CHINA'S DEBT: THREAT OR STIMULUS TO GLOBAL GROWTH?

In the aftermath of the credit-economy's worst contraction in the past six decades, it is essential to differentiate between productive-oriented public debt and parasitic debt, which includes everything from debt devoted to luxury imports to speculative investment that adds nothing to jobs or productive capacity, but merely concentrates wealth. If China borrows to build its infrastructure and strengthen mining, fisheries, agriculture, and manufacturing, then public debt is a well-worth investment in the national economy's future, and it will produce massive new wealth to pay off old debt in the process of creating new wealth.

By contrast, if a country, let us say Greece as the poster child of bad public debt in the early 21st century, borrows to finance primarily luxury imports, defense, speculative enterprises, and all within a system of high level of public and private sector corruption, then such public debt is parasitic for it will not produce new wealth with which pay off the old debt. Therefore, one must look at the goal of capital formation in China is very different from that of Greece, or any Western nation, including the US where parasitic economics have been the cause of the economy's steady decline in the past half century.

It is true that China has a very low cost structure  and a small consumption base - a small middle class, a very large working class and peasantry, and a very strong state that plays catalytic role in capital formation. Precisely because China has a state-directed (statist) production-oriented economy with cheap labor available and low consumption base it has been able to lift itself from underdevelopment to preeminent economic superpower status.

By contrast, Western economies are based on capital formation intended to benefit the very small and powerful private sector, against the background of a consumer-based economy where the state that transfers wealth from the productive classes to banks and corporations to keep them globally competitive. This is a salient factor in capital formation and in the public debt that Western nations have accumulated.

The latest controversy regarding China's public debt is the credibility of the official figures that Beijing provides, figures that no doubt lack credibility. While  the central government aggregate debt is 17% of GDP in 2010, as far as official stats are concerned, private Western analysts estimate that China's debt-to-GDP ratio may be anywhere between 40 and 90%.

China's top auditor has warned about local governments using billions of dollars to finance infrastructural projects to the detriment of the banking system. However, even if China had a debt-to-GDP ratio that matched the US, China would retain its excellent credit rating while the US cannot, for the simple reason that the American-consumption-parasitic-defense sector oriented economy is headed for a long decline in this century while China's prospects are very bright. Again, we must focus on the modality and goal of capital formation, and not compare raw statistics as though economic, monetary, and fiscal conditions in China and the West are identical.

It is true that China has benefited from hundreds of billions of foreign capital that has massively strengthened capital formation, while such capital has been drained from the West where parasitic economics prevails. Furthermore, the Chinese government regards deficit financing as a means of growth, and it does not fear its own position, given that Japan, and practically every Western country is carrying massive public debt intended to strengthen banks and the corporate system that would have collapsed in the absence of government support.

That China is carrying the paper, which permits the US economy to grow and unlike the US and EU that have a meager GDP growth, means that China continues to lead the world in economic growth as well as economic and political leverage. Partly because it is enjoying balance of payments surplus, China can afford to have local and regional government run up debt as long as it is geared to establish an economic foundation. This does not mean that all of this is carried out free of corruption. In the past ten years, a number of organizations, among them the OECD, have warned about corruption among Chinese government officials, bankers, and others in state enterprises.

To diminish the Chinese government's fiscal credibility, many Western analysts, rating agencies, and financial firms have tried to argue that China's fiscal and monetary behavior has been as irresponsible toward a market-friendly world as that of the West. The way to prove this point is to argue that local and regional government in China has engaged in deficit spending that accounts for sharp rise in liabilities, especially when social security funds are taken into account.

That Chinese local and regional governments went on spending spree at the start of the US-based Western recession in 2008 actually helped to moderate the impact of that recession. If the Chinese were spending on luxury imports, defense, and other parasitic areas including speculative investment, the debt problem would indeed be very serious, especially given the very high level of corruption. Although China has laws to prevent local and regional government from violating balance budgets, there have been many ways that such laws were violated, helping to stimulate Chinese growth as well as keeping the world economy from suffering further decline.

China will continue to buy US bonds to finance the American consumption-parasitic-defense oriented economy, although for how long is difficult to predict. Offering the stimulus to global growth amid the recession of 2008-present, China was able to do so by keeping a very low foreign debt in comparison with the US and Western nations whose public debt is mostly in foreign hands.Again, I stress the key issue of modality and goal of capital formation, even with the prevalence of massive corruption.

That the issue of China's public debt is now raised by Western as well as some Chinese sources reveals more about the obsession of the neo-liberal trend to reduce the role of the state in the economy and strengthen finance capitalism that caused the global recession of 2008-present. Although the parasitic nature of speculative capitalism that works through manipulation of the markets is the cause of undermining the health of the economy, free market advocates insist that is the solution and the problem is the state.

Unlike most European countries and the US, which raise public debt levels to finance parasitic enterprises and defense, and which see capital formation as a means to sustain finance capitalism in its parasitic mode, China has pursued fiscal stimulus through its banks, a fact that kept the national economy growing at a rapid rate during the global recession and mitigated the recession's impact across the rest of the world. China invested in the real economy instead of allowing capital to be absorbed by the parasitic speculative sector.

Despite the seriousness of corruption, that is indeed much higher than Greece and closer to Haiti and Bangladesh, China has managed to compensate with rapid growth and keeping focused on the ultimate goal of capital formation. By contrast, Western debtor nations borrow to keep a private sector operating in parasitic system that accounts for continued decline. Despite all its problems regarding corruption and massive labor abuses, in the absence of China maintaining a productive-oriented regime where capital formation was directed to build the world's preeminent economy, the rest of the world economy would have been in much more serious trouble from 2008 to the present.

GLOBAL RECESSION AND THE IMF

That the International Monetary Fund (IMF) has recently cut its outlook for global economic growth for 2012 and 2013 is not as surprising as the fact that the IMF-EU austerity policies - both formal as in the cases of Greece, Ireland and Portugal, and informal in the rest of Europe - are the root causes of the anticipated  contraction at the regional and global levels. In fact, the IMF cited the European debt crisis as 'the perilous new phase' of this crisis, but it failed to mention that the Fund together with Germany have imposed austerity policies on the rest of Europe that are responsible for the contraction.

Whereas global growth was at 5.2% in 2011, it has been revised down to 3.3% in 2012, with the advanced economies accounting for merely 1.2% growth, emerging economies 5.4% and China and India at 8.2% and 7% respectively. I am sure that those who have studied the history of IMF austerity policies will not be surprised to learn that they lead to sharp decline in economic activity, including a sharp downward trend in socioeconomic mobility. This is largely because neo-liberal style austerity entails sharp curbing of consumption power for the middle class and workers.

