The Olympia Academy

The ongoing war against Islamic extremism

2010-08-16T11:16:00.004-04:00

The current war against Islamic extremism is shifting from a reactionary war designed to secure the American people at home to a more proactive approach abroad. This strategy, which has also materialized in Yemen with the help of the current Yemeni government, has taken a foothold as the ‘scalpel strategy’ created by John Brennan, the President’s deputy national security advisor.

The strategy, however, depends on many variables that must work in synch to achieve success. For starters, the amount of coverage taken up by Iraq and Afghanistan has overshadowed ongoing operations in places like Yemen, where covert operations have replaced shock and awe. Our presence in those countries, however, also hurts us since al-Qaeda uses it as a recruitment tool. Secondly, the national governments must be “on board” with the special operations and work in conjunction with American military advisors; third, develop the conditions on the ground that will be conducive for solid intelligence; finally, invest money on local tribes, for as some Yemeni tribal leaders have said, “My state is anyone who fills my pocket with money.”

The total amount of money spent in the wars in Iraq and Afghanistan has reached over $1 trillion since 2001.[1] This is money that has been borrowed from countries like China, which, for the sake of comparison, holds $868 billion worth of US Treasury securities. It is this fact that has overshadowed the dialogue and tilted coverage in the favor of Iraq and Afghanistan allowing the US government (USG) to carry on the operations in Yemen seemingly under the radar.

The Yemeni government, under President Ali Abdullah Saleh, has worked and continues to work to combat al-Qaeda within that country. Innocent casualties aside, this has helped the USG with successful strikes against some al-Qaeda targets. However, hellfire missiles from drones as opposed to missiles form Navy ships can cut the number of innocent lives, therefore denying al-Qaeda their recruiting tool.

The tribes that are in a constant tug and pull with the Yemeni government can be bought for the right amount of money. They also haven’t shown complete allegiance to the al-Qaeda cause. Their cooperation – covertly in the way of intelligence – is imperative if the campaign is to work in the short and long term.

Moving Forward

Several things need to happen in order for the “scalpel strategy” to succeed in destroying al-Qaeda. First, a withdrawal of military personnel from Iraq and a draw down of military personnel from Afghanistan needs to occur. This will reduce propaganda by al-Qaeda and thwart their recruitment efforts by eliminating our significant footprint in those regions; second, increase the funding for covert operations in Yemen, the Maghreb, Somalia and Xinjiang (East Turkestan Islamic Movement) and start planting the seeds of cooperation between tribes and USG; last, but not least, shift from a reactionary military campaign to proactive, fluid operations where al-Qaeda has or could have influence in the region. Taking the fight to them and using foreign fighters in ancillary operations with the support of USG will allow for rapid response in many hotspots in the Middle East. This, will keep al-Qaeda on the run without entrenching themselves in regions as they have done in Iraq, Pakistan and Afghanistan.

Sources:

· Major Foreign Holders of Treasury Securities, US Department of the Treasury, accessed: 8/15/2010

· Measuring Worth Web Site < http://www.measuringworth.com/index.html> accessed: 8/15/2010.

· Active Duty Military Personnel Strengths by Regional Area and by Country, Department of Defense, < http://siadapp.dmdc.osd.mil/personnel/MILITARY/history/hst0712.pdf> accessed: 8/16/2010.

[1] For comparison, the United States spent conservatively around $3.4 trillion on World War II (in 2008 dollars).

By: Julio Lainez

Why Israel Is Wrong

2010-06-05T15:03:00.000-04:00

Before I get started let me get this out of the way: This blog supports Israel's right to defend itself and its right to live in peace side by side with a new Palestinian state, a free Palestinian state. Having said that, however, when a "freedom flotilla" threatens to further stall and bring the region to the brink, that's when you should rethink your security strategy. Israel, threatened from every corner of the Arab world, has - again - the right to defend its people by making sure that shipments that go to Gaza are thoroughly checked to make sure that no arms or bomb-making materials reach the hands of Hamas. But, the government which has made mistake after mistake with the surprising incompetence shown by Bibi Netanyahu has given the Arab world a propaganda win without having them lift a finger. Israel's respected daily Haaretz said in an editorial: "Hamas claimed an outstanding victory without firing a single rocket." (see article) The ineptitude shown by the Israeli government gave Israel a black eye (yet another one) and further magnified the plight of the Palestinians in Gaza. This is something that Israel doesn't need, not now, as it tries to mend fences with its strongest ally, the United States.

What Could They Have Done?

How about working with Turkey to inspect ships that will be "problem children" in Turkey before they leave for Gaza therefore ensuring that no arms nor bomb-making materials are onboard. This, however, would require close cooperation between the two countries, something that has eroded over the row in the Mediterranean. Not all ships decide to break the blockade that Israel has on Gaza, but the ones that do, make a point by saying that they will not stop in Israel. Those ships should be checked by security personnel from the departing country as well as by Israeli Defense Forces. Ships that say one thing and do another, for example, claim that they will stop at an Israeli port and be searched, but fail to do so, should be searched on the high seas. Under international law, Israel has every right in the world to board a ship it deems as a threat. Procedures, however, should be reviewed to make sure that it is done in a way that it is not threatening but at the same time creates an undue burden so that other ships do not follow suit. These procedures would avoid another confrontation and another embarrassing situation that would further derail the peace process.

