What we learned from Seymour Hersh 6.

There were several different strands of policy-making that took place in late 2001 and early 2002. It brings more clarity if the strands are disentangled, rather than presenting the material in strictly chronological order.

First, in co-operation with former government officials, Chalabi worked up a plan to overthrow Saddam Hussein. In late 2001, two unpaid consultants to Chalabi worked up a new plan for getting rid of Saddam Hussein. The consultants were retired Army General and Special Forces commander Wayne Downing[1], and former CIA counter-terrorism chief Duane (“Dewey”) Clarridge. In October 2001, Wayne Downing was appointed as deputy national security adviser for combating terrorism. In December 2001, Chalabi presented the Bush administration with the new plan for overthrowing Saddam Hussein that had been worked up by Downing and Clarridge. A study group in the Defense Department then buffed up the Chalabi plan and sent it on to the Joint Chiefs of Staff (JCS).

Second, the Defense Department extended its role in fighting terrorism from special operations and intelligence gathering to intelligence analysis. In December 2001, a Department of Defense memorandum argued that terrorism experts had “downplayed or sought to disprove” the existence of a link between Al Qaeda and Iraq, and that the intelligence community had a bias against defector testimony. The memorandum concluded that Abram Shulsky[2] and a couple of analysts be charged to “investigate linkages to Iraq,” and to be allowed to investigate defector testimony in this regard. (p. 211.)   In the course of 2002, Rumsfeld became angry with the CIA for failing to find any evidence of a link between Saddam Hussein and Osama bin Laden. (p. 210.) Rumsfeld ordered or approved someone’s suggestion for creation of a special intelligence unit “to search for information on Iraq’s hostile intentions or links to terrorists.” (Quoted from NYT, October 2002.)  In September 2002, an Office of Special Plans (OSP) was created in the Defense Department to house Shulsky and his analysts.[3] Throughout 2002 OSP reports were “stovepiped” to Vice President Cheney’s office, and then on to the President. In this fashion, the reports bypassed normal intelligence agency vetting. (p. 217.)

Third, Secretary of State Colin Powell seems to have accommodated himself to the prevailing currents in the Bush Administration, rather than fighting against them. In December 2001, the State Department’s Bureau of Intelligence and Research (INR) presented its report on Iraq’s WMD to Secretary of State Colin Powell. One analyst who helped write the report told Hersh that “It basically said that there was no persuasive evidence that the Iraqi nuclear program is being reconstituted.” (p. 225.) On 30 January 2002, the CIA informed Congress that “Baghdad may be attempting to acquire materials that could aid in reconstituting its nuclear weapons program.” (p. 228.)   On 6 February 2002, Secretary of State Colin Powell went further than the CIA report that Iraq “may be…reconstituting its nuclear weapons program” and flatly contradicted the INR report that there was no persuasive evidence that Iraq was trying to revive its nuclear program. He stated before the House International Relations Committee that “with respect to the nuclear program, there is no doubt that the Iraqis are pursuing it.” (p. 228.)

Fourth, the President had decided on war against Iraq by early in 2002. On 29 January 2002, President George W. Bush denounced an “Axis of Evil” (Iraq, Iran, North Korea) in his State of the Union speech. In early 2002, President Bush told the various interested departments to come up with a plan to topple Saddam Hussein. The plan must be ready by 15 April 2002.

[1] http://en.wikipedia.org/wiki/Wayne_A._Downing

[2] http://en.wikipedia.org/wiki/Abram_Shulsky

[3] http://en.wikipedia.org/wiki/Office_of_Special_Plans

What we learned from Seymour Hersh 5.

In the days after 9/11 some intelligence and military people suspected that so complex an operation could only have been mounted by—or at least with the support of—a foreign intelligence agency. (p. 75.) On 14 October 2001, Sabah Khodada, an Iraqi army captain who had defected, told reporters for the NYT and the PBS program “Frontline” that the 9/11 attacks were “conducted by people who were trained by Saddam.” (Quoted, p. 216.) Another defector, apparently a former lieutenant general in Iraqi intelligence, said he had observed Arab students being taught how to hijack planes in a security facility at Salman Pak. (p. 216.)