At the macroeconomic level, world trade volume will drop from 12.7% in 2011 to 3.8% in 2012, a trend made much worse because IMF is helping in the process of capital concentration. The current figures about world trade and economic growth may actually be very optimistic, because they take into account steady energy prices, when in reality energy costs may rise sharply in case of the lingering US-Iran confrontation, instability in Nigeria, unanticipated problems in post-Chavez Venezuela, and sharp rise in demand across Asia. Some oil experts maintain that the price of crude oil may hover between $100 and $180 in the next two years, and that is without a major crisis. A deep recession with high unemployment and low consumption would be about the only moderating factor in energy prices over the next couple of years.

Not surprisingly, the IMF is blaming 'the sovereign debt crisis', which speculators and the banks have caused and from which they benefit. As a solution to the global economic contraction in the next two to three years, the IMF has recommended policies that continue to create very high unemployment across Europe, low consumption on the part of the middle class and workers, and higher tax burden on the same classes. Even its own economists warn that overly-aggressive austerity measures could backfire and kill any prospects for economic growth, something that is a reality for many European countries.

That the IMF readily admits its own policies contribute to retarding economic growth is an indication that the policies it follows would not be pursued unless they served to strengthen finance capital in the core countries. Indeed, a closer look at the IMF austerity policies in Eastern and Southern Europe in the last two years point to resounding failures, not by any independent standard, but the ones that the IMF established.

For example, in May 2010, the IMF insisted that if Greece followed austerity policies the result would be:
1. In one year Greece would be able to return to the private sector for its borrowing needs. Two years later, the IMF admits that Greece may not be able to borrow from the markets for at least ten years, and that assumes no messy 'un-managed or unstructured default'.
2. In May 2010, the IMF insisted that austerity and neo-liberal policies were essential for sustainable economic growth. Today, the IMF admits that Greece would suffer negative GDP growth for at least the next two years, unemployment would probably hit 22-25%, and living standards would in fact decline and must in fact do so to  levels that are closer to the rest of the Balkans. This means that living standards would revert to 1960s levels.
3. The IMF had promised solvency within a couple of years, and aggregate debt dropping from 135% of GDP to under 100%. Today, the IMF admits that Greece would be very lucky to have 120% total public debt to GDP by 2020. Moreover, the entire country would be reduced into a low-wage economy, forcing a massive wave of people to emigrate.

The IMF record is just as dismal in Portugal and Ireland, just as dismal in Spain and Italy, just as dismal across all of Eastern Europe. Besides destroying the lives of millions of people with austerity policies that benefit very few wealthy individuals, IMF austerity policies also serve as a tool of neo-imperialism. For example, Germany has imposed a team of its own technocrats to oversee the entire Greek economy that is a virtual German satellite, and it has proposed a German overseer in fiscal policy. Relinquishing control of the national budget is in fact surrendering sovereignty. But then again, has Greece really ever enjoyed national sovereignty to the degree that the US or Germany did?

In short, with the help of the IMF, Germany has laid the groundwork for financial, trade, investment, and overall economic control that extends into the domain of labor policy in Greece. If this integration model is imposed in Greece, the rest of Southern and Eastern Europe are next. From the 1950s in Latin America to Russia in 1999, IMF policies has been a catalyst to destroying democracy and promoting authoritarian political conditions as a result of helping to concentrate wealth and create a wide gap between rich and poor.

To blame the IMF without taking into account that it serves the core capitalist countries and within those finance capital is to ignore the purpose of the institution since its founding. Billionaire George Soros recently noted that Germany has been playing the traditional role of the IMF in Europe as financial policeman and endangering the health of the European economies. Although the core countries and finance capital are behind the IMF, the image that the Fund projects is one of 'objective economic policy', as though it serves God instead of mortal masters.

IS PREJUDICE CAUSED BY LOW INTELLIGENCE?

Scholarly studies have shown that there is a correlation between prejudice of any type from race and ethnicity to gender and religious caused by ignorance, isolation - the absence of cultural diffusion - the environment, and low IQ. One recent study- Gordon Hudson lead psychologist -  emphasizes low intelligence, social conservatism and prejudice. In an era of the war on terror aimed against Islam, the topic of prejudice ought to concern the entire world, but the question is whether a scientist ought to place more emphasis on neuro-biological factors than psychological and environmental, or whether to adopt a holistic approach.

From John Stuart Mill to Bertrand Russell, philosophers have debated how religious, moral, political and philosophical dogmatism can account for falling into the trappings of the illusions of absolutes and thus to prejudice, in my view. In short, we have seen throughout history learned people, scientists included, develop ideologies to defend prejudice, everything from racial and ethnic prejudice, to religious and gender prejudice. By no means does this indicate that the people who led the debate on such issues, frequently learned people of secular or religious background, were of low intelligence.

In American history from colonial times until the Civil Rights movement during the Johnson administration, we have a long record of learned individuals who tried to prove the legitimacy of racism based on what they deemed scientific reasoning. Similarly, we have a long record of learned men who tried to prove the inferiority of women by pseudo-scientific methods, or the inferiority of homosexuals. Can it be argued that people advancing arguments based on prejudice suffered low IQ, or that they were conditioned by the prevailing political and social environment, or that they suffered from deep-seated psychological problems?

In the recent scholarly study regarding the correlation between IQ and prejudice, researchers found that right-wing ideas and prejudice commonly appeal to the less educated masses with a low IQ. Therefore, the lower the IQ and lower the ability for abstract thought, the higher the possibility that the individual embraced right ideas and prejudice. Although the study did find empirical evidence for a correlation between social conservatism and low intelligence, it cannot be established that people of higher intelligence with the ability to conceal underlying prejudice are not more hypocritical and less transparent in their views. In short, the higher the education level, the better the ability to articulate a more liberal (tolerant) view that may be hiding prejudice. The empirical evidence of isolated people with a higher propensity toward prejudice is useful, but it is one that has been well established historically, and hardly a revelation.

In studying and analyzing the causes of prejudice it is important to keep in mind that conservatives are actually just as hypocritical about this issue as liberals, and that less intelligent individuals more honest about prejudice than educated ones or high IQ people. Historically it is true that people of higher IQ and of more liberal leanings have advanced ideas of greater tolerance and understanding, but this is not to conclude that intelligent liberals are free of prejudice in some form, from socioeconomic to racial.

Nor does a lower sense of prejudice of any type indicate that the individual may be of high intelligence, but rather that the environment has molded the individual as such. Moreover, we must keep in mind that an individual may be free of racial prejudice, but very much a slave to gender or socioeconomic prejudice. In short, the idea that all forms of prejudice are eliminated from those of higher IQ and greater liberal disposition in a myth.

It is true that the more simple-minded people tend to find appeal to right-wing ideologies that very intelligent people have developed and the privileged ones have embraced out of enlightened self-interest. It is true that the simplicity of right-wing ideas and prejudice may have a mass appeal partly because it is rooted in the irrational to which people respond more readily. Clearly, social class, education, home/family environment, political proclivities, cultural/religious influences, and personal emotional/psychological balance are all variables in the individual's makeup regarding prejudices that all human beings have and cannot escape.