By Julio Lainez

On the Causes of the Greek Financial Crisis and Solutions to Prevent It from Occurring Again

2010-05-13T15:00:00.001-04:00

While the Greek financial crisis was caused by a bloated public sector, uncontrolled spending, corruption, and an inefficient bureaucracy, Goldman Sachs also played a major role when they helped the government mask the true extent of its deficit when it joined the Euro-zone. This paper will look at the causes of the crisis, the solutions that are being offered as well as the most recent developments. The Greek government is to blame for the predicament they find themselves in, but a collapse of Greece could have a larger effect on the Euro-zone given their economic ties and interdependence of international markets. Labeled as “Europe’s very own subprime crisis” the current state of the Greek crisis could metastasize to other parts of the Euro-zone. Therefore it is important to understand the policy solutions being offered as well as the necessary measures that need to take place, so that going forward, proper methods of financial disclosure exist. This will prevent governments from using deceptive mechanisms to hide their true finances, avoiding the Greek predicament where discussions of bankruptcy and the end to the euro as a currency are taking place.

Many questions remain as to how Greece, a country with one of the highest inflation ratios, managed to meet the demands of the European Central Bank (ECB) and join the European Union. The Hellenic nation had been plagued for many years with nepotism, dishonest accounting, massive corruption and tax evasion by its very own government. The fraudulent accounting was entirely linked to the governments predecessors, who for over six years managed to ride up the debt of “Greece's thriving black economy.”

In early 2000, Greece was known as Europe’s anchor of stability in a very troubled region. This period of prosperity coincided with Greece’s acceptance and eventual entrance into the Euro-zone, which officially happened in 2001. Kostas Karamanlis , member of the opposition party when Greece joined the Euro-zone in 2001, wrote the following statement supporting the admission into Europe’s exclusive club:

As a fully integrated European state, Greece is playing its part in facing such twenty-first-century challenges as globalization, technological change, environmental degradation, and organized crime. However, the problems of Southeast Europe are in certain respects more traditional and involve age-old issues of nationalism, peace, and security. Greece's history and geographic location give it unique standing to assist in the Europeanization of the Balkans and bring them into a common future of prosperity.

Clearly, the movement that was abreast created a sense of patriotism and hyper-inflated hopes for the country and region. In 2001, Greece dropped their century old currency, the drachma, and adopted the euro. In order to do this, Greece had to agree to certain requirements established by the Maastricht Treaty. The convergence criteria, as presented in Article 121(1) of the treaty, states that four objectives shall be met to adopt the European currency, those being:

(1) price stability
(2) government finances;
(3) exchange rates; and
(4) long-term interest rates.

In addition to this, the Stability and Growth Pact must also be adhered to. The pact was intended to ensure that Euro-zone members maintain a budgetary discipline by keeping a debt-to-GDP ratio of less than 60% of their GDP and their annual budget deficit to under 3% of GDP. The Stability and Growth Pact is intended to keep accountability of those member states that fail to maintain their low deficit numbers once they join the European Union. Penalties are set in place if the pact is not upheld, but unfortunately there are no teeth associated with these penalties and are always subject to the “assessment of the circumstances of the Council.” With no clear rule or strict enforcement, member states often break the rules without any consequences. For example, today there are many countries within the EU that have annual budget deficits of above 3% of GDP.

As part of the European Union, Greece benefited from this monetary policy. Since they were under the umbrella of the Euro-zone’s sixteen powerful economies, and the authority to print money lied within the European Central Bank, they became more liberal with their fiscal policy. However, their ability to borrow and spend, became extremely weak due to the nation’s uncontrolled spending. Although the Maastricht Treaty did apply the deficit standards to Greece when they joined the EU, these were sometimes circumvented or even ignored. More to the point, Greece went out of their way to try to meet these standards in 2001, when they decided to reach out to Goldman Sachs, to help them reduce their deficit via creative accounting.
In order for Greece to comply with the EU accounting framework, the nation had to resort to the international debt market. Therefore, unhedged foreign currency denominated debt was required to be translated into euro using the year-end exchange rate . According to a statement by Goldman Sachs, Greece’s euro debt level increased in unfavorable proportions from 1991 through 2000, when the dollar and yen both strengthened against the euro. In order to transform this foreign debt into Euro, Goldman developed a portfolio of swaps hedging dollars and yen debt issued by Greece.

These currency transactions, connected to Greece’s outstanding yen and dollar debt, allowed Goldman to channel about $1 billion of funding to the government in 2002. These transactions known as a cross-currency swaps, involved the exchange of a fixed rate obligation in one currency for a floating rate obligation in another. Deals like cross-currency swaps are expensive ways of raising money, but they have the advantage of not having to be accounted for as debt. Since these deals are done over the counter, there is no public paper trail and unlike bank loans are not ordinarily disclosed on the balance sheet. Ben Bernanke, Chairman of the Federal Reserve stated that “these contentious derivatives trades… helped the country massage its public finances.” These transactions also obscured billions in debt from their budget overseers in Brussels.

A New York Times article stated that even as the crisis was reaching its peak, Goldman Sachs executives, led by their President Gary Cohn, travelled again to Greece and tried to have the government purchase these financial instruments so they could push debt from their health care system far into the future. Greece, however, did not engage in this new deal with the bank. Transactions by Goldman Sachs once again came under fire when rumors began circulating that credit default swaps (CDS) were being purchased by the bank on whether Greece would default on their current debt. Something similar to their CDS’s in the highly publicized mortgage-linked security named Timberwolf deal from 2008. Testifying before Congress, Bernanke responded to concerns that “instability in markets for Greek debt and other securities had been heightened by trading in other derivatives, known as credit default swaps, which compensate investors in case of default.” Bernanke stated that default swaps are “properly used as hedging instruments” and that “using these instruments in a way that intentionally destabilizes a company or a country is counterproductive”.