In Fall 2001, Italy’s intelligence service sent a report to CIA of a February 1999 visit by the Iraqi ambassador to the Vatican[1] to Niger and three other African countries. The Italians—apparently—suggested that the ambassador had been seeking to arrange the purchase of “yellow cake” uranium from Niger. This report alarmed some officials in the American government because it suggested that the Iraqis were trying to re-establish a nuclear weapons program soon after the IAEA had declared that they no longer had a nuclear program. (p. 226.)   Intelligence analysts derided the report, but someone “stovepiped” it to Vice President Cheney. (p. 227.) So, in Fall 2001, the State Department’s Bureau of Intelligence and Research (INR) launched a review of Iraq’s WMD programs. (p. 225.)

In late 2001, an unanticipated division arose within the ranks of the conservatives who had signed the 1998 letter to President Clinton. There were two issues. The first question was whether to extend the war on terror from Afghanistan to Iraq. On the one hand, according to Hersh, “Perle and Woolsey inspired a surge of articles and columns calling for the extension of the Afghan war into Iraq.” (p. 169.) On the other hand, Richard Armitage, now at the State Department, concluded that the extension of the war to Iraq would be a bad idea. (p. 169.) Armitage has adopted the long-standing position voiced by Anthony Zinni. A “former high-level intelligence official” who supported Armitage’s position in the debate told Hersh that “We have no idea what could go wrong in Iraq if the crazies took over that country. Better the devil we know than the one we don’t.” (p. 170.) Secretary of State Colin Powell failed to support for Armitage in the debate, apparently believing that his deputy would be able to hold up the momentum for war while he played the disinterested adjudicator.[2]

The second question was whether to use Ahmad Chalabi and the INC in any effort to topple Hussein or to find someone else. (p. 179.) [It looks to me like the opponents of war with Iraq used the Chalabi-is-death argument as a fall-back position. This then required them to find an alternative to Chalabi in the form of other dissident groups.] For the State Department, the “someone else” turned out to be the two factions of the Kurds, the Shi’ite Supreme Council for Islamic Revolution, and a group headed by Iyad Allawi.[3] (pp. 179-180.) For the CIA the “someone else” was Nizar Khasraji[4], a former Iraqi general who had bolted in the mid-1990s. (p. 181.) These candidates had various defects. Allawi appears to have been one of Hussein’s original supporters, a former senior intelligence officer, and a “thug.” In the mid-Seventies, Allawi parted ways with Saddam and then survived several assassination attempts. Khasraji was very Westernized, so he might not play well with the majority of Iraqis, who were not, and he had been involved in the use of poison gas against the Kurds in 1988.

[1] Who knew?

[2] To my mind, Powell was a soldier-turned-administrator, rather than someone with finely-honed political skills.

[3] http://en.wikipedia.org/wiki/Ayad_Allawi

[4] http://news.bbc.co.uk/2/hi/not_in_website/syndication/monitoring/media_reports/2286537.stm

What we learned from Seymour Hersh 4.

In 1998, Major General Anthony Zinni[1], commander of Central Command (CENTCOM), told a Senate committee that “I don’t see any opposition group that has the viability to overthrow Saddam. Even if we had Saddam gone, we could end up with fifteen, twenty, or ninety groups competing for power.” (Quoted, p. 165.)

In 1998, David Albright, head of the Institute for Science and International Security[2], and Khidhir Hamza, shopped around a book proposal for Fizzle: Iraq and the Atomic Bomb, which described the failure of the Iraqi nuclear project. They found no interest among publishers.[3]

In October 1998, Congress passed and President Clinton signed the Iraq Liberation Act, providing $97 million to support training and equipment for the INC and other military forces.[4]

In 2000, after the failure of American publishers to take his story of Iraqi failure in the pursuit of nuclear weapons, Hamza reversed course and began talking about Iraq’s comparative success. This may have led to a break with Albright and the ISIS. In any event, Hamza alone published Saddam’s Bombmaker.[5]

By 2000, Anthony Zinni had not become more optimistic about plans to overthrow Saddam Hussein. He wrote an estimate of what it would take to get rid of Saddam Hussein for the US Naval Institute’s Proceedings. It would take six divisions of ground forces (150,000 men), lots of close air support, and the united political support of the American government and people. “There are congressmen today who want to fund the Iraqi Liberation Act, and let some silk-suited, Rolex-wearing guys in London gin up an expedition….And what will we have? A Bay of Goats most likely.” (Quoted, p. 174.) How did he ever make Major General? Should be a retired Lieutenant Colonel, playing golf in South Carolina, running a paving company.

