On Reason, Freedom and Democracy

Pls note that Masadi sb has been banned and so cannot respond to you.

Regards

Re: # 74...lol..............
Mwaqar
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Re: # 73; hamidm sahib

at least he is getting published ... and we are spared the randi rona (praise the moon-god) ... that's a small price to pay for the constant whining before

masadi mian,

..... sorry it took me this long to post my comments, but i read your article ten fifteen times and still don't understand a word of what you are trying to say ..... either i am stupid, or you are a mad man ..... i like to think that you are a looney .... but, i might be wrong

Living hell of trapped bodies after blast..THE NEWS
PESHAWAR: As the wounded tried to flee, they were engulfed in flames and buried alive by falling masonry. With one deafening boom, a congested Pakistan street full of women and children was transformed into hell.

“It was like a massive earthquake. Everything in my shop fell on me. There was so much smoke. When everything fell on me I passed out,” clothes shop owner Ali Akhbar told AFP from his hospital bed in the city Peshawar.

Rescue workers fished out charred bodies from the debris where a woman was buried in the rubble near a mosque, three buildings and five cars that were destroyed in scenes of armageddon, an AFP reporter said.

Bodies were trapped under huge slabs of concrete and crumbling bricks, the slow rescue heavily constrained by the collapsed buildings, pushing the death toll ever higher as cranes were mobilised to pluck survivors to safety.

The smouldering wreckage was devastating testament to a routine shopping trip or a pleasurable day out turned into bloody carnage for scores of ordinary families in the historic city of Peshawar and the largest northwest.

“I saw a flash of blue and white light and I was thrown to the other side of the street. I’m surprised I’m alive,” said Shahid Khan, 15, who was standing with a popcorn cart on the side of the road when the bomb went off.

“My entire shop fell on me. Smoke filled my face,” said Raza Ali, 30, a grocery store owner whose face was badly burnt.Crowds ran screaming down alleys in the market place, desperate to get away from the congested Meena market, fearing that a second bomb could explode. Others lifted out the casualties, their clothes splattered with blood.

“I was inside my shop. All of a sudden, there was a huge blast. It was dark everywhere. The roof of my shop fell on me, trapping me in the debris. Then I don’t know what happened,” said another survivor in hospital.

Television footage showed harrowing images. A young man was seen biting his fingers in disgust watching his shop and livelihood go up in flames.Another person in the crowd repeatedly shouted out name of a loved one, his panic rising with the passing silence. Some were seen rushing out with bundles of their belongings loaded on their backs.

The agony of loss was overwhelming at the hospital, where survivors wept over dead loved ones, crying into mobile phones, with staff struggling to cope with each new consignment of casualties as a state of emergency was declared.
Mwaqar
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Masadi sahib anyone who says something against cruel ignorant Taliban you label them as CIA employees,today barbarian Taliban killed 105 people in Peshawar,what was their crime,were they CIA'S employees too? Terrorists showed their ugliest faces by targeting women and children in Peshawar. According to reports, 70 women and children were killed and 25 suffered injuries.
Mwaqar
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http://thepathans.blogspot.com/
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Re: # 69

Dost sahib:

A short story called "Shatranj ke Khiladi" by Munshi Premchand. It is very apt and applicable don't you think?

Yesterday's news on CNN was that Obama administration has got budget approved to pay dollars to buy Teliban (presumably good Taliban). West's strategy as I have often stated here, is to create a sustainable "Chaotic Buffer" so that terror acts can be contained in that area. British did that earlier in that part of the world.

KHYBER:

"The military acknowledges that it has struck deals with two other militant factions, both Mehsud rivals who focus their attacks in Afghanistan. Displacing the Taliban might empower those groups, some analysts said."

The amazing thing is that, despite a multitude of such reports, there are deluded Pakistanis who think that the civilian govt. and army are now of one mind in cleansing Pakistan of all jehadis. If they are of one mind, it is only that they have this notion of anti- and pro-taleban (thanks zee!). And there is no better way of doing so that calling some taleban as hindu and zionist agents. Works like a charm!

Cheema sahib: i did not red-flag your posts. if you have anything substantive to say please say it - dont just parrot trite gora phrases ("cuckooland") and think that proves anything other than what i said below about your emitting nothing but gas.

Re: # 53
haneef...
who will give chance?
If Pakistan tries to maintain military balance with India, it will never be able to find an effective democracy...
The other factor, which will hinder progress is traditional islamic value system...If you allow civilians to use arms, you are bound to bring trouble to yourself...In that respect both muslas and Communists are real danger for democracy....

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cheema sahib: thanks for the character certification (I shall frame it and place it on the wall), since you have nothing to contribute to the discussion other than gas, I will have to wish you a nice day and last post.

some of us are foolish enough to take events in Pakistan seriously, rather than watching in amusement from a safe distance.

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#61 cheema sahib: such modesty on top of such...er...stratrospheric enlightenment!!

like I attempted to clarify for the benefit of your friend on UP, I am only as 'khandani' as you are sir

#59 cheema sahib: i am demolished by your stratospheric comments. after all, poor folks like me cannot hope to match a "khandani" intelketchool like you.

tahmed sahib ... sometimes I do feel sorry for the future of the universe you are an inhabitant of .... I mean that in the nicest possible way :)

#52 Posted by KHYBER on October 27, 2009 5:43:02 pm


,IS IT NOT TIME TO CRUSH THEM OR WE STILL LIVING IN DENIAL ?



denial? dude..you all are practically egyptians...country based around denial...

haneef.gujar2: Disinformation is a key weapon in the enemy's arsenal. And the biggest piece of disinformation is to point away from the real enemy (i.e. taliban adn al qaeda) and towards the democracies of the world, US, India, Israel. And yet, it is well known that democracies dont go to war against each other - dictatorships (in their variety of forms including military, religious, dynastic) do that with one another and with democracies.

Time has shown the extent of the damage to the nation Musharraf's dictatorship has done - that what was promoted as "peace deals" with "fellow muslims" by the dictator have been revealed over time (per the article posted by Khyber below) to have in fact been the betrayal of the poor people of Waziristan to a ruthless invader.

Just one more reason why dictatorship is the worst form of government, regardless of how "enlightened" or "pious" or "patriotic" the dictator proclaims himself to be.

more sad news: Car bomb blast kills more than 80 in Peshawar :(

Khyber #52 It is clear from this article that the "deals" whereby Musharraf stopped the military on three or four different occasions from going for the kill when it had the taliban on the run was nothing short of a betrayal of the people of Waziristan. Let us hope this time there is no treacherous Musharraf around to stop the Pakistan Jawans from completing the job and sending the enemy to hell.

Re: # 53...well said...haneef.gujar2
Mwaqar
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Re: # 26 Re: # 26 Khyber you have made some good points. Elaborating on my earlier post- I do not think entrusting a select group with the welfare of the masses - with no sort of accountability is going to solve the problem. The accountability is exercised through the ballot-and that is the beauty of democracy. True, people misuse their vote, they sell it etc-but we can only hope they learn with time.

I dont see any other solution- definately not in the Pakistani context. The jurnails,the feudals,the mullah's,the bureaucracy cannot be trusted. What about the politician? Well the people vote for them. If they don't perform- then lets weed them out by the ballot. Unfortunately Pakistan has never gone through this weeding process- because democratic goverments have been sabotaged. I say give- democracy a full continuous 15-20 years- you will see people will choose better leaders. Cheers!

Waziristan offensive is pivotal test for army, residents
Washington Post

DERA ISMAIL KHAN, PAKISTAN -- As Pakistan's army battles with guns and jets to wrest control of the restive South Waziristan region from the Taliban, it remains unclear whether the military will have another kind of ammunition it desperately needs: the support of people who have lived in the militants' grip for years.

