhead the colleges were going to defend, and they were somewhat successful in that they got the regulations weakened,” he said. “The Department of Education really bent to the lobbying push.”

(Eric Lichtblau, New York Times, 9 December 2011)

During the summer of 1913, in a field just south of Cairo on the eastern bank of the Nile, an American engineer called Frank Shuman stood before a gathering of Egypt’s colonial elite, including the British consul-general Lord Kitchener, and switched on his new invention. Gallons of water soon spilled from a pump, saturating the soil by his feet. Behind him stood row upon row of curved mirrors held aloft on metal cradles, each directed towards the fierce sun overhead. As the sun’s rays hit the mirrors, they were reflected towards a thin glass pipe containing water. The now super-heated water turned to steam, resulting in enough pressure to drive the pumps used to irrigate the surrounding fields where Egypt’s lucrative cotton crop was grown. It was an invention, claimed Shuman, which could help Egypt become far less reliant on the coal being imported at great expense from Britain’s mines.

“The human race must finally utilise direct sun power or revert to barbarism,” wrote Shuman in a letter to Scientific American magazine the following year. But the outbreak of the first world war just a few months later abruptly ended his dream and his solar troughs were soon broken up for scrap, with the metal being used for the war effort. Barbarism, it seemed, had prevailed.

Almost a century later, a convoy of air-conditioned coaches sweeps through the affluent suburb of Maadi – where Shuman had demonstrated his fledgling solar panels – continuing south for 90km towards Kuraymat, an area of flat, uninhabited desert near the city of Beni Suef. The high-level international delegation of CEOs, politicians, financiers and scientists has come to visit a brand new “hybrid” power station that uses both natural gas and solar panels to generate electricity. Before the coaches reach the facility’s security gates, its 6,000 parabolic troughs – each six metres tall with a combined surface area of 130,000sq metres – are already visible from the perimeter road. Even though the panels account for just one seventh of the power plant’s 150MW generating capacity, the Egyptian government, which has been pushing to develop the site since 1997, hopes to prove to the delegation that it is the desert sun – not fossil fuels, such as gas, coal and oil – that should be used not only to generate far more of the electricity across the Middle East and North Africa (Mena), but, crucially, for neighbouring Europe, too.

Gerhard Knies, a German particle physicist, was the first person to estimate how much solar energy was required to meet humanity’s demand for electricity. In 1986, in direct response to the Chernobyl nuclear accident, he scribbled down some figures and arrived at the following remarkable conclusion: in just six hours, the world’s deserts receive more energy from the sun than humans consume in a year. If even a tiny fraction of this energy could be harnessed – an area of Saharan desert the size of Wales could, in theory, power the whole of Europe – Knies believed we could move beyond dirty and dangerous fuels for ever. Echoing Schuman’s own frustrations, Knies later asked whether “we are really, as a species, so stupid” not to make better use of this resource. Over the next two decades, he worked – often alone – to drive this idea into public consciousness.

The culmination of his efforts is “Desertec”, a largely German-led initiative that aims to provide 15% of Europe’s electricity by 2050 through a vast network of solar and wind farms stretching right across the Mena region and connecting to continental Europe via special high voltage, direct current transmission cables, which lose only around 3% of the electricity they carry per 1,000km. The tentative total cost of building the project has been estimated at €400bn (£342bn).

Until now, Desertec has been seen by many observers as little more than a mirage in the sand; the fanciful plan of well-meaning dreamers. After all, the technical, political, security and financial hurdles can, each on their own, appear to be utterly insurmountable. But over the past two years, the initiative has received significant support from some of the biggest corporate names in Germany, a country that already leads Europe when it comes to adopting and developing renewable energy, particularly solar. In the autumn of 2009, an “international” consortium of companies formed the Desertec Industrial Initiative (Dii) with weighty companies, such as E.ON, Munich Re, Siemens and Deutsche Bank, all signing up as “shareholders”. Germany’s announcement earlier this year that, in the wake of the Fukushima disaster, it was to speed up its total phase-out of nuclear power suddenly pulled the Desertec idea into much sharper focus. Coupled with faltering international negotiations and increasingly dire warnings on climate change – just last month the International Energy Agency warned that the world is headed for irreversible climate change if it doesn’t start reducing carbon emissions within five years – it would seem the time is now right for an idea of such scale and ambition.

Last month, at its annual conference in Cairo, Dii confirmed to the world that the first phase of the Desertec plan is set to begin in Morocco next year with the construction of a 500MW solar farm near to the desert city of Ouarzazate. The 12sq km project would act as a “reference project” that, much like Egypt’s own project at Kuraymat, would help convince both investors and politicians that similar farms could be repeated across the Mena region in the coming years and decades.

“It’s all systems go in Morocco,” announced Paul van Son, Dii’s CEO, to the visiting delegates. Talks, he added, were – given their shared close proximity, along with Morocco, to western Europe’s grid – already under way with Tunisia and Algeria about joining the “first phase” of Desertec. Countries such as Egypt, Syria, Libya and Saudi Arabia would be expected to join in the “scale-up” phase from 2020 onwards, once extra transmission cables were laid across the Mediterranean and via Turkey, with the whole venture becoming financially self-sustaining by 2035.

Van Son swats away any talk that the Desertec project is built on a precarious foundation of presumption, naivety and hope. “Yes, the current global financial crisis has clearly not been very helpful, but everyone also realises that being dependent on fossil fuels creates vulnerability,” he says.

He also rejects any notion that Desertec carries with it even a whiff of neo-colonialism. Earlier this year such sentiments were raised by Daniel Ayuk Mbi Egbe of the African Network for Solar Energy. “Many Africans are sceptical [about Desertec],” he said. “[Europeans] make promises, but at the end of the day, they bring their engineers, they bring their equipment, and they go. It’s a new form of resource exploitation, just like in the past.” Other Mena-based speakers made similar points, not least that any electricity generated will first be desperately needed by local populations as they fight poverty.

“When the idea for Desertec was first announced there was anger and irritation from the Arab League,” admits Van Son. “They didn’t understand it at first, but we explained that it would benefit their members, too. We explained it would be a cooperative process and they became more relaxed. It’s a win-win for all, we stressed. The relationship is all positive now.”

Desertec should also be supported, argue its champions, because it will improve energy security by helping to diversify supply. At present, says Van Son, Europeans are vulnerable to the so-called “energy weapon”, namely, when an energy-rich country holds its neighbours to ransom by restricting or denying supply. Think Russia and its gas, he says. Or a terrorist attack on an oil pipeline. Desertec will help to dilute these threats.

He is bemused, though, that the current domination of Dii by German companies should rouse suspicion. (There was not a single political or corporate representative from the UK at the conference, yet at least half hailed from Germany.) “Yes, the initiative came from Germany. But there are 15 different nationalities involved, including companies such as HSBC and Morgan Stanley. This is just the start.”

A common question at the conference is: “Who is going to pay for Desertec?” There is talk of loans from development institutions such as the World Bank (the route being taken by Morocco). The presence of German banks suggests they are considering being key lenders, too. But there is also the implication that much of the burden will fall on the European taxpayer, either through EU subsidies, or tariffs added to their energy bills.

Angelika Niebler, a Christian Democrat MEP from Germany, travelled to Cairo as a member of the European parliament’s energy committee. She says it is “too early” to talk about EU financing but adds: “Energy is going to be a bigger priority for the EU in coming years than agriculture has been in the past and Desertec will surely feature.”

Hans Josef-Fell, a representative of Germany’s Green party, is also in Cairo for the conference. “There is a fear in Germany that paying for green electricity direct from North Africa will be too heavy a burden on our consumers,” he says. Germany already has among the highest electricity prices in Europe, in part because of a huge wave of renewable energy installations across the country.

Europe, particularly Germany, seems to increasingly know what it wants from Desertec. But what of its Mena partners? Obaïd Amrane, a board member of the Moroccan Agency for Solar Energy, the government body responsible for overseeing Desertec’s first plant, says his country has its own plans for the electricity generated at the facility – and for the other four that will follow by 2020 – and it doesn’t necessarily include selling it to Europe.

“By 2020, we are expecting a doubling of electricity consumption in Morocco, as the population and standard of living grow,” he says. “At the moment, we are 97% dependent on foreign energy which is becoming increasingly unsustainable. But we are now aiming to have 42% capacity of renewable electricity by 2020. We will build extra capacity beyond what Morocco needs if someone wants us to, but we will need a big share of the electricity produced by these projects.”

Such sentiments propose another challenge for Desertec: how will it guarantee that the electricity Europe needs is sent down the transmission cables and not just all consumed locally? And how will Mena countries justify selling the electricity to Europe – where the retail price of electricity can be up to 20 times more expensive – if the local population is, say, experiencing regular blackouts?

At the visitor centre at Kuraymat, bottles of chilled water are being distributed ahead of a tour of the parabolic troughs. The mid-morning November sun is already heating the engine oil-like fluid inside the troughs’ receiver tubes – a technology not that far removed from Shuman’s century-old design – up towards 400C.

The technical questions are coming thick and fast for Bodo Becker, the operations manager at Flagsol, the German company that specialises in building concentrated solar power (CSP) plants in the deserts of the US, Spain and now Egypt. The leading query is how the troughs perform in such harsh conditions.

“We only have one sandstorm, on average, pass through here each year,” he says, “but we tilt the troughs down and away from the wind whenever it gets up beyond 12 metres per second, as they act like giant sails.”

Keeping them clean is the main challenge, he adds. “Due to the dusty conditions, we are witnessing about 2% degradation every day in performance, so we need to clean them daily. We use about 39 cubic metres of demineralised water each day for cleaning across the whole site.”

This surprises many delegates, as they have previously been told at the conference that CSP troughs need cleaning weekly compared to photovoltaic panels which need cleaning monthly. Either way, it highlights yet another challenge for Desertec: can enough local water ever be secured for cleaning duties? The Nile is just a few miles from Kuraymat, but some countries aim to push much deeper into their deserts to build such facilities. “Dry cleaning” technologies are being developed, but they reduce the generating efficiency at the plant. Either way, the super-heated transfer fluid requires cooling before it can loop back to the troughs for re-use, and, as with cleaning, water is the cheapest and easiest way to do this. Until “dry cooling” technologies are further advanced, it could limit solar farms to the desert fringes close to large bodies of water.

Somewhat counter-intuitively, some countries, such as Jordan, now favour wind over solar as a source of desert energy, because it is currently more affordable and isn’t so water-intensive. But it is suspected that it will be many years before a single desert energy technology comes to dominate the market. Some within the industry advocate photovoltaic panels, but, currently, CSP is more popular. However, even within CSP, there are loyalists for parabolic troughs and others for “solar towers”, which rely on hundreds of pivoting mirrors laid out on the ground to track the sun and direct its rays towards one fixed point at the top of a giant tower.

Whichever technology succeeds, it is already clear which nation in particular will win out as Desertec develops in the coming decades. One member of the visiting delegation asks Becker where the troughs are made.

“The metal cradles were made here in Egypt, but the glass troughs were all made in Germany,” he says. “And only two companies in the world make the glass tube receivers, which is where the main intellectual property of this technology lays – Schott Solar and Siemens.” Both companies are German.

(Leo Hickman, Guardian, 11 December 2011)

In a potentially fundamental advance, researchers have opened up a novel approach to combating the effects of aging with the discovery that a special category of cells, known as senescent cells, are bad actors that promote the aging of the tissues. Cleansing the body of the cells, they hope, could postpone many of the diseases of aging.

The findings raise the prospect that any therapy that rids the body of senescent cells would protect it from the ravages of aging. But many more tests will be needed before scientists know if drugs can be developed to help people live longer.

Senescent cells accumulate in aging tissues, like arthritic knees, cataracts and the plaque that may line elderly arteries. The cells secrete agents that stimulate the immune system and cause low-level inflammation. Until now, there has been no way to tell if the presence of the cells is good, bad or indifferent.

The answer turns out to be that the cells hasten aging in the tissues in which they accumulate. In a delicate feat of genetic engineering, a research team led by Darren J. Baker and Jan M. van Deursen at the Mayo Clinic in Rochester, Minn., has generated a strain of mouse in which all the senescent cells can be purged by giving the mice a drug that forces the cells to self-destruct.

Rid of the senescent cells, the Mayo Clinic researchers reported online Wednesday in the journal Nature, the mice’s tissues showed a major improvement in the usual burden of age-related disorders. They did not develop cataracts, avoided the usual wasting of muscle with age, and could exercise much longer on a mouse treadmill. They retained the fat layers in the skin that usually thin out with age and, in people, cause wrinkling.

“I am very excited by the results,” said Dr. Norman E. Sharpless, an expert on aging at the University of North Carolina. “It suggests therapies that might work in real patients,” he said.

Dr. van Deursen’s work is the first to show that removing senescent cells is beneficial. If confirmed, it “will be considered a fundamental advance by our field,” Dr. Sharpless said.

Aging research is a relatively young field because until 20 or so years ago the prospect of defeating age seemed hopeless. Then researchers found that the lifespan of laboratory animals could be extended by manipulating certain genes, setting off a hunt for drugs that might influence the corresponding genes in people. This line of research remains promising but has produced few tangible results so far. The discovery that senescent cells seem to be the cause of tissue degeneration opens out a new direction for researchers on aging to explore.

Judith Campisi, at the Buck Institute for Research on Aging, said the new finding was the first proof that senescent cells can drive the aging process. “So it’s really quite a breakthrough,” she said.

In both mice and people, senescent cells are few in number but have major effects on the body’s tissues. Killing the cells should therefore have large benefits with little downside. The gene-altering approach used on the mice cannot be tried in people, but now that senescent cells appear to be harmful, researchers can devise ways of targeting them.

Drugs already exist to combat some of the inflammatory hormones secreted by senescent cells. The body’s immune system, which probably clears away senescent cells all the time but does so less efficiently with age, could perhaps be trained to attack senescent cells more aggressively. Or researchers could one day develop specific drugs to kill the cells, when the differences between ordinary and senescent cells are better understood.

Dr. van Deursen said he thought it worth trying to eliminate senescent cells after the finding that they reliably switch on a characteristic marker gene known as p16-Ink4a. In his mice, he arranged that the genetic element that switches on the marker gene would also prime a mechanism to make the cell self-destruct. The mechanism fired only when the mice were dosed with a specific drug. The result was that only senescent cells were at risk from the drug, and that they could be purged at any desired time in the mouse’s lifetime.

In a second experiment, the mice were not given the cell-cleaning drug until they were middle-aged. Their cataracts had already developed by then and were irreversible, but aging was delayed in their fat and muscle tissues.

