Kristof: Obama’s ‘secretary of food’?

As Barack Obama ponders whom to pick as agriculture secretary, he should reframe the question. What he needs is actually a bold reformer in a position renamed “secretary of food.”

A Department of Agriculture made sense 100 years ago when 35 percent of Americans engaged in farming. But today, fewer than 2 percent are farmers. In contrast, 100 percent of Americans eat.

Renaming the department would signal that Obama seeks to move away from a bankrupt structure of factory farming that squanders energy, exacerbates climate change and makes Americans unhealthy – all while costing taxpayers billions of dollars.

“We’re subsidizing the least healthy calories in the supermarket – high fructose corn syrup and hydrogenated soy oil, and we’re doing very little for farmers trying to grow real food,” notes Michael Pollan, author of such books as “The Omnivore’s Dilemma” and “In Defense of Food.”

The Agriculture Department – and the agriculture committees in Congress – have traditionally been handed over to industrial farming interests by Democrats and Republicans alike. The farm lobby uses that perch to inflict unhealthy food on American children in school lunch programs, exacerbating America’s national crisis with diabetes and obesity.

But let’s be clear. The problem isn’t farmers. It’s the farm lobby – hijacked by industrial operators – and a bipartisan tradition of kowtowing to it.

I grew up on a farm in Yamhill, Oregon, where my family grew cherries and timber and raised sheep and, at times, small numbers of cattle, hogs and geese. One of my regrets is that my kids don’t have the chance to grow up on a farm as well.

Yet the Agriculture Department doesn’t support rural towns like Yamhill; it bolsters industrial operations that have lobbying clout. The result is that family farms have to sell out to larger operators, undermining small towns.

One measure of the absurdity of the system: Every year the American taxpayer sends me a check for $588 in exchange for me not growing crops on timberland I own in Oregon (I forward the money to a charity). That’s right. The Agriculture Department pays a New York journalist not to grow crops in a forest in Oregon.

Modern confinement operations are less like farms than like meat assembly lines. They are dazzlingly efficient in some ways, but they use vast amounts of grain, as well as low-level antibiotics to reduce infections – and the result is a public health threat from antibiotic-resistant infections.

An industrial farm with 5,000 hogs produces as much waste as a town with 20,000 people. But while the town is required to have a sewage system, the industrial farm isn’t.

“They look profitable because we’re paying for their wastes,” notes Robert P. Martin, executive director of the Pew Commission on Industrial Farm Animal Production. “And then there’s the cost of antibiotic resistance to the economy as a whole.”

One study suggests that these large operations receive, in effect, a $24 subsidy for each hog raised. We face an obesity crisis and a budget crisis, and we subsidize bacon?

The need for change is increasingly obvious, for health, climate and even humanitarian reasons. California voters last month passed a landmark referendum (over the farm lobby’s furious protests) that will require factory farms to give minimum amounts of space to poultry and livestock. Society is becoming concerned not only with little boys who abuse cats but also with tycoons whose business model is abusing farm animals.

An online petition at http://www.fooddemocracynow.org calls for a reformist pick for agriculture secretary – and names six terrific candidates, such as Chuck Hassebrook, a reformer in Nebraska. On several occasions in the campaign, Obama made comments showing a deep understanding of food issues, but the names people in the food industry say are under consideration for agriculture secretary represent the problem more than the solution.

Change we can believe in?

The most powerful signal Obama could send would be to name a reformer to a renamed position. A former secretary of agriculture, John Block, said publicly the other day that the agency should be renamed “the Department of Food, Agriculture and Forestry.”

And another, Ann Veneman, told me that she believes it should be renamed, “Department of Food and Agriculture.” I’d prefer to see simply “Department of Food,” giving primacy to America’s 300 million eaters.

As Pollan told me: “Even if you don’t think agriculture is a high priority, given all the other problems we face, we’re not going to make progress on the issues Obama campaigned on – health care, climate change and energy independence – unless we reform agriculture.”

Your move, Mr. President-elect. I invite you to visit my blog, On the Ground and join me on Facebook. You can also watch my Youtube videos and follow me on Twitter.

PAULSON DEFIES HIS OWN PREDICTIONS

Rich Lowry

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Breaking all his promises on bailout spending.

HERE’S the three-point pro gram for determining how the $700 billion of the Paul son bailout plan will be deployed:

1) Listen to what Treasury Secretary Henry Paulson says he’ll do with the money; 2) Wait a few weeks; 3) Watch him do the precise opposite.

A few weeks ago, Paulson insisted that troubled US automakers “fall outside” the bailout program’s original purpose, which “was aimed at the financial system.” That’s quite categorical. Clearly, funds can’t be used for a purpose for which they were never intended. At least that’s what the civics books lead us to believe.

The books should be sent back for a rewrite. Last week, the Bush administration all but committed bailout funds to the – in the great economist Joseph Schumpeter’s phrase – “hopelessly maladapted” auto companies. Congress held multiple hearings on what to do about the automakers and had a fierce debate culminating in a tense, high-wire meeting between Tennessee Sen. Bob Corker and United Auto Workers officials.