Prejudice is not caused by low intelligence, although low intelligence exacerbates predisposition toward prejudice. A combination of factors, largely environmental and psychological, and not necessarily predominantly neuro-biological as some scientists have argued, account for human prejudice. The issue is not necessarily prejudice at the individual level, but at the mass/societal level and how politicians use it for policy of inclusion/exclusion, as a pretext for conflict and wars, as we have seen in the past two decades with the clash of civilizations between Islam and the Christian West.

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UN: MARKET-ORIENTED DEMOCRACY vs. NATIONAL SOVEREIGNTY?

Throughout its history the UN has done a great deal of good for people around the world, especially UNESCO, UNICEF, UNAIDS, UN-HABITAT, and World Health Organization to mention some of the noteworthy entities. Although it has tried to live up to its mission of preserving peace, alleviating misery and promoting human progress at all levels, the actual record is not very good at all, and some of UN entities including the International Atomic Energy Agency (IAEA), International Labor Organization (ILO), UN Democracy Fund, to mention a few, have been controversial and heavily influenced by specific governments and private corporations.

The UN Charter (Ch. I-Art. 1) specifically states that its mission includes measures to preserve and foster collective security, harmonizing relations between nations. Thus, helping to prevent war through a multilateral process - collective security - is at the top of the list, followed by promoting international economic cooperation, human rights, equality between men and women, labor rights, and promoting equality between nations small and large.

In addition, the UN mission includes fostering conditions from which treaties and international law can be maintained, and social progress promoted. There is nothing in the charter about 'democracy', but Article 2 does state that the UN is based on the principle of sovereign equality of its members, a principle that the Great Powers (permanent members of the UN Security Council) have repeatedly violated, especially the US that was the world's strongest country - militarily and economically - from 1945 to the present and had an interventionist foreign policy that sharply conflicted with the UN's multilateral principles, procedures and goals.

Let us begin by accepting the premise that organizations, secular or religious, are above all interested in self preservation, like Darwin's species struggling to survive the process of 'selection', not natural but institutional. The UN has survived the divisive Cold War, but how is the UN record of the past six decades or so measured against its own charter? My reading of UN history is that it has a very mixed record, at best.

The UN has actually hindered social justice, something that is claims it supports, it has not alleviated poverty regardless of its numerous programs and promises to end poverty, and its has actually contributed to inequality between nations small and large, instead of closing the gap as its charter claims. In large measure, this is because the UN has always been a captive organization to powerful nations, especially the US, and to a political economy that it supports and promotes, although the political economy is the root cause of the problems that the UN claims it wishes to fix.

Although it claims that its mission is to contribute to freedom, the record shows that with some exceptions the UN yields to the Security Council members, especially the US, which has been involved in more than 70 political, covert, and military interventions from Truman to Obama. Given the nature of the organization, its size, scope and diversity, it is inevitable that would not have a spotless record by any definition, just as it is inevitable that the US would manipulate the UN to serve its own interests.

On the plus side, there has been no global war since WWII, but from the end of the Second World War until 2000, it is estimated around 27 million have died as a result of war. This is a number roughly half those who died in WWII (50-70 million casualties, depending on the source). That we have had no global war since the 1940s is a great achievement for which the UN must take credit is a great achievement according to some, while others point to the number killed in small wars as indicative of the UN failure to keep the peace.

The degree to which the UN has promoted market-oriented Western-style democracy and the degree to which its policies are a reflection, while hindering national sovereignty and social justice are pertinent issues in judging how far the organization has deviated from its own charter. The UN has spent millions of dollars promoting multi-party systems around the world, but remains silent in countries where the US has a dominant influence.

For example, Saudi Arabia is hardly a democracy, but very much heavily invested in the US economy and integrated with it. The US is not anxious to have the UN interfere in Saudi Arabia because it will upset the status quo that favors US economic, political and military interests. Even worse, the UN has a longstanding record of resolutions that have gone unenforced and are mere moral condemnations of Israel for PR purposes. That a double-standard regarding Israel's nuclear arsenal that it does not examine versus Iran's nuclear energy program that it deems menacing to the West. Should the world expect more of an organization that succeeded the League of Nations as a necessary tool of multilateral diplomacy?

The United Nations was founded as the successor organization to the League of Nations. Originally an American proposal under President Woodrow Wilson, the League of Nations as an instrument of global peace earned the respect of many including Albert Einstein. That the League lacked the fervent support of its members - the US never joined and retreated to isolationism during the interwar era - was a tragedy that contributed to the second World War. Another tragedy of the League of Nations was the reality that it was essentially a Western club that turned a blind eye to colonialism and spheres of influence. With only France as its strongest supporter, and the rest of the members suspecting that the League of Nations was simply incapable of serving their interests, they ignored it.

The Second World War forced the allies to create the UN. During the Truman administration, the US dominated the UN, because it enjoyed voting majority having lined up behind it most countries against the Soviet-China bloc.During that period, the US unilaterally intervened in Greece, China, Philippines, Iran and Guatemala. These interventions constituted a flagrant violation of the UN Charter, but the UN could do nothing because it was in essence an extension of the State Department. Therefore, the Cold War took precedence over everything from democracy to human rights, and the UN became a facilitator of and legitimized interventionism.

From Eisenhower to Johnson the non-aligned bloc, headed by Egypt, Yugoslavia, and Indonesia tried to influence the UN, but it was only at the National Assembly level, for the Security Council reflected the Great Powers leverage in the world. During the late 1950s and 1960s, the UN again failed to prevent major attempt at interventions by both superpowers in their reflective spheres of influence where freedom, national sovereignty, human rights, and social justice were systematically violated. The Hungarian Revolution of 1956 and the Czech uprising of 1968 represented the blatant cases of Moscow's intervention to deny national sovereignty and freedom to the two East European nations. The UN was only useful as a Cold War arena for the two superpowers to air their respective propaganda, rather than prevent interventions and protect national sovereignty.

The UN was equally unable to do anything about US interventions in Vietnam, Indonesia, Congo, Dominican Republic to name a few of the more blatant cases where the US was trying to install puppet regimes. Nor was the UN effective trying to end apartheid conditions in pro-US South Africa and Israel where the minority populations were systematically repressed by a white majority. The UN has a record of resolutions reflecting opposition to apartheid in South Africa and apartheid conditions of Palestinians, but the US imposed veto on such resolutions, until June 1990 when Nelson Mandela addressed the issue before the UN.

The UN was equally unable to do anything about the Soviet intervention in Afghanistan in the 1980s, or the US interventions in Nicaragua, Granada, and Panama. The end of the Cold War (Soviet-American power struggle) until the present meant that the UN would have to reorient its political agenda to reflect US foreign policy, namely the war on terror aimed at Muslims. Toward that end, the UN became the instrument of US policy to intervene in Iraq, declare war on Afghanistan, isolate countries with regimes unfriendly to the US like Libya under Gadhafi, Syria under Assad and of course Iran under Islamic law.