It may be that senescent cells are beneficial in youth but harmful in old age, when the immune system seems to clear them less rapidly from the body. The second mouse experiment suggests that middle age would be an effective time for clinical intervention, assuming humans behave in the same way.

If aging of the tissues is delayed by eliminating senescent cells, the mice should, in principle, have lived longer. Dr. van Deursen said this was not the case in this experiment only because he had chosen a fast-aging strain of mice in order to save himself time. These particular mice succumb to heart attacks at an early age, regardless of the state of their tissues. The Mayo Clinic team plans to repeat its experiment with an ordinary strain of mouse that normally lives three years or more, to see if its life span is extended as expected.

The Mayo Clinic finding “is a really important step forward for the field,” said Dr. Campisi of the Buck Institute.

The purpose of research on aging, she said, is not to let people live a thousand years, as portrayed in science fiction, but to increase health span, the proportion of people’s natural lives that they live in good health.

“People used to see aging as a rusting nail — there’s nothing you can do about it,” Dr. Campisi said. “But we now know that there are processes that are driving aging, and that those processes can be meddled with.”

(Nicholas Wade, New York Times, 3November2011)

The mayor of London demands a law against it to stop tent villages “erupting like boils” across the capital. If you lived like Boris, you too might be a bit paranoid about boils. The prime minister interrupts a trip to Australia to announce that the government is poised to intervene. Meantime, the Church of England is split down the aisle about whether the Christian thing is to embrace the protesters encamped on the doorstep of its cathedral – after all, St Paul was a tent-maker and Christ had a robust approach to moneychangers – or to join forces with the mammonites who run the City of London and have the protest camp evicted. Much of the mainstream media side with the establishment by dismissing them as an incoherent and unrepresentative fringe. Well-paid television interviewers sneer that the protesters are spoilt brats while grand columnists scoff that they will achieve nothing.

Yet they have already done something fairly remarkable. My congratulations to the encampment outside St Paul’s for sending almost the entire British establishment into a tizzy every bit as confused as some of the protesters themselves. Amazing what you can achieve by occupying a small, albeit famous, patch of the capital with a few nylon tents and some amateurish banners expressing well-mannered rage about capitalism. You have brought a frown to the forehead of the prime minister, hyperbolic froth to the lips of Boris Johnson, attracted the disdain of a pomposity of pontificators and thrown the state church into something approaching a constitutional crisis. It is twisted knickers time among pundits, politicians and prelates. Imagine what might be achieved if this movement can get really serious and starts taking its protest more directly to the avaricious bankers, corporate larcenists and crony capitalists who are the central source of their discontent with how we live now.

The protest at St Paul’s is just one example of an international phenomenon. What began in the Spanish springtime with demonstrations by the splendidly named los indignados has turned viral and global. It is just over a month since the first thousand people turned up at Zuccotti Park in New York to express their rage at Wall Street. Since then, similar movements have come to life in more than 900 cities around the globe. They have camped in front of the European Central Bank in Frankfurt and on the Plaza del Congreso in Buenos Aires.

The default response of establishment opinion is glibly to dismiss these protests as a passing spasm which cannot achieve anything because the movement is either wildly unrealistic in its aspirations for a new world economic order or too vague in its demands. It is true to say that the protests vary in their tactics and are disparate in their goals. Movements like this are often woven from multiple threads of grievance, a tapestry of dissent which can be both a source of initial strength and an ultimate cause of weakness. But they are loosely united by common themes: fury at corporate greed, resentment at lack of economic opportunity, concern about social inequality and alienation from a conventional politics that appears incapable of doing anything serious to address and redress public discontents.

The anarchic end of the protesting spectrum do indeed sound naive when they cry “smash the system”, especially when they are either muddled or utopian about what would take its place. More realistic are those protesters who see their role as “raising awareness”. That is a very valuable purpose in itself. Simply by existing, they push these issues up the media agenda and towards the front of the public mind. If it makes it just a little bit harder for financial interests and their friends among politicians to put the argument to sleep, it is a little bit worth doing.

The protesters over-claim when they say they speak for “the 99%”, but some of their themes do resonate very potently with mainstream voters. The occupation movement is succeeding where conventional politics of both left and right have badly failed. It articulates a profound public resentment with over-mighty finance and the failure of government to do anything about it. The protesters strike a resounding chord when they complain that financial elites are getting rewarded with special treatment while the punishment for their mistakes is meted out on the rest of society.

On top of the billions of taxpayers’ money already committed to rescuing the banks, the eurozone leaders have just signed up to providing billions more. Yet from the nabobs of finance there is still not a whisper of a hint of a scintilla of humility or penance. The Institute of International Finance, the main industry organisation, reports that banks are handing more guaranteed bonuses to new employees than they were before the financial crisis. Governments have neither punished those who wrecked the economy nor taken adequate steps to ensure that they will be more accountable and responsible in future. Sir Fred Goodwin – why the hell is he still Sir Fred Goodwin? Three years have elapsed since the bubble burst in 2008 and yet we are still waiting for the fulfilment of promises of systemic reform. The wonder is not that people have been provoked to occupy parks and squares in every continent but Antarctica. The wonder is that this did not happen earlier.

The composition of the demonstrations is interesting. A rough survey of the occupation movement in New York found that about two in three of the protesters are under 34. This is not just because protesting may be more attractive to people with unfurred arteries, but because the young are suffering disproportionately from a crisis not of their making. Youth unemployment in Britain is at record levels: 20% of the under-24s do not have work. In Spain, youth unemployment has surged to a staggering 46%. These protests are an alert to explosive issues of inter-generational unfairness which most politicians have yet to wake up to, probably because their trade is dominated by the middle aged. Their generation often did well enough during prosperity to cushion them from present austerity while the less fortunate young are asked to pay the price.

A big mistake is to think that because the protesters tend to be youthful it follows that they should be treated like children. Richard Chartres, the Bishop of London, has made that error by suggesting to the campers that they ought to leave in return for a debate under the dome of St Paul’s – gosh, thanks my Lord Bishop. He further asks them to go on the grounds that: “I am involved in ongoing discussion with City leaders about improving shareholder influence on excessive remuneration.”

I am sure that the bishop is well-meaning, but that is not going to cut it. There has been “ongoing discussion” for years. The result, according to the latest report by Incomes Data Services: Britain’s top executives gave themselves a 49% increase in their salaries, benefits and bonuses in the past year. It does not even occur to the business and financial elite that it might be good old cynical public relations to moderate their greed while so many of their fellow citizens are suffering the consequences of corporate follies.

Who is truly the more adult: the protesters or an establishment that regards itself as older and wiser? The protesters have largely been very decorously behaved. They have thus far displayed no propensity to riot or to loot. Their tents are erected in rather neat rows. They hold laboriously consensus-seeking meetings at which they keep minutes and take votes. Their spokespeople are polite and articulate. If they do not have all the answers, they are at least posing some of the right questions. I don’t see why they should be criticised for the absence of a manifesto when the leaders of Europe spent months quarrelling and flailing over the euro crisis before scrabbling together an expensively botched compromise.

The protesters shun formal leaders and hierarchies – and I also don’t see why they should be criticised for this at a time when conventional leaders and hierarchies have been so conspicuously useless. Here are some recent scenes in establishment politics. Silvio Berlusconi displays his incomparable charms by describing Angela Merkel as “culona ichiavabile” (”an unfuckable lard arse”). Rick Perry, contender to become Republican candidate for the great office of president of the United States, questions where Barack Obama was born five months after the White House released his long-form birth certificate, and excuses himself by saying: “It’s fun to poke at him.” A punch-up breaks out on the floor of the Italian parliament between one right-wing member of the government and an even more right-wing member. Nicolas Sarkozy tells David Cameron to “shut up” because he is “sick” of him. David Cameron elevates the tone at prime minister’s questions by shouting: “Complete mug!” at Ed Miliband.

Protesters or leaders? I know who looks the more grown-up.

(Andrew Rawnsley, The Observer, 30 October 2011)

The Network of Global Corporate Control
by Stefania Vitali, James B. Glattfelder, and Stefano Battiston

Abstract
The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.

[For the first six pages of the actual paper, consult this:
WorldControlpp3v2
For the rest, consisting of a total of 36 pages, go to http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf]

1. Afghans have always beaten foreign armies, from Alexander the Great to modern times

Afghan history is certainly littered with occasions when foreign invaders were humiliated. But there have also been many cases when foreign armies penetrated the country and inflicted major defeats. In 330BC, Alexander the Great marched through the area of central Asia that is now Afghanistan, meeting little opposition. More than a millennium later, the Mongol leader Genghis Khan also brushed resistance aside.

Since Afghanistan emerged as a modern state, there have been three wars with Britain. The British invasion of 1839 produced initial victory for the intruders followed by stunning defeat followed by a second victory. In 1878, the British invaded again. Though they suffered a major defeat at Maiwand, their main army beat the Afghans. The British then re-drew the frontier of British India up to the Khyber Pass, and Afghanistan had to cede various frontier areas. In the Third Anglo-Afghan war, the fighting was launched by the Afghans. Amanullah Khan sent troops into British India in 1919. Within a month they were forced to retreat, in part because British planes bombed Kabul in one of the first displays of airpower in central Asia. The war ended in tactical victory for the British but their troop losses were twice those of the Afghans, suggesting the war was a strategic defeat. The British abandoned control of Afghan foreign policy at last.

The results of the three Anglo-Afghan wars undermine the claim that Afghans always defeat foreigners. What is true is that foreigners have always had a hard time occupying the country for long. The British came to understand that. From bitter experience they kept their interventions short, preferring domination over foreign affairs to the option of colonisation that they adopted in India.

2. The Soviet invasion led to a civil war and western aid for the Afghan resistance

Armed opposition to the government in Kabul long pre-dated the arrival of Soviet troops in December 1979. Every one of the Pakistan-based Afghan mujahideen leaders who became famous during the 1980s as the Peshawar Seven and were helped by the United States, Pakistan, Saudi Arabia and China had gone into exile and taken up arms before December 1979, many of them years earlier. As Islamists, they opposed the secular and modernising tendencies of Daoud Khan, [the Afghan PM] who toppled his cousin, King Zahir Shah, in 1973.

Western backing for these rebels had also begun before Soviet troops arrived. It served western propaganda to say the Russians had no justification for entering Afghanistan in what the west called an aggressive land grab. In fact, US officials saw an advantage in the mujahedin rebellion which grew after a pro-Moscow government toppled Daoud in April 1978. In his memoirs, Robert Gates, then a CIA official and later defence secretary under Presidents Bush and Obama, recounts a staff meeting in March 1979 where CIA officials asked whether they should keep the mujahideen going, thereby “sucking the Soviets into a Vietnamese quagmire”. The meeting agreed to fund them to buy weapons.

3. The USSR suffered a massive military defeat in Afghanistan at the hands of the mujahideen

This is one of the most persistent myths of Afghan history. It has been trumpeted by every former mujahideen leader, from Osama bin Laden and Taliban commanders to the warlords in the current Afghan government. It is also accepted unthinkingly as part of the western narrative of the war. Some western politicians go so far as to say that the alleged Soviet defeat in Afghanistan helped to cause the collapse of the Soviet Union itself. On this they agree with Bin Laden and al-Qaida’s other leaders, who claim they destroyed one superpower and are on their way to destroying another.

The reality is the Afghan mujahideen did not defeat the Soviets on the battlefield. They won some important encounters, notably in the Panjshir valley, but lost others. In sum, neither side defeated the other. The Soviets could have remained in Afghanistan for several more years but they decided to leave when Gorbachev calculated that the war had become a stalemate and was no longer worth the high price in men, money and international prestige. In private, US officials came to the same conclusion about Soviet strength, although they only admitted it publicly later. Morton Abramowitz, who directed the State Department’s Bureau of Intelligence and Research at the time, said in 1997: “In 1985, there was a real concern that the [mujahideen] were losing, that they were sort of being diminished, falling apart. Losses were high and their impact on the Soviets was not great.”

4. The CIA’s supply of Stinger missiles to the mujahideen forced the Soviets out of Afghanistan

This myth of the 1980s was given new life by George Crile’s 2003 book Charlie Wilson’s War and the 2007 film of the same name, starring Tom Hanks as the loud-mouthed congressman from Texas. Both book and movie claim that Wilson turned the tide of the war by persuading Ronald Reagan to supply the mujahideen with shoulder-fired missiles that could shoot down helicopters. The Stingers certainly forced a shift in Soviet tactics. Helicopter crews switched their operations to night raids since the mujahideen had no night-vision equipment. Pilots made bombing runs at greater height, thereby diminishing the accuracy of the attacks, but the rate of Soviet and Afghan aircraft losses did not change significantly from what it was in the first six years of the war.

The Soviet decision to withdraw from Afghanistan was made in October 1985, several months before Stinger missiles entered Afghanistan in significant quantities in the autumn of 1986. None of the secret Politburo discussions that have since been declassified mentioned the Stingers or any other shift in mujahideen equipment as the reason for the policy change from indefinite occupation to preparations for retreat.

5. After the Soviets withdrew, the west walked away

One of the most common promises western politicians made after they toppled the Taliban in 2001 was that “this time” the west would not walk away, “as we did after the Russians pulled out”. Afghans were surprised to hear these promises. They remembered history in rather a different way. Far from forgetting about Afghanistan in February 1989, the US showed no let-up in its close involvement with the mujahideen. Washington blocked the Soviet-installed President Mohammad Najibullah’s offers of concessions and negotiations and continued to arm the rebels and jihadis in the hope they would quickly overthrow his Moscow-backed regime.

This was one of the most damaging periods in recent Afghan history when the west and Pakistan, along with mujahideen intransigence, undermined the best chance of ending the country’s civil war. The overall effect of these policies was to prolong and deepen Afghanistan’s destruction, as Charles Cogan, CIA director of operations for the Middle East and south Asia, 1979–1984, later recognised. “I question whether we should have continued on this momentum, this inertia of aiding the mujahideen after the Soviets had left. I think that was probably, in retrospect, a mistake,” he said.

6. The mujahideen overthrew Kabul’s regime and won a major victory over Moscow

The key factor that undermined Najibullah was an announcement made in Moscow in September 1991, shortly after a coup mounted against Gorbachev by Soviet hard-liners collapsed. His longtime rival, Boris Yeltsin, who headed the Russian government, emerged in a dominant position. Yeltsin was determined to cut back on the country’s international commitments and his government announced that from 1 January 1992, no more arms would be delivered to Kabul. Supplies of petrol, food and all other aid would also cease.