Among refugees who were jostling for donated blankets in this dusty frontier town last week, few dared discuss the Taliban fighters controlling their villages. Several whispered that there was no graver offense than speaking against the Taliban, and seemed fearful that breaching that rule would haunt them once the offensive -- which several referred to as an artificial "drama" cooked up to satisfy the U.S. -- was over.

"The operation is a joke just to please the foreign masters," said Saidalam Mehsud, 59, a burly driver. "Whenever the dollars are floating into Pakistan, such operations are carried out."

In the past week, refugees said, their doubts about the offensive intensified because they had seen little evidence of the ground operation Pakistan's military says has killed nearly 200 insurgents. While many said shells and bombs had been raining on the hilly terrain all week, some hitting civilian houses, none said they had seen government soldiers.

Instead, masked and armed militants were roaming with apparent ease and digging trenches, the refugees said. Security analysts say soldiers are moving cautiously, partly to avoid civilian casualties, and the military says it has captured key militant hideouts.

The offensive is a pivotal test for Pakistan. The United States is giving unprecedented aid to Pakistan, but is also pressuring the government here to clamp down on militant Islamist groups that attack both Pakistani targets and U.S. forces in Afghanistan. Pakistani officials say South Waziristan is the refuge for one group of Pakistani Taliban, led by Hakimullah Mehsud, that has orchestrated a string of recent attacks on high-profile targets across the country.

Hundreds of thousands of civilians have traversed craggy terrain to flee the nearly two-week-old offensive. Researchers and people familiar with the long neglected, semi-autonomous tribal area say many of South Waziristan's fiercely independent Pashtun residents desperately want the Taliban to go. But the Taliban of South Waziristan are a deeply entrenched and organized group that has had years to force locals into submission.

"They will only rise against the Taliban when they are convinced the government means business," said Saifullah Mehsud, director of the FATA Research Center in Islamabad, which studies Pakistan's tribal areas. "But they have never been convinced."

For half a dozen years, a stew of Pakistani and foreign fighters has exerted near complete control in the region. Bearded fighters travel ridges in convoys, while local commanders police villages and the rank-and-file paste up posters pronouncing the latest religious edicts.

The militancy has shattered the economy, and at least half of South Waziristan's 500,000 people had moved from the area by July, according to the International Crisis Group. Those who remain live in forced compliance, with many families offering at least one son to the Taliban to avoid drawing suspicion, researchers said. Other poor young men eagerly sign up, lured by the promise of guns, travel in SUVs and martyrdom. Amid the lines of refugees in Dera Ismail Khan, some delicately described Taliban rule as merely strict.

"The Taliban are bad for criminals and outlaws," farm worker Saidullah Khan, 37, said on a recent evening. "The Taliban cause no problems for me or other common people."

Others bold enough to speak to a journalist said the situation in South Waziristan was dire. During the Taliban's reign, roads have deteriorated and most schools have shut, residents said. Even worse, some residents said, the hard-line version of Islam favored by the Taliban has destroyed a rich Pashtun culture. Traditional drumming is banned, stifling the vibrant weddings and elaborate funerals that were once common.

But the most profound effect, they said, is the quiet, daily task of projecting loyalty to the Taliban.

"There is constant fear in our minds," said Ali Mohammed, a 35-year-old out-of-work teacher, who said he had recently come across a corpse in a field near his militant-riddled town, Makeen, from which he drew a lesson: "If they take you as an opponent or a spy, then they will punish you -- very brutally."

One businessman who fled last week to Peshawar, who did not want his name published out of fear for his life, said he had carefully carved out a narrow space to avoid Taliban wrath. He is one of the few male residents without a beard, but he dutifully attends the funerals of suicide bombers. And when he runs into fighters, he praises Baitullah Mehsud, the former Taliban chief who was killed by a U.S. drone strike in August, as a martyr and the "only big tree under which we were sheltered."

Privately, though, the businessman said he had decided the insurgents were mostly thugs, not religious purists. Worried his two adolescent sons might think otherwise, he regularly exhorts them to reject the Taliban allure.

"I am telling them, 'If you are in favor of jihad, okay, but think about it -- have these mullahs preaching to you also gone for jihad?'" the 35-year-old, boom-voiced man said in an interview in Peshawar. "This I cannot say publicly, or I would be killed."

Khadim Hussain, who researches Pakistan's tribal belt at an Islamabad-based think tank, said that a recent survey he directed in the region revealed widespread dislike for the Taliban's extremist ideology. About 550 informal interviews with residents showed most favor targeted attacks on insurgents, he said.

Even if the military offensive succeeds, some South Waziristan natives said they feared it would simply usher in a new set of outlaw rulers. The military acknowledges that it has struck deals with two other militant factions, both Mehsud rivals who focus their attacks in Afghanistan. Displacing the Taliban might empower those groups, some analysts said.

"We are silent in this whole drama. But that does not mean we are Taliban," said Mohammed, the out-of-work teacher who spoke openly only inside a car, away from a packed refugee registration point here.

If the military offensive flushed out the Taliban, some observers said, the people of South Waziristan would work to hold their ground. For now, they are crammed into rented homes outside the battle lines, waiting with hushed, almost muted hope.

"We are very weak," said Gulzada Khan, 68, a white-bearded elder in a soiled striped turban who fled to Dera Ismail Khan. "It is the worst time in my life. We were proud, respectful people. We never bowed down to anyone. Now I think we have lost that glory."
SO THOSE TRIBAL MEN SPEAKING IN THIS ARTICLE ARE AMERICANS ETC???IT IS REALLY SHOCKING TO READ HOW TALIBAN INFLUENCED HAS INCREASED IN TRIBAL AREAS,IS IT NOT TIME TO CRUSH THEM OR WE STILL LIVING IN DENIAL ?

& most of the damage is self-inflicted (US).

Asadi, I forgot to mention my appreciation 4 ur article.

Yes, the American world we live is going to an end sooner than later & most of it is the damage is self-inflicted (US).

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okhla writes "Since culture is objectively diffused through rational organizations in the post-modern era"

I know that okhla reads at the sixth grade level therefore he cannot comprehend this, but the fact is culture is objectively diffused, what Simmel the sociologist referred to in his "Philosophy of money" as objective culture, where your mode of life is not self determined but determined by the organization that control the very means of your life and how it is conducted. Weber referred to it as the Iron cage of Bureaucracy, contemporary sociologists call it the McDonaldization of society. Habermas referred to it as the "colonization of the life-world" where system integration takes over social tradition. BTW rational organizations are bureaucracies which by definition involve written rules and procedures in how your work is to be conducted, a hierarchy of authority and specified roles. You need other references I can provide those as well.

Tahir sahib I await your comments and comments by the CCC. IT is time you all grew up.....

have a nice day,

Anil sahib, I already addressed your concern about peace time preparation. The wars conducted today are not for protection, they are the necessary consequence of having a permanent war structure that increasingly defines the world based on how the US has been projecting and defining "reality" post WW2.

Okhla, any article is better than your solo entry in your ilogs that states "great day at fishing".

Ahmad sahib, if those militants are our creation why is America so bothered about how we deal with them. Do the Pakistani envoys make 1000 trips per year trying to convince the Americans that the 100,000+ militia members running around the Midwestern states should be dealt with by displacing Michiganders and launching an invasion of Michigan because one of them with one hit killed more people than a dozen suicide bombings have achieved thus far in Pakistani cities (never mind that the Americans carried those out with CIA support)?

VRV this Stiglitz guy is suspect, all Keynesians are suspect, they are like the northern racists, they will lynch you just like the sourthern racists but hang you by a shorter tree to show their "enlightenment".

Read this section of his article below that you pasted "As America owes more and more money to others, those nations inevitably start to question whether they will be paid back—or be paid back with dollars that are worth anything. And there is a further political-economy problem: because reserve-currency countries can borrow so easily (other nations are willing to hold the country’s IOUs even when the return is close to zero), the temptation to profligacy may be hard to resist. Certainly America hasn’t been able to resist the temptation. Hence America’s enormous fiscal deficit."