The true extent of the role that Goldman Sachs had in the Greek financial crisis may never be known, as facts have slowly been trickling out. What we do know, however, is that Goldman was heavily involved in advising the Greek Minister of Finance in using these currency derivatives to swap some of its toxic debt. Creative accounting took priority when it came to masking the true extent of Greek debt in the early 2000s, right around the time that Greece was working to join the Euro-zone. According to Eurostat, Greece never had an annual budget deficit of 3% or less of its GDP. After recalculating figures, Eurostat estimated that Greece went far above the 3% limit, which ballooned to over 13% last year. This, however, was just the tip of the iceberg. One insider was quoted as saying the following:

"Around 2002 in particular, various investment banks [like Goldman Sachs] offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had “snapped up such products.”

Therefore the cross-currency swap deal with Goldman Sachs allowed the Greek government to claim the 3% limit while exchanging $3.8 billion in bonds denominated in yen and dollars. This transaction did not show up in the Greek debt statistics since Eurostat reporting rules did not record transactions involving financial derivatives, something that a large investment bank with the resources of Goldman Sachs would have been keenly aware of. Reports have stated that when the European system of accounts was adopted, swap transactions were not common by member states and specific statistical rules for such government transactions did not exist. The Goldman Sachs deal allowed Greece to bring down its annual budget-to-GDP ratio to 1.2% for 2002, but after Eurostat reviewed the data in 2004, they adjusted the figure to 3.7%, and has been further adjusted to 5.2% now.

Yannios Papantoniou, the Greek Finance Minister that was in charge when Goldman was advising the government, defended his transaction with Goldman Sachs saying: “We took a loan that was to be repaid in 2019…. It was public. I know that what we've done then was consistent with what was done by many Euro-zone countries.” Both Greece and Goldman Sachs stand true to their statement that the currency swaps played a minimal role in Greece’s current financial crisis and that the transactions were in line with European regulations. On the other hand, there have been recent statements from Goldman Sachs employees, like Managing Director Gerald Corrigan, that have said that the currency swaps his bank entered into with Greece in 2001 could have and should have been more transparent.

Years of uncontrolled spending, a bloated public sector and the failure of much needed financial reforms left the Greek economy on the brink of collapse. However, the switch from drachma to the euro seemed to give the Greek government a sense of invincibility when it came to selling its debt. As you can see in the Council on Foreign Relations chart on the right, only 27% of Greek debt was issued in drachma in 1995, while a whopping 79% was issued in euro alone at the end of 2000.

Financial irresponsibility and corruption left Greece as the Euro-zone’s “virus” according to some, but the cheap money made available to them from European banks, namely France and Germany, gave a very corrupt and reckless government a lot of cheap money. Sixty percent of the loans that Greece received originated in banks from the Euro-zone.

Another glaring statistic comes from a study done in 2005 regarding the public sector performance (PSP) and potential government expenditure savings. The chart on the left indicates that from 1990 to 2000 Greece’s PSP actually improved compared to the rest of the Euro-zone area. What’s also interesting is that some of the other nations, currently also experiencing financial strains, like Portugal, Italy, Ireland and Spain (PIIGS) also saw their PSP improve from 1990 to 2000. This, however, begs the question: What happened? Unfortunately for Greece, the PSP figures don’t tell the whole story.

The bloated public sector, one of the factors that lead to the huge government expenditures that have caused a dramatic increase in the country’s budget, however, is not a new thing. The main reason that Greek public servants are guaranteed lifetime employment is because in the old days, when a new administration – with a different political ideology – came to power one of the first things that it did was fire everyone within the public sector and employ their supporters. This practice created a very unstable situation and lead to inefficiency in government, curiously, something that the current public sector has been accused of. To combat massive layoffs due to party loyalty, Greece passed laws that not only allowed you to keep your job, but also gave each Greek citizen from the public sector a very hefty pension when they retired. The increased spending every year and coupled with the lack of accountability, created a monstrosity that caused a strain in the federal budget.

In order to relieve Greece from these fiscal strains and economic meltdown, austerity measures need to be adopted internally. The Greek government, especially their parliamentarians need to set an example and forgo their 13 and 14-month bonuses—many Greek public servants get paid 14 months' salary in a year. There also needs to be leadership from the highest levels of government with members of the public and private sector, as well as the opposition, to come up with manageable wage and benefit cuts, as well as a small increase in the Value Added Tax (VAT). These are just small steps but could very well pave the way to the bumpy road to recovery.

The Greek government as mentioned earlier must also do its part by passing laws that will make all financial transactions more transparent to the public, Europe, and to the international markets. Full disclosure of activities by the Greek government with banks will not only help rid it of the stench of corruption, but will establish a new relationship with its people.

Even before the austerity measures – some which have been already passed by the government – took effect in response to the crisis, Greek society was reeling from the effects of full-fledged riots in the streets. Although the Greek riots of 2008 were sparked by police brutality, the shooting of 15-year-old Alexandros Grigoropolous, they reflected the youth’s dissatisfaction with the government and a widespread feeling of frustration regarding the country’s financial woes. Then Prime Minister Karamanlis lost control of the government and the opposition began fueling the unrest. George Papandreous – current Prime Minister of Greece – then opposition leader said in the midst of the riots that the Prime Minister should resign because there was essentially “no government… [the Panhellenic Socialist Movement] claim power.” That is hardly the recipe for reconciliation and the riots continued. Karamanlis’s biggest mistake as Prime Minister was avoiding the types of reforms that would have thwarted the current crisis. Ignoring social reform, education, health and the police proved to be his undoing. The unemployment rate for young Greeks in 2008 was 21% compared to the 8% of the whole workforce. The national debt in 2010 ballooned to over $413 billion, bigger than the country’s economy, and many experts believe that it will reach 120% of the GDP next year. The world and especially Europe have monitored the situation in Greece very closely as the contagion has the possibility of spreading from Greece to the rest of the PIIGS (Portugal, Ireland, Italy, Greece, Spain) and to the rest of the continent and, quite possibly, the world.