The decision was catastrophic for the morale of Najibullah’s supporters. The regime had survived the departure of Soviet troops for more than two years but now would truly be alone. So, in one of the great ironies of history, it was Moscow that toppled the Afghan government that Moscow had sacrificed so many lives to keep in place.

The dramatic policy switch became evident when Professor Burhanuddin Rabbani, head of one of the mujahideen groups, was invited to Moscow in November 1991. In a statement after the meeting, Boris Pankin, the Soviet foreign minister, “confirmed the necessity for a complete transfer of state power to an interim Islamic government”. In today’s context, the announcement could be compared to an invitation by Hillary Clinton to Taliban leader Mullah Mohammed Omar to come to Washington and a declaration the US wanted power transferred from Karzai to the Taliban.

The move led to a wave of defections as several of Najibullah’s army commanders and political allies switched sides and joined the mujahideen. Najibullah’s army was not defeated. It just melted away.

7. The Taliban invited Osama bin Laden to use Afghanistan as a safe haven

Osama bin Laden got to know the mujahideen leaders during the anti-Soviet jihad after traveling to Peshawar in 1980. Two years later, his construction company built tunnels in the mountains of eastern Afghanistan that the CIA helped him to finance and which he was later to use to escape US bombing after 9/11.

He returned to Saudi Arabia, disillusioned with the Saudi royal family for collaborating with the US in the Gulf war against Saddam Hussein in 1990–1991. In Afghanistan, there was cause for disappointment too. The mujahideen’s incompetence was preventing them from toppling Najibullah. Bin Laden turned his attention to jihad against the west and moved to Sudan in 1992. After Sudan came under pressure to deport him in 1996, Bin Laden had to find somewhere else to live. Najibullah had finally lost power in Afghanistan, and Bin Laden decided it might be the best place after all.

His return in May 1996 was prompted less by a revival of interest in Afghan politics than by his need for a safe haven. His return was sponsored by the mujahideen leaders with whom he had become friendly during the anti-Soviet struggle. He flew to Jalalabad on a plane chartered by Rabbani’s government that also carried scores of Arab fighters.

It was only after the Taliban captured Jalalabad from the mujahideen that he was obliged to switch his allegiance or leave Afghanistan again. He chose the first option.

8. The Taliban were by far the worst government Afghanistan has ever had

A year after the Taliban seized power, I interviewed UN staff, foreign aid workers and Afghans in Kabul. The Taliban had softened their ban on girls’ education and were turning a blind eye to the expansion of informal “home schools” in which thousands of girls were being taught in private flats. The medical faculty was about to re-open for women to teach midwives, nurses, and doctors since women patients could not be treated by men. The ban on women working outside the home was also lifted for war widows and other needy women.

Afghans recalled the first curbs on liberty were imposed by the mujahideen before the Taliban. From 1992, cinemas were closed and TV films were shortened so as to remove any scene in which women and men walked or talked together, let alone touched each other. Women announcers were banned from TV.

The burqa was not compulsory, as it was to become under the Taliban, but all women had to wear the head-scarf, or hijab, unlike in the years of Soviet occupation and the Najibullah regime that followed. The mujahideen refused to allow women to attend the UN’s fourth world conference on women in Beijing in 1995. Crime was met with the harshest punishment. A wooden gallows was erected in a park near the main bazaar in Kabul where convicts were hanged in public. Above all, Afghans liked the security provided by the Taliban in contrast to the chaos between 1992 and 1996 when mujahideen groups fought over the capital, launching shells and rockets indiscriminately. Some 50,000 Kabulis were killed.

9. The Taliban are uniquely harsh oppressors of Afghan women

Afghanistan has a long history of honour killings and honour mutilation, going back before the Taliban period and continuing until today. They occur in every part of the country and are not confined to the culture of the Pashtun, the ethnic group from which most Taliban come.

Women are brutalised by a tribal custom for settling disputes known as baad, which treats young girls as voiceless commodities. They are offered in compensation to another family, often to an elderly man, for unpaid debts or if a member of that family has been killed by a relative of the girl.

On the wider issue of gender rights, the Taliban are rightly accused of relegating Afghan women to second-class citizenship. But to single the Taliban out as uniquely oppressive is not accurate. Violence against women has a long pedigree in all communities in Afghanistan, among the Shia Hazara and the northern Tajiks, as well as the Sunni Pashtun.

Underage marriage is common across Afghanistan, and among all ethnic groups. According to Unifem (the United Nations Development Fund for Women) and the Afghan independent human rights commission, 57% of Afghan marriages are child marriages – where one partner is under the age of 16. In a study of 200 underage wives, 40% had been married between the ages of 10 and 13, 32.5% at 14, and 27.5% at 15. In many communities, women are banned from leaving the house or family compound. This leads to a host of other disabilities. Women are not allowed to take jobs. Girls are prevented from going to school. In the minds of western politicians and the media, these prohibitions are often associated exclusively with the Taliban. Yet the forced isolation of women by keeping them confined is a deep-seated part of Afghan rural culture. It is also found in poorer parts of the major cities.

10. The Taliban have little popular support

In 2009, Britain’s Department for International Development commissioned an Afghan NGO to conduct surveys on how people compared the Taliban to the Afghan government. The results suggested Nato’s campaign to demonise the Taliban was no more effective than the Soviet effort to demonise the mujahedin.

One survey reported on Helmandis’ attitudes to justice systems. More than half the male respondents called the Taliban “completely trustworthy and fair”. The Taliban took money through taxes on farm crops and road tolls but did not demand bribes. According to the survey, “Most ordinary people associate the [national] government with practices and behaviours they dislike: the inability to provide security, dependence on foreign military, eradication of a basic livelihood crop (poppy), and as having a history of partisanship (the perceived preferential treatment of Northerners).”

Does the US understand why Afghans join the Taliban? Do Afghans understand why the US is in their country? Without clear answers, no counter-insurgency strategy can succeed. A 2009 survey commissioned by DFID in three key provinces asked what led people to join the Taliban. Out of 192 who responded, only 10 supported the government. The rest saw it as corrupt and partisan. Most supported the Taliban, at least what they called the “good Taliban”, defined as those who showed religious piety, attacked foreign forces but not Afghans and delivered justice quickly and fairly. They did not like Pakistani Taliban and Taliban linked to narcotics. Afghans did not like al-Qaida, but did not equate the Taliban with this Arab-led movement.

(Jonathan Steele, Guardian, 27September2011)

In 1987, Canada led the world by hosting the Montreal Protocol, an international treaty signed by 196 nations to ban the use of chemicals known to harm the ozone layer. Now, Canadian scientists aren’t even allowed to talk about it.

A report last week in the prestigious journal Nature announced that this year’s ozone hole above the Arctic is the largest ever recorded. But when a newspaper reporter asked Canadian scientist Dr. David Tarasick, who was involved in the study, to explain the results, he was prohibited by Environment Canada from speaking to the media about his own work. CBC News Network was similarly turned down when it requested an interview with him.

Also this past week, Scott Vaughn, Commissioner for the Environment and Sustainable Development, and Parliament’s environmental watchdog, released a report on the federal government’s poor performance in reducing greenhouse gasses, and its failure to properly monitor the environmental impact of the Alberta oil sands project.

What has happened?

How has this country turned from a world leader in environmental protection, to one where scientists are forbidden to speak and the government seems to have turned its back on environmental protection?

Muzzling government scientists, especially those working at Environment Canada, is not new. In fact, journalists from across the country wrote a joint letter to the government, through the Canadian Science Writers Association, to express their frustration over scientists who were either forbidden to speak, or cases where permission was granted too late for the journalist’s deadline.

Scientists are our eyes on the planet. Their detailed monitoring of changes to the atmosphere, water, and movements in the ground, give us a window into the complex interplay of the Earth’s many systems. They also see how human activity has an effect on those systems and the courses they will take in the future.

Over the long term, the scientists see trends, such as warming temperatures, loss of Arctic sea ice, shifting ocean currents or changes in biology, that are used to make predictions about the type of world our children will inherit.

But scientists can only report what they see. What happens to those reports is what really counts, and in many cases, the scientific perspective is overshadowed by an economic one.

The Canadian economy is driven, in large part, by the fossil fuel industry, which will only continue to grow. We are an oil-producing country and an oil-consuming country. It will be a challenge to find a balance between the benefits of a profitable industry and its costly negative effects on the environment. But that balance will not come about by turning our scientific eyes blind.

(Bob McDonald in Quirks & Quarks, CBC , 7October2011)

This is why we need to end the war on drugs and why Thunder Bay Mayor Keith Hobbs was right the other day to champion the complete legalization of marijuana in Canada – as a straightforward economic proposition. “Look at the money that governments make off alcohol,” Mr. Hobbs told the CBC. “You know, perhaps instead of organized crime getting the profits [from marijuana], the federal government could generate revenues from it.” Mr. Hobbs errs only in limiting his proposal to cannabis. He should extend it to opiates, cocaine and most other drugs. Governments can raise revenue off all of them – without hurting drug users nearly as much as prohibition hurts them.

Canada can’t do this alone, alas, without making the country a sanctuary for drug tourists. (See The Netherlands.) It would be best done with a number of countries acting more or less simultaneously – the reverse process of prohibition. Western governments left drugs alone in the 19th century. (The Victorians loved laudanum: 10 per cent opium, 90 per cent alcohol.) It wasn’t until 1906 that the U.S. required the labelling of alcohol, cocaine, heroin and morphine; Canada did so in 1908. It wasn’t until 1914 that the U.S. required a licence to sell them; Canada did so in 1911. The two countries marched step by step toward criminal prohibition.

Assuming some international consensus for repeal, though, Canada has a number of retail models to contemplate. Assuming a government monopoly, it could regulate the drug trade through government-owned outlets (“beer and liquor stores”). Assuming a regulated industry, it could exploit existing pharmaceutical emporiums (“drugstores”). Assuming a more free-market approach, it could use corner-store outlets (“smoke shops”). All these establishments sell lots of government-regulated drugs already – most of them, when you think about it, for medical purposes of one kind or another.

Canada would presumably delegate the manufacture and distribution of illicit drugs to big-brand drug companies – or (for marijuana) to supply management. Canada, after all, has practice with such things: It has marketed chicken and eggs as controlled substances since the 1970s. Provincially operated Cannabis Growers Marketing Boards would appear inevitable.

Ironically, drugs became a significant problem only when governments declared war on them. Although Richard Nixon cited drugs as “public enemy No. 1” when he declared war in 1971, the statistical evidence doesn’t support the pronouncement. The U.S. incarceration rate, now the highest in the world, was one-eighth the problem 40 years ago than it is now. From 1920 through 1970, the rate remained flat: with 0.1 per cent of Americans in prison at any one time. By 1980, the rate doubled: 0.2 per cent. By 1990, it doubled again: 0.5 per cent. By 2010, it reached a record high: 0.8 per cent. This exceeds two million people – roughly 25 per cent of whom are serving time for drugs.

The consequences of the war on drugs are appalling, from excruciating personal suffering to intractable national tragedy. It’s enough to note that the death toll in Mexico alone exceeded 15,000 last year, bringing the number of people killed in the past five years to nearly 40,000.

Some Canadians sneer at U.S. drug policy, and there’s much in it to justify the response. Yet, the Washington-based Justice Policy Institute reported in April that more Canadians (17 per cent of the population) consume marijuana than Americans (12 per cent), and almost as many Canadians (2.3 per cent) consume cocaine as Americans (2.8 per cent). But the issue isn’t drugs; the issue is war and peace.

Harvard economist Jeffrey Miron, incidentally, says legalizing drugs would save the United States $44-billion a year in law-enforcement costs and generate another $42-billion in tax revenue – finally, after the longest war in American history, a peace dividend that could buy a lot of help for a lot of troubled people.

(Neil Reynolds, Globe and Mail, 17October2011)

The fairer sex won big at Tuesday’s [September 20] Slate/Intelligence Squared U.S. debate. Voters agreed: Women are doing better than men these days. In the middle of Tuesday night’s Slate/Intelligence Squared U.S. debate, ABC News chief legal analyst Dan Abrams presented this damning piece of evidence: “Between 1995 and 2008, 82 percent of lightning strikes were on men,” Even God, Abrams told the packed house at NYU’s Skirball Center, has decided that men are finished.

Abrams teamed with journalist Hanna Rosin of Slate and the Atlantic to argue for the proposition, “Men Are Finished.” They squared off against American Enterprise Institute scholar Christina Hoff Sommers and Men’s Health Editor in Chief Dave Zinczenko, who opposed the motion. ABC News Nightline Correspondent John Donvan moderated.

The debate—lively, a little bit mean, and extremely funny—ended with a big victory for Rosin and Abrams. Before the debate started, 20 percent of the audience voted for the motion, 54 against, and 26 were undecided. By the end of the debate—in a result that Intelligence Squared deemed the biggest swing in its history—the numbers had more than reversed, with 66 percent voting for the motion, 29 against it, and 5 percent undecided.

“Men are finished,” is a bold claim—”preposterous,” as Zinczenko scoffed repeatedly. Rosin and Abrams helped their cause early by defining victory down: They argued that “men are finished” did not mean complete and utter humiliation of the sex, but rather an end to male dominance. Rosin, the author of last summer’s Atlantic cover story “The End of Men,” used her opening statement to argue that men are through dominating because they’ve failed to adapt to a postmodern economy that places a higher premium on traditionally feminine attributes (consensus-building, social intuition, empathy, and communication skills). Men have narrow, inflexible ideas of what it means to be a man, and thus have pigeonholed themselves into dying industries. Women, on the other hand, are more flexible and malleable than ever before. There’s “some special formula required for succeeding” today that women seem to have in greater abundance,” Rosin said, while reeling off favorable statistics. In 2010, women became the majority of the workforce for the first time in American history. They now hold 54 percent of managerial jobs, and are set to dominate 13 of the 15 industries projected to grow the most in the next decade. They’re more likely than men to receive a college degree. Meanwhile, one-fifth of men are out of work. And images of the “omega” male (imagine the slothlike, video-game entranced, drugged-up, potbellied guys you see in Judd Apatow movies) dominate movies and television shows. “We’d like you to think of this as the writing on the wall, the sign that points to an inevitable future,” she asserted. “The world where men dominate the public sphere, and where male traits lead to public success is the world we’re saying goodbye to.”