As America owes more and more money to nations is nonsense. America does not owe money to nations, it owes money to multinational corporations, and many of them know that the American tax payer has deep pockets because the US government will keep fleecing them to hand money over to the corporations. Just look at the $900 B given on the two wars so far not to mention the $700 B bank bailout, this in addition to the over $700B in discretionary funding given for defense year in and year out. All of this is glossed over by Stiglitz and blamed on ease of loans is tempting!!! Yes tempting but why not be tempted to spend those loans on social services rather than feeding a permanent war economy??

Re: # 35 Posted by tahmed32 ..Thanks Tahmed,its too easy to blame others and live in denial,and unfortunately thats what we do...'' Then they came for me '' good article.

Mr. Asadi, What's ur opinion?



Death Cometh for the Greenback
by Joseph E. Stiglitz

10.27.2009

EMAIL ARTICLE | PRINTER FRIENDLY

From the November/December issue of The National Interest.



THE DOLLAR is in trouble. That’s clear, and it’s been true for a while.

The cornerstone of the global economic system has long been the greenback. In the aftermath of the Vietnam War and the oil shocks that brought on inflation, the value of the dollar relative to other currencies could not be maintained, so countries moved away from pegging their currencies to America’s. But still, the almighty dollar was used by countries all over the world for their reserves. The reserves provided backing for the currency and the country. They were a bank account that could be drawn upon in times of need. If oil prices shot up, a crop failed or lenders demanded their money back, there was a stockpile of money that could be used.

There was a longtime confidence in the dollar, even more when then–Chairman of the Federal Reserve Paul Volcker brought down inflation in the early ’80s. The dollar was a good “store of value.” And the fact that others were willing to hold American dollars was a big advantage to the United States—it could borrow cheaply abroad.

To assure the dollar’s standing, by the ’90s, America officially had a strong-dollar policy. Speeches by then–Secretary of the Treasury Robert Rubin affirmed our determination to maintain the value of the dollar. And for much of the period, the dollar was indeed “strong.” But it had little to do with the speeches, though I sometimes suspect not only that the secretary of the treasury but also the financial markets thought so.

For the past eight years, the dollar has increasingly become less revered. Its value has been volatile. As the rest of the world saw the United States struggling with a failing war and soaring budget deficits, many who had large dollar holdings began to reduce those reserves (or increase them less than they otherwise would have). All this put downward pressure on the dollar. And thus began the first signs of a vicious circle. The strength of the dollar is becoming riskier and riskier. The growing U.S. deficit and the ballooning of the Federal Reserve’s balance sheets leave many worried that in their wake will come inflation, undermining the long-term attractiveness of the U.S. currency.

In this article, I try to explain why the dollar is in trouble, but ask—should we care? What are the consequences? I will suggest that, for the most part, and for most Americans, it is probably a good thing. But the adjustment to a lower value of the dollar will not necessarily come easily. One of the consequences—already under way—is the fraying of the dollar-reserve system. I argue that a move to a global reserve system would be good for the United States, and good for the world.



OVER EIGHT short years, former-President George W. Bush doubled the U.S. national debt (with little to show for it, except a wrecked economy). With the debt expected to double again in the next decade (in optimistic scenarios), the picture gets grimmer still.

America’s debt-to-GDP ratio is slated to increase from 40.8 percent in 2008 to 70 percent or more by 2019, and if interest rates return to more normal levels of say 5 to 6 percent from their current range of 0.0 to 0.25 percent, it will mean the cost of paying interest on the debt will eat up a substantial fraction of tax revenue (20 percent or more)—unless taxes are raised. The costs of funding programs for the aging baby boomers will only put further strains on the budget.

Granted, deficits by themselves need not present a problem. Deficits are of course only one side of a country’s balance sheet. On the other side are assets. If a company borrows money to make high-return investments, no one is worried—so long as those investments do in fact yield returns.1 Our soaring deficit is not a concern if the money is spent on education, technology, infrastructure—all investments that historically have yielded very high returns, far higher than the interest rate the government has to pay—because then the returns to our society are far greater than the costs. But, if the money is spent on wars in Afghanistan or Iraq, poorly designed bailouts for banks or tax cuts for upper-income Americans, then there will be no asset corresponding to the increased liabilities, and then there is cause for concern. This seems to be the road we have been heading down for the last eight years and, disappointingly, are to too-large an extent continuing to travel.2

And with it there will be strong incentives to reduce the burden of the debt through inflation because inflation reduces the real value of what is owed. It means the government will pay back its debt with dollars that are worth less than they are today.3

This is how we come to another threat to the dollar: inflation.



THE STRENGTH of the dollar is determined by the laws of supply and demand, just like the value of any asset. The demand for a currency is based on the return to holding the asset relative to other assets, e.g., the interest rate received from a dollar asset, like a Treasury bill, plus the expected capital gain or loss. Demand today (and thus the value today) depends critically on expectations about the value tomorrow, but the value tomorrow will, in turn, depend on expectations of the day after. Prices are inexorably linked to expectations of the future, both near and far. If investors, or even people as a whole, believe that sometime in the future there is going to be high inflation, then those who hold dollars will be able to buy less with those dollars. The demand for dollars then—and now—will decrease, and hence (holding everything else constant) so will the value of the dollar at the present moment.

As market participants have watched the U.S. deficit rise dramatically and the Federal Reserve effectively print money seemingly without limit, fears of that very kind of inflation, not now, but sometime in the future, have grown. The fear is not of immediate inflation; there is so much excess capacity and unemployment that deflation is in fact more a worry. But the longer-term concern is that if and when the economy recovers, inflationary pressures will grow.



THE FEAR from some debt holders (China in particular) is that the U.S. government will purposely try to raise inflation—or be soft in resisting it, for the obvious reasons. I would normally think these concerns to be exaggerated. “Inflating” away debt is not painless. And if the Fed tried to do so, our foreign creditors would immediately demand higher interest rates—the only way to collect the real value of what they are owed.

The Fed, of course, right now wants to keep interest rates low because it is worried about the recovery. The only way to offset our foreign debt holders’ demands of higher interest rates would be to start buying up our own debt (the same T-bills the Chinese buy) to ensure our interest rates stay low. But this would only make the Fed’s balance sheet worse.

There is another reason that I would normally not be so worried about the buildup of the deficit and the Fed’s ballooning balance sheet. It is in the genes of all central bankers, ours included, to fight inflation. It is part of their self-identity. But the situation now is unique, so the Fed might not be as “tough” on inflation as it would normally be. The Fed knows that it is largely responsible for having created the crisis. Like the arsonist who calls the fire department, it has now received kudos for helping put out the fire. In these circumstances, it especially doesn’t want to be blamed for putting the economy back into recession, just as it is climbing out. That suggests that it may err on the side of caution as it contemplates whether to step on the brake now.

There lurks in this morass the possibility of another outcome that will not be good for America: the Fed will allow interest rates to rise somewhat—sufficient enough to stifle the inflation in the short run, but not enough to stifle our creditors’ fears of future inflation. We will pay an “inflation premium,” but not enjoy any benefits from the inflation that would normally reduce the real value of our national debt. Because we will have had to pay higher interest rates, in effect, inflationary expectations will have added to the real value of our national debt.



BUT OUR creditors will have to worry about another possibility as well. And it is equally threatening and probably more likely: the Federal Reserve will not intentionally attempt to hike up inflation, but its incompetence in managing monetary policy will do the same. In the best of circumstances and with the best expertise, monetary policy is difficult. It takes six to eighteen months for monetary policy to have its full effects. The Fed has to forecast where the economy is going, with considerable accuracy. Acting either too vigorously or too soon will plunge the economy back into recession. Delay may lead to an onslaught of inflation. Balancing the risks moment by moment is a Herculean task. Anyone looking at the Fed’s record has to feel some anxiety. It repeatedly underestimated the severity of the problems leading up to our current crisis.4 And to make matters worse, we are in uncharted territory: no central bank has confronted a situation quite like ours.

