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Tuesday, January 04, 2011

Israel Next War

The US.s failure under Barack Obama to impose peace between Israel and the Palestinians makes a new war likely

In March 1973 the Israeli prime minister Golda Meir visited US president Richard Nixon in Washington. He told her that the Egyptian president Anwar Sadat was prepared to negotiate a full treaty, and Meir assured him that Israel wanted peace, but that she would prefer an interim agreement as Cairo was not to be trusted. She said Egypt.s primary aim was to force Israel to withdraw to the line of 4 June 1967, then resurrect the UN plan for the partition of Palestine that had been adopted in 1947; a solution to the problem of Palestine would have to be discussed with Yasser Arafat and .the terrorists..

Israeli journalist Aluf Benn reported this conversation, on the basis of documents disclosed by Wikileaks, and drew a parallel between the situation then, when Israel.s refusal to negotiate led directly to war and to Egyptian troops crossing the Suez Canal in October 1973, and prime minister Benyamin Netanyahu.s current evasive response to President Barack Obama. Benn notes that Netanyahu, who returned from the US and rushed to the front in October 1973, .would do well to refresh his memory by listening to the tape of Meir and Nixon and asking himself what he can do to avoid repeating her mistakes and keep from dragging the country blindly toward a second Yom Kippur disaster. (1). In that war the Israeli army lost 2,600 troops.

Israel.s refusal to accept Obama.s proposal to halt settlements on the West Bank (but not in East Jerusalem) for three months in return for unprecedented promises . or bribes, according to columnist Thomas Friedman (2), who is not known for sympathy to the Arabs . confirmed that Obama is unable to exert any real pressure on Israel and that Netanyahu rejects any compromise. Netanyahu, like his predecessors, claims to want peace but he wants the humiliating peace imposed by conquest and based on denial of Palestinian rights. In secret negotiations over the past year, he has repeatedly told the Palestinians they had to accept Israel.s .security concept., keeping Israeli troops stationed in the Jordan valley along the .barrier. (on the Palestinian side) and the occupation of a substantial part of the West Bank (3). He did not say how long the occupation would last.

This deadlock is forcing the Israeli army to draw up plans for further wars based on the .security concept. . that anyone who refuses to accept Israel.s rule in the region is a .terrorist. to be eliminated. No other country, not even the US, has such a comprehensive security concept, which means that Israel is permanently at war. Who will the Israeli army attack next? Gaza? Two years ago Israeli tanks and aircraft reduced buildings to rubble and killed hundreds of civilians in what the Goldstone report describes as .war crimes. and probably .crimes against humanity.. But Hamas is as strong as ever. How long will Israel tolerate this? Lebanon? In July-August 2006, the Israeli army failed to bring down Hizballah but succeeded in destroying the country; Hizballah is now stronger than ever and the Israeli high command cannot rule out the possibility of a major operation and occupation of part of Lebanon (4). Iran? At the risk of starting a major conflict from Iraq to Lebanon, Palestine to Afghanistan?In the Middle East unrest inevitably leads to war. This time, unlike 1973, Israel would take the first direct step, but it will face far more effective enemies and, as Israeli peace campaigner Uli Avnery points out, the hostility of world public opinion (5). Brazil, Bolivia and Argentina have recognised the Palestinian state within the pre-1967 borders and there has been a letter from 26 European elder statesmen (including Chris Patten, Giuliano Amato, Felipe Gonzáles, Lionel Jospin, Hubert Védrine, Romano Prodi, Javier Solana), who are anything but extremists, calling on the European Union to impose sanctions if the Israeli government has not reviewed its policy by the spring. Human Rights Watch published a report on 19 December (Israel/West Bank: Separate and Unequal) about the systematic discrimination against Palestinians, calling on the US government to withhold US funding from the Israeli government equivalent to expenditure on settlements (more than $1bn).

Avnery concludes: .Somebody wrote this week that America.s support of Israel is a case of assisted suicide. In Israel, assisting suicide is a crime. Suicide itself, however, is allowed by our laws. Those whom the gods want to destroy, they first make mad. Let.s hope we recover our senses before it is too late..

Why Washington Hates Hugo Chavez

by Mike Whitney

In late November, Venezuela was hammered by torrential rains and flooding that left 35 people dead and roughly 130,000 homeless. If George Bush had been president, instead of Hugo Chavez, the displaced people would have been shunted off at gunpoint to makeshift prison camps--like the Superdome--as they were following Hurricane Katrina. But that's not the way Chavez works. The Venezuelan president quickly passed "enabling" laws which gave him special powers to provide emergency aid and housing to flood victims. Chavez then cleared out the presidential palace and turned it into living quarters for 60 people, which is the equivalent of turning the White House into a homeless shelter. The disaster victims are now being fed and taken care of by the state until they can get back on their feet and return to work.