Sommers, author of The War Against Boys, countered that the short-term trends we’re seeing are signs of equalization, not dominance: Women are joining men, or even catching up to them, as partners in running the world. They are not surpassing them. She and Zinczenko both cited Mark Zuckerberg, Steve Jobs, and Bill Gates as proof that we need men to drive innovation in fields like technology and science. And our civilization depends on the brawn and bravery of the men—”and some women”—who fight and die to protect us. “Toughness and assertiveness are obsolete—that’s absurd!” she declared, referring to the idea that male traits aren’t as crucial to the postindustrial economy.

Abrams, who is also the author of Man Down: Proof Beyond a Reasonable Doubt that Women are Better Cops, Drivers, Gamblers, Spies, World Leaders, Beer Tasters, Hedge Fund Managers and Just About Everything Else, highlighted a new study showing that female politicians are more far effective than men. So why aren’t more women voted into office? He pointed to the paradoxical results of a survey that asked participants to rate whether they associated the eight most important political traits (intelligence, compassion, creativity, etc) with women or men. They associated seven of those positive traits with women. Yet only six percent said that women made better political leaders. It’s a strange incongruity, Abrams admits, but it’s one that will ultimately dissipate as the public becomes more aware of women’s superior skills. “There is only so long men will be able to thrive, much less survive on the fumes of past sexism and assumptions.”

Zinczenko, who maintains a well-known bromance with Abrams, began his argument not with statistics or studies, but with a sex joke. “Men can’t possibly be finished because as all of you know, when men are finished, they roll over immediately and go to sleep. That’s not happening. … They continue to do what they have always done…”

“Sleep!” yelled out a member of the audience.

Zinczenko, unfazed, continued. “All of the statistics my opponents are citing tonight are indicative of a trend,” he said. “Women are beginning to catch up to men, but the pace of that progress is inexorably slow.” Then, he cited a few statistics of his own: Women perform two-thirds of the world’s work, but only earn a fraction of the world’s income. Men rule 92 percent of its sovereign nations. “I didn’t get through all of Freakonomics, admittedly, but these do not seem like winning statistics for that side,” he joked.

So why do women seem to be forging ahead, even it if it is only a temporary trend? “Women are willing to move together as a unit, and men are rugged individualists,” he explains. “They want to move together, but none is willing to stop and ask for directions. We need to move beyond our opponents’ assertion that there is something wrong with that.”

Later, Zinczenko took shots at his friend for the data he was citing. “Don’t trust Dan and his statistics,” he gibed.” He’s a columnist for Men’s Health, and he has the hardest time getting his pieces through our fact-checking department.”

Perhaps the most telling moment in the debate came during a rather rowdy question-and-answer session. The bombastic crowd was driving moderator Donvan “nuts” with two-part questions and long premises. He seemed exasperated. Then Diane Salvatore, the editor of Prevention magazine, stepped in.

“Is it true that men with power and money tend to self-destruct more than women do?” Salvatore asked. “And I think here of Oprah versus Charlie Sheen.”

“That was a focused question,” said Donvan happily. “That’s the model.”

“By a woman,” Rosin quipped.

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Rosin then said she was grateful to Salvatore for mentioning Charlie Sheen. “I feel like if you say ‘Charlie Sheen’ enough times, everyone will vote for us.”

(Elizabeth Weingarten, Slate, 21September2011)

The regional military training centre in Herat is a desolate and harsh place. On the outskirts of an Afghan city bustling with commerce and construction, the vast training grounds extend out into the desert and high into the mountains.

We were at this training facility to see a live-fire exercise, intended as a demonstration of what is now the primary pillar of the International Security Assistance Force mission: forging the Afghan army into a force capable of securing the country and keeping the national government together as NATO draws down.

After winding through dozens of marching drills and shooting ranges, we arrived at the edge of the facility and a line of six young Afghan soldiers, each with a rocket-propelled grenade launcher on their shoulder. They were aiming at three burned-out Russian tanks. One by one, they fired at the tanks, most missing wildly.

After this somewhat chilling demonstration, we were taken to meet the commander of Regional Command West; he will ultimately take control of one of five regional armies. His message was blunt: He had fought for the mujahedeen, the Russians, the Taliban and now for NATO. While he appreciated our support, he had no doubt it would be fleeting.

It would be difficult to find a better distillation of the challenges NATO faces in Afghanistan than what we saw at this training facility. But such is the current state of the mission. With eight years of fighting having mostly failed, the NATO mission is in a process of transition, with security being transferred to Afghan forces between now and 2014. Training, which began in earnest only in November of 2009, is at the centre of this strategy.

Canada may no longer be fighting in Kandahar, but this new mission is nonetheless a daunting and risky task.

The police training process, for example, involves only three weeks of very basic security and language training (85 per cent of the recruits are illiterate). As one German colonel who is part of the mentoring program put it, we are training them to be checkpoint guards, not police officers.

This has real consequence for our counterinsurgency strategy. In the north, the Afghan National Police has proved incapable of patrolling and securing villages; immediately after NATO soldiers leave, the insurgents simply return. The village is then taken again and those who assisted NATO are punished. Each time this happens, more civilians are killed. The villagers then stop pointing out the whereabouts of IEDs, thereby increasing NATO casualties.

In the past year, there hasn’t been a single village held by the Afghan National Police in the north. The insurgents always come back.

Also of concern is the fact that the departing Americans are meant to be replaced by these new Afghan recruits. For example, the 30,000 U.S. soldiers who are being withdrawn over the next 18 months are supposed to be replaced by 50,000 to 70,000 new Afghan National Army troops. While there’s something to be said for the argument that an Afghan soldier can be more effective than a Western one, the lack of training, organization, leadership and equipment, combined with corruption, make one seriously question NATO’s math.

Training is also incredibly expensive. NATO support for training now costs $11-billion a year, mostly paid by the Americans. After 2014, the security sector is expected to require a continual $4-billion a year of external financial assistance, in a country with a GDP of $15-billon. It’s extremely unlikely that this level of financial and logistical assistance will be politically and economically sustainable by Western countries tired of war and teetering on the edge of yet another recession.

Ultimately, the questionable quality of the forces being trained, combined with the unsustainability of NATO support, presents potential strategic peril. As we put $11-billion a year of arms and training into the security sector, the civilian governance structures continue to falter amidst corruption and diminishing authority. Are we paving the way for a military-run Afghanistan?

One thing is clear: Our participation in this training process, while likely the best course of action in a very challenging situation, simply adds to both the moral responsibility we owe Afghanistan and the strategic corner we have backed ourselves into. If we build this army, we had better be willing to fund it and support it long into the future. This will be added to the long-term development and humanitarian engagement we also have rightly committed to and have the obligation to maintain. Afghans, of course, have been taught to shoot RPGs before.

(Taylor Owen, Globe and Mail, 6September2011)

The U.S. ambassador to Afghanistan described the bold and vicious raid [around September 11] on the heart of Kabul’s military and diplomatic operations as “not a very big deal.” NATO’s Secretary-General vowed it would not affect the transition, or the handing over of security responsibilities to Afghan forces by 2014.

Who are they trying to kid? The assault endured for 20 hours, left 16 Afghans dead and paralyzed the city. The insurgents dressed up in burkas, infiltrated the “ring of steel” that surrounds the American embassy and NATO headquarters, and fired rocket-propelled grenades from a building overlooking the compound. Hundreds of U.S. diplomats and staff had to take shelter in an embassy bunker, while the Taliban gleefully sent out text messages to journalists with a blow-by-blow account of events.

The West has invested too much in Afghanistan to have such incidents white-washed. The U.S., Canadian and other concerned governments should be honest with their citizens about the precarious state of security in the country, and the challenges ahead. There is no sense in pretending that the Taliban is not still a threat, in order to justify the withdrawal of Western forces, or to measure the success of the NATO mission. Clearly, the country is still extremely vulnerable to large-scale suicide attacks and bombs.

This week’s brazen assault, meant to coincide with the 10th anniversary of the Sept. 11 attacks on the U.S., is only the latest in a string of high-profile incidents – including the recent assassination of President Hamid Karzai’s half-brother, and an attack on the British Cultural Centre. Such attacks are designed to undermine confidence in the Afghans’ ability to police their own state, and to illustrate the Taliban’s continued strength. It also reveals the weakness of the Afghan army, despite intensive training efforts. (Though Canada’s combat mission ended in July, 1,000 Canadian Forces personnel are in Kabul as trainers.) Taliban forces have successfully infiltrated both the army and the Afghan National Police.

The West doesn’t have the stomach, or the deep pockets, to prolong its mission. But in order to help Afghanistan become a truly self-sufficient state, the seriousness of such a galling security breach – and intelligence failure – must be recognized, and overcome.

(Editorial, Globe and Mail, 14September2011)

It is hard to remember a more dismal moment in American politics. The debt-ceiling crisis and the agreement that ended it point to deep dysfunction in our system. In a variety of ways, the episode portends continued short-term economic misery and long-term national decline. It’s as if the United States chose at the last minute not to commit financial suicide—but only out of preference for a slower, more excruciating form of self-destruction.

The crisis has, however, been clarifying in several respects. To begin with, we can now say with some confidence that Washington will be doing nothing more to help the ailing economy. President Obama is trying to push a jobs agenda. But for the federal government to spur growth or create jobs, it has to spend additional money. The antediluvian Republicans who control Congress do not think that demand can be expanded in this way. They believe that the 2009 stimulus bill, which has prevented an even worse economy over the past two years, is actually responsible for the current weakness. Their Hooverite approach—embedded in the debt-ceiling compromise—demands that we address the risk of a double-dip recession by cutting public expenditure now rather than later.

So instead of trying to pull out of the stall, the economy simply will have to absorb whatever blow is coming. Some of the congressional Republicans who are preventing action to help the economy are simply intellectual primitives who reject modern economics on the same basis that they reject Darwin and climate science. Others are obviously cynical, desiring the worst possible economy as an aid to recapturing the White House and Senate in 2012. Still others simply do not believe that government action can ever be a force for good at any time or in any way. Whatever their motivations, there is something terribly sad about desperate and unemployed Americans looking for rescue to a party that lacks any inclination to alleviate their misery.

A second lesson is that Washington will not be doing anything to address the fiscal imbalance that threatens America’s long-term economic vitality and global power. The deal that President Obama and House Speaker John Boehner tentatively agreed upon in early July was far from perfect, imbalanced in favor of spending cuts over revenues by a ratio of 4-to-1. But that $4 trillion “grand bargain” would have constituted a serious down payment on the deficit, and sent a strong signal to financial markets that our political establishment took the problem seriously.

Instead we got this week’s sad bargain—a much smaller, deferred, and contingent reduction in spending projections. This sends quite a different signal: that our political system cannot, in its current configuration, cope with difference between what comes in and what goes out. The quandary is now doubly insoluble, because closing that gap, by all sensible accounts, requires both higher revenues and reductions in entitlement spending. Faced with Republican intransigence on taxes, Democrats are less likely than ever to give ground on Social Security or Medicare.

We now also understand that we’re not going to make meaningful investments in our economic future. The conservative position that all spending is evil obliterates any distinction between investment and consumption, between the long-term and the short-term. The United States suffers with an increasingly third-world level of infrastructure, a third-tier education system, and enormous gaps in the preparedness of its workforce. The debate has now ended: Money to upgrade those faltering systems will not be forthcoming. And by the way, the United States isn’t going to take on any other major problems either—immigration, tax reform, or climate change, for example. It isn’t going to do so for the same reason it has failed at sensible economic management: because the Tea Party has a veto.

Some lessons of the crisis have added significance beyond our shores. One is that America now regards its most solemn financial obligations as flexible commitments. The problem isn’t just that some members of Congress were willing to contemplate national default. It was that some of them clearly desired default as a kind of ultimate weapon against social spending. The precedent has been set for using America’s credit rating as blackmail. The issue comes up again in less than a year and a half, at which point the masochistic drama of recent weeks could be repeated with a different outcome. This is the way in which the United States resembles Greece—not in its underlying creditworthiness, but in making the matter of paying its debts a political question.

At the level of political culture, we have learned some other sobering lessons: that compromise is dead and that there’s no point trying to explain complicated matters to the American people. The president has tried reasonableness and he has failed. It has been astonishing to watch Obama’s sheer unwillingness to give up on his opponents after their refusal to work with him on the stimulus package, health care reform, or the extension of the Bush tax cuts last fall. A Congress dominated by mindless cannibals is now feasting on a supine president. But surely even he now realizes there’s no middle ground with antagonists whose only interest is in seeing him humiliated.

(Jacob Weisberg, Slate, 4 August 2011)

Much has been made of the poll this week from Justason Market Intelligence offering a snapshot of the state of civic politics in Vancouver.

The market research firm has been surveying Vancouverites regularly since July of 2010 as part of its Vancouver Civic Outlook series.

I imagine that as we get closer to election day, we’ll see a lot more polls.

This one I consider an early warning of the way politicians and their ever-growing blobs of handlers and consultants spin different outcomes from the same numbers.

There’s nothing wrong with the data or how they were collected. But omit a few facts, cherry-pick your time periods, parse out degrees of approval or disapproval, throw in a few apple-and-orange comparisons, confuse “coincide” with “correlate” – in general narrow your view – and suddenly the poll is good news. Or bad.

What follows are two stories, based on the same data gathered in the latest Justason survey. Can you spot the differences?

[Headline] NPA gains support – Vancouver mayor’s disapproval rating at all time high: Poll

According to a survey by Justason Market Intelligence, 19 per cent of those surveyed “strongly disapprove” of the performance of Vancouver Mayor Gregor Robertson.

The poll was conducted from July 11 to 15 and released earlier this week.

It found that the number of people who “strongly disapprove” of the mayor’s performance has increased by more than 60 per cent compared with the same time period last year.

As well, the number of people who “strongly approve” of Mr. Robertson’s performance has dropped by nearly half. In a survey conducted by Justason just three months ago, 20 per cent of respondents said they “strongly approved” of the mayor’s performance. The most recent survey shows that number has dropped to 12 per cent, the lowest level in the survey’s history.

Meantime the mayor’s political organization, Vision Vancouver, has slipped even further behind the mayor in the polls. The survey shows that just 37 per cent of decided voters now support Vision Vancouver, down from a high of 52 per cent in July of 2010.

The Non-Partisan Association, led by mayoral candidate Councillor Suzanne Anton, has seen its popularity increase from 25 per cent of decided voters in February of 2011, to 32 per cent in the most recent survey.

While respondents were not asked specifically about Ms. Anton’s leadership, the NPA’s upward trend continued through May and June following the announcement of her candidacy.

The time period during which the survey was conducted coincides with a number of controversial issues, including repeated calls by Ms. Anton for a full and independent review of the Stanley Cup riot.

The survey also gauged the performance of municipal government on issues like reducing homelessness and consulting with local business, and found very strong levels of dissatisfaction among voters.