In addition to internal fixes, the European Central Bank needs to pass laws that will outlaw practices designed to mask debt obligations, the way Goldman Sachs helped the Greek government before it joined the Euro-zone. The ECB, which oversees monetary policy for Europe, is ultimately the organization in charge of creating stricter rules for future countries looking into joining the Euro-zone, but it also has the responsibility to better police its current members. It has been said that the ECB has promised stricter rules and is considering amending current EU rules so countries cannot use swaps to cut excessive budget deficits. In order to increase transparency the ECB is willing to propose tighter fiscal controls and would make its collateral rules for banks “more restrictive” regarding “idiosyncratic structures” such as swaps. The ECB needs to seek these tougher measures since the size and scale of the use of these derivatives is yet not fully understood, even by Eurostat.

In addition to this, the Depository Trust Clearing Corporation (DTCC), is also considering making available certain information regarding the trading activity of swaps and revealing the identity of investors, Greek-Goldman Sachs ones as well. The DTCC currently provides a registry of all outstanding credit default swaps traded globally. In an effort to become more transparent, the DTCC is considering developing special regulator access protocols in which counterparty names would be included in all transactions. This is not only a great idea, but something that is sorely needed and extremely helpful for future investors.

Currently Greece has a debt-to-GDP ratio of 125 per cent, Financial Times columnist Wolfgang Münchau has stated that Greece “needs to raise around €50 billion ($68 billion) in finance for each of the next five years to roll over existing debt and pay interest. That adds up to approximately €250 billion, or about 100 per cent of Greek annual GDP.” So in order for Greece to not default on its debt they must be able to raise about €10 billion towards the end of May.
There have been several options floated by EU leaders on how to avoid having Greece default on its debt. In mid February an emergency meeting was called where leaders promised “coordinated actions to safeguard financial stability,” this was followed by a one month deadline for Greece to enforce their proposed agenda on how to cut back the deficit. When the deadline was reached, EU leaders said that the “technical modalities of a Greek bailout” were still being clarified.

Although trouble continued to grow as yields on Greek debt soared, the country entered another predicament when Standard & Poor’s downgraded the nation to junk status, the lowest investment grade. The access for aid from the EU and the IMF now became a must. In late April, EU leaders stated that they were prepared to offer Greece a €30 billion bailout if needed, but critics tried to prove that this bailout might only be a plan by investors “to test Europe’s—and in particular Germany’s—stomach for a rescue of other troubled European economies, beginning with Portugal.”

On April 24, Greek Prime Minister George Papandreou asked the Euro-zone members and the International Monetary Fund for a bailout. Papandreou described the bailout package as "a necessity. It is an extreme necessity, it is a national necessity." Described as “a humbling step that reshapes the rules of the currency union” Greece will now have to endure several years of economic sacrifice.

Looking at its bleak situation raising funds as an “emerging market” while being a developed nation, Greece’s last line of defense was to tap into the International Monetary Fund to alleviate its crushing debt. As of the date of this paper, the IMF had reached a “staff-level agreement” with Greece on a €30 billion rescue package. Mr. Dominique Strauss-Kahn, Managing Director of the IMF issued the following statement on the agreement:

“The Greek government has designed an ambitious policy package to address the economic crisis facing the nation. It is a multi-year program which begins with substantial up-front efforts to correct Greece's grave fiscal imbalances, make the economy more competitive and—over time—restore growth and jobs. We believe these efforts, along with the government’s firm commitment to implement them, will get the economy back on track and restore market confidence.

According to the IMF press release, Greece will implement spending cuts and revenue increases which will amount to 11% of GDP, which will start a turnaround in the debt-to-GDP ratio in 2013 and will reduce the annual budget deficit to 3% by 2014. Ambitious figures to say the least, which will prove very difficult for Greece to meet. Greece promised a significant reduction in public sector expenditures including salaries and pensions as well as a reduction in military spending for the length of the program. Euro area members have also pledged €80 billion in bilateral loans on top of its €30 billion 3-year program from the IMF.
Although asking for a bailout was considered a last resort, Greece was forced to make the request when the sale of Greek bonds was rejected by several foreign investors, including the U.S. and China. Furthermore having the yield on Greek bonds reach nearly 9 percent, did not help them pitch their investments and escalated the need for this request even further. "With the bond markets in cardiac arrest," says Ms. Komileva of Tullett Prebon, "there is little hope for Greece but a long period of EU transfers."

As part of the European Union, Greece’s problem becomes everyone’s problem. The €30 billion emergency lending plan would divide shares among Euro-zone countries according to their share of capital contributions to the European Central Bank, which are based on population and GDP. For example, approving the €30 billion Euro-zone package would have Germany putting up €8.4 billion of it. German Chancellor Angela Merkel, who is facing a crucial election in the coming months, has tried to avoid offering Greece any sort of bailout, as she is certain it will be a struggle to get it through Germany’s parliament. Unfortunately, Germany’s position as one of the strongest economies in the Euro-zone has made this impossible. In order to secure support for the bailout, Merkel has stated that if the IMF-led austerity program for Greece succeeds, the package of rescue loans will make a profit for German taxpayers.

There are some out there who still believe that an IMF bailout is not necessary and Europe could design a fiscal austerity program. Ousmène Mandeng, a former IMF official stated that “this is an internal fiscal problem rather than an external sustainability problem, so it is not a typical IMF issue; therefore it is really not that hard for the European Commission to devise a fiscal target for Greece without needing the IMF’s help.” Many nations have learned to know that rescue packages have to constantly be revisited and “as illustrated by Mexico in 1995, Korea in 1997, and in some cases, such as Russia in 1998 and Argentina in 2001, the packages never succeed in getting ahead of deteriorating debt dynamics.”