They were all play actors in a simulacrum of democratic deliberation. The Bush administration had the Paulson slush fund that it could choose to tap or not at whim. It’s hard to see how GM or Chrysler constitutes a financial institution. Never mind. Logic will be tortured to shovel them money as necessary.

When Lehman Brothers went down in September, the financial system faced a crisis. Paulson needed the flexibility to adjust to dire and unpredictable circumstances, but in retrospect his conduct verges on bad faith. His $700 billion program is called the Troubled Assets Relief Program for a reason: It was premised on relieving financial institutions of their troubled assets through government purchases of them. Paulson ended up instead injecting capital directly into banks, an idea he had repeatedly opposed during his TARP testimony.

He can certainly change his mind, but Congress deserved a clearer window into his thinking before it handed him hundreds of billions of dollars. Paulson told The Washington Post that his staff was working on an option to inject capital directly even as he was declaring to Congress he wouldn’t do it.

Democrats wanted to limit the pay of executives, so they inserted a provision stipulating that any firm taking TARP funds had to restrict executive compensation. But the administration insisted on adding a sentence saying the restriction only applied to firms selling their troubled assets to the government, thus gutting the restriction since the funds have never been used for that – its stated – purpose.

It was Federal Reserve Chairman Ben Bernanke who originally suggested to Paulson that he go to Congress. Bernanke worried that there wasn’t enough democratic accountability in the two of them deciding on their own authority how to deploy tens of billions of dollars in case-by-case bailouts. Maybe they figure it’s the thought that counts?

Bernanke and Paulson have said they didn’t bail out Lehman – generally considered a near-catastrophic mistake – because they didn’t have the legal power. This excuse is, as Abraham Lincoln put it, “thinner than soup made from the shadow of a pigeon that starved to death.”

Bernanke and Paulson strained for any plausible authority to do anything else they wanted during the crisis, with the Federal Reserve drastically increasing its power with a raft of new lending programs whose obscure initials – TAF, TSLF, PDCF, etc. – put the New Deal to shame.

Paradigm shifts in American politics usually begin before the figures who are associated with them in history actually take power. Herbert Hoover broke with the minimalist governing vision of Calvin Coolidge before Franklin Roosevelt won the White House. Jimmy Carter began implementing deregulation before Ronald Reagan was elected.

Now, through TARP, George W. Bush has removed any restraint on Washington spending and extended a lifeline to automakers in a step toward pre-1980s industrial policy, thus paving the way for the ambitious activism of Barack Obama.

If asked, surely Paulson would have said this wasn’t what they intended – in yet another inoperative assurance.

Bush Touts Alliances on Trip to Iraq and Afghanistan

President George W. Bush made surprise visits to Iraq and Afghanistan, seeking to boost support for his responses to the 2001 terrorist attacks and solidify his foreign-policy legacy.

[President George W. Bush and Iraqi Prime Minister Nouri al-Maliki in Baghdad on Sunday celebrated the approval of a security agreement that establishes the basis for a continued U.S. military presence in Iraq.] Reuters

President George W. Bush and Iraqi Prime Minister Nouri al-Maliki in Baghdad on Sunday celebrated the approval of a security agreement that establishes the basis for a continued U.S. military presence in Iraq.

In Iraq, the president highlighted a new security agreement intended to cement recent security gains and form the basis for a long-term alliance. Later, as he headed to Afghanistan, Mr. Bush said the U.S. was putting policies in place there similar to the ones that brought improvements in Iraq, including a troop surge, in response to recent deterioration in military and political conditions.

“It’s the same mission we had before [in Iraq], to have the young democracy develop the institutions so it can survive on its own…and to deny a safe haven for al Qaeda,” Mr. Bush said in a roundtable interview on the way to Afghanistan from Iraq.

On arrival at Bagram Air Base in Afghanistan, Mr. Bush spoke to more than a thousand U.S. soldiers and Marines at a hangar on the tarmac. “Afghanistan is a dramatically different country than it was eight years ago,” the president said. “We are making hopeful gains.” Mr. Bush also was set to meet on Monday with Afghan President Hamid Karzai.

Iraqi Hurls Shoes at President Bush

0:48

Watch George W. Bush duck as an Iraqi throws two shoes at the U.S. President. Bush was in Iraq on an unnanounced visit. Video from Fox News. (Dec. 14)

Underscoring the potential long-term significance of the U.S. commitment in Iraq, the commander of U.S. forces there — echoing recent statements by U.S. and Iraqi officials — suggested the timelines for troop withdrawals in the security agreement could be modified by the two sides. The agreement, approved by Iraq’s parliament in November, outlines a U.S. withdrawal from urban areas by summer and a full withdrawal by 2011. There are about 150,000 U.S. troops in Iraq.

Mr. Bush, on his fourth and almost certainly final visit to the country, met on Sunday with Iraqi leaders and praised efforts to establish a democratic government there. “The war is not yet over,” Mr. Bush said, following a meeting with Prime Minister Nouri al-Maliki, but “it is decisively on its way to being won.”

Iraq is likely to play a big role in defining Mr. Bush’s legacy. Despite the war’s unpopularity, he says he hopes Iraq can serve as an example of a moderate, democratic and prosperous country for the rest of the Mideast, as well as provide a bulwark against extremism.