The US war on terror became the policy around which all UN programs operated, including cultural and educational programs. Everything in the UN was filtered through the war on terror campaign, but only as the US defined it, given that this is a highly political issue. Naturally, Iran was at the center of the new Cold War and one of the UN agencies, the IAEA would be at the center of the controversy involving Middle East regimes that the US was interested in undermining or overthrowing. That the UN permitted itself to be used in this manner reflects the type of highly political organization it is, and not at all committed to its own charter and principles therein, least of all the principle of freedom and democracy.

Invariably with a pro-market, pro-Western agenda behind it, the UN contributes to the promotion of human rights, refugee rights, women and minority rights, child rights, and prisoners'/POW rights. Moreover the UN advocates cultural diffusion, literacy, water, food and health programs, disaster relief, sustainable development assistance, but all within the context of a pro-market-oriented, pro-West model.

The UN Democracy Fund makes a genuine effort to promote democracy, but upon a closer examination of the projects that it funds, one can clearly discern the assumptions of 'democracy' that the UN has. Although there is some funding for human rights and promoting women in society, such funding is directed in countries where the West actively supports regime change, or there is an effort to foster political, economic and strategic integration with Western nations.

While providing funding for human rights ought to be considered an integral part of promoting democracy, doing so selectively based on political criteria is indicative that the Western Powers are promoting their interests, especially given that national sovereignty of the same countries where human rights may be promoted are not respected by the US and EU, because they are in essence interested in economic integration under the market economy.

Providing UN funding for elections in Latin America, central Asia, or Africa is fine, but do elections entail democracy? There is nothing wrong with clean water, food, and medicine programs, as long as behind them do not rest multinational corporations interested in the natural resources and cheap labor of Africa. One may argue that the market-oriented solution is better than nothing, and that it is a pragmatic approach, given that the UN has no choice but to link with corporations, IMF, World Bank, and former politicians like Bill Clinton interested in providing a 'corporate-sponsored' solution to poverty - currently at roughly 1.3 billion people. Fine. But what are the results so far, given that more than a decade has passed since this program was introduced as the Millennium Development Goals (see my posting Foreign Aid, Global Poverty and the UN).

The reader may argue that it is easy for outsiders, especially academics, to criticize a mammoth organization like the UN, given that everyone from far right wing to far left political elements have come out against the UN. However, top UN officials have also criticized the UN for some of the exact reasons as I have outlined above. Consider for example, former UN secretary-general Boutros-Ghali (1992-1996) who is on record castigating the UN as having no moral authority to preach democracy, for it does not practice it and that the UN violates its mission because of the 185 members only one, the US, dominates the organization.

The history of US-UN relations shows that the US has used the international organization to promote its own economic, political and military interests to the detriment of other nations, often violating the national sovereignty of UN members. Pointing to the Kosovo crisis of the 1990s in which the UN became a mere instrument of the US and NATO, Boutros-Ghali merely confirmed the strong interventionist role of the US in UN affairs that Mohammad ElBaradei, former IAEA has stated. This is extremely significant because the UN has failed to maintain collective security, succumbing to the hegemonic US unilateral influences, only tamed by the veto power of Russia and China. 

Given that in 2012, the US is searching for all kinds of excuses to destroy Iran's nuclear energy program, which has the potential of becoming a nuclear weapons program; given that the US, perhaps with the aid of British and Israeli intelligence has been assassinating Iranian scientists; given that the UN is supposed to be helping prevent war but it is an instrument of precipitating it, I can understand why many people wonder if the UN never existed would the global balance of power be any different and would not the same number of wars have taken place? In its six-decade history we see that UN has tried to realize the principles in its own charter, but it has failed because it is dependent on national powers, especially on the US that has always exerted dominant influence over the organization's operations to suit its foreign policy and its market-oriented democracy.

IRAQ AND THE END OF PAX AMERICANA

There is no doubt that Leslie Gelb is not the issue, but US policy of intervention is very much so, especially in so far as it reflects the last desperate acts of a declining superpower. In so far as Gelb reflects the position of segments within the political mainstream, discussing his proposal is addressing the issue of American hegemonic influence at the very least and imperialism at worst. In so far as there is an assumption that governments outside of Iraq have the arrogance to decide the kind of regime in Iraq, Afghanistan, and other Muslim nations, this constitutes indisputable proof of imperialist thinking.

By the same logic, why should not Muslim governments decide what kind of regime the US ought to have? What if Muslim countries proposed that it would suit them fine to have the US divided into North and South. Are Iraqis debating whether the US should have a certain type of regime? The assumption that the US reserves the right to determine regimes around the world is an integral part of Pax Americana legacy and demonstrates that there is a total absence of democratic thinking and a double-standard when treating European countries versus Muslim and/or Third World. Would the US dare consider deciding what kind of regime Belgium must have, whether it ought to be divided or not, or the recent debate about the independence of Scotland? Solutions for Iraq and for the entire Middle East regarding what type of institutions it wishes is a matter that rests entirely in the hands of its people, just as the US insisted when the USSR invaded Afghanistan in order to sustain in power a pro-Soviet regime in the 1980s. The real issue is the goal of the US to determine the balance of power in the Middle East and exploit its resources, and toward that goal it proposes policies accordingly.

People need to remember several things about the US invasion of Iraq.
1. The lies on which the US invaded the country, namely, that it a) had weapons of mass  destruction, and b) that there was a link to al-Qaeda, when it was well known that the al-Qaeda organization was made up primarily of Saudis with which the Bush family as well as a number of well-connected Republicans had multi-billion dollar interests. The real reasons were the oil reserves, the US obsession to counterbalance Iran, and strengthen the defense industry in which Republicans and Democrats had personal financial interests. It is interesting to note, that the US defense and intelligent budgets skyrocketed as a result of this war combined with Afghanistan, while the US economy continued losing ground to China.

2. War and occupation that destroyed the country. During the occupation, US forces committed war crimes, but the International Court has not dared to charge any US official. Just as the US destroyed Vietnam where it committed war crimes, and just as Vietnam has taken many decades to rebuild and it is still in the process of doing so, similarly it will take many decades to rebuild Iraq that the US left in ruins. Yet, there is no talk about helping Iraq revive, only about dividing it and exploiting its oil reserves.
3. US tax payers paid for a war in order to advance the profits of Republican party-linked corporations in which Bush, Cheney, Baker, Rumsfeld and others were connected, corporations such as the Carlyle Group and Halliburton that defrauded the US government of millions of dollars in contract work in Iraq. This is the same Halliburton against which Nigeria filed corruption charges against Cheney as CEO, and the same company that was partly responsible for the Deep Horizon oil disaster in autumn 2010.
4. Iraq was not among the top 20 most corrupt countries in the world before the US invasion, but it advanced to the number #2 spot during the occupation! The US reduced the country into a concentration camp where corruption was the way of doing business. Focused only on oil and counterbalancing Iran, the US was unable to do anything with Iraq other than leave a devastated country that its people must rebuild.
5. The issue of federalism and/or breaking up Iraq was one that concerned American politicians, think tanks, journalists, and academics after the US invaded. The question is why? While the Kurdish population has historically wanted autonomy, the US has never been interested in this minority group, otherwise it would demand that Turkey also submit to some type of federalist system. The goal is to keep Iraq weak and dependent on the US so that it can exploit its oil and counterbalance Iran, while also determining the regional balance of power. 