On the other hand there is always the option for Greece to default on its debt. "A Greek default through debt restructuring is still very possible," especially if there are more shocks to the global economy, says Lena Komileva, an economist at Tullett Prebon in London. But this would make the credit market extremely nervous, as it could spark a trend on other nations, like Spain and Portugal which are also currently displaying problems. German Finance Minister, Wolgang Schäuble is trying to avoid this option at all cost, since Greece’s sovereign debt is estimated at €300 billion. He compared Greece’s situation to that of Lehman Brothers. He said, “Greece’s debts are all in euro, but it isn’t clear who holds how much of those debts. The consequences of a national bankruptcy would be incalculable. Greece is just as systemically important as a major bank.”

Larger questions also remain as to whether other PIIGS could follow in the steps of Greece. Italy, France and Spain were countries that were also doing similar deals like Greece in the early 2000s. More importantly these types of cross-currency swaps may be smart short-term policy when hiding debt, but in the long run they cause a destabilization which threatens other economies directly tied to the same monetary policy. This destabilizing effect creates a tenable market which depreciates the value of currency. The euro has fallen 7% against the dollar this year partly due to the Greek financial crisis. The German reluctance to help Greece has thrown in doubt its reliability as well as a European seemingly lack of solidarity. Johan Jooste from Merril Lynch stresses that "this is the (Euro-zone's) first real stress test and the system has been exposed in many ways."

Goldman Sachs and financial derivatives played a crucial role in the severity of Greek debt, but as stated earlier, multiple factors aggravated this as well. For now, several question lie ahead for Greece; among them, how long will its European neighbors agree to support this proposed and recently accepted aid package? The Greek crisis not only has tainted the image of the European Union but has also “exposed the underlying tension between the EU's ambitions to build a stable, integrated economic space and its obligations to respect national sovereignty.” The crisis has also brought into question what will be done about these other struggling economies like Spain, Italy and Portugal. With the ongoing threat of strikes over cutback in salaries, pensions and employments rights, is there a way for Greece to instill these austerity measures the Prime minister promised?

“The Greek economy has become like an aircraft that's caught in a flat spin, with the pilot, Prime Minister George Papandreou, struggling to regain level flight by trying to increase tax revenues.” If the country is not on board with the new measures it will be very hard to accomplish anything, even with the EU-IMF loans. Not only this, but the crisis in Greece poses and enormous challenge to the euro, therefore a default on their debt, which would be felt worldwide, needs to be avoided at all cost. Moreover, although the debt problem that is looming over Greece cannot just be attributed to Goldman Sachs and investment banks in general, their roles in enabling them to borrow beyond their means and increase their deficit spending cannot be ignored and needs to be reformed as well.

By: Julio Lainez & Raquel Suarez

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On the Political Instability of Honduras Following the Removal of Manuel Zelaya: A Look Back

2010-05-05T15:38:00.002-04:00

World opinion was as united and nearly as adamant in denouncing the events of June 28, 2009, as the day after the September 11, 2001 terrorist attacks in New York and Washington. What happened during that day, however, was neither a terrorist attack nor a natural disaster. Manuel “Mel” Zelaya, the democratically elected President of the Republic of Honduras, was deposed and exiled to the neighboring Central American country of Costa Rica.

In the early hours of the morning of June 28, the popularly elected president was arrested by the Honduran military through a court order issued by the country’s Supreme Court. He was taken to an air force base south of the country’s capital city of Tegucigalpa and flown to the neighboring country of Costa Rica. Later in the day, the Honduran Congress unanimously voted for a resolution to officially depose of the exiled president and designated the President of the National Congress, Roberto Micheletti, as the new president to finish Zelaya’s term which ended in January 2010, as stipulated by the Honduras Constitution. This paper will examine the actions taken by Honduras and expand on why the sacking of Zelaya was a defense, rather than a threat, of democracy because of three fundamental things: (1) An unstable political situation; (2) a high level of corruption within government; and (3) the fear of a socialist authoritarian regime. I will now examine these reasons more thoroughly.

The political situation in Honduras was unstable

The arrest warrant from the Supreme Court of Honduras said that Zelaya had committed treason and abuse of power, among other offenses, which not only violated rulings form the lower courts, but more importantly the Honduran Constitution.[1] According to the Supreme Court, Zelaya had committed the following:

Crimes against the state;
Treason against his homeland; and
Abuse of power and usurpation of functions;

Based on these crimes against the state the Supreme Court issued an order for the arrest of the president, which was signed by all 15 justices. Due to the incredible circumstances, the Honduran Supreme Court promptly notified the Chief Justices of the other Supreme Courts in Central America. The United Nations, acting as if the political situation in Honduras was the usual Banana Republic coup d’état, issued a scathing resolution chastising the courts and armed forces for interrupting the “democratic and constitutional order and the legitimate exercise of power in Honduras.”[2] The resolution, which was sponsored by friends of Zelaya like Bolivia and Venezuela, was also sponsored by Mexico, who feared political unrest near its borders, and the United States, who feared not to look like it was supporting a “coup” in a part of the world where its reputation has not been held in great esteem. In a statement, UN Secretary-General Ban Ki-moon urged “the reinstatement of the democratically elected representatives of the country and full respect for human rights, including safeguards for the security of President Zelaya, members of his family and his government.”