The details of Chavez's efforts have been largely omitted in the US media where he is regularly demonized as a "leftist strongman" or a dictator. The media refuses to acknowledge that Chavez has narrowed the income gap, eliminated illiteracy, provided health care for all Venezuelans, reduced inequality, and raised living standards across he board. While Bush and Obama were expanding their foreign wars and pushing through tax cuts for the rich, Chavez was busy improving the lives of the poor and needy while fending off the latest wave of US aggression.

Washington despises Chavez because he is unwilling to hand over Venezuela's vast resources to corporate elites and bankers. That's why the Bush administration tried to depose Chavez in a failed coup attempt in 2002, and that's why the smooth-talking Obama continues to launch covert attacks on Chavez today. Washington wants regime change so it can install a puppet who will hand over Venezuela's reserves to big oil while making life hell for working people.

Recently released documents from Wikileaks show that the Obama administration has stepped up its meddling in Venezuela's internal affairs. Here's an excerpt from a recent post by attorney and author, Eva Golinger:

"In a secret document authored by current Deputy Assistant Secretary of State for Western Hemisphere Affairs, Craig Kelly, and sent by the US Embassy in Santiago in June 2007 to the Secretary of State, CIA and Southern Command of the Pentagon, along with a series of other US embassies in the region, Kelly proposed "six main areas of action for the US government (USG) to limit Chavez's influence" and "reassert US leadership in the region".

Kelly, who played a primary role as "mediator" during last year's coup d'etat in Honduras against President Manuel Zelaya, classifies President Hugo Chavez as an "enemy" in his report.

"Know the enemy: We have to better understand how Chavez thinks and what he intends...To effectively counter the threat he represents, we need to know better his objectives and how he intends to pursue them. This requires better intelligence in all of our countries". Further on in the memo, Kelly confesses that President Chavez is a "formidable foe", but, he adds, "he certainly can be taken". (Wikileaks: Documents Confirm US Plans Against Venezuela, Eva Golinger, Postcards from the Revolution)

The State Department cables show that Washington has been funding anti-Chavez groups in Venezuela through non-governmental organizations (NGOs) that pretend to be working for civil liberties, human rights or democracy promotion. These groups hide behind a facade of legitimacy, but their real purpose is to topple the democratically elected Chavez government. Obama supports this type of subversion just as enthusiastically as did Bush. The only difference is the Obama team is more discreet. Here's another clip from Golinger with some of the details on the money-trail:

"In Venezuela, the US has been supporting anti-Chavez groups for over 8 years, including those that executed the coup d.etat against President Chavez in April 2002. Since then, the funding has increased substantially. A May 2010 report evaluating foreign assistance to political groups in Venezuela, commissioned by the National Endowment for Democracy, revealed that more than $40 million USD annually is channeled to anti-Chavez groups, the majority from US agencies....

Venezuela stands out as the Latin American nation where NED has most invested funding in opposition groups during 2009, with $1,818,473 USD, more than double from the year before....Allen Weinstein, one of NED.s original founders, revealed once to the Washington Post, .What we do today was done clandestinely 25 years ago by the CIA.. (America's Covert "Civil Society Operations": US Interference in Venezuela Keeps Growing", Eva Golinger, Global Research)

On Monday, the Obama administration revoked the visa of Venezuela.s ambassador to Washington in retaliation for Chávez.s rejection of nominee Larry Palmer as American ambassador in Caracas. Palmer has been openly critical of Chavez saying there were clear ties between members of the Chavez administration and leftist guerrillas in neighboring Colombia. It's a roundabout way of accusing Chavez of terrorism. Even worse, Palmer's background and personal history suggest that his appointment might pose a threat to Venezuela's national security. Consider the comments of James Suggett of Venezuelanalysis on Axis of Logic:

"Take a look at Palmer's history, working with the U.S.-backed oligarchs in the Dominican Republic, Uruguay, Paraguay, and Sierra Leone, South Korea, Honduras, "promoting the North American Free Trade Agreement (NAFTA)." Just as the U.S. ruling class appointed an African-American, Barack Obama to replace George W. Bush with everything else intact, Obama in turn, appoints Palmer to replace Patrick Duddy who was involved in the attempted coup against President Chávez in 2002 and an enemy of Venezuelans throughout his term as U.S. Ambassador to Venezuela." (

Venezuela is already crawling with US spies and saboteurs. They don't need any help from agents working inside the embassy. Chavez did the right thing by giving Palmer the thumbs down.