The war, which began with a U.S.-led invasion in 2003, has come at a high cost in lives and in financial terms. It has also left U.S. efforts in Afghanistan short of troops and other resources.

In a sign of the hostility the U.S. presence continues to generate in the region, a local journalist threw his shoes at Mr. Bush — a gesture of contempt in Iraqi culture — during a news conference with Mr. Maliki. The man was quickly overpowered by security agents. When the conference resumed, Mr. Bush, who ducked the projectiles, noted that other Iraqi journalists in the room had apologized.

Man Throws Shoes at Bush

A television correspondent tossed two shoes at President George W. Bush during a news conference in Baghdad Sunday.

The security agreement, covering military relations and broader cooperation, replaces a series of United Nations Security Council resolutions as the legal basis for foreign troops’ presence in Iraq. Comments by Gen. Raymond Odierno, the commander in charge of U.S. troops in Iraq, suggested the pact leaves some matters to interpretation and could open the door to broader roles for U.S. forces in Iraq. That could complicate decision making for the administration of President-elect Barack Obama, who has pushed for a clear timetable for withdrawal.

Mr. Bush expressed optimism that Mr. Obama shares his commitment to achieving U.S. goals in Iraq. “I believe he understands the strategic importance of Iraq, and now he’s got a framework from which to make decisions.”

Gen. Odierno said Saturday that U.S. forces will remain indefinitely in dozens of small bases in Iraq’s cities, despite language in the pact that appeared to require a withdrawal by next summer. He said the provision applied only to combat personnel. U.S. commanders classify the urban counterinsurgency forces that mentor and fight alongside Iraqi troops as training personnel, he said.

The commander said he was operating under the assumption all American forces would leave Iraq by December 2011 as called for by the agreement. But he said U.S. commanders were talking to their Iraqi counterparts about the possibility of leaving combat personnel in Mosul beyond next summer. He said the Iraqi government will make the final decision.

The Secrets of Marketing in a Web 2.0 World

Consumers are flocking to blogs, social-networking sites and virtual worlds. And they are leaving a lot of marketers behind.

For marketers, Web 2.0 offers a remarkable new opportunity to engage consumers.

If only they knew how to do it.

That’s where this article aims to help. We interviewed more than 30 executives and managers in both large and small organizations that are at the forefront of experimenting with Web 2.0 tools. From those conversations and further research, we identified a set of emerging principles for marketing.

But first, a more basic question: What is Web 2.0, anyway? Essentially, it encompasses the set of tools that allow people to build social and business connections, share information and collaborate on projects online. That includes blogs, wikis, social-networking sites and other online communities, and virtual worlds.

Millions of people have become familiar with these tools through sites like Facebook, Wikipedia and Second Life, or by writing their own blogs. And a growing number of marketers are using Web 2.0 tools to collaborate with consumers on product development, service enhancement and promotion. But most companies still don’t appear to be well versed in this area.

So here’s a look at the principles we arrived at — and how marketers can use them to get the best results.

Don’t just talk at consumers — work with them throughout the marketing process.

Recovering From Negative Reviews

4:17

A Web site can be a marketer’s lifeline with its customers, but what happens when it’s marred with negative reviews and comments? Bruce Weinberg, marketing professor at Bentley University, tells WSJ’s Erin White how to address and recover from poor feedback.

Web 2.0 tools can be used to do what traditional advertising does: persuade consumers to buy a company’s products or services. An executive can write a blog, for instance, that regularly talks up the company’s goods. But that kind of approach misses the point of 2.0. Instead, companies should use these tools to get the consumers involved, inviting them to participate in marketing-related activities from product development to feedback to customer service.

How can you do that? A leading greeting-card and gift company that we spoke with is one of many that have set up an online community — a site where it can talk to consumers and the consumers can talk to each other. The company solicits opinions on various aspects of greeting-card design and on ideas for gifts and their pricing. It also asks the consumers to talk about their lifestyles and even upload photos of themselves, so that it can better understand its market.

A marketing manager at the company says that, as a way to obtain consumer feedback and ideas for product development, the online community is much faster and cheaper than the traditional focus groups and surveys used in the past. The conversations consumers have with each other, he adds, result in “some of the most interesting insights,” including gift ideas for specific occasions, such as a college graduation, and the prices consumers are willing to pay for different gifts.

Similarly, a large technology company uses several Web 2.0 tools to improve collaboration with both its business partners and consumers. Among other things, company employees have created wikis — Web sites that allow users to add, delete and edit content — to list answers to frequently asked questions about each product, and consumers have added significant contributions. For instance, within days of the release of a new piece of software by the company, consumers spotted a problem with it and posted a way for users to deal with it. They later proposed a way to fix the problem, which the company adopted. Having those solutions available so quickly showed customers that the company was on top of problems with its products.

Business Insight] Peter & Maria Hoey

Give consumers a reason to participate.

Consumers have to have some incentive to share their thoughts, opinions and experiences on a company Web site.