The Fed is walking a policy tightrope. Many banks today have “excess liquidity,” enabling them to lend, yet they choose not to because of fears they won’t get paid back. We wish at this moment in time that they would lend more to get the economy moving again. The difficulty is that once the economy starts to strengthen and recover, that is precisely the time when our banks would decide to start lending more. And that is precisely when we want the banks to stop lending too freely, lest we stretch the economy to the limit once again. The additional lending would risk reinforcing inflationary pressures.

The standard policy prescription for these poorly timed loans is to, somehow, reduce banks’ ability and willingness to lend when necessary. And the Fed says it will deftly do just that, for instance taking out this excess liquidity as needed, or paying interest on deposits in the Federal Reserve so that banks’ incentives to lend will be weakened. But many, looking at the Fed’s track record and its seemingly cloudy crystal ball, are unconvinced.

The most recent episode has shown that markets are often not self-correcting and central bankers don’t always know best. Worries about inflation and the Fed’s intentions and capabilities will continue to decrease the value of the dollar. The dollar is in trouble indeed.



WHY IS the future of the dollar so important? The global financial system has been called a dollar-reserve system, as countries use dollar reserves to enhance confidence in their state and their economy. But the dollar is no longer a good store of value. It provides risk without return. The yield on a T-bill today is around zero, and no one—not even the most confident supporter of the Fed—would say that it is without risk. It is thus understandable that countries which hold large amounts of dollar reserves are feeling anxious. They don’t want to see their hard-earned savings disappear. And some of the moves countries will now take to protect themselves will both weaken the dollar and move the world away from the dollar-reserve system.

China’s Premier Wen Jiabao has already forcibly expressed his concerns (which are widely shared within the country) about the long-term strength of the dollar, and while we have equally forcefully explained that he should have complete confidence in the dollar, most are unconvinced. And with China holding so much of our debt, the impact of its actions will be felt far and wide. Some small countries that can move much of their reserves out of dollars already have done so. Others are likely to follow suit—providing a further reason that the dollar may decrease in value.

Now, China and Japan face a distinct problem: if they sell too much of their reserves too quickly, the value of the dollar could fall dramatically, and that would undermine the value of their remaining dollar reserves. Moreover, it would make exporting to the United States more difficult. That has led some Americans to take comfort, thinking that China, caught between a rock and a hard place, has no choice but to continue with the current system. This is not correct. China does have strategies it can use, many of which make the future of the dollar perilous.

One tack, likely to be followed by Beijing to the extent that it can: continue to buy dollar assets, but look for investments that are somehow protected against inflation and exchange-rate fluctuations, or at least better protected than U.S. T-bills. An example of such an investment is U.S. inflation-indexed bonds (Treasury inflation-protected securities or TIPS). The value of these funds rises with inflation, so they appeal to those wary of being hit with rising prices. While that doesn’t necessarily protect one fully against exchange-rate fluctuations, it at least protects against the correlated risk of inflation. This strategy maintains the strength of the dollar, and for those concerned about that issue, it is the tack they hope the Chinese take.5

There is a second tack that is already part of the Chinese strategy and undermines the likelihood the dollar will be kept as the reserve currency: shift the locus of sales. Some have suggested that China is dependent on exports to the United States. But that may be less true than some Americans believe. Formerly, there was the belief that the U.S. financial system and its monetary/fiscal policy were such that whatever was lent would be repaid, and with “sound” dollars. That confidence has now been eroded. Instead, Beijing could provide the finance that would enable Southeast Asians, Europeans or Africans to buy its goods—or even to allow the Chinese themselves to purchase the goods made in China. For when a country provides “vendor finance”—simultaneously selling the goods and financing the sales—it has more choices. The point of vendor finance is that one is not intending to give the goods away, but to get paid at a later date. For the repayment to be made in dollars of diminished value is akin to getting the merchandise at a big discount. Instead, providing funds to Africa and other mineral-resource-rich countries could yield double or triple dividends, including access to scarce resources and enhanced geopolitical influence, especially important at a time when the United States has its focus on other matters. In the end, this simply means the Chinese will buy fewer dollars and the value of the dollar will fall.

The final part of the response, and in some ways the most important for the long run, is a reform of the reserve system, through the creation of a global reserve system. For holders of reserves, this approach lends the prospect of efficient (low-cost) risk diversification. The notion that in this world of globalization, there would be so much dependence on a single country’s currency seems anomalous, and especially so when that country has experienced such economic and political vicissitudes.

The key implication for the global financial system: the dollar will no longer be the reserve currency.



THE CURRENT system is unstable, leads to a weakened global economy and is unfair. It works to the disadvantage of developing countries, but also to the disadvantage of the United States. It is a system that produces only losers.

Developing countries have been putting aside hundreds of billions of dollars in low-yielding reserves instead of undertaking potentially high-yielding investments. Typically, developing countries should be borrowing and spending in order to grow. And this is good for the global economy as a whole. But, they are cautious because of what they saw happen during the East Asian crisis of 1997 when, without enough reserves, developing countries were unable to pay back the money they had borrowed from the West. And the economic policies foisted on them by the IMF and the U.S. Treasury not only led to what many perceived to be a loss of their economic sovereignty but also converted downturns into recessions, recessions into depressions. As the prime minister of one of the East Asian countries that suffered from the 1997 crisis confided in me, “We were in the class of 1997. We learned what happened when you didn’t have enough reserves.” Their response was the familiar: “Never again.” Clearly, these developing countries realize the high opportunity costs of doing more saving than spending, but they are equally aware of the even-higher costs—both to the economy and to their societies—of not having large-enough reserves.

In the end, by building up reserves they enhanced their countries’ economic security, but they also contributed to weakness in global aggregate demand. This is a problem that is likely to persist for years to come. So long as the global economic system is as volatile as it has been, and so long as there are not cheaper alternative ways of obtaining the requisite security, countries that can will put aside money into reserves.

In earlier days, profligate spending by developing countries helped offset the frugality of the better managed. But since those countries learned their lesson, America has become, in a sense, the “consumer of last resort.”

John Maynard Keynes and Yale University’s Robert Triffin pointed out that as countries around the world build up reserves in the currency of a single country, confidence in that reserve currency erodes. Reserves are just IOUs from the reserve country to the rest of the world. As America owes more and more money to others, those nations inevitably start to question whether they will be paid back—or be paid back with dollars that are worth anything. And there is a further political-economy problem: because reserve-currency countries can borrow so easily (other nations are willing to hold the country’s IOUs even when the return is close to zero), the temptation to profligacy may be hard to resist. Certainly America hasn’t been able to resist the temptation. Hence America’s enormous fiscal deficit.

It is a basic economic identity that the trade deficit is equal to U.S. borrowing from abroad.6 If foreigners lend us more money (T-bills they put in their reserves), then we will have a larger trade deficit. Running a trade deficit means the United States has a high level of net imports. This, in turn, means people buy fewer domestically produced goods and national aggregate demand (which is simply the sum of consumption, investment, government expenditures and net exports) is weakened. Unless the country is going through a period of “irrational exuberance,” leading for example to a tech bubble (the case of the United States in the 1990s), aggregate demand may be so weak that the economy will be operating below its potential. To combat this low demand and stimulate the economy, the government commonly runs a fiscal deficit—it spends beyond its income. This has the adverse effect of leading, in the long run, to less confidence in the reserve currency. Yet this is the course the United States has typically taken and seems intent on continuing. It is economically unhealthy and creates massive worldwide imbalances.

Over time, the fact that those countries that should have been spending (on investments) were lending, and those that should have been lending were borrowing, created an unsustainable system. In a bizarre way, this has created a kind of reverse foreign aid. Poor countries are lending to the United States trillions of dollars at a zero interest rate.