Iraq and Afghanistan represent the twilight of Pax Americana, the last vestiges of an imperial democracy operating on a foreign policy based on a predominantly Protestant missionary pretext about the White Anglo-Saxon Christians 'saving' the weaker dark-skinned non-Christian brethren whose land just happens to have natural resources that the West needs, and it just happens to be located in a place of strategic interest. From the colonial ventures of Portugal five hundred years ago to the present, the world has seen the blatant hypocrisy of the Caucasian West toward the non-white East and South. Is it not time to at least be honest about imperialism and stop with the pretenses of freedom and democracy, of humanitarian concern for the Muslim and/or potential threat that the Muslim poses to the West that has defense capabilities sufficient to destroy the planet many times over?

DOES DIVIDING IRAQ BEST SERVE US INTERESTS?

 Leslie Gelb among others has proposed that the best way for the US to exert influence in the Middle East and contain Iran is to divide Iraq into a federation of three groups - Kurdish, Shi'ite and Sunni. After all, Yugoslavia was divided and the small republics seem to be doing just fine, after a decade of war, so why not do the same with Iraq now that US troops have withdrawn. Why not give the US to send troops back to Iraq once conflict flares up between these three entities and that way Iran will stay out Iraq and the US can keep containing it?

Those familiar with the history of the Middle East know that divisions such as Gelb proposes are a reflection of Western divide and conquer mode of thought, more precisely of the US right-wing and Israeli lobby position. Gelb's proposal creates more problems than it allegedly tries to solve owing to a lack of appreciation of complex problems, and a single-minded purpose of undermining Iran at any cost to the region, the world, even to the US that cannot possibly benefit from such a reckless scheme.

During the Paris Peace treaty negotiations between President Woodrow Wilson and his European counterparts, the division of the Middle East and its oil fields was very controversial and exposed the Great Powers as imperialistic, just as Vladimir Lenin responded to their designs when he publicly proclaimed that the USSR would have no claim in spheres of influence. The situation became even more complicated after Mustafa Kemal Ataturk defeated Greece in the Asia Minor War and began making demands of his own in Iraqi oil fields. We are now looking at a similar situation with regard to Iraq, except that the US is not holding all the cards it needs in order to have the leverage it needs.

Let us first consider that the Gelb proposal is actually as old as the US invasion of Iraq and it came from inside the Bush administration. Gelb is merely rehashing old material that experts inside the various government agencies have discussed in the last decade and then set aside. This is partly because the US cannot draw the map of Iraq in the manner that the Great Powers drew the map of the Middle East under the 'Mandate system'. Russia, China, Europe and the Arab countries must have a voice, so the Gelb proposal is worthless because unilateralism is out of the question on this matter. The only way that Iraq's division could take place is if the US instigates conflict among the various factions in order to realize the country's division.

Let us also consider that the US is desperate to have some sort of control in the region and Gelb as an old-style imperialist who equates Israeli security with US interests reflects exactly that mindset. But would not a division of Iraq strengthen Iran even more and weaken the Arab countries? Would not a division of Iraq strengthen Syria - no matter who is president - and Turkey that has publicly proclaimed it wishes to revive the influence it enjoyed under Ottoman rule? Would not such a division entail a great threat of what the US calls 'terrorism' and instability in Turkey, Syria and Iran owing to the Kurdish question that involves all of these countries? 

Above all, let us consider Gelb's assumption that Iran wants to gobble up Iraq. Would the rest of the Arab states, Turkey, Russia and China allow for such a 'gobbling up', even if Iran had the inclination, means and intent? Is Gelb aware that Iran and Iraq have a history of conflict - remember the Iran-Iraq War in which the US backed Saddam Hussein? Gelb's position is a reflection of extreme right-wing propaganda intended to beat the war drums against Iran, and it is shallow and simpleminded thinking on foreign affairs.

Those who have studied US-Iraq relations know that there is not one ounce of consideration for what happens to the people who live in Iraq, for if that were the case proposals to destroy the country even more than the US has done in the last ten years by dividing it would not be in any kind of discussion. If Gelb and those who claim to be concerned about Iraq really care, they would try to convince the US government to ameliorate relations with Iran and deal with it in accordance to its current power, instead of trying to find one pretext after the other to have Israel bomb it, or to have drones hit various military and nuclear program installations. As paradoxical as it may sound, the best (meaning cheapest and most beneficial to its own interests) way for the US to secure greater influence in the Middle East is to normalize relations with Iran and forget the old Cold War style confrontation that does not apply, and even if it were tried the cost would be immense.

 Facts about Iraq's constitution:

1. Iraq drafted a constitution in 2005 under military occupation conditions and with the considerable oversight of the US regarding both process and substance. Iraqi participants at the time of the drafting explicitly stated that the US had 'input, oversight, and evaluation'.

There are many aspects of the Constitution, such as human rights protection, that are excellent. But how legitimate is a Constitution drafted when a country is under military occupation and the occupying force has a dominant role in process and substance?

2. The Constitution was an attempt by the US as a military occupation power to demonstrate that: a) the country had 'legitimacy' emanating from domestic bases and not from the occupying forces, and b) to set the foundation for a type of regime the US would accept. Owing to domestic American and world-wide criticism of the US role in Iraq, the Constitution was intended as much to serve political purposes of the US as it was to provide a sense of constitutional order in Iraq, especially against the background of substantial Iraqi opposition to the US.

3. Representatives from Sunni, Kurdish and Shi'ite were apprehensive about the US role and the push toward federalism owing to suspicions that they had about each other's ambitions and about which faction the US would favor at any one time. Despite the reality of religious and ethnic divisions, the federalism element in the Constitution was a US insertion. However, Chapter V, Articles 116 through 121 of the Constitution that deal with regionalism are open to different interpretations of what federalism means, depending on the particular religious, ethnic and regional group. That the US continued to 'encourage' federalism more than the Iraqis as a means of keeping Iraq a weak American satellite reflects the nature of US military, political and economic interests, and it has nothing to do with the people of Iraq.

4. It is one thing drafting a Constitution under military occupation, and entirely a different story trying to implement it after the occupation forces have left the country.  

CAN OBAMA WIN 2012 WITH HIGH UNEMPLOYMENT?