In January 2001, the inauguration of President George W. Bush brought in a new group of policy-makers. Some of them had signed the open letter to President Clinton in 1998 urging support for the INC and warning of the danger posed by Saddam Hussein’s WMD program. Donald Rumsfeld became Secretary of Defense; Paul Wolfowitz became Deputy Secretary of Defense; Douglas Feith became Under-Secretary of Defense for Policy; Richard Perle became chairman of the Defense Policy Board; and Richard Armitage became Deputy Secretary of State.

In March 2001, Richard Perle[6] testified before a sub-committee of the Senate Foreign Relations committee. “Does Saddam Hussein now have weapons of mass destruction? Sure he does. We know he has chemical weapons. We know he has biological weapons….How far he’s gone on the nuclear-weapons side, I don’t think we really know. My guess is it’s further than we think. It’s always further than we think, because we limit ourselves, as we think about this, to what we’re able to prove and demonstrate…And, unless you believe that we have uncovered everything, you have to assume there is more than we’re able to report.” (Quoted, pp. 209-210.)

In April 2001, the INC opened a liaison office in Tehran, Iran—with the approval of the Bush administration. (p. 171.)

[1] http://en.wikipedia.org/wiki/Anthony_Zinni

[2] http://en.wikipedia.org/wiki/David_Albright

[3] Apparently, NOT running around with your hair on fire is an undesirable quality in mass market non-fiction publishing. Maybe if they had called it “The Saddam Hussein Diet,”…

[4] http://en.wikipedia.org/wiki/Iraq_Liberation_Act

[5] For a sense of the contemporary reaction among interested readers, see http://www.amazon.com/Saddams-Bombmaker-Daring-Escape-Secret/dp/0743211359

[6] http://en.wikipedia.org/wiki/Richard_Perle

What we learned from Seymour Hersh 2.

In 1986 the CIA established the Counter Terrorism Center. The founding director of the Center was Duane (“Dewey”) Clarridge.[1] Clarridge quickly recruited Robert Baer, an Arabic-speaking case officer with a lot of experience in the Middle East.[2] (p. 78.)

In 1993 or 1994 Baer got out of the CTC and was posted to Dushanbe, Tajikistan. (p. 79.) (I haven’t yet figured out if he was there at the same time as Colonel Tom Wilhelm.[3])

In November 1993 Ahmad Chalabi,[4] the leader of the Iraqi National Congress (INC), sent its plan for the over-throw of Saddam Hussein to the Clinton administration.   Between November 1993 and October 1994, Chalabi’s plan wound its way through the Clinton administration and received approval for American support. In October 1994, a CIA outpost in Kurdish-held northern Iraq began operating in support of Chalabi’s plan. Robert Baer took charge of the local operations.

Between October 1994 and March 1995, Chalabi’s people tried to suborn treason on the part of a lot of Iraqis—purportedly. In March 1995, Chalabi attempted a coup against Saddam Hussein. It proved a complete failure. In April 1995, Chalabi and INC moved their base to London. From here they began trolling for new support among American conservatives. Chalabi developed close ties with the American Enterprise Institute. In 1996, the CIA cut off payments to Chalabi and the INC.

NB: The Cold War was closely bound with the history of refugee movements. Many refugees settle into some kind of life in their new homes. However, there are always some refugees who continue to involve themselves in the politics of their homeland. In sum, the Central Intelligence Agency has long experience at dealing with refugees as problematic sources.

In 1994, Dr. Khidhir Hamza[5], formerly a member of Iraq’s WMD program, defected to the West. Eventually he settled in the United States and was given a job by the Institute for Science and International Security, a pro-disarmament think tank in Washington, DC.

In August 1995, Hussein Kamel[6], the head of Iraqi weapons programs, and his brother, Saddam Kamel, defected to the West. They brought with them many documents that revealed the exact nature of Iraq’s WMD program. These programs turned out to have been largely invisible to the UN weapons inspectors. However, the Kamel brothers also claimed that large quantities of weapons had been destroyed to prevent their discovery by the UN weapons inspectors in place after the First Gulf War. (pp. 212-213.)