A GLOBAL reserve system could help address all of these problems. One way of thinking about this system is to think of a massive gold mine being discovered underneath the IMF. It yields, say, $600 billion a year. The IMF could simply ship out the gold to its members (say, in accordance with a particular formula based on their income). Now, instead of shipping the gold, the IMF issues pieces of paper telling each country how much gold they now own underneath the IMF building on 19th Street. Paper gold, we could call this. It’s clear that we don’t really need to have the gold. All that matters is trust, the willingness of governments to exchange the paper gold (Keynes called it bancor; one could call it global greenbacks) for their own currency—and that would be achieved through international agreement. In this situation, everyone has guaranteed reserves.

This would first and foremost help the problem of developing countries that have been hoarding their savings rather than investing. But by helping them, it would help the entire global economy—a new kind of trickle-up economics. They could each hold the paper gold in their reserves as a buffer against all of the risks they face. Consider a country that had been setting aside $50 billion a year in reserves, but now gets a transfer of $50 billion in paper gold, put into its account at the IMF or in a “New Global Reserve Facility” that might be created to administer the new global reserve system. Because their reserves are now sufficient to protect themselves against the global economic vicissitudes, they wouldn’t have to put aside from their current incomes the corresponding amount. They could spend that amount, and that would lead to stronger global demand.

The system has one further advantage. Another basic economic identity is that the sum of trade surpluses must equal the sum of trade deficits; if some country exports more than it imports, some other must import more than it exports. So long as there are some countries that run surpluses (like China and, until recently, Japan), some other country must run deficits. But deficits are like hot potatoes. Countries with too-large deficits have learned the hard way what happens—there can easily be a run against the country’s currency, leading to a currency and financial crisis. But if one state with too big a deficit takes actions to reduce it, the deficit just moves to another country. It was not an accident that after the East Asian governments reduced their trade deficits, deficits showed up in other parts of the world. As all tried to make reductions, the United States became the deficit of last resort—again an unsustainable situation. Under the global reserve system, with an annual emission of reserves from the new worldwide global reserve facility, countries could still run moderate deficits and let their own reserves build up. The system would be far more stable. And the system could be designed to incentivize countries not to have reserves, by, for instance, reducing allotments of new emissions to countries that ran persistent surpluses.

We already have a precursor to a global reserve system, in the IMF “money” called Special Drawing Rights (SDRS). The problem is that the issuances have been episodic, small and the money allocated in ways that are not ideal—America gets the largest allocation.

The UN Commission of Experts on Reforms of the International Monetary and Financial System (which I chaired) has argued that fixing the issuance of the SDRS is perhaps the most important medium-term reform that can be undertaken if we want to have a robust and stable recovery. The new global reserve system is not a panacea for the world’s financial ills, but it could make the global financial system work far better than it has in the past.



SOME IN the United States are resisting the increasing demands for a global reserve system. The adverse effects on the United States (both as a result of heightened global instability and the associated trade deficit that are weakening national aggregate demand) are not always as obvious as the advantages of being able to borrow at a very low interest rate.

What does a weaker dollar really mean for Americans and the global financial system? A weaker dollar means America can export more—and will import less—and that is good for jobs. A stronger labor market leads to increased wages, and that too is good for workers. Export businesses gain, and so do those that compete with imports.

Certainly this will not be good news for everyone. Those who depend on imports—like retailers selling imported clothing—lose. Those on Wall Street who have bet on a strong dollar (and put their money in dollar bonds, say, relative to euro bonds or yen bonds) suffer. The weaker dollar may contribute a little bit to inflation, as the price of imports increases. If the Fed suffers from inflation paranoia, it may respond by increasing interest rates.

Like any major economic change, there are winners and losers. One can’t always tell whether, on average, a particular change is good simply by measuring the volume of noise created by supporters and critics. Wall Street losers may be more voluble and visible than the many workers and main-street businesses that benefit.

But the current system is simply unsustainable no matter how many cries on Wall Street there are to the contrary. Countries will be more and more reluctant to lend to the United States at the favorable terms that they have in the past, while the disadvantages associated with global instability may be mounting. The United States cannot unilaterally declare the dollar the reserve currency. Others have to choose to accept the dollar in their reserves. America may not want to contemplate the possibility of losing its reserve-currency status, just as it’s trying to figure out how to finance a $9 trillion ten-year deficit. But it may have no choice. Overall, a move away from the dollar-reserve system is inevitable—and, contrary to conventional wisdom, it will benefit the United States.



IN SHORT, the dollar-reserve system is already fraying. The question is, what will happen next? Economists are not good at predicting timing—when will all of this happen? And things don’t always move smoothly. During the crisis, the dollar actually strengthened. With the U.S. government providing guarantees on money markets and other deposits—and a U.S. government guarantee having more credibility than that of many developing countries—money sought a safe haven. America, from where the crisis originated, seemed safer than those countries that were the innocent victims.

And the dollar may continue to be strong for some time because what is happening elsewhere could be worse: worries about inflation are also arising in other countries. There may be even less confidence in, say, Europe’s ability to manage its affairs, and if so, the dollar may strengthen further, not because of confidence in the United States, but because of a lack of confidence in other markets. No wonder that, with all these uncertainties, almost the only thing we can be certain of is that markets will be marked with volatility.

As we move (hopefully) toward a global reserve currency, there will be inevitable bumps in the transition along the way. There are, of course, alternatives to the SDRS approach. We may create a multiple-exchange-rate system, in which countries diversify their reserve holdings between the dollar, euro and yen. Over the long run, this system could be highly unstable, as in one period the euro will appear stronger, and funds will shift there, weakening the dollar and strengthening the euro. In another, just the opposite may happen.

Or we may begin to form regional reserve systems. They also manage and dole out reserves for a group of countries but on a smaller scale (along the lines of the Chiang Mai Initiative in Asia, which has been greatly expanded during the crisis). Latin America is discussing doing something similar. One of the ways of creating the global reserve system is through developing and then interlinking these regional efforts.

Whichever path we take, like it or not, we will be moving away from current arrangements, the dollar-reserve system. There are only two questions: will the movement away be orderly or disorderly, and will America play a part in shaping the new system that will emerge? I believe that the transition to the new system will be smoother and that both the United States and the world will benefit if we stop putting our heads in the sand and help create the worldwide reserve system that the globalization of financial markets requires. Keynes recognized the need for such a global reserve currency seventy-five years ago. At the Bretton Woods meeting of 1944, in a costly act of self-interest, the United States blocked the full implementation of Keynes’s scheme. This is an old idea whose time has finally come.



Joseph E. Stiglitz is University Professor at Columbia University. He served as chief economist of the World Bank from 1997 to 2000. Most recently he is the author, with Linda J. Bilmes of Harvard’s Kennedy School, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict (W. W. Norton, 2008).



1 Our wizards of Wall Street got it all wrong: they seemed unfazed when household debt mounted, pointing out that there was something to show for it, a house whose value well exceeded the debt. But they had helped engineer a bubble, and the true value of the assets was in fact less than what was owed. The result is the economic travails that we are now going through. At this point, many are upset as they see the government’s deficit soar—and they pay no attention to whether there are any assets corresponding to these liabilities.

2 Wall Street deficit hawks went on vacation from September 15, 2008, to mid-2009, while the money was pouring into the banks. But as soon as it became clear that there was no more money for the banks, they went back to their usual stance.

3 It is also a way of handling the problem of excessive household indebtedness, and creditors certainly don’t like this prospect.

4 It didn’t see the bubble—even claiming there was no bubble. When the subprime bubble broke, the Fed claimed the problems were contained and limited. Just months before the calamitous events of fall 2008, it was claiming, privately and publicly, that we had turned the corner.

5 It is unlikely they will try to get around their fears of inflation by buying real assets like real estate or shares in companies. The losses that China experienced on its Blackstone investments (Beijing bought a $3 billion stake in the company) have provided a cautionary note. And will America take well to China buying key assets? It’s one thing to take a loser—like the Hummer—off our hands; it’s quite another to sell an asset like UNOCAL.