One lure is to make sure consumers can use the online community to network among themselves on topics of their own choosing. That way the site isn’t all about the company, it’s also about them. For instance, a toy company that created a community of hundreds of mothers to solicit their opinions and ideas on toys also enables them to write their own blogs on the site, a feature that many use to discuss family issues.

Other companies provide more-direct incentives: cash rewards or products, some of which are available only to members of the online community. Still others offer consumers peer recognition by awarding points each time they post comments, answer questions or contribute to a wiki entry. Such recognition not only encourages participation, but also has the benefit of allowing both the company and the other members of the community to identify experts on various topics.

Many companies told us that a moderator plays a critical role in keeping conversations going, highlighting information that’s important to a discussion and maintaining order. That’s important because consumers are likely to drift away if conversations peter out or if they feel that their voices are lost in a chaotic flood of comments. The moderator can also see to it that consumer input is seen and responded to by the right people within the company.

Getting Sociable

  • A New Approach: Marketing these days is more about building a two-way relationship with consumers. Web 2.0 tools are a powerful way to do that.
  • The Pioneers: A growing number of companies are learning how to collaborate with consumers online on product development, service enhancement and promotion.
  • The Lessons: From these early efforts, a set of marketing principles have emerged. Among them: get consumers involved in all aspects of marketing, listen to and join the online conversation about your products outside your site, and give the consumers you work with plenty of leeway to express their opinions.

And, of course, it’s important to make a site as easy to use as possible. For instance, there should be clear, simple instructions for consumers to set up a blog or contribute to a wiki.

Listen to — and join — the conversation outside your site.

Consumers tend to trust one another’s opinions more than a company’s marketing pitch. And there is no shortage of opinions online.

The managers we interviewed accept that this type of content is here to stay and are aware of its potential impact — positive or negative — on consumers’ buying decisions. So they monitor relevant online conversations among consumers and, when appropriate, look for opportunities to inject themselves into a conversation or initiate a potential collaboration.

For example, a marketing manager of a leading consumer-electronics company monitors blogs immediately after a new-product launch in order to understand “how customers are actually reacting to the product.” Other managers keep an eye on sites like Digg.com and Del.icio.us that track the most popular topics on the Web, to see if there’s any buzz around their new products, and whether they should be adjusting, say, features or prices.

In one case, a company found a popular blogger who had spoken highly of the company’s brand. Just prior to launching a new product, the company sent the blogger a free sample, inviting him to review it with no strings attached. The end result: The blogger wrote a favorable review and generated a flood of comments. So the company got nearly free publicity and feedback.

Business Insight] Peter & Maria Hoey

Resist the temptation to sell, sell, sell.

Many marketers have been trained to bludgeon consumers with advertising — to sell, sell, sell anytime and anywhere consumers can be found. In an online community, it pays to resist that temptation.

When consumers are invited to participate in online communities, they expect marketers to listen and to consider their ideas. They don’t want to feel like they’re simply a captive audience for advertising, and if they do they’re likely to abandon the community.

The head of consumer research for a leading consumer-electronics organization created an online community of nearly 50,000 consumers to discuss product-development and marketing issues. One of the key principles of the community, she says, was “not to do anything about marketing, because we weren’t about selling; we were about conversing.”

In short order, community members not only identified what it was they were looking for in the company’s products, but also suggested innovations to satisfy those needs. The company quickly developed prototypes based on those suggestions, and got an enthusiastic response: Community members asked when they would be able to buy the products and if they would get the first opportunity to buy them. They didn’t have to be sold on anything.

Don’t control, let it go.

In an online community, every company needs to find an effective balance between trying to steer the conversation about its products and allowing the conversation to flow freely. In general, though, the managers we interviewed believe that companies are better off giving consumers the opportunity to say whatever is on their minds, positive or negative. Moderators can keep things running smoothly and coherently, but they shouldn’t always keep the conversation on a predetermined track. The more that consumers talk freely, the more a company can learn about how it can improve its products and its marketing.

For Further Reading

See these related articles from MIT Sloan Management Review.

  • Harnessing the Power of the Oh-So-Social Web

By Josh Bernoff and Charlene Li (Spring 2008)
The authors develop a strategic framework that businesses can use to implement social applications in a number of departments, including research and development, marketing, sales, customer support and operations.
http://sloanreview.mit.edu/smr/issue/2008/spring/01/

  • Enterprise 2.0: The Dawn of Emergent Collaboration

By Andrew P. McAfee (Spring 2006)
There is a new wave of business communication tools including blogs, wikis and group messaging software that allow for more spontaneous, knowledge-based collaboration.
http://sloanreview.mit.edu/smr/issue/2006/spring/06/

  • Beyond Enterprise 2.0

By Erik Brynjolfsson and Andrew McAfee (Spring 2007)
The authors explore the complementary relationship between traditional managerial tools and the evolving modes of collaboration and communication, such as wikis.
http://sloanreview.mit.edu/smr/issue/2007/spring/16/

  • Systems Marketing for the Information Age

By John G. Singer (Fall 2006)
The authors suggest that companies must take a marketing ecosystems view, which shifts away from the logic of “brand” as the primary unit for business strategy.
http://sloanreview.mit.edu/smr/issue/2006/fall/18/

  • How to Market to Generation M(obile)

By Fareena Sultan and Andrew J. Rohm (Summer 2008)
The mobile platform provides the perfect mechanism for reaching young consumers.
http://sloanreview.mit.edu/smr/issue/2008/summer/12/

One marketing executive recalled the first time she let an online community created for a client interact with very little control or moderation, resulting in an animated discussion about the look of the company’s product. The client, with great concern, asked. “Who told them [the consumers] they could do this, that they could go this far?” Of course, when this process resulted in totally new packaging that helped boost sales, the client was ecstatic.