In October 1997, the UN’s International Atomic Energy Agency (IAEA) declared Iraq to be disarmed of nuclear weapons. (p. 225.) That still left poison gas, chiefly a battlefield weapon.

In February 1998, forty prominent Americans (including Frank Carlucci, Caspar Weinberger, Donald Rumsfeld, Richard Perle, Paul Wolfowitz, Douglas Feith, Richard Armitage) signed an open letter to President Clinton. They argued that Saddam Hussein’s pursuit of WMD posed a threat to the United States. The letter urged recognition of the INC as Iraq’s provisional government. This began a conservative campaign for action against Saddam Hussein.

[1] http://en.wikipedia.org/wiki/Duane_Clarridge

[2] http://en.wikipedia.org/wiki/Robert_Baer

[3] On Wilhelm, see: http://www.theatlantic.com/magazine/archive/2004/03/the-man-who-would-be-khan/302899/

[4] http://en.wikipedia.org/wiki/Ahmed_Chalabi

[5] http://en.wikipedia.org/wiki/Khidir_Hamza

[6] See his blood-curdling story in http://en.wikipedia.org/wiki/Hussein_Kamel_al-Majid

What we learned from Seymour Hersh 3.

Between the end of the Cold War and 9/11, the C.I.A. had declined in some areas while growing stronger in other areas. The areas of its strength did not match well with the immediate needs of counter-terrorism. The areas of its weakness were just those areas where competence was in high demand. Secretary of Defense Donald Rumsfeld[1] knew very well the weaknesses of the C.I.A. because he had served on several task forces on intelligence during the previous Bush and Clinton administrations. It would take several years to bring the C.I.A. back to full strength. The terrorists were not going to wait in a neutral corner until the Americans got back on their feet and the referee allowed the fight to continue. If the C.I.A. could not fill the leadership role, then some other organization would have to lead.

Very soon, Secretary of Defense Donald Rumsfeld began to press for “the civilian leadership in the Pentagon, and not the C.I.A., [to get] the lead in fighting terrorism.” (p. 17.) What Rumsfeld wanted was “to get the U.S. Special Forces community into the business of what he called…”manhunts,”…” (p. 16.)

Immediately following 9/11, Rumsfeld ordered General Charles Holland[2], commander of Special Operations, to come up with a list of known terrorist targets for immediate attack. (p. 265.) In October 2001, numerous cases occurred where either Air Force pilots or Special Forces teams were prevented from striking at suspected Al Qaeda targets by various bureaucratic and/or legalistic restrictions. (pp. 48-49.) At about the same time, Holland provided a list, but warned that there was a dearth of “actionable intelligence” to support any rapid attack. (p. 266.) Rumsfeld suggested that Special Operations be made a “global command” directly under the command of the Secretary of Defense, with responsibility for all military operations against terrorists. (p. 271.)

In late 2001 or early 2002, President George W. Bush signed a legally required “finding” that authorized the Department of Defense to create a special unit to attack Al Qaeda. Henceforth, Hersh identifies this program as the SAP (for “special access program”).[3] (p. 16.) This “highly secret program….was given blanket advance approval to kill or capture and, if possible, interrogate high-value targets…..The program would recruit operatives and acquire the necessary equipment, including aircraft, and would keep its activities under wraps.” (p. 49.) “In theory, the operation enabled the Bush Administration to respond immediately to time-sensitive intelligence: commandos crossed borders without visas and could interrogate terrorism suspects deemed too important to for transfer to the military’s facilities at Guantanamo. They carried out instant interrogations, often with the help of foreign intelligence services—using force if necessary—at secret C.I.A. detention centers scattered around the world. [4] The intelligence would be relayed to the SAP command center in the Pentagon in real time, and sifted for those pieces of information critical to the “white,” or overt world.” (p. 50.) In July 2002 Rumsfeld ordered General Holland, commander of Special Operations, “to develop a plan to find and deal with members of terrorist organizations…The objective is to capture terrorists for interrogations or, if necessary, to kill them, not simply to arrest them in a law-enforcement exercise.” (p. 265.)