The Palmer nomination is just "more of the same"; more interference, more subversion, more trouble-making. The State Dept was largely responsible for all of the so-called color-coded revolutions in Ukraine, Lebanon, Georgia, Kyrgyzstan etc; all of which were cookie cutter, made-for-TV events that pitted the interests of wealthy capitalists against those of the elected government. Now Hillary's throng want to try the same strategy in Venezuela. It's up to Chavez to stop them, which is why he's pushed through laws that "regulate, control or prohibit foreign funding for political activities". It's the only way he can defend against US meddling and protect Venezuelan sovereignty.

Chavez is also using his new powers to reform the financial sector. Here's an excerpt from an article titled "Venezuelan National Assembly Passes Law Making Banking a .Public Service.:

"Venezuela's National Assembly on Friday approved new legislation that defines banking as an industry .of public service,. requiring banks in Venezuela to contribute more to social programs, housing construction efforts, and other social needs while making government intervention easier when banks fail to comply with national priorities."...

The new law protects bank customers. assets in the event of irregularities on the part of owners... and stipulates that the Superintendent of Banking Institutions take into account the best interest of bank customers . and not only stockholders... when making any decisions that affect a bank.s operations."

So why isn't Obama doing the same thing? Is he too afraid of real change or is he just Wall Street's lackey? Here's more from the same article:

"In an attempt to control speculation, the law limits the amount of credit that can be made available to individuals or private entities by making 20% the maximum amount of capital a bank can have out as credit. The law also limits the formation of financial groups and prohibits banks from having an interest in brokerage firms and insurance companies.

The law also stipulates that 5% of pre-tax profits of all banks be dedicated solely to projects elaborated by communal councils. 10% of a bank´s capital must also be put into a fund to pay for wages and pensions in case of bankruptcy.

According to 2009 figures provided by Softline Consultores, 5% of pre-tax profits in Venezuela's banking industry last year would have meant an additional 314 million bolivars, or $73.1 million dollars, for social programs to attend the needs of Venezuela.s poor majority."

"Control speculation"? Now there's a novel idea. Naturally, opposition leaders are calling the new laws "an attack on economic liberty", but that's pure baloney. Chavez is merely protecting the public from the predatory practices of bloodthirsty bankers. Most Americans wish that Obama would do the same thing.

According to the Wall Street Journal, "Chávez has threatened to expropriate large banks in the past if they don't increase loans to small-business owners and prospective home buyers, this time he is increasing the pressure publicly to show his concern for the lack of sufficient housing for Venezuela's 28 million people."

Caracas suffers from a massive housing shortage that's gotten much worse because of the flooding. Tens of thousands of people need shelter now, which is why Chavez is putting pressure on the banks to lend a hand. Of course, the banks don't want to help so they've slipped into crybaby mode. But Chavez has shrugged off their whining and put them "on notice". In fact, on Tuesday, he issued this terse warning:

"Any bank that slips up.I'm going to expropriate it, whether it's Banco Provincial, or Banesco or Banco Nacional de Crédito."

=== 20 seconds ===

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in New York City. Joining us now is Michael Hudson. He's a distinguished research professor at the University of Missouri - Kansas City. He's the author of Super Imperialism: The Economic Strategy of American Empire and the book Trade, Development and Foreign Debt. Thanks for joining us.


JAY: So we've been having conversations. And let's pick up on the issue of taxes. Now, during the Eisenhower years, the marginal tax rate at the highest level was 90 percent. Give us a little bit of the history, because that seems an astounding number compared to the debate that's going on today. How did we get to that 90 percent? And then what happened?

HUDSON: But you got to that 90 percent right with the first income tax law that was passed in 1913. Under the original income tax law, only 1 percent of Americans had to file income tax returns, and you had to make the equivalent of about $120,000 in today's dollars even to be liable to file. The idea of the income tax was to get what the classical economists called unearned income. Most people who made over $100,000 at that time got it from rent or interest, or the financial sector or the real estate sector.

JAY: What was the politics of the time that allowed such a thing to be passed?