The rest of the world also tilted heavily against the actions in Honduras, and demanded the reinstatement of the deposed leader. Hugo Chávez, coming to the help of his friend and socialist comrade, escalated tensions by saying that he would “bring down” any government that did not include Zelaya:

World leaders were quick to react to the news of Zelaya's ouster. Venezuela’s President Hugo Chavez said if a new Honduran government is sworn in after the coup, "We will bring them down, we will bring them down, I tell you." He added: “I have put the armed forces of Venezuela on alert.”[3]

As is usual with Hugo Chávez, this statement proved to be more pomp than substance as this empty threat never fully materialized. He did, however, make many countries in Central America nervous as Rafael Correa of Ecuador also expressed support of military confrontation if Ecuadorian diplomats or diplomats from allies were threatened.[4] Spain also condemned the “illegal detention and expulsion” of Zelaya, while Bolivian president Evo Morales said “We no longer live under any dictatorships.” U.S. Secretary of State Hillary Clinton called on both sides to “respect the constitutional order and the rule of law.”[5]

Mel Zelaya's self-serving mayhem was ignored completely by OAS leadership and by nearly every government in the region that passed judgment on Honduras' actions of June 28. The spineless regional diplomats who have failed to confront undemocratic caudillos in the ALBA countries[6] are complicit in their abuses. Today, they have neither the credibility nor moral authority to pass judgment on those desperate patriots who act to defend their freedom. The Honduran people, on the other hand, saw things much differently than the rest of the world. A CID-Gallup poll conducted two days after Zelaya’s exile, from June 30^th to July 4^th, asked Hondurans if Zelaya’s actions, installing a fourth ballot box to gauge public support for a constitutional assembly to change the country’s constitution, justified his removal from office.[7] The result was 41% of the people said yes, while 28% said no.[8]

Nine months before Manuel Zelaya was removed from power by the Honduran military, CID-Gallup conducted a very interesting poll. In September 2008, it surveyed the Honduran population and asked them “How stable do you see the political situation in your country nowadays?” 47% of the respondents said that their country was not stable at all. This was 11% higher than the Latin American median of 36%. Also, only 40% answered “Very Stable” or “Somewhat Stable,” which was 16% lower than the Latin American median of 56% (see Chart 1).

Chart 1: Political Situation of Honduras

Question: How stable do you see the political situation in your country nowadays?

	Honduras	Latin American median	Honduras +/-
Very Stable	9%	9%	-
Somewhat Stable	31%	47%	-16%
Not Stable	47%	36%	+11%
Don’t Know	13%	7%	+6%

Source: CID-Gallup Poll, September 2008

This cynical view toward their government was due in part to many factors. After the 2005 general election that saw Zelaya win with just under 50% of the vote over Porfírio Lobo Sosa, he said “We need to begin a new era of transparency, starting with the fight to reduce poverty.”[9] In Central America, only Guatemala is poorer than Honduras.[10] The chart on the next page (Chart 2) illustrates the poverty in Honduras as measured by two different variables, the percentage of the population below the poverty line and the growth domestic product (GDP) per capita. Honduras ranks 6^th out of 7 in both of these numbers, illustrating their untenable situation, and part of the reason why their life expectancy is also ranked 6^th out of 7. Although they’re 4^th in literacy in the region, that number is misleading since Guatemala and Nicaragua are ranked so low, that even Honduras’s lowly 80% literacy rate beats both of them by over 11 percentage points.

Another reason for the distrust in government has been crime and violence. Honduras is the 3^rd most dangerous country in Central America (after Guatemala and El Salvador) with a deaths-per-100,000 rate of 43 (see Chart 2).

The last number in Chart 2 is the aggregate governance indicator, which is a snapshot of six indicators calculated by the World Bank and its Worldwide Governance Indicators Project.

Chart 2: Societal Overview of Central America[11]

	Percentage below poverty line (rank)	GDP per capita (rank)	Life expectancy at birth (rank)	Literacy of total population (rank)	Deaths per 100,000 from homicide (rank)[12]	Aggregate governance indicator (rank)[13]
Costa Rica	16.0% (1)	$11,600 (2)	77.6 (1)	94.9% (1)	7.9 (1)	0.55 (1)
Panama	28.6% (2)	$11,800 (1)	77.3 (2)	91.9% (2)	11.0 (3)	0.19 (2)
El Salvador	30.7% (3)	$6,200 (4)	72.3 (3)	80.2% (3)	58.1 (7)	-0.09 (4)
Belize	33.5% (4)	$8,400 (3)	68.2 (7)	76.9% (5)	32.7 (4)	-0.05 (3)
Nicaragua	48.0% (5)	$2,900 (7)	71.5 (4)	67.5% (7)	8.4 (2)	-0.59 (6)
Honduras	50.7% (6)	$4,400 (6)	69.4 (6)	80.0% (4)	43 (5)	-0.61 (7)
Guatemala	56.2% (7)	$5,300 (5)	68.2 (7)	69.1% (6)	45 (6)	-0.55 (5)

This number includes individual governance indicators for 212 countries using six dimensions: (1) Voice and accountability; (2) Political stability and absence of violence; (3) Government effectiveness; (4) Regulatory quality; (5) Rule of law; and (6) Control of corruption. The indicators are measured in units ranging from -2.5 to 2.5, with higher outcomes representing better governance. Honduras’s overall governance indicator was -0.61, placing 7^th out of the 7 Central American republics. Governance, as defined by the World Bank is as follows:

Governance consists of the traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

Three days before his arrest, Mel Zelaya, undermined the country’s top judicial body, the Supreme Court: “We will not listen to the Supreme Court, which has never fixed the major problems affecting the country. That court does not give justice, it is shameful.”[14] This remark was made after the Supreme Court ordered him to return to power a high ranking military official whom he had fired after the official refused to take part in installing a fourth ballot box that the president wanted to introduce at polling places in November’s election which would have asked Hondurans whether or not they supported a new constitutional assembly to draft a new constitution. An action that ultimately cost him his job.