[Headline] Mayor Robertson’s popularity holds; NPA challenger fails to sway voters: Poll

According to a survey by Justason Market Intelligence, with just over four months until the civic election, Vancouver Mayor Gregor Robertson is enjoying nearly unprecedented levels of support among decided voters.

The survey was conducted from July 11 to 15 and released earlier this week.

It shows the mayor’s approval rating has jumped by more than 10 points since July of 2010. Mr. Robertson’s popularity remains virtually unchanged since the last survey was conducted three months ago. It now stands at 54 per cent, just one point away from a historic high.

The survey did not gauge support for Non-Partisan Association mayoralty candidate Suzanne Anton.

However, it shows the announcement of Ms. Anton’s candidacy in May had little impact on the trajectory of the NPA’s popular support.

Vision Vancouver and COPE signed on to a power-sharing agreement in April that will see the parties run a single candidate for mayor and not compete against each other for seats on council, the park board or school board.

The survey shows that if an election were held tomorrow, a combined Vision Vancouver and COPE slate could expect support from 61 per cent of decided voters, nearly double that of the NPA at 32 per cent.

While no one can be sure what is behind the strong showing from the combined Vision/COPE slate, the surge coincides with the city releasing details of the Vancouver 125 poetry conference to be held this October.

Meantime, 80 per cent of those polled say they are satisfied with the way the city is taking care of basic services like garbage collection and street cleaning; 73 per cent approve of council’s efforts to make Vancouver a greener city.

If, after all of this you have failed to come to a conclusion that suits your needs, remember that the margin of error is plus or minus 5.1 per cent, and that an election will not be held tomorrow.

Stephen Quinn is the host of On the Coast on CBC Radio One, 690 AM and 88.1 FM in Vancouver.

(Stephen Quinn, Globe and Mail, 5August2011)

I. MISTAKING BEAUTY FOR TRUTH

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go from here?

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

It’s much harder to say where the economics profession goes from here. But what’s almost certain is that economists will have to learn to live with messiness. That is, they will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic “theory of everything” is a long way off. In practical terms, this will translate into more cautious policy advice — and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems.

II. FROM SMITH TO KEYNES AND BACK

The birth of economics as a discipline is usually credited to Adam Smith, who published “The Wealth of Nations” in 1776. Over the next 160 years an extensive body of economic theory was developed, whose central message was: Trust the market. Yes, economists admitted that there were cases in which markets might fail, of which the most important was the case of “externalities” — costs that people impose on others without paying the price, like traffic congestion or pollution. But the basic presumption of “neoclassical” economics (named after the late-19th-century theorists who elaborated on the concepts of their “classical” predecessors) was that we should have faith in the market system.

This faith was, however, shattered by the Great Depression. Actually, even in the face of total collapse some economists insisted that whatever happens in a market economy must be right: “Depressions are not simply evils,” declared Joseph Schumpeter in 1934 — 1934! They are, he added, “forms of something which has to be done.” But many, and eventually most, economists turned to the insights of John Maynard Keynes for both an explanation of what had happened and a solution to future depressions.

Keynes did not, despite what you may have heard, want the government to run the economy. He described his analysis in his 1936 masterwork, “The General Theory of Employment, Interest and Money,” as “moderately conservative in its implications.” He wanted to fix capitalism, not replace it. But he did challenge the notion that free-market economies can function without a minder, expressing particular contempt for financial markets, which he viewed as being dominated by short-term speculation with little regard for fundamentals. And he called for active government intervention — printing more money and, if necessary, spending heavily on public works — to fight unemployment during slumps.

It’s important to understand that Keynes did much more than make bold assertions. “The General Theory” is a work of profound, deep analysis — analysis that persuaded the best young economists of the day. Yet the story of economics over the past half century is, to a large degree, the story of a retreat from Keynesianism and a return to neoclassicism. The neoclassical revival was initially led by Milton Friedman of the University of Chicago, who asserted as early as 1953 that neoclassical economics works well enough as a description of the way the economy actually functions to be “both extremely fruitful and deserving of much confidence.” But what about depressions?

Friedman’s counterattack against Keynes began with the doctrine known as monetarism. Monetarists didn’t disagree in principle with the idea that a market economy needs deliberate stabilization. “We are all Keynesians now,” Friedman once said, although he later claimed he was quoted out of context. Monetarists asserted, however, that a very limited, circumscribed form of government intervention — namely, instructing central banks to keep the nation’s money supply, the sum of cash in circulation and bank deposits, growing on a steady path — is all that’s required to prevent depressions. Famously, Friedman and his collaborator, Anna Schwartz, argued that if the Federal Reserve had done its job properly, the Great Depression would not have happened. Later, Friedman made a compelling case against any deliberate effort by government to push unemployment below its “natural” level (currently thought to be about 4.8 percent in the United States): excessively expansionary policies, he predicted, would lead to a combination of inflation and high unemployment — a prediction that was borne out by the stagflation of the 1970s, which greatly advanced the credibility of the anti-Keynesian movement.

Eventually, however, the anti-Keynesian counterrevolution went far beyond Friedman’s position, which came to seem relatively moderate compared with what his successors were saying. Among financial economists, Keynes’s disparaging vision of financial markets as a “casino” was replaced by “efficient market” theory, which asserted that financial markets always get asset prices right given the available information. Meanwhile, many macroeconomists completely rejected Keynes’s framework for understanding economic slumps. Some returned to the view of Schumpeter and other apologists for the Great Depression, viewing recessions as a good thing, part of the economy’s adjustment to change. And even those not willing to go that far argued that any attempt to fight an economic slump would do more harm than good.

Not all macroeconomists were willing to go down this road: many became self-described New Keynesians, who continued to believe in an active role for the government. Yet even they mostly accepted the notion that investors and consumers are rational and that markets generally get it right.

Of course, there were exceptions to these trends: a few economists challenged the assumption of rational behavior, questioned the belief that financial markets can be trusted and pointed to the long history of financial crises that had devastating economic consequences. But they were swimming against the tide, unable to make much headway against a pervasive and, in retrospect, foolish complacency.

III. PANGLOSSIAN FINANCE

In the 1930s, financial markets, for obvious reasons, didn’t get much respect. Keynes compared them to “those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.”

And Keynes considered it a very bad idea to let such markets, in which speculators spent their time chasing one another’s tails, dictate important business decisions: “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

By 1970 or so, however, the study of financial markets seemed to have been taken over by Voltaire’s Dr. Pangloss, who insisted that we live in the best of all possible worlds. Discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse. The field was dominated by the “efficient-market hypothesis,” promulgated by Eugene Fama of the University of Chicago, which claims that financial markets price assets precisely at their intrinsic worth given all publicly available information. (The price of a company’s stock, for example, always accurately reflects the company’s value given the information available on the company’s earnings, its business prospects and so on.) And by the 1980s, finance economists, notably Michael Jensen of the Harvard Business School, were arguing that because financial markets always get prices right, the best thing corporate chieftains can do, not just for themselves but for the sake of the economy, is to maximize their stock prices. In other words, finance economists believed that we should put the capital development of the nation in the hands of what Keynes had called a “casino.”

It’s hard to argue that this transformation in the profession was driven by events. True, the memory of 1929 was gradually receding, but there continued to be bull markets, with widespread tales of speculative excess, followed by bear markets. In 1973-4, for example, stocks lost 48 percent of their value. And the 1987 stock crash, in which the Dow plunged nearly 23 percent in a day for no clear reason, should have raised at least a few doubts about market rationality.

These events, however, which Keynes would have considered evidence of the unreliability of markets, did little to blunt the force of a beautiful idea. The theoretical model that finance economists developed by assuming that every investor rationally balances risk against reward — the so-called Capital Asset Pricing Model, or CAPM (pronounced cap-em) — is wonderfully elegant. And if you accept its premises it’s also extremely useful. CAPM not only tells you how to choose your portfolio — even more important from the financial industry’s point of view, it tells you how to put a price on financial derivatives, claims on claims. The elegance and apparent usefulness of the new theory led to a string of Nobel prizes for its creators, and many of the theory’s adepts also received more mundane rewards: Armed with their new models and formidable math skills — the more arcane uses of CAPM require physicist-level computations — mild-mannered business-school professors could and did become Wall Street rocket scientists, earning Wall Street paychecks.

To be fair, finance theorists didn’t accept the efficient-market hypothesis merely because it was elegant, convenient and lucrative. They also produced a great deal of statistical evidence, which at first seemed strongly supportive. But this evidence was of an oddly limited form. Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices. Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient.

But neither this mockery nor more polite critiques from economists like Robert Shiller of Yale had much effect. Finance theorists continued to believe that their models were essentially right, and so did many people making real-world decisions. Not least among these was Alan Greenspan, who was then the Fed chairman and a long-time supporter of financial deregulation whose rejection of calls to rein in subprime lending or address the ever-inflating housing bubble rested in large part on the belief that modern financial economics had everything under control. There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.”

By October of last year, however, Greenspan was admitting that he was in a state of “shocked disbelief,” because “the whole intellectual edifice” had “collapsed.” Since this collapse of the intellectual edifice was also a collapse of real-world markets, the result was a severe recession — the worst, by many measures, since the Great Depression. What should policy makers do? Unfortunately, macroeconomics, which should have been providing clear guidance about how to address the slumping economy, was in its own state of disarray.

IV. THE TROUBLE WITH MACRO

“We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.” So wrote John Maynard Keynes in an essay titled “The Great Slump of 1930,” in which he tried to explain the catastrophe then overtaking the world. And the world’s possibilities of wealth did indeed run to waste for a long time; it took World War II to bring the Great Depression to a definitive end.

Why was Keynes’s diagnosis of the Great Depression as a “colossal muddle” so compelling at first? And why did economics, circa 1975, divide into opposing camps over the value of Keynes’s views?

I like to explain the essence of Keynesian economics with a true story that also serves as a parable, a small-scale version of the messes that can afflict entire economies. Consider the travails of the Capitol Hill Baby-Sitting Co-op.

This co-op, whose problems were recounted in a 1977 article in The Journal of Money, Credit and Banking, was an association of about 150 young couples who agreed to help one another by baby-sitting for one another’s children when parents wanted a night out. To ensure that every couple did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy pieces of paper, each entitling the bearer to one half-hour of sitting time. Initially, members received 20 coupons on joining and were required to return the same amount on departing the group.

Unfortunately, it turned out that the co-op’s members, on average, wanted to hold a reserve of more than 20 coupons, perhaps, in case they should want to go out several times in a row. As a result, relatively few people wanted to spend their scrip and go out, while many wanted to baby-sit so they could add to their hoard. But since baby-sitting opportunities arise only when someone goes out for the night, this meant that baby-sitting jobs were hard to find, which made members of the co-op even more reluctant to go out, making baby-sitting jobs even scarcer. . . .

In short, the co-op fell into a recession.

O.K., what do you think of this story? Don’t dismiss it as silly and trivial: economists have used small-scale examples to shed light on big questions ever since Adam Smith saw the roots of economic progress in a pin factory, and they’re right to do so. The question is whether this particular example, in which a recession is a problem of inadequate demand — there isn’t enough demand for baby-sitting to provide jobs for everyone who wants one — gets at the essence of what happens in a recession.

Forty years ago most economists would have agreed with this interpretation. But since then macroeconomics has divided into two great factions: “saltwater” economists (mainly in coastal U.S. universities), who have a more or less Keynesian vision of what recessions are all about; and “freshwater” economists (mainly at inland schools), who consider that vision nonsense.

Freshwater economists are, essentially, neoclassical purists. They believe that all worthwhile economic analysis starts from the premise that people are rational and markets work, a premise violated by the story of the baby-sitting co-op. As they see it, a general lack of sufficient demand isn’t possible, because prices always move to match supply with demand. If people want more baby-sitting coupons, the value of those coupons will rise, so that they’re worth, say, 40 minutes of baby-sitting rather than half an hour — or, equivalently, the cost of an hours’ baby-sitting would fall from 2 coupons to 1.5. And that would solve the problem: the purchasing power of the coupons in circulation would have risen, so that people would feel no need to hoard more, and there would be no recession.

But don’t recessions look like periods in which there just isn’t enough demand to employ everyone willing to work? Appearances can be deceiving, say the freshwater theorists. Sound economics, in their view, says that overall failures of demand can’t happen — and that means that they don’t. Keynesian economics has been “proved false,” Cochrane, of the University of Chicago, says.

Yet recessions do happen. Why? In the 1970s the leading freshwater macroeconomist, the Nobel laureate Robert Lucas, argued that recessions were caused by temporary confusion: workers and companies had trouble distinguishing overall changes in the level of prices because of inflation or deflation from changes in their own particular business situation. And Lucas warned that any attempt to fight the business cycle would be counterproductive: activist policies, he argued, would just add to the confusion.

By the 1980s, however, even this severely limited acceptance of the idea that recessions are bad things had been rejected by many freshwater economists. Instead, the new leaders of the movement, especially Edward Prescott, who was then at the University of Minnesota (you can see where the freshwater moniker comes from), argued that price fluctuations and changes in demand actually had nothing to do with the business cycle. Rather, the business cycle reflects fluctuations in the rate of technological progress, which are amplified by the rational response of workers, who voluntarily work more when the environment is favorable and less when it’s unfavorable. Unemployment is a deliberate decision by workers to take time off.

Put baldly like that, this theory sounds foolish — was the Great Depression really the Great Vacation? And to be honest, I think it really is silly. But the basic premise of Prescott’s “real business cycle” theory was embedded in ingeniously constructed mathematical models, which were mapped onto real data using sophisticated statistical techniques, and the theory came to dominate the teaching of macroeconomics in many university departments. In 2004, reflecting the theory’s influence, Prescott shared a Nobel with Finn Kydland of Carnegie Mellon University.

Meanwhile, saltwater economists balked. Where the freshwater economists were purists, saltwater economists were pragmatists. While economists like N. Gregory Mankiw at Harvard, Olivier Blanchard at M.I.T. and David Romer at the University of California, Berkeley, acknowledged that it was hard to reconcile a Keynesian demand-side view of recessions with neoclassical theory, they found the evidence that recessions are, in fact, demand-driven too compelling to reject. So they were willing to deviate from the assumption of perfect markets or perfect rationality, or both, adding enough imperfections to accommodate a more or less Keynesian view of recessions. And in the saltwater view, active policy to fight recessions remained desirable.