As another executive of a company that creates online communities for clients told us: “You have to let the members drive. When community members feel controlled, told how to respond and how to act, the community shuts down.”

Find a ‘marketing technopologist.’

So who should direct a company’s forays into Web 2.0 marketing? A number of managers identified an ideal set of skills for an executive that go beyond those of a typical M.B.A. holder or tech expert. We coined the term marketing technopologist for a person who brings together strengths in marketing, technology and social interaction. A manager said, “I’d want to see someone with the usual M.B.A. consultant’s background, strong interest in psychology and sociology, and good social-networking skills throughout the organization.”

Foot soldiers need to be carefully selected as well. One large technology company weighs employees’ proven skills to choose writers for blogs that are read by consumers. The company has long used blogs internally to help employees discuss technical issues, products, and company and industry topics. When it decided to use blogs to raise its profile online, it recruited those who had shown the most skill at blogging within the company. The company currently has about 15 employees who blog publicly, mostly on technology trends, and is recruiting more the same way. Meanwhile, the bloggers plan to meet occasionally to share the lessons learned from their experiences.

Embrace experimentation.

One Web 2.0 strategy does not fit all, and sometimes the best way to find out what’s best for a given company is to try some things out and see what happens.

Blogs, wikis and online communities are among the tools that companies are most commonly using for marketing, but there are other ways to reach consumers. Some of the companies we talked with have gotten their feet wet in the online virtual world Second Life, where millions of users interact with each other through avatars. Companies can sell their goods and services and sponsor events in Second Life just as they do in the real world; one sponsored a contest for the best avatar.

Others are considering new ways to use more-familiar tools. For instance, many companies have long used instant messaging on their Web sites to allow shoppers to chat with customer-service representatives. One executive we spoke with said he would like to experiment with allowing consumers to chat with each other as they shop on his company’s site.

—Dr. Parise is an assistant professor of technology, operations and information management at Babson College in Wellesley, Mass. Dr. Guinan is an associate professor of technology, operations and information management at Babson College. Dr. Weinberg is chairman of the marketing department and an associate professor of marketing and e-commerce at Bentley University in Waltham, Mass. They can be reached at reports@wsj.com.

Process to Oust Governor Starts

Illinois Lawmakers Set to Form Committee to Explore Impeaching Blagojevich

SPRINGFIELD, Ill. — Illinois lawmakers started impeachment proceedings Monday against Gov. Rod Blagojevich as he continued to show up for work in Chicago and firmed up his legal team to fight corruption charges.

[Process to Oust Blagojevich Starts] Associated Press

Illinois Gov. Rod Blagojevich on Monday, when state lawmakers started impeachment proceedings against him.

The state House of Representatives unanimously authorized a bipartisan committee to explore the possibility of ousting the two-term Democratic governor, by a vote of 113 to zero. But lawmakers did not move forward with a bill to create a special election to fill the U.S. Senate seat vacated by President-elect Barack Obama, which Gov. Blagojevich is accused of trying to sell.

The special committee to consider the impeachment begins meeting Tuesday. The committee will be made up of 12 Democrats and nine Republicans.

“We’re going to proceed with all due speed, but we’re going to make sure that what we do is done correctly,” said state House Speaker Michael Madigan.

Once the committee makes a recommendation, the full state House will decide whether to file impeachment charges against the governor. The state Senate ultimately would rule on them.

Republicans were irate that the special election wasn’t acted on.

“I think it was a huge mistake,” said House Republican leader Tom Cross. “I think we have to avoid the appearance of impropriety and the way to do that is through a special election. It’s one way to erase some of the cynicism.”

“The speaker called the House members back into session this week specifically to deal with special-election legislation,” said Republican Rep. Tim Schmitz. “A special election is what the people of Illinois want….Mr. Speaker, we’re here. Let’s get on with it!”

Democrats were quick to criticize the governor but are reluctant to risk a special election unless they have to, said longtime Chicago political consultant Don Rose.

Mr. Madigan, a political rival of the governor who nonetheless served as co-chairman of Gov. Blagojevich’s 2006 re-election committee, said he wasn’t surprised when he learned of the arrest of Gov. Blagojevich.

“I’ve had an opportunity to get to know Mr. Blagojevich over six years, so I was not surprised,” Mr. Madigan said.

Mr. Cross said he supports the impeachment move, saying he wants the process to be “swift and fair.”

Also, Chicago law firm Genson & Gillespie confirmed that it would represent the governor in the unfolding federal investigation. Partners Edward M. Genson and Terence Gillespie have played high-profile roles as attorneys for decades in some of the most well-known corruption cases in the state.