It is an undeniable fact that the unemployment rate is at historical high and the income distribution at historical lows. From 1948 to the present, has there been an election year when unemployment - currently at 8.5% officially, as my chart below indicates:

1948- January - 3.4% unemployment

1952 - "" - 3.2% 

1956 - "" - 4.0%

1960 - "" - 5.2%

1964 - "" - 5.6%

1968 - "" - 3.7%

1972 - "" - 5.8%

1976 - "" - 7.9%

1980 - "" - 6.3%

1984 - "" - 8.0%

1988 - "" - 5.7%

1992 - "" - 7.3%

1996 - "" - 5.6%

2000 - "" - 4.5

2004 - "" - 6.3%

2008 - "" - 5.4%

2012 - "" - 8.5%

Only Ronald Reagan's administration came close to the current unemployment rates, which is interesting for those who either remember of have studied that era and will know that Reagan put foreign policy front and center to distract the American people from the economic issues confronting them. But even in the Reagan era that was responsible for slashing social welfare programs and strengthening the corporate welfare state, especially defense, income distribution was not as uneven as it is today.

In the past few years and months, I have provided numerous postings on the issue of US income distribution, but any person interested in doing comparisons between income distribution in the mid-1980s and today will find that today the middle class is experiencing a sharp downward socioeconomic mobilization. This is primarily because Reagan borrowed heavily to finance tax cuts that trickled down to the rest of the population. Some may recall the trickle-down economics and John Kenneth Galbraith criticizing the theory and practice as analogous to the horse (eating massive quantities from the trough) while the sparrow was picking up what fell on the ground from the horse's mouth! The current administration must pay down debt, so it cannot engage in heavy borrowing or any more liberal monetary policy as a stimulus.

Therefore, it must take the income to pay down debt from the middle class, especially given the resistance of the corporations to make any sacrifice for a stronger fiscal structure. This does not mean that by mid-summer the rate unemployment will not be at around 7-7.5%, giving Obama a boost for November. This is his race to lose, given that the Republicans have nothing to offer that would strengthen the American middle class. In closing, if Obama were to ask the American people "Are you better off now than you were four years ago" what would the majority answer? Statistically speaking, the majority of the American people, middle class and workers are worst off today than four years ago, although that is not necessarily the fault of Obama alone.

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GLOBAL CONSEQUENCES OF DESTABILIZING IRAN

The US antagonistic relationship with Iran is now entering its fourth decade. It seems to the interested observer of international affairs that there would have been some progress toward ameliorating relations simply because it makes sense for all parties concerned. With the exception of defense contractors, oil producing nations and the oil industry, no one really benefits from this chronic antagonism that threatens to disrupt the world economy and regional balance of power.

Is it the fault of the US and its junior partners, which merely wishes to stop Iran from acquiring nuclear weapons? Is it the fault of Iran, which argues that its nuclear program is for non-defense purposes and that the US has been silent about Israel that actually possesses nukes? Is it a case of Iran filling the regional power gap that the US has left now that its troops are out of Iraq and plan to withdraw from Afghanistan (by 2014?), thus the US must make sure to keep Iran weak?

Is it a case of Iran refusing to submit to the political, economic and military might of the West, preferring instead to cut deals with a number of countries individually, especially China and Russia, so that it can enjoy its national sovereignty? Is it a case of Iran posing a threat to: a) Israel's security; b) regional security, given that the pro-West Arab countries are adamantly against Iran having a hegemonic role; c) representing a rogue state and/or supporting 'terrorism' - as the US and its partners define the subjective political term?

The reality is that the US is now willing to destabilize Iran and along with it the world economy by confronting this country with new sanctions, which have some impact on the national currency and national economy, but mostly a devastating impact on the very fragile world economy. Iran supplies one-sixth of the world's oil, but China and Japan rely on Iran and the Straits that Iran threatens to close for most of their energy sources. PETRO-China, whose combined worth is the largest in the world, at an estimated $1 trillion that is more than several Dow-30 companies combined, has absolutely nothing to gain and everything to lose going along with the US sanctions.

What is the US hoping to achieve, and what can it really achieve that it has failed to do so in the past three decades in Iran?
1) Geopolitical goals include a non-nuclear Iran that can be checked by Israel which possesses nuclear weapons. - Possibility of achieving the goal? Very slight, because eliminating the nuclear facilities will only delay the country before it begins again to rebuild.
2) Economic goals that include integration under the traditional patron-client model - the same one the US has been relying on to deal with the rest of the Middle East, Latin American, and African countries that open their markets and accommodate foreign capital investment at the expense of national capitalism.Very slim possibility of achieving this goal, for it would in essence mean going back to the Shah era.
3) Political goals that include becoming a more pluralistic society, respect human rights, and allow minority voices to be heard so that there is no strong dominant political group controlling the state. Very slim possibility this will be realized with external force, but much more likely from internal public pressure.
4) Foreign policy goals that include rapprochement with Israel and the pro-US Arab states, going along with US operations intended to fight Islamic terrorism, and allowing the US the pre-1979 Revolution role of determining the regional balance of power. The only way to achieve this goal is regime change, as is the ultimate goal of the US.

Are the four goals I have listed above worth the cost to the rest of the world, especially since it is highly unlikely the US can succeed? The US knows that:
1) Iran is the only country in the world the supplies all of Southern Europe with crude oil on credit. Southern Europe is suffering a very serious sovereign debt crisis and is under voluntary or IMF-EU-imposed austerity. If the US-Iran diplomatic conflict escalates, Iran will cut off countries that do not have the cash for crude oil and the price of crude will rise sharply, thus derailing the already recessionary world economy.

2) Iran controls the passageway where more than two-thirds of  China and Japan's energy flows, and that destabilizing Iran necessarily entails undercutting East Asian economy and thus the world economy. As the world's second and third largest economies, China and Japan cannot contribute to global growth if oil prices spike upwards and supply is short. While China and Japan want lower energy prices, they have no guarantees that the US sanctions will somehow benefit them long-term.

3) Sanctions have never worked no matter how tough, and in this specific case, the US destabilization efforts only strengthen the regime that the US wants undermined. Although in recent weeks some Iranians have been going to the banks converting their cash into foreign reserve currencies or gold, they will come together behind their government when the entire country is under attack merely because it is pursuing a nuclear energy program that the US wants destroyed.

4) Closing the Straits of Hormuz would be an act of war, as far as the US is concerned, but would the US go to war to enforce sanctions at the risk that somehow this would modify Iran's conduct, even if that means negotiating on the nuclear energy program as the US, France and Germany wish, purchasing the equipment from their companies and operating under their watchful eye? Obama has been truing to convince Japan and China of the wisdom of going along with the new round of sanctions because Iran will have to yield to such pressure sooner or later. However, Iran has survived under great pressure in the past 32 years and this round is unlikely to have any lasting impact, given that sanctions cut both ways and Iran has always found ways to secure supplies by circumventing sanctions.