HUDSON: It was called the progressive era. And you had--at that time the Republicans were still relatively progressive. You had the business schools believing in the economy of high wages doctrine and--that underlay American progress after the Civil War. The idea was that American labor could undersell foreign labor by being highly paid, because highly paid labor was well-clothed, well-educated, healthier labor. So the idea was to raise wages and the economy hand-in-hand, and it would be a feedback where there would be positive growth. And the essence of free market economics at that time, which is what the Republicans believed, and many Democrats, was that a market was free of interest and rent charges. The idea of free market from Adam Smith, John Stuart Mill, Henry George, and the American progressives was how do you free market from income and prices that are not necessary. And what is unnecessary in prices? Well, you need to pay wages, you need to pay the cost of living, but you don't need to pay rent and interest. And the idea was that the government was initially to collect all of the higher rental income of land, that that was basically--land rent was created by public prosperity, it belonged to the public.

JAY: Now, this is a fairly radical departure, even from British capitalism, where all this emerged.

HUDSON: Not really.

JAY: I mean, rent's a bit--was not a--the rentiers were a big stratum of the capitalist class [inaudible]

HUDSON: Yes, they were. But the ideal of--what had put all of this idea politically in was a right-winger, Henry George. Henry George was the antithesis of socialism, because he said, you don't have to nationalize the land to take it over. All you need to do is to tax the land rent, and you can leave housing, commercial property in private hands, you can leave utilities in private hands. So whereas the European countries would take over electric power utilities as a nationalistic--nationalized public enterprises, in America we left the electric utilities, the gas utilities, most of the public infrastructure in private hands, but we taxed away the surplus and we regulated the prices, so that the idea was to keep prices in line with cost value. Now, this was what classical economics is all about. You have not only the labor theory of value, which was of necessary cost, but you had the price theory of economic rent, rent being the excess of price over and above the necessary cost of production. And so the income tax law said: how do we make the American economy more productive, so we can become the most productive economy and outcompete foreign economies? And the answer was: so that we can keep our prices in line with costs; and the costs will go up, our labor costs are going to go up, but our productivity is going to rise even more. So you had Democratic as well as Republican administrations doing wage productivity studies from the 1890s on that showed that highly paid American labor could undersell what was called proper labor. So you had America get rich by following the exact opposite of what Paul Samuelson says, the exact opposite of what is taught in international trade theory today, the exact opposite of what Nobel prizes are given for, that if you increase living standards, you make labor more productive. This is why Asia today is becoming more productive than the United States.

JAY: Okay. Let's back up. So income tax is introduced in 1913. It's at 90 percent at that time?

HUDSON: Ninety percent, yes. The--and right after the income tax was passed, you had World War I. So you had--90 percent, basically, is the--

JAY: Top marginal rate,--

HUDSON: --top margin. You can look it up on Wikipedia.

JAY: --on, you're saying, 1 percent--.

HUDSON: Only 1 percent of the American population even had to pay a tax return. And that 1 percent that had to file tax returns paid up to a 90 percent marginal rate. Wikipedia gives a whole history of the American tax rate. This became normal during World War II. You had high tax rates in the--up to 90 percent not only here but in England, in Europe. You had, all over the world, very high marginal tax rates, because the theory was that over a given amount of income, you just didn't need any more income, and that if you made more than, let's say, 30 or 40 times what a normal worker made, it was probably unnecessary income, and it was income that was created by public spending and by public subsidy and public infrastructure. There was a whole different view of how the economy worked than what you have today.

JAY: But massive fortunes were accumulated during this period.

HUDSON: Yes, they were, even at 90 percent. You're quite right. Massive fortunes were accumulated. And they were accumulated because even with paying high tax rates, you had the greatest prosperity of all. You could say that GDP, national income, and prosperity and wealth grows fastest when income tax rates are highest, and wealth slows in--the economy slows when taxes are cut. That's counterintuitive, but if you look at any chart comparing tax rates and economic growth rates, that's what you find. The 19th century knew it. The 18th century knew it. But today you have a kind of counterrevolution of junk economics that is basically anti-labor economics.

JAY: Now, in terms of attack on workers' wages in the United States, one of the big attacks takes place right after World War II in 1946. There's 5 million workers on strike. It's followed by the Taft-Hartley Act, which goes after union rights. So talk about this period, 'cause it's kind of a mixed bag here. While wages compared to now were relatively higher, it was still the beginning of a real onslaught against workers' ability to organize.