Mr. Genson is known as a lawyer prone to taking cases to trial and not as one likely to work out plea deals for clients. One person familiar with the dealings between the firm and the governor said Gov. Blagojevich plans to go to trial if indicted by a federal grand jury, but emphasized that such decisions aren’t set in stone. “You can take that position on Monday, and take a different one on Wednesday,” this person said.

Monday, December 15, 2008

Barack Obama-san

As January 20 nears, Barack Obama’s ambitions for spending on the likes of roads, bridges and jobless benefits keep growing. The latest leak puts the “stimulus” at $1 trillion over a couple of years, and the political class is embracing it as a miracle cure.

[Review & Outlook] AP

Not to spoil the party, but this is not a new idea. Keynesian “pump-priming” in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment.

In the Age of Obama, we seem fated to re-explain these eternal lessons. So for today we thought we’d recount the history of the last major country that tried to spend its way to “stimulus” — Japan during its “lost decade” of the 1990s. In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa’s Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a “lifestyle superpower.” The country embarked on a great Keynesian experiment:

August 1992: 10.7 trillion yen ($85 billion). Japan passed its largest-ever stimulus package to that time, with 8.6 trillion yen earmarked for public works, 1.2 trillion to expand loan quotas for small- and medium-sized businesses and 900 billion for the Japan Development Bank. The package passed in December, but investment kept falling and unemployment rose. By the end of the year, Japan’s debt-to-GDP ratio was 68.6%.

[Review & Outlook]

April 1993: 13.2 trillion yen. At exchange rates of the day, this was a whopping $117 billion giveaway, again mostly for public works and small businesses. Tokyo erupted into domestic politicking over election practices, the economy went sideways, and the government fell. New Prime Minister Morihiro Hosokawa floated tax cuts, deregulation and decentralization to spur growth. But as the economy worsened — inflation-adjusted GNP shrank 0.5% in the April to June quarter — the political drumbeat for handouts increased.

September 1993: 6.2 trillion yen. Mr. Hosokawa announced a compromise “smaller” stimulus of $59 billion, along with minor deregulation. He dropped plans for an income-tax cut. The stimulus included 2.9 trillion yen in low-interest home financing, one trillion yen for “social infrastructure,” and another trillion for business. The economy didn’t respond. By the end of the year, Japan’s debt-to-GDP reached 74.7%.

Is any of this beginning to sound familiar? There’s more.

February 1994: 15.3 trillion yen. This stimulus included 5.8 trillion in income-tax cuts, 7.2 trillion in public investment, 1.5 trillion for small business and employment-support, 500 billion for land purchases and 230 billion for agricultural modernization. The income tax cut was temporary, effective only for 1994. The economy stagnated and Prime Minister Hosokawa resigned amid a corruption scandal. By the end of the year, debt-to-GDP was 80.2%.

September 1995: 14.2 trillion yen. The Socialist government of Tomiichi Murayama, with a wobbly coalition, rolled out a $137 billion whopper, with 4.6 trillion in public works, 3.2 trillion for government land purchases, 1.3 trillion in business loans, and more. Mr. Murayama resigned in early 1996, and in June Prime Minister Ryutaro Hashimoto agreed to raise consumption taxes to 5% from 3%, starting in April 1997, to reduce the fiscal deficit.

In 1994 and 1995, Japan spent 3.1% and 2.9% of its annual GDP, and (helped by central bank easing) the economy did respond with modest growth for about two years. Debt-to-GDP hit 87.6%.

April 1998: 16.7 trillion yen. When growth starting slowing again, the re-elected LDP turned to old medicine: 7.7 trillion yen for public works. The $128 billion grab-bag also included 2.3 trillion for the disposal of bad loans. The government announced four trillion yen in (again) temporary income-tax cuts, spread over two years. Mr. Hashimoto resigned in July after voters registered their discontent at the polls.

November 1998: 23.9 trillion yen. Desperate to get the economy moving, Prime Minister Keizo Obuchi rolled out the country’s largest-ever stimulus, valued at $195 billion. The giveaway included 8.1 trillion yen in social public works, 5.9 trillion for business loans, one trillion for job-creation programs, 700 billion in cash handouts to 35 million households, and more. By the end of the year, debt-to-GDP hit 114.3%.

November 1999: 18 trillion yen. In a “last push,” Mr. Obuchi’s government spent 7.4 trillion yen to prop up businesses, 6.8 trillion yen for social infrastructure projects like telecommunications and environmental projects, and two trillion yen for housing loans, among other things. Debt-to-GDP reached 128.3%.

Japan’s economy grow anemically over that decade, but as the nearby chart shows, its national debt exploded. Only in this decade, with a monetary reflation and Prime Minister Junichiro Koizumi’s decision to privatize state assets and force banks to acknowledge their bad debts, did the economy recover. Yet recent governments have rolled back Mr. Koizumi’s reforms and returned to their spending habits. But Japan does have better roads.

Now we’re told that a similar spending program — a new New Deal — will revive the U.S. economy. How do you say “good luck” in Japanese?