But the self-described New Keynesian economists weren’t immune to the charms of rational individuals and perfect markets. They tried to keep their deviations from neoclassical orthodoxy as limited as possible. This meant that there was no room in the prevailing models for such things as bubbles and banking-system collapse. The fact that such things continued to happen in the real world — there was a terrible financial and macroeconomic crisis in much of Asia in 1997-8 and a depression-level slump in Argentina in 2002 — wasn’t reflected in the mainstream of New Keynesian thinking.

Even so, you might have thought that the differing worldviews of freshwater and saltwater economists would have put them constantly at loggerheads over economic policy. Somewhat surprisingly, however, between around 1985 and 2007 the disputes between freshwater and saltwater economists were mainly about theory, not action. The reason, I believe, is that New Keynesians, unlike the original Keynesians, didn’t think fiscal policy — changes in government spending or taxes — was needed to fight recessions. They believed that monetary policy, administered by the technocrats at the Fed, could provide whatever remedies the economy needed. At a 90th birthday celebration for Milton Friedman, Ben Bernanke, formerly a more or less New Keynesian professor at Princeton, and by then a member of the Fed’s governing board, declared of the Great Depression: “You’re right. We did it. We’re very sorry. But thanks to you, it won’t happen again.” The clear message was that all you need to avoid depressions is a smarter Fed.

And as long as macroeconomic policy was left in the hands of the maestro Greenspan, without Keynesian-type stimulus programs, freshwater economists found little to complain about. (They didn’t believe that monetary policy did any good, but they didn’t believe it did any harm, either.)

It would take a crisis to reveal both how little common ground there was and how Panglossian even New Keynesian economics had become.

V. NOBODY COULD HAVE PREDICTED . . .

In recent, rueful economics discussions, an all-purpose punch line has become “nobody could have predicted. . . .” It’s what you say with regard to disasters that could have been predicted, should have been predicted and actually were predicted by a few economists who were scoffed at for their pains.

Take, for example, the precipitous rise and fall of housing prices. Some economists, notably Robert Shiller, did identify the bubble and warn of painful consequences if it were to burst. Yet key policy makers failed to see the obvious. In 2004, Alan Greenspan dismissed talk of a housing bubble: “a national severe price distortion,” he declared, was “most unlikely.” Home-price increases, Ben Bernanke said in 2005, “largely reflect strong economic fundamentals.”

How did they miss the bubble? To be fair, interest rates were unusually low, possibly explaining part of the price rise. It may be that Greenspan and Bernanke also wanted to celebrate the Fed’s success in pulling the economy out of the 2001 recession; conceding that much of that success rested on the creation of a monstrous bubble would have placed a damper on the festivities.

But there was something else going on: a general belief that bubbles just don’t happen. What’s striking, when you reread Greenspan’s assurances, is that they weren’t based on evidence — they were based on the a priori assertion that there simply can’t be a bubble in housing. And the finance theorists were even more adamant on this point. In a 2007 interview, Eugene Fama, the father of the efficient-market hypothesis, declared that “the word ‘bubble’ drives me nuts,” and went on to explain why we can trust the housing market: “Housing markets are less liquid, but people are very careful when they buy houses. It’s typically the biggest investment they’re going to make, so they look around very carefully and they compare prices. The bidding process is very detailed.”

Indeed, home buyers generally do carefully compare prices — that is, they compare the price of their potential purchase with the prices of other houses. But this says nothing about whether the overall price of houses is justified. It’s ketchup economics, again: because a two-quart bottle of ketchup costs twice as much as a one-quart bottle, finance theorists declare that the price of ketchup must be right.

In short, the belief in efficient financial markets blinded many if not most economists to the emergence of the biggest financial bubble in history. And efficient-market theory also played a significant role in inflating that bubble in the first place.

Now that the undiagnosed bubble has burst, the true riskiness of supposedly safe assets has been revealed and the financial system has demonstrated its fragility. U.S. households have seen $13 trillion in wealth evaporate. More than six million jobs have been lost, and the unemployment rate appears headed for its highest level since 1940. So what guidance does modern economics have to offer in our current predicament? And should we trust it?

VI. THE STIMULUS SQUABBLE

Between 1985 and 2007 a false peace settled over the field of macroeconomics. There hadn’t been any real convergence of views between the saltwater and freshwater factions. But these were the years of the Great Moderation — an extended period during which inflation was subdued and recessions were relatively mild. Saltwater economists believed that the Federal Reserve had everything under control. Fresh­water economists didn’t think the Fed’s actions were actually beneficial, but they were willing to let matters lie.

But the crisis ended the phony peace. Suddenly the narrow, technocratic policies both sides were willing to accept were no longer sufficient — and the need for a broader policy response brought the old conflicts out into the open, fiercer than ever.

Why weren’t those narrow, technocratic policies sufficient? The answer, in a word, is zero.

During a normal recession, the Fed responds by buying Treasury bills — short-term government debt — from banks. This drives interest rates on government debt down; investors seeking a higher rate of return move into other assets, driving other interest rates down as well; and normally these lower interest rates eventually lead to an economic bounceback. The Fed dealt with the recession that began in 1990 by driving short-term interest rates from 9 percent down to 3 percent. It dealt with the recession that began in 2001 by driving rates from 6.5 percent to 1 percent. And it tried to deal with the current recession by driving rates down from 5.25 percent to zero.

But zero, it turned out, isn’t low enough to end this recession. And the Fed can’t push rates below zero, since at near-zero rates investors simply hoard cash rather than lending it out. So by late 2008, with interest rates basically at what macroeconomists call the “zero lower bound” even as the recession continued to deepen, conventional monetary policy had lost all traction.

Now what? This is the second time America has been up against the zero lower bound, the previous occasion being the Great Depression. And it was precisely the observation that there’s a lower bound to interest rates that led Keynes to advocate higher government spending: when monetary policy is ineffective and the private sector can’t be persuaded to spend more, the public sector must take its place in supporting the economy. Fiscal stimulus is the Keynesian answer to the kind of depression-type economic situation we’re currently in.

Such Keynesian thinking underlies the Obama administration’s economic policies — and the freshwater economists are furious. For 25 or so years they tolerated the Fed’s efforts to manage the economy, but a full-blown Keynesian resurgence was something entirely different. Back in 1980, Lucas, of the University of Chicago, wrote that Keynesian economics was so ludicrous that “at research seminars, people don’t take Keynesian theorizing seriously anymore; the audience starts to whisper and giggle to one another.” Admitting that Keynes was largely right, after all, would be too humiliating a comedown.

And so Chicago’s Cochrane, outraged at the idea that government spending could mitigate the latest recession, declared: “It’s not part of what anybody has taught graduate students since the 1960s. They [Keynesian ideas] are fairy tales that have been proved false. It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn’t make them less false.” (It’s a mark of how deep the division between saltwater and freshwater runs that Cochrane doesn’t believe that “anybody” teaches ideas that are, in fact, taught in places like Princeton, M.I.T. and Harvard.)

Meanwhile, saltwater economists, who had comforted themselves with the belief that the great divide in macroeconomics was narrowing, were shocked to realize that freshwater economists hadn’t been listening at all. Freshwater economists who inveighed against the stimulus didn’t sound like scholars who had weighed Keynesian arguments and found them wanting. Rather, they sounded like people who had no idea what Keynesian economics was about, who were resurrecting pre-1930 fallacies in the belief that they were saying something new and profound.

And it wasn’t just Keynes whose ideas seemed to have been forgotten. As Brad DeLong of the University of California, Berkeley, has pointed out in his laments about the Chicago school’s “intellectual collapse,” the school’s current stance amounts to a wholesale rejection of Milton Friedman’s ideas, as well. Friedman believed that Fed policy rather than changes in government spending should be used to stabilize the economy, but he never asserted that an increase in government spending cannot, under any circumstances, increase employment. In fact, rereading Friedman’s 1970 summary of his ideas, “A Theoretical Framework for Monetary Analysis,” what’s striking is how Keynesian it seems.

And Friedman certainly never bought into the idea that mass unemployment represents a voluntary reduction in work effort or the idea that recessions are actually good for the economy. Yet the current generation of freshwater economists has been making both arguments. Thus Chicago’s Casey Mulligan suggests that unemployment is so high because many workers are choosing not to take jobs: “Employees face financial incentives that encourage them not to work . . . decreased employment is explained more by reductions in the supply of labor (the willingness of people to work) and less by the demand for labor (the number of workers that employers need to hire).” Mulligan has suggested, in particular, that workers are choosing to remain unemployed because that improves their odds of receiving mortgage relief. And Cochrane declares that high unemployment is actually good: “We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.”

Personally, I think this is crazy. Why should it take mass unemployment across the whole nation to get carpenters to move out of Nevada? Can anyone seriously claim that we’ve lost 6.7 million jobs because fewer Americans want to work? But it was inevitable that freshwater economists would find themselves trapped in this cul-de-sac: if you start from the assumption that people are perfectly rational and markets are perfectly efficient, you have to conclude that unemployment is voluntary and recessions are desirable.

Yet if the crisis has pushed freshwater economists into absurdity, it has also created a lot of soul-searching among saltwater economists. Their framework, unlike that of the Chicago School, both allows for the possibility of involuntary unemployment and considers it a bad thing. But the New Keynesian models that have come to dominate teaching and research assume that people are perfectly rational and financial markets are perfectly efficient. To get anything like the current slump into their models, New Keynesians are forced to introduce some kind of fudge factor that for reasons unspecified temporarily depresses private spending. (I’ve done exactly that in some of my own work.) And if the analysis of where we are now rests on this fudge factor, how much confidence can we have in the models’ predictions about where we are going?

The state of macro, in short, is not good. So where does the profession go from here?

VII. FLAWS AND FRICTIONS

Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with flaws and frictions. The good news is that we don’t have to start from scratch. Even during the heyday of perfect-market economics, there was a lot of work done on the ways in which the real economy deviated from the theoretical ideal. What’s probably going to happen now — in fact, it’s already happening — is that flaws-and-frictions economics will move from the periphery of economic analysis to its center.

There’s already a fairly well developed example of the kind of economics I have in mind: the school of thought known as behavioral finance. Practitioners of this approach emphasize two things. First, many real-world investors bear little resemblance to the cool calculators of efficient-market theory: they’re all too subject to herd behavior, to bouts of irrational exuberance and unwarranted panic. Second, even those who try to base their decisions on cool calculation often find that they can’t, that problems of trust, credibility and limited collateral force them to run with the herd.

On the first point: even during the heyday of the efficient-market hypothesis, it seemed obvious that many real-world investors aren’t as rational as the prevailing models assumed. Larry Summers once began a paper on finance by declaring: “THERE ARE IDIOTS. Look around.” But what kind of idiots (the preferred term in the academic literature, actually, is “noise traders”) are we talking about? Behavioral finance, drawing on the broader movement known as behavioral economics, tries to answer that question by relating the apparent irrationality of investors to known biases in human cognition, like the tendency to care more about small losses than small gains or the tendency to extrapolate too readily from small samples (e.g., assuming that because home prices rose in the past few years, they’ll keep on rising).

Until the crisis, efficient-market advocates like Eugene Fama dismissed the evidence produced on behalf of behavioral finance as a collection of “curiosity items” of no real importance. That’s a much harder position to maintain now that the collapse of a vast bubble — a bubble correctly diagnosed by behavioral economists like Robert Shiller of Yale, who related it to past episodes of “irrational exuberance” — has brought the world economy to its knees.

On the second point: suppose that there are, indeed, idiots. How much do they matter? Not much, argued Milton Friedman in an influential 1953 paper: smart investors will make money by buying when the idiots sell and selling when they buy and will stabilize markets in the process. But the second strand of behavioral finance says that Friedman was wrong, that financial markets are sometimes highly unstable, and right now that view seems hard to reject.

Probably the most influential paper in this vein was a 1997 publication by Andrei Shleifer of Harvard and Robert Vishny of Chicago, which amounted to a formalization of the old line that “the market can stay irrational longer than you can stay solvent.” As they pointed out, arbitrageurs — the people who are supposed to buy low and sell high — need capital to do their jobs. And a severe plunge in asset prices, even if it makes no sense in terms of fundamentals, tends to deplete that capital. As a result, the smart money is forced out of the market, and prices may go into a downward spiral.

The spread of the current financial crisis seemed almost like an object lesson in the perils of financial instability. And the general ideas underlying models of financial instability have proved highly relevant to economic policy: a focus on the depleted capital of financial institutions helped guide policy actions taken after the fall of Lehman, and it looks (cross your fingers) as if these actions successfully headed off an even bigger financial collapse.

Meanwhile, what about macroeconomics? Recent events have pretty decisively refuted the idea that recessions are an optimal response to fluctuations in the rate of technological progress; a more or less Keynesian view is the only plausible game in town. Yet standard New Keynesian models left no room for a crisis like the one we’re having, because those models generally accepted the efficient-market view of the financial sector.

There were some exceptions. One line of work, pioneered by none other than Ben Bernanke working with Mark Gertler of New York University, emphasized the way the lack of sufficient collateral can hinder the ability of businesses to raise funds and pursue investment opportunities. A related line of work, largely established by my Princeton colleague Nobuhiro Kiyotaki and John Moore of the London School of Economics, argued that prices of assets such as real estate can suffer self-reinforcing plunges that in turn depress the economy as a whole. But until now the impact of dysfunctional finance hasn’t been at the core even of Keynesian economics. Clearly, that has to change.

VIII. RE-EMBRACING KEYNES

So here’s what I think economists have to do. First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.

Many economists will find these changes deeply disturbing. It will be a long time, if ever, before the new, more realistic approaches to finance and macroeconomics offer the same kind of clarity, completeness and sheer beauty that characterizes the full neoclassical approach. To some economists that will be a reason to cling to neoclassicism, despite its utter failure to make sense of the greatest economic crisis in three generations. This seems, however, like a good time to recall the words of H. L. Mencken: “There is always an easy solution to every human problem — neat, plausible and wrong.”

When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right.

Paul Krugman is a Times Op-Ed columnist and winner of the 2008 Nobel Memorial Prize in Economic Science. His latest book is “The Return of Depression Economics and the Crisis of 2008.”

This article has been revised to reflect the following correction:

Correction: September 6, 2009
Because of an editing error, an article on Page 36 this weekend about the failure of economists to anticipate the latest recession misquotes the economist John Maynard Keynes, who compared the financial markets of the 1930s to newspaper beauty contests in which readers tried to correctly pick all six eventual winners. Keynes noted that a competitor did not have to pick “those faces which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.” He did not say, “nor even those that he thinks likeliest to catch the fancy of other competitors.”