HUDSON: That's right. The--things changed after World War II, and you begin emerging from the war with an economy pretty much free of debt. There wasn't much for consumers to buy during the war. Companies didn't borrow. There were a lot of savings. Not only in America but in Third World countries and other countries you had pretty much a debt-free economy. So there was a lot of room. The economy had a heavy government debt, but there was very little--

JAY: You mean private debt.

HUDSON: --very little private debt after the war, hardly any consumer debt, very little corporate debt. There were heavy savings that were the counterpart to the debt. So debt wasn't a problem after war. Every recovery since World War II has taken place with a larger and larger proportion of debt to income. So it's as if you've been trying to drive a car with the break pedal pressed further and further, tighter to the floor, and now the debt is so high that you have debt slowing things down. So that's changed a lot.

JAY: Okay. Let's back up to taxes. So after the war you've got--still you're up at a 90 percent marginal tax rate for the top--what? One, two percentile?


JAY: And then what? How do we get from there to here?

HUDSON: Well, steadily you've had two things happen after World War I, when it all began. Number one, you have a redefinition of income. So you give small-print tax loopholes to wealth so that wealth is not taxed. In the original income tax, capital gains were taxed the same rate as earned income, on the theory that if you have a capital gain and build up your savings that way, it's just as if you'd earned the income to save it. There was a whole body of tax literature on this. Eighty percent of the capital gains in the economy are not capital gains; they're land value gains. Real estate is the largest asset in every economy. And people think of America being an industrial economy and Europe being an industrial economy. All economies are still basically real-estate economies. The largest sector's real estate. And within larger real estate, half the value is the land's site value. So when you have a capital gain on a house, what you're really selling is the value of that house. Well, once you had the capital gains tax cut to half the normal income tax rate, all of a sudden you made it possible for--.

JAY: When was that?

HUDSON: That was, I think, in the 1930s and '40s. Today the capital gains rate is only 15 percent. That's less than the 15.3 percent FICA withholding tax that workers have to pay in their Social Security and Medicare. So now you have, all of a sudden, the economy encouraging speculation in real estate, in stocks and bonds, instead of direct investment. So the result of lowering the taxes, of steadily lowering the taxes on the rich, has been to encourage money to be made in the way that the rich make their money, which isn't on building factories. It's not on employing labor. It's on speculating on real estate, stocks, and bonds. And every day in the American economy, an entire year's national income passes through the New York Clearing House every day and the Chicago Mercantile Exchange. The money is spent mainly on assets, on stocks and bonds.

JAY: When you say speculating in stocks, I mean, in theory that's the way companies raise money to go, in theory, to do something productive, by selling stocks.

HUDSON: Take any stock in the United States. The average time in which you hold a stock is--it's gone up from 20 seconds to 22 seconds in the last year. Most trades are computerized. Most trades are short-term. The average foreign currency investment lasts--it's up now to 30 seconds, up from 28 seconds last month. So we're talking about really short-term. The financial sector is short-term. They talk as if they're long-term, because you have--essentially, economic discussion in this country is like a Chinese menu. You have what really happens in column A, and you have column B, what people would like. You take what really happens and you think, what word for what they'd like would be an appropriate label for this? So you can say--ripping off corporations and embezzlement, you can call that--Alan Greenspan would call that wealth creation. You have an appropriate euphemism for every kind of reality. But there's a disconnect between the language that you use and what's actually happening financially. And if you're making money as sort of a--suppose you're an ATM robber and you hold up somebody and you say, "Your money or your life." The National Income Accounts would call that providing a service: you're giving them the life, and you're taking a payment for the service. Well, you don't really do that, because you're small scale. But when a pirate was taken before Alexander the Great, Alexander the Great said, what do you have to say for yourself? And the pirate says, well, I'm a little pirate. When I rob ships, you call me a pirate. But when you, the king, rob an empire, you're called a great king. Well, that's how the National Income Accounts do. When a bank tells a homeowner, your house or we're going to foreclose, that's not treated like an ATM. The interest in the fees that a bank get is part of a service economy. So when we have a service economy, this is what the 19th century called a free lunch economy, unproductive income--or unearned increment is what John Stuart Mill called it. You've all of a sudden replaced the classical economic vocabulary with a kind of euphemism, and then you pretend that Adam Smith and John Stuart Mill were your grandfathers and your patron saints, when actually Adam Smith and John Stuart Mill and the classical economists denounced almost everything that the Chicago boys and the junk economists that are appointed by presidential commissions are saying today is their received wisdom.

JAY: Thanks for joining us.

HUDSON: Thank you.

JAY: Thank you for joining us on The Real News Network.

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