Let’s Buy Pakistan’s Nukes

Every visitor to Pakistan has seen them: 20-foot tall roadside replicas of a remote mountain where, a decade ago, Pakistan conducted its first overt nuclear tests. This is what the country’s leaders — military, secular, Islamist — consider their greatest achievement.

[Global View] AP

A model of Chaghi mountain, the site of Pakistan’s nuclear test.

So here’s a modest proposal: Let’s buy their arsenal.

A.Q. Khan, father of Pakistan’s nuclear program (and midwife to a few others), likes to point out what a feat it was that a country “where we can’t even make a bicycle chain” could succeed at such an immense technological task. He exaggerates somewhat: Pakistan got its bomb largely through a combination of industrial theft, systematic violation of Western export controls, and a blueprint of a weapon courtesy of Beijing.

Still, give Mr. Khan this: Thanks partly to his efforts, a country that has impoverished the great mass of its own people, corruptly enriched a tiny handful of elites, served as a base of terrorism against its neighbors, lost control of its intelligence services, radicalized untold numbers of Muslims in its madrassas, handed the presidency to a man known as Mr. 10%, and proliferated nuclear technology to Libya and Iran (among others) has, nevertheless, made itself a power to be reckoned with. Congratulations.

But if Pakistanis thought a bomb would be a net national asset, they miscalculated. Yes, Islamabad gained parity with its adversaries in New Delhi, gained prestige in the Muslim world, and gained a day of national pride, celebrated every May 28.

What Pakistan didn’t gain was greater security. “The most significant reality was that the bomb promoted a culture of violence which . . . acquired the form of a monster with innumerable heads of terror,” wrote Pakistani nuclear physicist Pervez Hoodbhoy earlier this year. “Because of this bomb, we can definitely destroy India and be destroyed in its response. But its function is limited to this.”

In 2007, some 1,500 Pakistani civilians were killed in terrorist attacks. None of those attacks were perpetrated by India or any other country against which Pakistan’s warheads could be targeted, unless it aimed at itself. But Pakistan’s nuclear arsenal has made it an inviting target for the jihadists who blew up Islamabad’s Marriott hotel in September and would gladly blow up the rest of the capital as a prelude to taking it over.

The day that happens may not be so very far off. President Asif Ali Zardari was recently in the U.S. asking for $100 billion to stave off economic collapse. So far, the international community has ponied up about $15 billion. That puts Mr. Zardari $85 billion shy of his fund-raising target. Meantime, the average Taliban foot soldier brings home monthly wages that are 30% higher than uniformed Pakistani security personnel.

Preventing the disintegration of Pakistan, perhaps in the wake of a war with India (how much restraint will New Delhi show after the next Mumbai-style atrocity?), will be the Obama administration’s most urgent foreign-policy challenge. Since Mr. Obama has already committed a trillion or so in new domestic spending, what’s $100 billion in the cause of saving the world?

This is the deal I have in mind. The government of Pakistan would verifiably eliminate its entire nuclear stockpile and the industrial base that sustains it. In exchange, the U.S. and other Western donors would agree to a $100 billion economic package, administered by an independent authority and disbursed over 10 years, on condition that Pakistan remain a democratic and secular state (no military rulers; no Sharia law). It would supplement that package with military aid similar to what the U.S. provides Israel: F-35 fighters, M-1 tanks, Apache helicopters. The U.S. would also extend its nuclear umbrella to Pakistan, just as Hillary Clinton now proposes to do for Israel.

A pipe dream? Not necessarily. People forget that the world has subtracted more nuclear powers over the past two decades than it has added: Kazakhstan, Belarus, Ukraine and South Africa all voluntarily relinquished their stockpiles in the 1990s. Libya did away with its program in 2003 when Moammar Gadhafi concluded that a bomb would be a net liability, and that he had more to gain by coming to terms with the West.

There’s no compelling reason Mr. Zardari and his military brass shouldn’t reach the same conclusion, assuming excellent terms and desperate circumstances. Sure, a large segment of Pakistanis will never agree. Others, who have subsisted on a diet of leaves and grass so Pakistan could have its bomb, might take a more pragmatic view.

The tragedy of Pakistan is that it remains a country that can’t do the basics, like make a bicycle chain. If what its leaders want is prestige, prosperity and lasting security, they could start by creating an economy that can make one — while unlearning how to make the bomb.

The Return of Realpolitik in Arabia

Bush’s ‘diplomacy of freedom’ gives way to Obama’s caution and reticence. The Middle East may test our fatigue.

President Bush assumed office promising a “humble foreign policy.” But it was his luck, or fate, to have much of his presidency consumed by adventures in the Greater Middle East. It is clear from the passion of his valedictory tour that he has caught the bug of that region, that it has worked its way on him as he himself worked his will, and the power available to him, on its settled and ruinous ways.

[Commentary] Ismael Roldan

President-elect Barack Obama has signaled that the foreign world will not be his primary concern, that the repair of the American economy will trump all other pursuits and temptations. On the lands and the peoples of the Middle East, Mr. Obama has been largely silent, if not detached. He was in the Illinois Senate when a huge storm blew over the Islamic world. He was lucky, as his secretary of state designate endlessly reminded us, to have given a solitary speech on Iraq when the challenge came calling.