(Paul Krugman, New York Times, 2September2009)

FEATURE4 PERSONAL DEBT

The U.S. government’s recent resolution to raise the debt ceiling averted a financial crisis, but there are chilling similarities between how both Washington and individual Canadians are struggling to manage their debt.

Like the U.S. government, many Canadians owe more debt than their income. In addition, not many have set aside money for a rainy-day fund, says Janet Peddigrew, vice-president with Bank of Montreal in Kitchener-Waterloo.

“Too many people are living paycheque to paycheque. If there was an emergency, such as losing their job, they would have to turn to credit cards and line of credit … incurring further debt at a time when they are not able to repay it. It becomes a vicious cycle.”

A report released last month showed that the rate at which Canadians are borrowing money for consumer goods has slowed dramatically. But a steep run-up in housing prices means many people are now saddled with large mortgages.

Ms. Peddigrew says it is tempting to use credit for things like shopping or going to see a show, something previous generations would never do.

“Today we live in a culture where it seems like more of a norm to have credit cards, a mortgage and lines of credit, which is good and gives us flexibility. But we need to make sure we take the time to manage what credit is available.”

When it comes to their personal financial health, Ms. Peddigrew has provided these tips to help Canadians avoid hitting their own personal debt ceiling:

1) Don’t spend more than you earn.
The U.S. government carries six times in debt what it makes in revenue. The average debt-to-income ratio for Canadians shows we owe $1.47 for every dollar we earn. Everyday expenses are one of the biggest reasons we’re not saving. Be mindful of your spending habits. For example, instead of splurging on takeout, eat in and put that money into a high-interest savings account.

2) Shed high-interest debt.
Consolidate credit card debt with a line of credit or one low-interest card. Whenever possible, target high-interest debt and pay off your entire credit card balance every month. The faster you pay off the balance, the less interest you’ll pay.

3) Stress-test your housing budget.
Buying a home is likely the largest debt you will incur. Before you buy, do the math and make sure you can afford it. A good rule of thumb is that your total housing costs should not consume more than one-third of your household income. Sit down and plan all of your house-related expenses – everything from heating, cooling and lighting costs to property taxes, insurance and mortgage payments.

4) Reduce your debt time-horizon.
The shorter the life of the mortgage, the less you pay in interest. Choosing a 25-year amortization can help you become mortgage-free faster and, ultimately, put more savings towards long-term goals, such as retirement. Also consider taking advantage of annual prepayment privileges to pay down the principal.

5) Save for a rainy day.
More than 40 per cent of Canadians will not be able to handle their financial obligations in the event of an emergency, a recent survey by Leger Marketing shows. Having a contingency plan in place doesn’t have to mean living on a shoestring budget. Putting away $25 a week can add up to $1,300 over a year’s time.

6) Invest what you save.
Consider a Tax-Free Savings Account (TFSA) or high-interest savings accounts for whatever you manage to set aside. Be sure to do your homework on which institutions offer the best rates, as well as on the details of each type of account, including withdrawal and contribution rules for TFSAs. Explore your options on what works best for you.

(Roma Luciw, Globe and Mail, 7August2011)

When he was running for mayor last year, Rob Ford made two explicit promises to the voters of Toronto.

The first was that his plan to trim spending and “stop the gravy train” would not mean any cuts to city services. “I will assure you that services will not be cut, guaranteed,” he said on Oct. 8, two weeks before winning election.

The second was that there would be no layoffs. In a statement released on YouTube on Sept. 27, he said he would reduce the number of city employees through attrition. “No need for layoffs.”

Now it looks as if he will break both promises. City hall is considering a whole menu of service cuts as Mr. Ford seeks to wipe out a $774-million budget shortfall. City council is to meet next month to consider cutting back on everything from libraries to policing to street cleaning.

As for layoffs, Mr. Ford came close to admitting on Friday that they are inevitable. It was clear all along that attrition alone would not do the trick. Now it seems that a second tactic – offering buyout packages to employees if they leave – is falling short too. Though Mr. Ford says that the last thing he wants to do is put people out on the street, “I don’t know if we have a choice.”

How does he justify breaking his word? Like countless politicians down the ages, he is arguing that he has to change tack because of the horrible mess left by his predecessor. Following the well-thumbed script of the newly elected, he says that the mess is much worse than he expected. “To see the $774-million coming down the pipe – that was something that… was hard to expect or to see,” he told a Sun TV interviewer.

That claim does not hold water. The city has been wrestling for years with an annual shortfall fluctuating between $500-million and $800-million. Mr. Ford knows that as well as anyone. Toronto’s budget process is remarkably open and, as a city councillor of 10 years standing, he enjoyed a front-row seat.

If this year’s crunch is especially bad, it is at least partly because Mr. Ford himself chose to begin his term by killing the vehicle-registration tax and freezing property taxes for one year, making it much harder to balance the budget. Now he says that drastic spending cuts are needed to avoid tax hikes of “20, 25, 30 per cent.”

The mayor’s supporters say that we in the press should stop hectoring him over what he might have said during the long-ago election campaign. Toronto’s budget problem is real, they rightly argue, and he is trying to fix it. Leave the poor man alone. If he told a few stretchers, well, he was only doing what every politician does when he is trying to get elected.

But that’s the point. Mr. Ford ran for office claiming to be something different than the usual smooth-talking politician. He was the no-nonsense ordinary guy who would cut through the baloney and tell it like it is. As the whole city knows now – and should have known then – he was peddling a line of guff. The idea that he could cut spending, taxes and debt without cutting any services or putting a single person out of work was an obvious fantasy from the start.

Now it is being exposed as such. Shouldn’t the mayor be held to account? Are we supposed simply to forget that he was elected on false pretenses? If his promises to avoid service cuts and layoffs were fake, what are we to make of his election promise to achieve $2.8-billion (yes, billion) in budget savings over four years, to produce $1.7-billion in operating surpluses, to pay down debt by $800-million?

It’s not hectoring to expect a mayor to be straight with the public.

(Marcus Gee, Globe and Mail, 12August2011)

Today’s [July 19] pie attack on Rupert Murdoch would appear to cement the phone-hacking scandal into the mind of North American audiences as some kind of media circus.

It’s a story about the media, after all, one might think. A bunch of reporters and editors did horrible things, and then a saucy newspaper got shut down, and now some press baron is in a show trial.

In reality, this is only tangentially about journalism. It’s really about power.

News Corp. basically ran Britain for the past thirty years. They were the cheerleaders for Margaret Thatcher’s regime, popularizing something that was essentially elitist. They made neo-conservatism understandable and positive to the man on the street.

Tony Blair’s New Labour was only able to contest for power after a long seduction of News Corp. Running against the political power of the tabloids, Blair would have suffered the same fate as Kinnock and Foot before him. With them behind him, he held power through three elections.

The price of that seduction was hard edged policies on crime, limited ability at reforming the state, and an open-door policy to Rupert Murdoch at 10 Downing Street. The relationship between Blair and Murdoch included intimate discussions by the press baron urging Britain’s support for the invasion of Iraq.

News Corp.’s power was so great that the papers hacked the sitting finance minister’s bank account. They acquired the medical records of his son. Rebekah Brooks actually called Gordon Brown to ask him to not reveal his son had cystic fibrosis so her paper would get an exclusive.

During the expense scandal that rocked Labour in its final year, the News Corp. tabloids were the prime generators of the endless shocks. The genesis of Gordon Brown’s election loss was in the reversion of the tabloids back to their natural constituency in the Conservative Party.

The close relationship of Tory leader David Cameron and News Corp. executives like Brooks and Andy Coulson cemented that new loyalty. Coulson’s installation as the new Prime Minister’s communications director was just another proof point of the infiltration of News Corp. into the power structure.

What we are watching is not a colourful story about journalistic ethics. This is the dissolution of the established political power structure in Britain.

Britain was run for the past 30 years in a devil’s pact between journalists and politicians. The one would turn a blind eye to the other, and both would profit.

Arguably, the journalists forgot about the blind eye thing in recent years, exposing and destroying major political figures with whimsy. Helpless to defend themselves despite the power of the state, the politicians simply had to accept their humiliation and defeat.

But now the shoe is on the other foot.

News Corp. is horribly vulnerable. The public is justifiably outraged. And the opposition is ready to attempt to take power without the benefit of the tabloids. In the current minority government, this scandal could lead to the collapse of the governing coalition and a snap election on this issue.

Prime Minister Cameron clearly sees the critical threat in this scandal. He can no longer play cozy with News Corp., and was forced to call an inquiry and extend Parliament. It is an open question if he will be able to deflect enough of the mud onto Murdoch and company, or if the damage is done in the eyes of the public.

Just like the sponsorship scandal in Canada, this scandal is blowing apart a cozy relationship in the power structure.

Here, it was the Quebec/Liberal establishment of ad firms, politicians and bag men who fed the anti-separatist machine at the cost of huge waste of public dollars. There, it is the unholy alliances between prime ministers and News Corp. executives that corrupted the democratic process, the criminal justice system and the free press.

The story in Canada ended with a ruling party in tatters, criminal charges and horror from citizens. The story in Britain is just beginning, and hopefully won’t end until the root of this injustice is scoured from the state forever.

(Andrew Steele, Globe and Mail, 19July2011)

I flew back to Kandahar this summer, my 17th visit, before Canada formally ended its combat mission on Thursday. The violence was setting records. Peace and democracy seemed like half-forgotten dreams. After years of empty boasts about smashing the insurgency, military commanders admitted that they could not defeat the Taliban. They were packing up and leaving the mess to the Afghan government, telling it to negotiate some kind of settlement with its enemies.

Whatever has been achieved over the past five years is sometimes called “fragile progress,” but that delicate phrase does not capture the sense of looming disaster many locals feel, a fear that the foreigners built a system that will soon collapse.

In dozens of interviews with locals – governor to farmer, police chief, hairdresser and Taliban – people expressed appreciation for all the construction projects, the schools and roads, but described the overall situation as terribly precarious.

They do not trust that the corrupt Afghan government, installed by foreigners, will be strong enough to stand by itself. Even senior government officials doubt their own comrades, and those misgivings are stronger at the lower ranks: A bodyguard for the governor mused about joining the Taliban; a policeman begged the Canadians to stay because he feared that his family would be killed.

Many spoke about the tradition of revenge, the way conflicts can burn for generations in Afghanistan. A farmer described his plans to kill a government official who steered a Canadian road project through his vineyard, saying he would attack when the troops leave and the government weakens.

Return engagement

The level of anxiety in Kandahar surprised me, because troop withdrawals did not seem like a bad idea at first blush. Every surge of reinforcements in recent years has brought new heights of violence. It’s not crazy to think that the coming withdrawals will sap the energy, and unity, of insurgents whose rallying cry has always been the removal of foreign troops.

And the new government has visibly strengthened in recent years. On my first visit in 2005, I had to crawl along the baggage carousel and duck through the plastic curtain to find my bags, wrestling with dirty children who tried to slip their fingers into my pockets. Now, the local police have cleared away the beggars and porters, and the Kabul airport itself looks much better: carved wood, clean marble, freshly painted surfaces. Standing in the astonishingly straight line for a flight to Kandahar – no pushing, no jostling – I turned to a friend and said: “This place is beautiful now.”

An Afghan standing behind me overheard the comment. “Are you kidding?” he said. “It was much better during Najib’s time.” He was referring to the last communist ruler, Mohammad Najibullah, whose presidency serves as the model for Afghans who hope the current regime will last. Dr. Najibullah clung to power as long as he continued receiving billions of dollars’ worth of Soviet support; his downfall came only as the assistance dried up and he ran into supply shortages in 1992.

The Afghan who challenged my rosy view also sat beside me on the short flight to Kandahar. He introduced himself as a Pashto-language interpreter for “OGA,” an acronym that means “other government agencies,” shorthand for the U.S. Central Intelligence Agency. He looked exhausted and seemed irrationally angry, insisting that the stewardesses were too ugly. He did not harbour any great hopes for his own government, which he considered weaker than the communist regime. When I asked him why the foreigners’ good intentions had amounted to so little, he looked at me like the answer was obvious.

“Because they’re idiots,” he said, with his American accent drawing out the first vowel of the word “idiots” into a long “eeeeee” sound. Then he cranked up something called “party mix” on his iPod and ignored me for the rest of the flight.

The final approach to Kandahar was rough, with hot wind coming off the desert around the airfield. Even from the air, I could see progress: new roads, new buildings, new cellphone towers. The Kandahar airport has expanded dramatically in recent years, like a sprawling dust-coloured city. The Canadians were part of that growth when the battle group deployed in 2006, doubling the number of soldiers in the south. Now their departure will barely register, as Canadians make up a tiny fraction of the forces still fighting the insurgency.

Canada’s pullout is an important symbol, however. At the same time that Canada is leaving, the United States, Britain, France and other countries have started talking about the number of soldiers they will remove in coming years. From the moment I stepped off the plane in Kandahar, I started meeting old friends and acquaintances in various stages of fear and denial about the withdrawals.

Afghan makeover

It was a hairdresser who best captured the sense of impending ruin. He pointed to a deep crack in the arched ceiling of his small shop in downtown Kandahar, the only trace of a suicide bombing a couple of years ago. Everything else in the salon looks better these days: The ripped grey linoleum has been replaced with blue tile, and waiting customers now relax on a plush sofa instead of plastic lawn chairs. A television has been installed, bringing news of the war that rages ever more fiercely.

The hairdresser, Zabiullah Farhad Khoshbakht, 37, complained to his landlord that the jagged lines across his ceiling made him worried that chunks of concrete might break off. The landlord put masking tape over the cracks; when the tape breaks, he told him, run away. The yellowed bits of tape broke a long time ago, but Mr. Khoshbakht tries to ignore the warning sign. He avoids looking at the ceiling, and continues snipping, buzzing and trimming for the dwindling number of customers who are willing to brave the dangerous streets for a haircut.

He nodded enthusiastically at the idea that his damaged shop serves as a metaphor for the way Kandahar has emerged from the past five years, since the arrival of Canada’s battle group: scarred by violence, with visible signs of improvement, but every day a little closer to the whole thing crashing down on everyone’s head.

“Now, we have an asphalt road, and it was only dirt before,” he said, gesturing with his scissors at the street, where an Afghan policeman sat in the back of a pickup truck, keeping watch with a heavy machine gun. “We have a good sidewalk. But when the Canadians came, they promised to bring security and stop the fighting, and it only increased.”

I’ve known this man for five years. He did not want to offend me, but felt compelled to make a point. “They did not keep their promises,” he said.