The Defense Department was going to collect and analyze intelligence on terrorism.

[1] http://en.wikipedia.org/wiki/Donald_Rumsfeld

[2] See: http://en.wikipedia.org/wiki/Charles_R._Holland

[3] See: http://en.wikipedia.org/wiki/Special_access_program The Wikipedia entry illustrates some of Hersh’s problems. There are a host of “Special Access Programs.”

[4] On the “black sites,” see: http://en.wikipedia.org/wiki/Black_site

What we learned from Seymour Hersh 1.

Seymour Hersh (1937- ) is an investigative journalist and—on occasion—a Holland Tunnel of an ass-hole in the eyes of American government officials. His parents were Lithuanian Jews who got to the United States before the Holocaust. He got a BA in History at the University of Chicago, then drifted into reporting. His politics leaned left and he was hard to corral.[1] His first big break came when he broke the story of My Lai (1969). Then he worked in the Washington bureau of the New York Times during the Watergate events (after which he wrote a highly critical book about Henry Kissinger). More books critical of American foreign policy followed. Hersh became controversial not only for his sharp stabs at alleged government wrong-doing, but for his use of anonymous sources. Richard Perle called Hersh the “closest thing American journalism has to a terrorist.” Hersh has won five George Polk Awards for investigative journalism and a Pulitzer Prize. In 2004, Hersh published a book on the enormities arising from the intersection of intelligence and policy-making in the run-up to the Second Gulf War.[2] What did we learn?

After the fall of the Soviet Union and the end of the Cold War, the CIA had gone into a steep decline. One factor in this decline had been the change in the nature of the target. CIA case officers were overwhelmingly European-language speakers used to suborning treason on the part of Soviet bloc officials while operating under diplomatic cover. The implosion of the Soviet target and the liberation of the eastern European satellites had rendered most of these men redundant. Emerging dangers in the post-Cold War scene were difficult to identify with certainty; it was even more difficult to create new cadres of officers to deal with these dangers. These factors led to a considerable decline in the over-all number of Operations Directorate officers, rather than a shift of human resources to new targets. Instead, there took place a shift of resources from gathering human intelligence to gathering signals intelligence and remote observation. To compensate for the loss of case officers, the Directorate of Operations shifted to relying upon liaison relationships with foreign intelligence services. (pp. 76-77.)

Later, in 1995, the public revelation that the CIA had employed a Guatemalan involved with the death squads as an informant led to an order that “assets” who might be considered to have criminal or humans rights problems in their records could only be recruited with prior approval of CIA headquarters in Langley. Hundreds of existing agents all around the globe were simply dumped and new ones rarely recruited. (pp. 79-81.) One case officer of the time fumed to Seymour Hersch that “Look, we recruited assholes. I handled bad guys. But we don’t recruit people from the Little Sisters of the Poor—they don’t know anything.” Bob Baer recalled that “It did make the workday a lot easier. I just watched CNN.” (Hersh, p. 81.)

By 9/11 the C.I.A. lacked the personnel to respond effectively. In summer 2001–before the 9/11 attacks–former Middle Eastern case officer Reuel Marc Gerecht warned of the dangers in an article in The Atlantic Monthly. He quoted officers saying things like “For Christ’s sake, most case officers live in the suburbs of Virginia….Operations that include diarrhea as a way of life don’t happen.” (Quoted, p. 77.) As one now-retired clandestine service officer put it to Hersh, the decision-making was dominated by people who “wouldn’t drive to a D.C. restaurant at night because they were afraid of the crime problem.” (Quoted, p. 81.) So, that’s concerning.

[1] D’un: the highly-educated child of Jewish immigrant parents living in Chicago. Gene McCarthy’s press secretary in 1968.

[2] Seymour Hersh, Chain of Command: The Road from 9/11 to Abu Ghraib (HarperCollins, 2004) based on a series of New Yorker pieces.

Flip-flops on the ground in Iraq.