The Honduran government was too corrupt

Corruption in government has always been one of the most important issues of the Central American electorate. In Honduras, Zelaya’s fall from grace began with a scandal involving Hondutel, the country’s government-owned telecommunications company. Zelaya appointed his nephew Marcelo Chimirri as General Manager of Hondutel after he became president in 2006. In 2009, after years of speculation regarding Hondutel’s business practices in the Honduran media, Latin Node, an American company pleaded guilty to making improper payments to Hondutel. Court documents said “Latin [Node] admitted that [from] March 2004 through June 2007, it paid approximately $1,099,889 to third parties, knowing that those funds would be passed on as bribes to officials of Hondutel.”[15] Marcelo Chimirri has been imprisoned, accused of fraud and blackmail and is awaiting trial.

Transparency International (TI) has consistently ranked Honduras as one of the most corrupt government in Central America. According to its Corruption Perceptions Index,[16] since Manuel Zelaya won the presidency in 2005, Honduras has consistently ranked at the bottom or near the bottom in terms of transparency in government. TI ranked New Zealand as the least corrupt nation in 2009 with a score of 9.4, followed by Denmark (9.3) and Singapore (9.2) respectively. For Central America, the rankings for 2009 were as follow:

Chart 3: Political Corruption in Central America

Country	2009	2008	2007	2006	2005	Avg.
Costa Rica	5.3	5.1	5.0	4.1	4.2	4.7
El Salvador	3.4	3.9	4.0	4.0	4.2	3.9
Panama	3.4	3.4	3.2	3.1	3.5	3.3
Belize	-	2.9	3.0	3.5	3.7	3.3
Guatemala	3.4	3.1	2.8	2.6	2.5	2.9
Nicaragua	2.5	2.5	2.6	2.6	2.6	2.5
Honduras	2.5	2.6	2.5	2.5	2.6	2.5

Source: Transparency International

Costa Rica continued to be the standard by which all Central American nations are measured. Their relatively transparent and stable democracy has consistently been number one in Central America for years. Honduras, on the other hand, has continually been ranked at the bottom of Central American nations for years, which has eroded confidence in its government and institutions. Government corruption has reached such a level that many Hondurans have grown disenchanted to the point of “putting aside democratic options,” said Juan Ferrara of the Honduras National Anti-Corruption Council, an independent nonprofit which works to defeat corruption in government. The first report issued by the Council estimated that Honduras lost millions of dollars not only to corrupt officials, but in taxes not paid and investments not made.[17] As Sánchez reported, corruption is not only eroding the Hondurans’ trust in their government, but also hurting the country in the eyes of the world as it applies for loans and grants like the U.S. government’s Millennium Challenge Account (MCA). The MCA, a fund established by the Bush administration, awards money to Third World countries that meet certain criteria, among them their fight against government corruption.

Even though the country was one of two nations that received the first-ever MCA awards in 2005, more money from the fund is not guaranteed and U.S. authorities had already looked at the Zelaya government with displeasure as he looked to align himself more closely with the Bolivarian Alliance, known as “ALBA,” an Hugo Chávez-created international cooperation organization based on socialist ideals.

The Honduran people feared a socialist chavista authoritarian regime

The election of Hugo Chavez to the presidency of Venezuela in 1999 signaled the beginning of a new Third World socialist movement in Latin America with populist, anti-American, anti-liberal, and anti-privatization ideals. The wave of socialist governments in Latin America continued with Manuel Zelaya (2005), Evo Morales in Bolivia (2006), Rafael Correa in Ecuador (2007), and Daniel Ortega in Nicaragua (2007).

When Zelaya decided to join ALBA, further strengthening his relations with the hemisphere’s socialist governments, the Honduran business community and the country’s right-wing heavily criticized him. This, however, did not dissuade Chávez from praising Zelaya and their “brotherhood” in the signing ceremony. “Today, we are signing not only a fraternal pact of solidarity,” said Chávez, “but also an integration project for Latin America that stands out as an alternative to imperial hegemony,” he continued in a direct attack at the United States. Zelaya welcomed Chávez’s tone and further added that Honduras’s entry into ALBA was “an act of freedom” because Hondurans are “a free and sovereign people.” Zelaya further added that joining ALBA was an “heroic act of independence” and that Honduras needed no one’s permission to “sign this commitment.” Then he closed defiantly: “Today we are taking a step towards becoming a government of the center-left, and if anyone dislikes this, we’ll just remove the ‘center’ and keep the [‘left’].”[18]

A presidential spokesman tried to put a positive spin on the joining of ALBA: “There has been much speculation about ALBA,” said Enrique Flores, “but the truth is it’s a good alliance for the country. In due course the transparency measures will be made known; not everything can be accomplished in one day, it’s necessary to be patient.”[19]

As news of joining ALBA permeated to the Honduran population, CID-Gallup conducted a poll that showed that even with new economic aid flowing from Venezuela the country was split in terms of its political future. When the poll, conducted in September 2008, asked Hondurans about their political futures, 29% of respondents said that they feared that a military coup was on the horizon (see Chart 4 below).

Chart 4: Political Future of Honduras

Question: Where do you see the country moving politically? Better democracy? Military coup? Civil war?

Moving towards a…	Agree	Disagree	Don’t Know / Refused
Better Democracy	29%	47%	23%
Military Coup	29%	40%	32%
Civil War	27%	39%	34%

Source: CID-Gallup Poll, September 2008

Zelaya saw his poll numbers dwindle to barely a quarter percentage points approval in the early part of 2009, as the public was up in arms over his dalliances with Venezuela’s leftist president Hugo Chávez, and Zelaya’s own perceived ambitions of authoritarian power. It is the same reasons why communism has not worked in places like El Salvador and Guatemala, because of the strong feelings of self-determination of the people as well as the anti-communist ideals of the Catholic Church:[20]

The Church has rejected the totalitarian and atheistic ideologies associated in modem times with "communism" or "socialism." She has likewise refused to accept, in the practice of "capitalism," individualism and the absolute primacy of the law of the marketplace over human labor.