6 What ensures that it is true is more complicated. It can be adjustments in income or in exchange rates. When the exchange rate (the value of the dollar relative to the euro and other currencies) increases, we export more and import less. When our income increases, we import more.

Re: # 41 lol. that's cruel yaar..masadi intellectual aadmi hai. he has come up with some absolute gems :)

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An aspect of this article that hasn't been explored much in the interacts is the tenuous connection between democracy and capitalism. Such a connection is heavily promoted by American politicians without mentioning the fact that Alexander Hamilton, the father of American Capitalism, expressed a dim view of ordinary people's ability to make important decision for themselves when he declared that "masses are asses".

Hamilton fervently believed that the masses need to be managed by the power elite.

Professor Leo Strauss of the University of Chicago, the father of modern necons, was a strong supporter of the idea of "noble lies" as a way to manufacture consent for "noble ends". In other words, he believed in the "ends justify the means" line of thinking to bring "democracy" to Iraq by invading on the false pretext of Saddam's WMDs.
Riaz Haq, PakAlumni Worldwide

I concur with Sohail. I for one would like to see more of Masadi. With write ups like these he takes Chowk's front page to a new level.

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dear masadi sahib...congratulations on writing such a wonderful article. now you cannot say that chowk editors do not publish your scholarly articles...all the best...sohail

Khyber #34: good article in the News today on this Pakistani habit of pointing to "foreign powers" while ignoring our own responsibilities.

Then they came for me
Tuesday, October 27, 2009
Zafar Khalid Farooq
... go to any drawing room soiree and the right-wing apologists bombard you with ignorant gossip. They'll cosy up to you and blame everyone but Pakistanis for the attacks. It's the Indians, they'll whisper. It's the Americans, the Jews, the Chinese and so and so forth. By apologising, or denying our responsibility in these attacks, these right-wing nationalists are harming the country they purport to love....Logically it just doesn't make sense either. There are very few things that can unify Sri Lanka and India, or Iran and the US, for that matter. Yet militants from this country have targeted all of them. Let's say it again -- these are our militants. This is our problem.

Re: # 31..masadi you are right about the role of foreign powers in Pakistan's tragedy,but what do you expect when your begging bowel floats all over the globe and then your elite steals all that aid money,when you live on charity then you have to listen and dance with the tone of your donors.

Re: # 29

Masadi:

This is what you say and how you distort:

You say:

"... you (Anil) say that peace time war preparation is for protection- here you are completely lost and out of tune with reality..."

This is what I had said:

"...In peace time we also create ever more powerful weapons of war to protect the resources that we have and to acquire more..."

Were you hungry to eat out "..and to acquire more.."?

Other than making snide remark you have not put forward even a single argument why my above statement is wrong.

Re: # 29

Masadi:

structures preexist people the fit into them they are not "built"

You hit and run and then beg to be excused. Ahhm I forgot that your God builds the structure for you or delivers it in the silver platter. I know Marx will throw your arguments into garbage.

It is shocking how ignorant you and social scientists (they should not call themselves scientists) are about role of technology, origins of creativity. Bill Gates, not Mills and certainly not your ilk, is probably the most vocal and active in the world today for social changes. But you still live in that dogmatic statement of yours.

You put down post-modern era as something of a cancer, where creativity, rationality, freedom etc. etc. are lost. The truth is all institutions have certain rules / laws to govern. To many, your religion is probably the most oppressive post-modern time and all times before, but to you it is the most perfect thing happen. You dismiss others are bigots, without presenting any arguments as you have tried to put down post-modern era. Are you too scared to apply the same tests?

Islam too was very creative. So were those who invented the wheel or plough. All except your ilk will attest that the most evolution in social structure took place in the post-modern era which you dismiss.

BTW, if you present your thesis expect response too.

What are you dismiss as confused understanding of society. Is society not a network of people where connections are relationship?

You rant so much and then in the last two paragraph you write your prejudices against American democracy and power Elite. You mention about military industrial complex, don't you realize that is has always existed, including in Islamic period. I challenge you to prove me wrong that the hate list you have assembled as indictment of post-modern did not exist in your darling Islamic period, or in any other period.

Khyber writes "Pakistan’s condition in the 65th year of its ‘independence.' is one of tragedy; it is a country which has lost its way and whose politicians care little for its reputation."

You forgot to mention the role of the Pakistan Army and your employers the CIA and the USA in this "tragedy".

Anil sahib, I am done arguing with you, it is a waste of my time, save your time also and don't bother replying. Thanks. This is my changed policy of not indulging those that have nothing substantive to offer to the discussion except distraction.

TNITC masadi

Anil sahib what you present is a confused understanding of society. Now from your HBS background (as you claim), it is understandable that you only view society as made up of consumers, and technology as serving the purpose of consumption, but you have to go further to look at the use technology is put to.

You write for example "We first build social structures in which we then live. They fulfill individual’s needs and comforts and have provided luxuries to those who could create leverage for themselves. This (needs, comforts and luxury) always creates a dynamics of change, a kind of kinetic energy to build (in peace time) and destroy (in war time). In peace time we also create ever more powerful weapons of war to protect the resources that we have and to acquire more."

This is clearly false, structures preexist people the fit into them they are not "built" except when ownership, control and power gets concentrated as in the post modern era, even then they have to rely on a culture that is deeply rooted in history and human interaction (religion being a small part of it) for success. You gloss over what causes change when your technology is meeting their needs. Your argument is only words thrown together, a reader's digest view of social science and using that you want to dismantle Mills' argument? I think you need to read a lot more. Further you have failed to argue against any point raised in the article, you say that peace time war preparation is for protection- here you are completely lost and out of tune with reality. Know this very clearly technology does not arise in a vacuum it is a Dependant variable, it depends on a social structure and its priorities, and if the priority is death and destruction of the many for the sake of enriching the few then no amount of "science" will fix your problems. Your grand assumption of the laissez faire, hidden hand of justice that causes just wars and armament for peace and change for the benefit and progress is a religious belief that is out of touch with reality. Your story plays the role of organized religion that after the charismatic founders who lead social movements for change was banalized, bureaucratized and made as tool to enhance the status quo. You don't realize just how close to those religious folk you deride you actually are.

Masadi

Allow me to critique your attack on democracy and economic model you term as capitalism, and everything you attribute in post-modern era.

I have repeatedly mentioned to you religion and science are two ends of the spectrum. One has to be blind to ignore the pillar religion provides in social structures. What you have attributed to post-modern era has happened and happened in all institutionalized organizations, religion is included.

Your start labeling bigot is not going to stop me from bringing forward my points. These are not against Islam as you. In case you can read English you would see that rush to state when you have nothing to add.

I have always said religion is one end of the spectrum. Please read again what I wrote to summarize what you wrote without bias and full respect to your intellect. Show it to others too.

anil writes "You are so enslaved to religion and your mindset that you talking about liberation is insult to true freedom fighters."