Iraq’s war with Iran (1980-1988) proved longer and costlier than Saddam Hussein had ever imagined.[1] At the end of the war Saddam Hussein found himself ruling a country that had exhausted its once huge oil reserves, that had become loaded with debt, and that badly needing to reconstruct. Iraq’s debt belonged to the Sunni Arab Gulf states. To finance the war he had presented himself to the other Gulf states as their shield against radical Shi’a Iran and has asked for money. Apparently Kuwait, the Arab Emirates, and Saudi Arabia had seen it in the same light, because they loaned Iraq $40 billion.

The post-war negotiations with Iraq’s creditors were mismanaged on both sides. Iraq asked for too much: forgiveness of the $40 billion debt, plus $30 billion in new money to pay for reconstruction. Since the Iranian danger had been blunted over the course of the Eighties, Iraq’s creditors were not much inclined to give the country easy terms or, for that matter, anything at all. Both Saddam Hussein’s request for loan cancellation and for an additional $30 billion loan (which was just as unlikely to be repaid as the original $40 billion in loans) fell on deaf ears. If Iraq could not get loan cancellation and additional loans, then it would have to pay its own way through oil sales. The falling price for oil put a severe crimp in what Iraq could earn.   In these negotiations the Emir of Kuwait took a particularly strong stand for the sanctity of international economic agreements by insisting upon repayment of the existing debt at the same moment that he was violating his oil quota.

In July 1990 Saddam Hussein sent Foreign Minister Tariq Aziz to put his case to the Arab League. The Iraqis made the same argument to the Arab League that the French and British once had made to the Americans after the First World War: We spent blood in the common cause while you gave only money, so you should cancel the money debt in exchange for us cancelling the “blood debt.” The Americans had not bought that line in 1919 and the Gulf states didn’t buy it in 1989.

On 17 July 1990 Saddam Hussein gave a belligerent speech that seemed to threaten action. That same day he sent the Kuwaiti government a letter in which he demanded a halt to the slide in oil prices, cancellation of Iraq’s debt to Kuwait, and an Arab package of aid to Iraq. Failing this, said Saddam Hussein, “we will have no choice but to resort to effective action to get things right and ensure the restitution of our rights.”[2]

To give meaning to this communication, Saddam Hussein ordered 30,000 troops massed close to the Iraq-Kuwait border. This threat, which Kuwait shared with Saudi Arabia and—undoubtedly–with the Americans, led the Saudi government to attempt to mediate. On 25 July 1990 Saddam Hussein had an interview with the American ambassador, April Glaspie, in which he gave her an ambiguous threat and she gave him an ambiguous warning. A week later, on 2 August 1990, the Iraqi army rolled into Kuwait.

The role of Saudi Arabia and its Gulf State clients in the coming of the First Iraq War is not much discussed these days in the American media. This role included financing Iraq in its long, predatory war against revolutionary Iran. It included pursuing a foolishly selfish policy on Iraq’s war-debts. It should surprise no one that, if it will take “boots on the ground” to defeat the Sunni fanatics of ISIS in their war against the pro-Iranian governments in Baghdad and Damascus, there will not be Saudi feet in them. Nor, probably, American feet. That just leaves the Iranians. Or the partition of Iraq.

[1] John Keegan, The Iraq War (2005).

[2] Quoted in Keegan, The Iraq War, p. 75.

White Flight from Baltimore.

Racism is widely deprecated. People of virtually all political stripes decry racism. Some Democrats deploy accusations of racism against their opponents in the sort of public shaming campaigns that other Democrats deplore when applied to other cases. However, one truth not much acknowledged in politics, the media, or scholarship is that—under most circumstances—racism isn’t illegal.[1]

The city of Baltimore offers an example of this inconvenient truth. After the Second World War, the other City by the Bay lost population, jobs, and the economic base needed to make the place run effectively. One important part of the problem arose from accelerating “white flight” from the city to the suburbs. Between 1950 and 1960, Baltimore’s population fell from 950,000 people to 939,000 people. From 1960 to 1970, Baltimore’s population fell from 939,000 people to 906,000 people. So, from 1950 to 1970 Baltimore lost 4.6 percent of its population.

Then came the riots of April 1968. Over a thousand businesses were looted, damaged, or burned down. The damage totaled about $79 million in today’s dollars. Virtually all of the businesses were owned by whites. One activist later reflected that “the riots really weren’t personal: They were against the system, not individual white people. There was only property loss.” However, property belongs to individuals. White flight accelerated, businessmen took their insurance money and moved to suburban locations, and landlords backed even farther off from maintaining property in a city where two-thirds of African-Americans rent their homes.