There is a detached tone to Mr. Obama’s utterances on the Islamic world, a kind of knowingness. In part, it is no doubt an intended contrast to the heat and fervor of George W. Bush. If Mr. Bush believed he could remake that old and broken and wily region, Mr. Obama signals a fatigue with it, an acceptance of its order of power. If Mr. Bush believed that he could insert himself into the internal affairs of distant Islamic lands, Mr. Obama and his foreign-policy advisers portend a return to realpolitik and to a resigned acceptance of the ways of foreign autocracies. We have erred, the Obama worldview preaches, and overreached. We have overread the verdict of 9/11, and it is time to make our peace with regimes we have offended in the Bush years. It is the Scowcroftian way — other lands, other ways.

Then, too, the Obama reticence about those burning grounds of the Islamic world is, in part, a matter of biography. The Islamic faith was the faith of his father. A candidate with the middle name of Hussein could not afford soaring rhetoric about the ability of freedom to survive on Islamic soil.

In contrast, George W. Bush had been free and confident enough to take up the cause of reform and drastic change in the Islamic world. True, he did not know much about the ways of those lands, but neither did Woodrow Wilson. His doctrine of self-determination in the aftermath of the Great War, and the dissolution of the Ottoman empire, endures as the most consequential and revolutionary American message taken to the lands of old empires.

Wilson himself, it should be recalled, had been chastened by the radical sweep and impact of his own doctrine; he had preached the gospel of self-determination, he said, “without the knowledge that nationalities existed, which are coming to us day after day.” Detailed “knowledge” can be overrated in the choices that history opens up. The post-Ottoman world was never the same after that American president who had known so little about it. A circle was closed between that Wilsonian policy and the massive American push into Arab and Islamic lands by George W. Bush.

One thing is sure to go with Mr. Bush when he departs to Crawford, Texas: his “diplomacy of freedom.” That diplomacy — which propelled the wars in Afghanistan and Iraq, which drove the Syrians out of Lebanon after they had all but destroyed the sovereignty of that country, and had challenged pro-American allies in Egypt and the Arabian Peninsula — is gone for good.

It was an odd spectacle, the time behind us: a conservative American president preaching the gospel of liberty for lands beyond, his liberal detractors at home giving voice to a deep skepticism about liberty’s chances in inhospitable settings. No one was more revealing of the liberal temper — and of things to come — than Vice President-elect Joe Biden (then the point man for foreign policy among the Democrats) speaking in December 2006 about the hazards of believing in liberty’s appeal to Muslim lands. Of President Bush, he said: “He has this wholesome but naive view that Westerners’ notions of liberty are easily transported to that area of the world.” Mr. Biden knew better: He warned the president, he said, that Grand Ayatollah Ali Sistani’s view of liberty differed from “our view of liberty . . . I think the president thinks there’s a Thomas Jefferson or Madison behind every sand dune waiting to jump up. And there are none.”

The course of history can shred the most detailed of briefing books. On the face of it, the new team tells us that there shall be no attachment to the gains we made in Iraq. This is not Mr. Obama’s cause, or call. That country can fend for itself, it is implied. The new cause shall be a return to the struggle for Afghanistan. This is the liberal narrative: the bad, unilateral “war of choice” in Iraq, the good, multilateral “war of necessity” in Afghanistan. The doves on Iraq can thus be hawks on the Afghan-Pakistan frontier. The strategic gurus who preached that Iraq is a hopeless, artificial state put together by Gertrude Bell and Winston Churchill and T.E. Lawrence can try for victory and nation building in the unforgiving tribal lands of Afghanistan and Pakistan. If there is an artificial state in our world of nations, Afghanistan must be its closest approximation. If there is a false national boundary — mocked by ethnicity and historical allegiance — it is the Durand Line, drawn up by British power in the 1890s, between Afghanistan and Pakistan, through the lands of the Pashtuns. Afghanistan could yet thwart President Bush’s successors, frustrate them in the way Iraq frustrated him.

Our country will be forgiving toward the new foreign-policy team, it is fair to assume. The hubris and self-confidence needed for expeditions into foreign lands have been devastated by the economic meltdown in our midst.

Of the good manners and pliability of foreign regimes, we can be less certain. Nature abhors a vacuum, and challengers are sure to step forth. To its surprise, the new administration could yet discover that our adversaries do not wish to see our withdrawal from their midst. The Iranians thrive on the American presence in the Persian Gulf and feed off it. They are the quintessential oppositional force. They are not good at generating policies of their own. Their work consists of subversive attacks on Pax Americana in the region. The call by President Bush’s critics for a dialogue with Iran will be exposed for the pathetic fraud it has been all along. The American drama swirling around the rise of Mr. Obama is of no interest to the theocrats in Tehran. For them, it is business as usual in the Persian Gulf.

We have witnessed the gains and the heartbreak of American activism and ambition on foreign shores. Around the corner lurk the risks of caution and reticence, of enemies who could see through, and test, our fatigue. The world is under no obligation to accommodate us.

Mr. Ajami is professor of Middle East Studies at The Johns Hopkins University, School of Advanced International Studies. He is also an adjunct research fellow at Stanford University’s Hoover Institution.

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