Please point to us where in this article do I discuss religion. The fact is you are so bigoted against Islam that whenever a Muslim makes sense you attack Islam. Think about this

#17 tahmed32, #23 haneef.gujar2...I appreciate your positive response and that is the beauty of Democracy,I am not anti Democracy,I am against those politicians who are abusing their voters because majority of voters are too naive or not educated to realize who is making em fool,what in Pakistan is needed strong accountability, Political leaders need to be accountable to the people they represent. Both Nawazand Asif Zardari are actually dictators wearing cloaks of democracy to fool the nation. Pakistan can never be a true democratic nation, unless the illiteracy is reduced, the judiciary is clean, bureaucracy is defeated and every Pakistani from cities, rural areas develops the political acumen. Typical Pakistani politicians thinks this following way. 1. They consider themselves higher than their institutions. 2. They believe - or at least that is what they claim - that only they can save the country. 3. Only they know what is right for their parties and for the country. 4. They make “temporary” compromises for their own personal interest. 5. They try to maintain a vacuum of leadership so that the party is identified with them - and no-one else. Where is the discussion about the higher education in Pakistan? How are the top notch scientists, engineers and doctors going to be trained? When will govt start pouring funds into these fields? No matter its a military dictator or a civilian ruler of Pakistan's elite club and bourgeois of Pakistan will keep people in dark and uneducated, that's the only way for them to rule uneducated people and steal more from them. Pakistan has struggled unsuccessfully to build a functioning democracy. Its civilian leaders have proven consistently corrupt, autocratic, and inept. Its public institutions have failed to mature, its civic life has remained largely confined to a tiny elite, and its internal tensions between Islamic and secular values have never been resolved. The Pakistani politics is like Pakistani movies where the same old story repeated endlessly with the change of faces but in politics, even the faces remain the same with repeated role, which proves that while the world may have moved on we remain stuck in the same grooves. The painful dilemma in the political fête is that the politicians who always cry for democracy are unable to produce democracy in their own parties. When the national political figureheads could not maintain fair and clean election within their parties how can they provide or maintain the true democracy in the country. When the power greedy politicians are ready to split their parties to retain the headship of the party or not allow the other person to contest for party leadership, how can one expect from them to run a true democracy in the country. Pakistan‘s future looks quite uncertain and a fundamentalist revolution is likely to follow if the wealthy, self-indulgent elites don’t clean up their act and provide proper leadership. Pakistan’s condition in the 65th year of its ‘independence.' is one of tragedy; it is a country which has lost its way and whose politicians care little for its reputation.

Masadi:

That is not the only sense about Technology. Wait for more to come on your post-modern era analysis. You are so enslaved to religion and your mindset that you talking about liberation is insult to true freedom fighters.

Arjun sahib joining the army was not the cause of the GI bill. What to do with returning veterans that would now demand jobs was what prompted it. The post war housing era in the us is qualitatively different to the pre war one. So what if loans existed before, due to the New Deal that itself was a reaction to the collapse of capitalism. The Keynesians are cheap plagirists who want to guard against what Marx foretold would happen to the capitalist system. They are mere manipulators, at least the laissez faire types are true to their creed, they aren't hypocrites.

Anil, please don't waste space here with this nonsense about technology- that more than any liberation has been used to control people

Tahir sahib, instead of getting all upset because I asked you not to post your judgmental comments that put you in a bad light, please enlighten us with your reaction to this piece and lift the ban on your CCC so they can post. Your ego due to your writing abilities is interfering with your growth as a person. Do something about it. Tahir's nemesis theGman, please take a hike.

Have a nice day

Re: # 8 Not a good idea-because the chances are the authoritarian regime will deliberalty keep the masses illiterate in order to stay in power.

Second of all-one doesnt need to be "educated" to demand better wages,better schools, and better health care. Every human being should have the right to exercise his demands through the ballot.

Confused view of technology

We first build social structures in which we then live. They fulfill individual’s needs and comforts and have provided luxuries to those who could create leverage for themselves. This (needs, comforts and luxury) always creates a dynamics of change, a kind of kinetic energy to build (in peace time) and destroy (in war time). In peace time we also create ever more powerful weapons of war to protect the resources that we have and to acquire more.

While in war we have created ever more forceful instruments of peace as there comes a point when for whatever reason war no longer makes sense.

The bricks and mortar used to build social structures have been religion and science at the two extreme ends within which we create tools to do better and live better. Religion came first, and has come to represent a collection of beliefs beyond which believers cannot question. They simply accept. Science on the other end represents just the opposite - probity, analysis question as against acceptance.

Both religion and science provide limits in this model.

Within this space we evolve rules that define inter personal relationships of the individuals to function and operate. This network of people and relationships is society. Many rules that can come from the either end become laws governing the group of people who lives it that part of the space.

Religion was supreme in the beginning as knowledge started with a set of beliefs. With the evolution of societies the gap between science and religion has also been increasing. This gap and previously explained dynamics of change gives birth to technology out of science.

Technology gives us rules to replicate and build the tools, whether it was arrow, plough, wheel, automobile, jet or computer. The leverage created by technology leads to creation of more than we can consume, as a result Economics, trade and commerce arose out of this situation because production (from better tools) and consumption by others becomes a new dynamics. Both producers and consumers know and improve further their roles.

It is wrong analysis and conclusion that “computer code writers” cannot give “a coherent arguments”; and people who use “these gadgets” without understanding “the logic behind” their working. This instead is a balance, by nature producers will know more about the logic and they indeed have "coherent arguments" to market and sell, whereas consumers will have more reasons and ways to use and not the logic. This was true when the wheel was first invented and remains true in what is termed as "post modern era".

This essay snows a lot, connects many dots and puts blame on post-modern era as Masadi calls.

As I read, Masadi make the following points, time permitted I will address each one of those points. In this one I will address the missing power of technology.

Classical Social Scientists (Marx etc.) were concerned about:
 “History was being made”
 “History making”
 “How biographies of people were being shaped”

Pre-modern era was called
 Dark ages

Modern era is where
 classical social scientists worked
 freedom and reason moved together and were cherished

Post Modern era is
 (1959 – 66)
 4th epoch
 when collapse of liberalism and socialism
 new social structures which resist interpretation of reason and freedom
 which “increased rationality of functional sort”
 which diminished substantive rationality
 where reason declines and freedom diminishes from bureaucratic rules and procedures.
 where we lost link between private trouble and public issues for vast majority from bureaucratic organizations that have invaded
 “forcing people” to live into “narrow circuits” “through necessity” .
 causing ”personal troubles” affecting “a large number of people” and the cause is in social structures and institutions and is a public issue. Science is such an issue – “technological second coming”, as the long awaited messiah that will cure all ills of humanity. Problems created by science require socio-political solutions.
 where life is “in contradiction” to “individuality” and “control of personal destiny moves from the individual to the bureaucratic society” in post modern era.
 where result is “wide spread alienation among population”.
 where culture is diffused.
 seeing “emergence of a mass society” and “stifling of human creativity”.
 where human creativity is ”neatly hidden away by the elite”.
 demonstrates that “computer code writers” cannot “a coherent arguments”.
 where people who use “these gadgets” without understanding “the logic behind” their working.
 where “system enforced culture” on people living “narrow rule-rigged lives” within “bureaucratic routines” like “cheerful robots”.
 causing “absence of self-education”, “self-reflecting public” democracy is of “form and not of substance”.
 defining a trajectory of democracy which starts with positioning it in “a social structure and the relationship of that structure to the individual biographies”, and its evolution.
 allowing "benevolent authority" to assert democracy as ”Dogmatic dictation” because “benevolent authority” think so.
 giving rise to a situation where “essence of democracy” (whatever Masadi means???) does not exist because people cannot make choices “though reasons” for which one need self-educating “publics” (whatever Masadi defines???).
 “freely thinking and deciding public (???) does not exist.
 creating “Power Elite” which requires “Cheerful Robots”, which are products of cultural manipulation. Therefore the situation is neither pluralism nor a “ruling class”
 where material condition for capitalism have been changed incorporating a permanent “war establishment” within privatized economy”.
 a situation where “corporations no longer rule through a ruling class”.
 a situation where corporations “form an uneasy alliance” involving the “political military and economic “domains”.
 where “Power Elite” exists, and no “form of discourse on the global situation” can ignore its existence.

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#10 masadi “What is conveniently forgotten in such manipulation is the fact that hard work didn't create that 'middle class' government subsidies in the form of the GI bill and loans for home ownership did.”

To qualify for the GI bill Americans joined the army and fought in the second world war- would that not qualify for hard work? The home loans were not created after the 2nd world war they existed well before the war. The FHA loans were started to help the returning veterans and their families.