To make matters worse, Baltimore’s economic base declined. The Bethlehem Steel Company’s Sparrows Point complex of steel mill and shipyard provided high-wage jobs to a huge number of people in the area. During the 1970s and 1980s, Bethlehem Steel encountered all sorts of problems that it failed to master. Repeated rounds of retrenchment led to huge losses of jobs. Moreover, both the steel mill and the shipyard formed the center of networks of local suppliers of goods and services. Job losses at Sparrows Point rippled outward through the community. The decline of Sparrows Point and the attendant job loss cost the city an ever-growing amount of revenue.[2] From 1970 to 1980, Baltimore’s population fell from 906,000 people to 787,000 people. Decline continued until it reached 651,000 people in 2000. All told, Baltimore’s population fell by 28 percent between 1970 and 2000. Most the emigrants were whites. As a result, the “non-white” population in Baltimore rose from 24 percent in 1950 to 44 percent in 1970 to 65 percent by 2000.[3]

If 76 percent of the Baltimore’s population was white in 1950, that would mean that about 725,000 white people lived in the city. By 2000, whites constituted 35 percent of the population. That would amount to about 228,000 people. Almost half a million whites left the city. Property taxes pay for schools; business and operations taxes and licensing fees pay for city government functions like police and fire departments, and trash collection.

If the population was 950,000 in 1950 and half a million people left, then the city’s population should be about 450,000 people. However, the city’s 2000 population was actually 651,000 people. In all likelihood, the extra 200,000 people were African-Americans from farther South who moved North in hopes of finding greater opportunity. Need grew as resources shrank. Bitter must be their tears.

[1] Some racist actions are illegal. Racist belief, however, is not illegal and many racist actions are not illegal.

[2] See Mark Reutter, Making Steel: Sparrows Point and the Rise and Ruin of American Industrial Might (2005).

[3] http://www.baltimoremagazine.net/2007/5/1/100-years-the-riots-of-1968?p=2007/5/100-years-the-riots-of-1968

Disruption.

Clayton Christenson, the Harvard Business School professor whose theory of “disruption” is all the rage, once used the decline of the American steel industry as an example.[1] Leaders obsessed with profit ratios surrendered the less profitable segments of their businesses to alligators willing to accept a smaller profit in order to take over that segment. The newcomers then expanded their profit margins by investing in modern technology and pursuing efficiencies. Eventually, Big Steel found itself devoured by the alligators. From 2000 to 2013, Dan DiMicco ran Nucor Steel, one of the alligators and now the second largest steel-maker in the United States. Since leaving Nucor, DiMicco has been pondering the state of the American economy—and of the society that the economy supports. What has he concluded?[2]

First of all, he thinks that the federal government botched the 2009 stimulus bill. He thinks that the almost $800 billion stimulus could have revived the economy if it hadn’t been piddled away on subsidies to “green technology” companies, grants to limit the lay-offs caused by balanced-budget requirements of states squeezed by falling revenues, and tax cuts.[3] The failed stimulus and the obsession about cutting the deficit among Republicans have left the economy laboring along in first gear, if not in neutral.

Second, he thinks that the United States needs to create an awful lot of jobs in a Hell of a big hurry. On the one hand, there is the normal population growth that pumps out new would-be workers onto the labor market. On the other hand, the Great Recession has left a lot of people working part-time or out of the labor market entirely. He figures that the economy will have to add at least 30 million new jobs over the next decade to soak up those who want to work. The post-Great Recession economy doesn’t seem up to this task. Instead, DiMicco argues for heavy investment in a ten year plan for infrastructure as part of the basis for reviving industry.

Third, he thinks that capital-intensive manufacturing jobs are better than labor-intensive service jobs. Capital makes for high productivity; high productivity allows both high wages and high profits. In contrast, labor-intensive jobs require employers to hold down wages in order to make even a razor-thin profit. We’re never going to get strong consumer demand from an overwhelmingly service-based economy. Nucor invests in training workers for their jobs (rather than shoving the task off on colleges), so it never suffered from a supposed “skills gap.”