The official version

The haircutter could keep working if the Taliban seize the city; others would need to run away. This includes Dagarwal Farooq, 52, director of Sarpoza prison, who got the job after the latest jailbreak in April, when hundreds of inmates scurried to freedom through a tunnel. The prisoners at Sarpoza now include his predecessor, locked up on suspicion of helping insurgents escape.

Mr. Farooq carries a key fob decorated with a Canadian government logo, and his institution has been showered with Canadian money: the upgraded jail looks nothing like the medieval warrens that previously served as the biggest prison in southern Afghanistan. But he fears that all those improvements, like so many others in Kandahar, could amount to nothing. He has seen it before, when he served in the communist regime and watched the Soviet troops departing. The communists bought themselves a little breathing room in those days by making deals with their enemies, he said, but he predicted no such agreements with the Taliban.

“If you look at the situation in Afghanistan in the future, it will be very bad,” the prison director said. “It will be like Vietnam.”

Even the governor, Tooryalai Wesa, who served in the communist administration at the time of the Soviet withdrawal, said his government’s forces are not as strong as they were during the 1980s. “They had belief, commitment,” Mr. Wesa said. “Now, they escape from the battlefield.”

The new police chief, Brigadier-General Abdul Razik, is a favourite with the U.S. military because of his can-do attitude; unsurprisingly, he did not predict another Vietnam. He spoke with confidence about filling the streets with plainclothes agents, so the Taliban would fear every beggar and taxi driver. It’s a strategy from the Soviet days, when the KGB taught its tricks to the local intelligence service.

But the police chief seemed to despise the more important communist strategy: trading land and cash for peace. His own relative, Esmat Muslim, was among the anti-Soviet commanders, or mujahedeen, lured to the government side in the late 1980s, but he now believes such agreements won’t work because the new generation of fighters lacks patriotism.

“The mujahedeen loved their country, just wanted the Russians to leave,” Gen. Razik said. “Now, the insurgents want other things.”

Talking to the Taliban

The Taliban disagree, saying their biggest aim is troop withdrawals, but Gen. Razik is correct that the Taliban want “other things” that do not sit well with the government: a new constitution, a new president. A researcher I’ve worked with for years in Kandahar travelled west of the city on my behalf, meeting two mid-level insurgent leaders and phoning back so that I could chat with them.

They were full of triumphant rhetoric about the Canadian pullout and the coming U.S. withdrawals.

Somewhat chillingly, they were the only people I spoke with in Kandahar who predicted that violence would decrease after the foreign troops leave. They expected to sweep back into power as they did from 1994 to 1996, eventually leaving Dr. Najibullah hanging in a public square, imposing a brutal order on the chaos.

Their return probably won’t be so easy this time; foreign aid will continue flowing into Kabul even after the troops leave. Without a peace deal or a decisive victor, Afghanistan could be left with civil war. Perhaps just as unlikely as the Taliban dream of imposing peace is their promise to continue hunting Canadians. They seemed undeterred by the fact that most insurgents cannot locate Canada on a map; thousands of civilians have died, they say, leaving a score that may need to be settled in future.

“They killed our people and we killed theirs,” an insurgent commander said. “Whether we need to take more revenge, we will discuss this after they withdraw.”

Bad Polling Numbers

None of the locals I met during a week in Kandahar described a feeling of safety in their communities, and I was working in the safest parts of the city. The Canadian government claims that Afghans feel differently: “Overall, 59 per cent of Kandaharis polled feel safe in their communities and 54 per cent think that security is improving,” says the latest quarterly report on the Afghan mission. “These levels are considerably higher than what was observed over the same period in 2010, when just 38 per cent reported feeling safe and 39 per cent believed security was improving.”

The numbers are pulled from a set of 16 polls commissioned by the Canadian military and conducted by the Afghan Center for Socio-Economic and Opinion Research (ACSOR), a large private firm. An analysis of ACSOR data, obtained by the Globe and Mail, shows that a statistician raised serious doubts about the company’s methods in Afghanistan. The British government commissioned two study papers, totalling 89 pages, which concluded last year that officials should not use the ACSOR results “for potentially contentious questions around government performance, security, corruption, justice and democracy.” The author suggested that trend indicators may be useful, if treated cautiously, but emphasized that high percentages of the Afghans surveyed did not understand the questions or felt uncomfortable answering honestly. During one round of surveys for the international military forces in southern Afghanistan, in Dec. 2009, the results suggested that only half the respondents understood the whole survey, and only a slightly greater percentage felt comfortable with all the questions. In a different ACSOR survey, roughly 60 per cent of respondents “somewhat” or “strongly” agree that it’s not acceptable to criticize the government. Those numbers suggest that Afghans are vulnerable to what surveyors call “social desirability bias,” a fancy term for telling people what they want to hear. That’s a problem everywhere, but gets magnified in a war zone where people do not feel safe speaking openly. One Western statistician said the social desirability issue makes the polls almost pointless — an idea rejected, of course, by ACSOR and the Canadian government.

“Polling in Afghanistan plays a useful and productive role in trying to understand the impact of both the Afghan and international efforts that are ongoing in all parts of the country,” said Matthew Warshaw, ACSOR’s managing director, in an email. “We apply rigorous social science research standards in our projects.” His clients also appear satisfied: “Polling data provides the Canadian forces in Afghanistan with very valuable information,” said a spokeswoman at the Canadian embassy in Kabul. Paul Fishstein, a Harvard fellow whose experience in Afghanistan and Pakistan spans three decades, says the analysis of ACSOR data gives some relief to the veteran researchers who have always wondered why the numbers differed from their anecdotal understanding of local opinion. “At a minimum,” he said, “it helps many of us reconcile what we hear over tea with Afghan friends and colleagues with the alternate reality presented by some of the public opinion polls.”

(Graeme Smith, Globe and Mail, 9Jul2011)

These companies are taking steps to reduce the risk of holding Treasury bonds or angling for ways to make profits from any possible upheaval. And even if a deal is reached in Washington, some in the industry fear that the dickering has already harmed the country’s market credibility.

On Wall Street, Treasuries function like a currency, and investors often use these bonds, which are supposed to be virtually fail-proof, as security deposits in their trading in the markets. Now, banks are sifting through their holdings and their customers’ holdings to determine if these security deposits will retain their value. In addition, mutual funds — which own billions of dollars in Treasuries — are working on presentations to persuade their boards that they can hold the bonds even if the government debt is downgraded. And hedge funds are stockpiling cash so they can buy up United States debt if other investors flee.

The rating agencies, which control the fateful decision of whether the nation deserves to have its credit standing downgraded, are surveying other entities that would be affected by a United States default — like insurance companies and states — and issuing warnings that a United States downgrade could result in several other ratings cuts. States that might be downgraded, in turn, are trying to reassure the market that they could still pay their bills on time.

All these contingency plans hinge on the pivotal date of Aug. 2, when the Obama administration has said it will no longer be able to finance government obligations without raising the $14.3 trillion cap on government borrowing. If lawmakers do not act before then, it will be difficult for the Treasury to meet coming interest payments as well as obligations to government employees, vendors and programs like Social Security and Medicare.

Even though many on Wall Street believe that a default remains unlikely, the financial markets are starting to become agitated. Volatility in stocks has soared, and some investors say stock prices are falling because a United States default could severely raise companies’ costs of doing business.

In the Treasury market, investors are starting to sell, fearing that the government will not make good on some interest payments that will be due next month. And complex financial instruments that will pay out if the United States defaults have become twice as expensive to buy as they were at the start of the year.

Analysts say the signs of panic are small for now.

“The metaphor is a pile of sand,” said Mark Zandi, the chief economist at Moody’s Analytics. “You keep putting one piece of sand on the pile, nothing happens, and then, all of the sudden it just caves.”

Several traders and bankers, including Mr. Zandi, said the imminence of a possible default was already damaging the United States’ standing as the most creditworthy country in the world. The tarnished reputation may linger, even if the government reaches a deal, and especially if the country’s financial books remain unbalanced.

“Our aura is diminished. You know people really view the U.S. as the AAA, the gold standard, and I think we’re tarnishing that,” Mr. Zandi said.

The government began preparing for much tougher borrowing conditions in the years since the financial crisis, shifting toward issuing longer-term debt. This was especially needed because much of the debt issued to cover the financial crisis of 2008 was short-term debt.

The United States still enjoys low borrowing costs — below 3 percent on a 10-year-note — but there is fear that the theatrics around the current debate will increase those costs. Low national borrowing costs translate into lower borrowing costs for American corporations and individuals.

Deterioration of investor confidence in the United States could also hurt the value of the dollar, according to William H. Gross, co-chief investment officer of Pimco, a bond fund based in California. Mr. Gross said he believed that the dollar would become weaker because of the country’s inability to deal with its rising deficit. Instead, he favors currencies in China, Canada, Brazil and Mexico. Compared with the balance sheet of the United States, he said, “their dirty shirts are much cleaner.”

In New York, the hedge fund KLS Diversified Asset Management has been accumulating cash to take advantage of profit-making opportunities if, for instance, investors are forced to sell cheaply because of a decline in the nation’s credit rating.

KLS was founded in the summer of 2008, and it weathered that storm in part by having lots of cash on hand, though back then it also was able to consider its Treasury holdings to be nearly as safe as cash. In the case of a United States default, KLS says it believes it can make money if investors flee the market, said Harry Lengsfield, a managing partner of the firm .

In his view, a default is unlikely but it should not be a surprise if one occurs. “It’s hard to argue that this case hasn’t been telegraphed and people haven’t been warned and warned again,” he said.

One of the worst possibilities that people in the financial industry, like Mr. Lengsfield, have been discussing is that scores of insurance companies, pension funds and mutual funds might be forced to dump their Treasury holdings. Some investors have rules that they cannot hold assets that are rated below AAA. It was this sort of rule that drove the forced selling of mortgage bonds during the financial crisis.

But in some cases, Treasuries may be exempt from the AAA rules.

Deborah Cunningham, who oversees $271 billion in money market funds at Federated Investors in Pittsburgh, said the funds themselves — even the Treasury-only money funds — would not be pressured to dump their holdings if there were a downgrade. Securities and Exchange Commission regulations say only that the funds have to invest in Treasuries, not that those Treasuries must be triple-A rated, she said.

Several weeks ago, Ms. Cunningham put plans in place to deal with a default. The firm will convene a teleconference with the boards of affected funds, she said, and, she is considering arguing for holding onto the federal debt.

“We have to justify to the board why we would want to continue to hold them, which might be because they are a high-quality, minimum-risk security,” Ms. Cunningham said.

Still, it is unclear whether other investors might stampede for the exits.

“The question I think investors are going to face is, Where do they go?” asked Ms. Cunningham. “Do they go to foreign banks? U.S. commercial paper issuers? U.S. agencies? Is there a safer haven than Treasury securities?”

As early as this spring, bankers began assessing the exposure of their trading positions if interest rates spiked, which would probably occur if there was a default. They have also been evaluating whether they may need to demand additional security deposits from trading customers.

At Wells Fargo, for example, executives said they had been keeping close tabs on the bond market and making sure they had ample cash on hand.

Timothy J. Sloan, Wells Fargo’s chief financial officer, said that if Congress could not reach a deal or if there was a spike in interest rates, his bank would be there to handle the situation. But in terms of specifics, he said, there was not much banks could do. “Because nobody knows what is going to happen, nobody knows how to prepare,” he said.

(Jeff Swensen, New York Times, 20 July 2011)

Billions of dollars will be spent over the next two decades to repair the Parliament Buildings. One reason for the repair: The buildings are full of asbestos, a cancer-causing substance that Canadians no longer use.

But we mine asbestos, we ship it, we make money from it, and we’ll use every diplomatic trick in the book to defend this odious practice. We are the Ugly Canadians.

The Harper government could care less. It vigorously defends mining asbestos because of one little corner of Quebec, near Thetford Mines, where the asbestos is mined and shipped to developing countries, mostly in Asia. Stephen Harper’s top Quebec minister, Christian Paradis, used to head the Thetford Mines chamber of commerce. Mr. Harper campaigned in the area and supported the mining. He spent part of Friday, St. Jean Baptiste Day, in Thetford Mines, thereby reinforcing his government’s political marriage to asbestos.

This week, the Ugly Canadians stood alone against the world in blocking the listing of chrysotile asbestos as a hazardous chemical under the Rotterdam Convention. At the meeting in Geneva, Canada had at first clustered itself among a small group of opponents that included such democratic stalwarts as Kazakhstan, Kyrgyzstan and Vietnam. Even these countries relented, however, and agreed to the listing. But not Canada. Not the Harper government. Not when there are jobs at an asbestos mine in Quebec.

Doctors from many countries have implored Canada for years to change its ways. The Lancet, a leading medical journal, has underscored the dangers of asbestos. The World Health Organization has warned that “at least 90,000 people die each year from asbestos-related lung cancer, mesothelioma and asbestosis resulting from occupational exposures.” Doctors from Canada (including Quebec) and abroad have signed petitions, sent letters, organized delegations – all to no avail.

The Quebec government, to its enduring shame, supports the mining (as does the Bloc Québécois) – it even gave money to the mine owners for expansion.

The Harper government is so locked into defending the indefensible that it wouldn’t even allow listing asbestos as a health hazard. That mild measure would only have required exporters to warn recipient countries of health hazards; it wouldn’t have required Canada to stop exports.

The government argues that chrysotile asbestos is legal in some countries and that its use under tight regulations poses only slight, if any, health risks. It even funds a lobby group for asbestos in Montreal that peddles this line. But the scientific and health worlds categorically reject this line. And member states of the United Nations have just agreed with the critics about the dangers of chrysotile asbestos – except Canada.

It’s estimated that the asbestos industry might be worth $90-million in this country. That sounds like a lot, but in the context of the Quebec economy, let alone the Canadian one, is a pittance. Even if that estimate were correct, it pales against the misery and cost of using this substance in other countries.

It’s true that some countries haven’t banned the substance, claiming they monitor how and where it’s used. If anyone believes the myth that developing countries with poor bureaucracies and widespread corruption oversee the substance’s use, then that person is engaging in willful self-deception.

Canada is a curious place when it comes to lecturing others about their bad practices while protecting our own. On climate change, Canada has the worst record for greenhouse-gas emissions in the developed world but does little at international conferences to deal with the problem. That this attitude regularly earns us the world’s scorn and “fossil of the year” awards from environmental groups apparently matters little.

Canada will lecture countries that harvest whales, while we harvest baby seals. We would get angry at any country that tried to export dangerous substances to us, but, if there are Canadian jobs at stake, we have no scruples about exporting a dangerous substance such as chrysotile asbestos to them.

(Jeffrey Simpson, Golbe and Mail, 25June2011)