After the war, to sustain the economic progress many actions were taken to increase the purchasing power of the general masses and the GI bill helped people get college education and then better jobs. That has to be taken as success of the capitalism not its failure. No economic system can survive or make progress without the government help. That’s why the libertarians or other analysts who propagate Laissez-faire are a bunch of crazies.

Masadi Sahib, have you been receiving e-mails from Nigeria for investment opportunities?

Riaz Sahib: Thanks for this awesome analysis of US economic history.

Re: # 10 Masadi: "As a result of which we see the construction of a middle class in America post WW2 in order to "prove" correct the ideology of hard work will get you somewhere. What is conveniently forgotten in such manipulation is the fact that hard work didn't create that 'middle class' government subsidies in the form of the GI bill and loans for home ownership did."

The emergence of a middle class and the social safety net in America, as you rightly point out, have been the result of FDR's New Deal and LBJ's Great Society, both of which were departures from laissez faire capitalism. So what has been accomplished here is in spite of capitalism, not because of it.
Riaz Haq, PakAlumni Worldwide

So a forty five times disparity of GNI

Khyber #8 I have to differ with you here my friend. Isnt 60 years of dictatorship enough? The important thing is to keep systems (i.e. democracy vs dictatorship) separate from personalities.

Kulharee sahib when the costs of "evil" have to be billions that live lives of deprivation, and billions whose soul is torn out and made a commodity then that evil has "costs" that no decent human being should be comfortable with. Regarding which evil is lesser a little while back I did a small comparative exercise using the poverty rate of nations as a factor of their GNI, and it so emerges that your model capitalistic society, the US far surpasses any other nation, including the most poor in having the greatest discrepancy between population living in poverty and GNI compared to any nation of the world.

For example take Nigeria their official poverty rate is around 58%, which is around four and a half times more than the US official rate, but the GNI per capita of Nigeria is 45 times less than the US. So a ten times disparity of GNI is producing only a 4 time disparity in the poverty rate. Given that fact even the Nigerian system is better than the US system. We can repeat this exercise for any country of the world and conclude the same. These figures are an official disgrace and signify the failure of a system that advertises its fictitious successes 24/7 and enjoys near total cultural hegemony. It is because of the US cultural hegemony that you see it as the lesser of all evils.

Get a conscience, and have a nice day.

Masadi Sahib, structural functionalism aside, but stack the capitalism next to some other system and see for yourself (yes yes, the lesser of two evils argument, but what exactly is your model system?? Islam? Communism? Anyism?). Let’s just talk about baseball, as I am watching the game on my gigantic TV. Tonight Yankees-Angels game will generate gazillions in revenue for the city (don’t want to scare you by the exact figures), let’s just say that there is no ticket to be bought for tonight’s game and diehard fans were willing to pay upto 8 grands for a good seat (and upto 30 grands for the world series).

chowkstaff, can you please add these two other references that are referred to in the article, thanks:


Riesman, David. (1950) 1965. The Lonely Crowd: A Study of the Changing American Character. New Haven, CT: Yale University Press.

Washburn, Katherine and John Ivan Simon. Editors. 1997. Dumbing down: Essays on the Strip Mining of American Culture. New York: W.W. Norton & Co.

Riaz Sahib #3, propaganda cannot work without some form of material translation into reality. As a result of which we see the construction of a middle class in America post WW2 in order to "prove" correct the ideology of hard work will get you somewhere. What is conveniently forgotten in such manipulation is the fact that hard work didn't create that 'middle class' government subsidies in the form of the GI bill and loans for home ownership did.

Fuzzylogic #6 There is nothing wrong with emotionality if that is what you mean by 'worshipers'. In the modern bureaucratized state, emotional management has resulted in a form of inauthentic social exchange which is alienating to the individual practicing such emotional management, it also takes away the functions of emotions as indicators of the need for action/change. The point of this writing was to show that the 'facade' of democracy in the West actually represents a manipulative polite form of authoritarianism where the control is not external and coercive but internal and elusive. This point is apparently lost on ellora #9 as well as Khyber, #7&8. For the former the most perverse kind of authoritarianism parading as 'democracy' brings greater benefits than equalizing the field for humanity so they can think for themselves and for the latter a form of racism that equates human worth with formal education guides the argument. Both are mistaken. The average Pakistani is more socially aware than the best Harvard business school graduate that takes the rules of a bureaucratically circumscribed society as 'reality' living a narrow life regardless of eating better and living in a million dollar condo. The deprivation of the soul, identity, personality and consciousness, and being in touch with yourself and your fellow man is much greater tragedy than the deprivation of animal needs like food and shelter. Think about that.

Have a nice day and thank you for your interest.

masadi.

Democracy, such as it is, with all its imperfections and blemishes is better in its potential for continuous improvements than all the phoney promises of paradise from all the high priests of religious or Marxist persuasions.

In holding America up to these high standards have you looked at the reality of all the Communist and Islamist utopias ?

The reason I support concept of authoratarian regimes--perhaps even communism,because DEMOCRACY requires educated society,unfortunately in 3rd world and in Pakistan where we have over 50 million people who lack basic education can't enjoy benefits of democracy,at the end we get corrupt leaders like NAWAZ SHARIF AND ZARDARI.

Re: # 6 fuzzylogic...well said,to a certain point I agree with Masadi but you made a strong point by saying,'' My conclusion from this, then, is that south asians are incapable of fueling any fair, balanced, or just system of democracy and we are more suited for authoratarian regimes--perhaps even communism.'''

brother asadi you seem to be a sociologist to me...i may be wrong but i have a suggestion for you. I am not qualified but over a long period of time i have come to believe that south asians as a whole are unsuited for democracy. We are worshippers, this perhaps being ingrained in us by our previous hindu culture of idol worshipping. Therefore, even today in pakistan we have political partys where educated pakistanis worship political leaders such as bhutto's and sharifs or mqm even. These leaders and their families have become like monarchies fighting in a democratic system. Across india and bangladesh we see the same pattern. A sign also seeable in the delirious bollywood fans worshipping their khan gods or even akshay. Hindus are notorious for worshipping and so we south asian muslims inherited some of that baggage. My conclusion from this, then, is that south asians are incapable of fueling any fair, balanced, or just system of democracy and we are more suited for authoratarian regimes--perhaps even communism. I think you could do more justice to this theory then i ever could. You are an eloquent writer and you write with a passion. I encourage you to further elaborate on this if it does interest you.

Good Article,Comrade Masadi!!!

chowkstaff, thank you for publishing this article. I will return later to comment on the interacts.

Masadi,
Good article.

I think you should watch Michael Moore's documentary "Capitalism: A Love Story" that makes similar points.

The movie has interviews with catholic Priests, including a bishop, describing capitalism as an evil system while the corporations and their politician friends extol the virtues of the capitalist system as bringing prosperity to all, giving hope to the 99% that they can someday join the top 1% if they work hard.

The power of the propaganda, carried out through the powerful corporate media owned by the top 1%, succeeds in getting 99% of the people to act against their own self-interest in US democracy.

The movie makes reference to a Citibank's memo that says that 1% of Americans have all the money and power while 99% are essentially peasants.

Moore mentions pilot salaries of around $20,000 forcing some to rely on welfare or take up second jobs to make ends meet. Shows USAir's pilot-hero Sully's testimony to Congress.

Talks about people doing financial engineering and producing "exotic" derivative products are making far more money while the wages of the real engineers and workers who design, develop and manufacture real products have suffered.



Riaz Haq, PakAlumni Worldwide

A good write up. I especially liked the way Masadi has argued that democracy in the present set up is pnly of form not essence.
It is quite true. Moreover the modern society has evolved in such a way that an indivdual in his bid to become upwardly mobile has to focus on careers offered by such society. The individual loses his freeedom of thought and his ability to reflect as the faculty of mind is narrowly focused on these "goals".

good analysis
Agha Amin