5) alarmist propaganda by all sides has momentum of its own and can lead to low-level conflict that may escalate into a broader conflict, unless Russia and China step in forcefully to deescalate the impending conflict before it starts. However, neither China nor Russia are willing to risk their economic and political relations with the West to save Iran, if it comes down to a war scenario. Iran fairly isolated would be even more dangerous than if it has China and Russia as its supporters containing it in a manner that the US cannot.

There have been reports that John Yoo, the infamous Justice Department official who authored memos (2002) to redefine torture and to advocate torture of adult detainees and their children, has been advising Republican presidential candidates to be prepared to confront Iran militarily, directly or through Israel. Yoo has argued that there are 'legal grounds' to engage in military strikes against Iran that plans to become a nuclear power, thereby threatening America's ability to self-defense and threatening regional security, namely Israel that wants Iran hit no matter the cost to the rest of the world. One must remember that Yoo is the same extreme right-wing ideologue whose definition of torture was never accepted by most legal definitions anywhere else in the world.

Yoo is not the problem, for he is merely a well-paid right-wing populist lackey advocating destabilizing Iran, and by implication the entire world. The problem is the Obama administration facing a tough election and its need to appear tough on foreign policy. Iran is an easy target for the US, because no one would object if the US went all out on this one.

As Colin Powell warned his boss George Bush who wanted US invasion of Iraq, if the US goes to war, then it has to accept the consequences- all of them, at home, in Iraq, regionally and globally. And those who have studied the Middle East East know that Iran, unlike Iraq, is the regional superpower. If the US could only destroy Iraq only to have a regime now that is friendlier to Iran than it was under Saddam Hussein, what is the goal of destabilizing Iran? Is this about the waning power of Pax Americana trying to project power that it simply does not have?

I am optimistic that China and Russia may be pressuring Iran to cut some kind of deal, to make some concessions to satisfy the US for now, to make Obama appear that his grandstanding paid off politically. After all, he needs something to make him appear strong and resolute during this mean election season that will be difficult given that unemployment remains at historically high levels and incomes at historically low levels. If Iran takes the American 'destabilizing' bait and does not back off on some issues to give the world's waning superpower the face-saving dignity it needs, Iran will suffer, but so will the rest of the world in a year that the IMF has warned will be very difficult for growth and especially for employment, all of which translates into greater sociopolitical instability.

GLOBAL ECONOMIC REALIGNMENT: ASIA, US and EU

Ever since Nixon took the step to ameliorate relations with China, there have been gradual global economic realignments. The end of the Cold War and the creation of the European Monetary Union were major historic turning points in global realignment, as was the US decision in the 1990s to promote China and Taiwan to counterbalance Japan's Asian hegemony. We are currently witnessing the unfolding of realignment with the US making bold moves toward consolidating its position in the Asia-Pacific markets, and with China and Japan fighting back with their own plans for regional cooperation.

In December 2011, China took steps to forge closer ties with Japan, South Korea and Afghanistan. This was part of a broader policy to consolidate its economic hegemony over Asia and to counterbalance the US role in the Asia-Pacific region, but also to protect itself from the economic problems facing the European Union that is undergoing major restructuring.

In mid-November 2011, I wrote a piece arguing that the US "Trans-Pacific Partnership" initiative at the Asia-Pacific Economic Cooperation (APEC) summit was aimed at containing China's economic role, but it would actually harm Japan's economic interests as well. I further argued that it was questionable whether the US could actually collaborate with China to carve out spheres of influence in the manner that the Great Powers did in the 19th century, and that regardless of the US-China relationship, Japan was the big loser from the Trans-Pacific Partnership initiative. At the time, I speculated that Japan could move toward closer cooperation with China to counterbalance the US.

During the 1980s, Japan experienced substantial economic expansion, while the US economy remained fairly stagnant by comparison. This reality convinced some US politicians and analysts that Japan was practicing unfair trade, focused on limiting imports from the US and exporting without restraints. It is interesting to note that the US has been using some of the exact same arguments against China in the past ten years as it used against Japan in the 1980s. Tensions were inevitable in US-Japan economic relations as long as Japan was gaining global market share at the expense of the US, until the US decided to use China and Taiwan to counterbalance Japan's hegemonic influence in Asia and the world.

The US-Japan bilateral relationship was gradually transformed in the 1990s when the US began to move toward a multilateral policy that aimed at closer integration of China and Taiwan into the world economy. Focusing on geopolitical rivalry that China posed historically, Japan did not take the necessary steps in the 1990s or in the first decade of this century to forge closer economic relations with China - at the bilateral and regional levels - to counter-balance the US. From 2001 to 2006, Japan focused on political tensions with China, and engaged in select boycott of Chinese products at times. Meanwhile, the Japanese economy continued to lose ground to China until the global recession of 2008-present finally pushed Japan into third place in world economic rankings and allowed China to take second place.

Exactly one month after the US Trans-Pacific bloc, China and Japan agreed to begin talks that would include South Korea for regional economic cooperation. The plans for such talks probably pre-date the APEC summit in November, but that summit may have pushed the two Asian countries to move faster on the issue.

At the same time, China announced a major economic integration initiative with Afghanistan. China's National Petroleum Corporation will become the first foreign company in Afghanistan's oil and natural gas reserves, a move that may have taken many analysts by surprise considering that the US has been fighting a war in the last ten years and has nothing to show for it in terms of tangible commercial gains after the conflict ends. Afghanistan is also interested in developing its mineral (copper and iron) resources that the US estimates at $1 trillion, while others believe the reserves could go as high as $3 trillion. To exploit those resources, Afghanistan has looked to China whose economy has been expanding rapidly and needs raw materials to continue the expansion.

In 2008, China Metallurgical Construction agreed to develop the Aynak copper mine in Afghanistan's Logar province, investing $3.5 billion, the largest foreign investment in the country. In short, China has a stake in the US stabilizing Afghanistan that is already set up to become one of China's economic satellites in Asia. That the US taxpayers have paid dearly in the last ten years to prepare Afghanistan for Chinese investment is one of history's interesting ironies. Just as interesting is the fact that the US has now driven Japan and China, with South Korea as junior partner, toward closer cooperation to counter-balance the US role in Asia.

The framework of China-Japan cooperation includes, but not limited to the following:
a) the two parties agreed to acquire China’s treasury debts as a means of stimulating economic activity.
b) enhancing their respective government bonds, the two countries will promote their respective currencies in global trade.
c) free trade between China, South Korea and Japan.
d) possibility of the trilateral trade deal expanding to join the US-led Trans-Pacific Partnership.
e) Japan to play a larger role in satisfying China's consumer demand as income rise in the future, considering that the two signatories are the world's largest holders of foreign reserves.