Fourth, he thinks that Americans—leaders and followers alike—are living in La-La Land about America’s place in the world economy. The Second World War developed the American economy while devastating those of every other country. For thirty years, American business and labor faced no serious challenge from foreign competition. At the same time, the United States promoted an open world economy because that would benefit the American economy of the Forties through the Sixties. The trouble was that the American economy did not stay “lean and mean,” while the reviving economies of Germany and Japan, and more recently China, became highly competitive. Moreover, the governments of those countries depreciated their currencies to make their countries’ more competitive with American ones. Free Trade has become a loser’s game for the United States.

There’s a lot to like in DiMicco’s bracing book.

[1] See: Larissa MacFarquahar, “When Giants Fail,” New Yorker, 14 May 2012.

[2] Dan DiMicco, American Made: Why Making Things Will Return Us to Greatness (Palgrave Macmillan, 2015).

[3] Here DiMicco is to some extent at odds with Paul Krugman. The Princeton economist wanted a stimulus bill that was twice as big, although he too derided the impact of the tax cuts.

Character Test.

Eduardo Porter has argued that Americans have been guided by a shared disdain for collective solutions and a belief individual responsibility. The conservative argument offered by Charles Murray and others is that the welfare state has undermined the character of its beneficiaries. The liberal argument offered by Eduardo Porter and others is that America has relied on continuing prosperity instead of a real welfare state. When long-term economic troubles hit, many Americans plunged through the cob-web of a “safety net.”[1]

On the right, in line with the moral corruption argument made by Murray, Republicans propose to repeal the Affordable Care Act and cut a bevy of other programs for the poor. This will end the culture of dependency that many conservatives blame for creeping social pathologies that came to light after the recent Baltimore riots that followed the arresting-to-death of Freddy Grey. The Republican budget plans seem like a dead-end. For one thing, they target relatively low-cost programs aimed at the poorest Americans. In reality, defense, Medicare/Medicaid, and Social Security are the big drivers of government spending. As Willy Sutton explained when asked why he robbed banks, “That’s where the money is.”

For another thing, these categories of spending are widely popular with the American middle class. Once again, as with opposition to gay marriage and to immigration reform, Republicans are picking the losing side of an argument. Takes Social Security as an example. As the Baby Boom retires, it places a mounting pressure on the system. When current revenue through withholding is inadequate to meet obligations, the System draws on the Social Security trust-fund (built up from revenue surpluses in the past). At the moment, the trust-fund is expected to be exhausted by 2033. After that happens, retiree benefits will be reduced to perhaps 75 percent of expected benefits.[2] Senators Elizabeth Warren and Bernie Sanders favor raising or removing the cap on Social Security withholding to greatly increase revenue for the supplemental retirement income system. However, they favor going beyond stabilizing the finances of the present system to create an expanded national pension system.[3]

This seems likely to emerge as a powerful issue in future elections. In 2005, 26 percent of still-working Americans expected “to rely on Social Security as a major source of income” in retirement. In 2015, 36 percent of still-working Americans “expect to rely on Social Security as a major source of income” in retirement. Among currently retired people, 73 percent are receiving reduced benefits because they retired early.

There are several possible explanations for the growing place of Social Security in the retirement income of Americans. One explanation could be that the Great Recession devastated both the savings and the income of ordinary Americans. Another explanation could be that a decade of aging forced many Baby Boomers to confront their own lack of thrift over the course of a lifetime. Similarly, the huge number of people who took early retirement could be explained by either the moral corruption argument or by the ravages of globalization over the last 25 years.

If conservatives want to sustain the moral corruption argument, they will have to openly apply it to middle class entitlements. Of course, cannibalizing the Affordable Care Act could provide some of the revenues to shore up middle class entitlements. However, this would require the middle class to turn its back on the poor. So, a test of character.

[1] Eduardo Porter, “Income Inequality Is Costing The Nation on Social Issues,” NYT, 29 April 2015.

[2] “Social Security worries mount,” The Week, 22 May 2015, p. 32.

[3] This strikes me as equivalent to the sort of defined-benefit system that American companies found to be unsustainable and abandoned in favor of the defined-contribution systems. Perhaps I’m wrong.