Despite their deep historic political differences, China and Japan have agreed to forge a closer economic relationship not only to counter-balance the US, but also EU, and at the same time to protect their countries from the imminent reality that recessions in the US and EU have a profound impact in Asia that relies on exports for its rising GDP.

Increasingly, the world does appear to be divided into regional blocs, regardless of the vacuous rhetoric about 'free trade', equality of trade opportunities for all nations. As the EU is undergoing structural shifts in its integration model from an inter-dependent where there was a semblance of national sovereignty to a patron-client model where Germany, with France as junior partner, imposes its hegemony over the eurozone, the other Great Powers, including China and Japan, are looking to remain competitive by forging new economic pacts.

The Great Powers are scrambling to secure markets and raw materials around the world, just as they did in the Age of Imperialism (1870-1914). The question is what will such a race for markets and raw materials mean for the global balance of power, for possible conflicts between the powers forging these regional blocs? Will conflict be resolved through diplomacy, or should we expect major wars in the 21st century as we had in the 20th century?

GAMBLING AND FINANCE CAPITALISM

Fyodor Dostoyevsky brilliantly captured the spirit of THE GAMBLER in one of his best novels. Subconsciously, the motivation of the gambler is to lose, a theory that Freud confirmed pinning it to loss of parental love and caring in childhood. Contemporary political economy is rooted in a 'Gambler' mindset, although the house (casino) is made up of financial institutions gambling and taking risks with peoples' money and if the house loses, the government bails it out.

In the last three decades of ebullient enthusiasm about the free market economy, gambling became more popular than ever around the world. Enthusiasm for gambling in casinos ran parallel to enthusiasm for gambling in the equities markets during a period when financial institutions risked other peoples' money - from individual investors' money to retirement funds to charity foundation investments - on derivative securities contracts, which in essence resulted in toxic assets during the tech-housing bubble. Investors were left holding worthless paper and the bursting financial bubble ushered in the worst global recession since the 1930s. When debts came due, government asked taxpayers to bail out the same financial institutions that had gambled on derivatives.

Gambling in stock markets was accompanied by traditional forms of gambling that were very popular not just in affluent countries, but in Ireland and across southern Europe (PIIGS) currently facing serious fiscal and economic problems. In Greece, for example, in December 2010, one billion euros was spent on legalized gambling - approximately half on casinos and the other half on state lottery and betting services. Illegal gambling operations of course are hard to trace and online gambling is not regulated.

The Greek government estimates that illegal gambling generates five billion euros per year, or about the same amount as legalized gambling. Given that the GDP of Greece is roughly 240 billion euros, ten billion euros spent on legal and illegal gambling represents a very high percentage of GDP for a country in a deep recession and under austerity measures. After consulting the IMF and EU, the Greek government plans to introduce legislation to issue gambling licenses for online and other 'gaming operations', so that govt can get its cut.

A similar picture exists in Portugal, Spain and Ireland where gambling has taken off in the past decade along with astonishing GDP growth rates too high to sustain on perpetual borrowing and cooking the books to show much lower than the actual debt. When Ireland established its first land casino in 2001, people spent 1.6 billion euros, an amount that has gone up substantially since then, and that does not include what is spent in sports and illegal betting operations.

In the last ten years gambling has risen even faster in Ireland. The sharp rise in gambling has brought a rise in related problems among them addiction, suicides that are 20 times more likely than in the general population, much higher divorce rates than the general population, alcoholism and drug addiction, and crime, all of which entail high costs to the formal economy, to the public health care and government in general, and of course to families that gambling destroys.

One could argue that gambling has existed throughout history as a part of human nature; that gambling is an exercise of free will of citizens with the privilege to live in a free society and to risk their own money. Beside, gambling per se is a non-violent form of entertainment, no matter how self-punishing it may be as Freud argued.

Gambling has risen sharply in the US as well. In 2007 Americans gambled more than twice what they deposited in their savings accounts. Gambling casino profits are estimated at $30 billion and for state lotteries at $17 billion. Americans spend more on legalized gambling than all other forms of entertainment. The gambling industry has grown ten-fold in the past 30 years and 80% of adults gambled at least once in the past year. Low-income people are far more likely to buy lottery and engage in off track betting than individuals with incomes above $50,000 and college education. There are an estimated 15 million addicts and the cost to society is in several billion ($5 billion ten years ago); a figure that does not take social costs into account.

Whether individual states (all except Utah and Hawaii) in the case of the US, or central governments in other parts of the world, including China that today has a gambling problem, legalized gambling is promoted and indirectly encourages illegal gambling as well. The question is to what degree should government be in the business of promoting self-destructive and addictive behavior without a warning label. Are consumers not entitled to know the consequences of services they are purchasing? Should government have a role in promoting gambling as a method of raising revenue? And what if government is guardian of the 'house' at the gambler's expense?

Gambling is a form of indirect taxation that falls mainly on the middle class and workers. Despite the social costs of gambling to society, it is becoming more popular and 'experts' advise governments to support it, especially online gambling. In some countries like Spain more is spent for online gambling than in casinos. PricewaterhouseCoopers is advising the US and other government that regulating online gambling will generate new revenue and keep direct taxes from rising.

There are those who argue that taxes from gambling helps to fund social programs. Based on this logic, why not put slot machines in every school from primary to college, in every work area lunch room or cafeteria, in every public bathroom, in every street corner? And why stop with horse and dog tracks, why not reintroduce Roman Circuses with live subjects - humans and animals - battling out to the death? As long as the taxes generated, gambling is for a 'good cause'!

Gambling is really an extension of the value system and ideology that has driven society to the current phase of finance capitalism, namely, "Las Vegas, or casino, or horse-track capitalism," as some are calling it. The US and other governments permitted banks and financial institutions to trade trillions in derivative contracts at an extraordinary high risk to the economy but very lucrative for the traders of such contracts. This type of gambling capitalism was responsible for the current crisis. Despite US and EU political commitments to do something about the destructive derivatives market, very little has been done. As soon as world markets rebound to pre-recession levels, there will be a return to higher risk CASINO capitalism that will drive the world economy into the ground in the next contracting cycle.

Wall Street and powerful financial interests globally will not permit government to introduce rigid regulation of swaps and other derivatives from which a few people make very high profits. When a Chicago construction worker plays the horses or a Cleveland auto worker buys a lottery ticket, or a retired Iowa City college professor goes to Vegas to test her luck, they are all gambling with their own money, perhaps because they lacked parental love as children, or because gambling fills the void of their existence.

When a New York banking executive is trading derivative contracts, he is creating toxic assets and gambling with other peoples' money to guarantee a profit for himself and a few other hedge fund investors. If government is to issue warning labels for gambling, how is to warn the public about the type of gambling in which financial institutions engage; and how is it to warn the public about government as protector and guarantor of same financial institutions? If only Fyodor Dostoyevsky were alive to capture this new gambling spirit of markets gambling people's money and bailed out by the state with peoples' money!