It is this very thing that has made the Church such a powerful institution in Latin America and has allowed it to not just opine on the current events of a nation, but also choose sides in political disputes and human rights violations. This is something that is foreign to us in the United States, as the church has been totally separated from the state and anything different would be taboo and go against the grain of American idealism.

In Honduras, the Catholic Church chose to take sides in the political dispute. Cardinal Oscar Rodriguez Maradiaga said in an interview: "[Zelaya] doesn't have any authority, moral or legal. The legal authority he lost because he broke laws and the moral authority he lost with a discourse full of lies. The most patriotic thing he could do is stay away. Anything else is just trying to impose Hugo Chavez's project at all costs."

Conclusion

The political crisis in Honduras showed that despite an overwhelming dissent amongst the world leaders and major international organizations, the Honduran people continued to believe in democracy and self-determination. The Honduras National Anti-Corruption Council wrote on one of its reports the following passage which highlights the importance of civic participation in government:

It is not possible to combat corruption without the citizenry searching for moral integrity and demanding the same from the Executive and the Judicial branches to prevent this evil and to punish the ones who have thwarted our development…

It is up to the people to come together and petition their government, and at the same time, air their grievances. It is up to the people to hold the government and its leaders accountable for their actions. In that regard, the events of June 28 in Honduras are an example of a young country’s struggle with the process of self-determination and the audacity of democracy. Let us not forget that democracy, although part of the American psyche and consciousness for more than 230 years, has been tenuously a part of Central America for a fraction of that time. The seven Central American republics are slowly growing up as semi-stable democratic states.

The Honduran people cared not what the international community would eventually think of their actions, but rather defended what they believed was a direct attack by a person whom they believed was taking the country down the wrong path. Manuel Zelaya promised a war on poverty, but what Hondurans got was more of the same. Over 50% of their people living below the poverty line; the average worker making $366 per month; the average Honduran only living till 69 years of age; 20% of the population cannot read and write; and the list goes on and on.

The people stopped trusting Mel Zelaya. The people stopped believing in the populist call for change. Corruption in the government was rampant and Zelaya did not help with the Hondutel scandal.

Last but not least, Honduras saw the suffering that many people in Venezuela went through after the failed coup attempts against the authoritarian government of Hugo Chávez. They feared of the formation of a socialist country that would have regressed further behind its other six neighbors in the American isthmus. They feared another Nicaragua under Daniel Ortega.

The circumstances that led to the removal of Zelaya from power might have been just, as usurpation of power and treason are very significant violations, however the government failed to properly execute an impeachment process that looked transparent as opposed to rushed and ill-conceived. Nowhere in the Honduran Constitution is there a clean impeachment process like there is in the U.S. Constitution. The impeachment process in the United States is an expressed power within the Constitution that allows for formal charges against a civil officer of the government for crimes committed while in office. For example, at the federal level of government the U.S. Constitution stipulates:

The President, Vice President and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other High crimes and misdemeanors.[21]

While this section of the Constitution states who can be impeached, another section within the Constitution gives impeachment authority to the U.S. House of Representatives:

The House of Representatives shall chuse [sic] their Speaker and other Officers; and shall have the sole Power of Impeachment.[22]

Impeachment, however, is half the battle, as the Senate is entrusted by the Constitution to convict the official, which removes him from power. This process, clearly stated in the document, leaves little room for misrepresentation and has been used before. Andrew Johnson and Bill Clinton were both impeached by the House of Representatives but failed to be convicted by the Senate.

Honduras, on the other hand, does not have a clearly stated impeachment process which caused the Supreme Court, the country’s highest body, which, to some, looked as though they were making up the rules as they went along.

The “constitutional crisis” as some called the events of last year in Honduras brought to the surface important issues of national security, regional instability, and political turmoil. As Central America moves more toward maturing democracies, the different constitutions will no doubt be stressed to the limit by new problems that will test the judiciary. This is extremely important for the United States as Central America is a very important regional partner because of the high number of Central Americans living in the United States. Also, regional instability and political unrest in this region has the potential to be exploited by drug cartels and terrorist organizations looking for a home base closer to the U.S. mainland.

At the same time, the question that we need to ask ourselves is: Could this happen again? Could another Central American country suffer through five months of crisis and have the international community up in arms? Could another Central American country afford to lose valuable investment from the United States and Europe like Honduras did? Are the constitutions of the other countries strong enough to withstand a constitutional crisis? And, finally, are the democratic institutions strong enough? These are possible questions that merit further study.

By: Julio Lainez

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[1] (Honduras Supreme Court Comunique)

[2] (UN News Centre)

[3] (France24)

[4] (Daniel and Pretel)

[5] (BBC 2009)

[6] ALBA is the Spanish acronym for the Bolivarian Alliance for the Peoples of Our America, an Hugo Chavez-sponsored regional organization of socialist countries.

[7] In Honduras the Constitution deems illegal any actions to change the term limits of presidents. Many people believed that Zelaya’s ultimate goal was the change the constitution for his benefit like Chavez did in Venezuela.

[8] 28% of the respondents replied, “I don’t know.”

[9] (Es Mas, 2005)

[10] (Central Intelligence Agency, 2009)

[11] (CIA, 2009)

[12] (United Nations Office of Drugs and Crime, 2006; Guatemala and Honduras statistics from Cevallos, 2008)

[13] (World Bank, 2009)

[14] (La Prensa Gráfica, 2009)

[15] (FBI, 2009)

[16] The Corruption Perception Index ranks all countries in the world according to “the degree to which corruption is perceived to exist among public officials and politicians.” (Internet Center for Corruption Research, 2005)

[17] (Sánchez, 2007)

[18] (Mejia, 2008)

[19] Ibid.

[20] (The Vatican)

[21] (The Constitution of the United States, Article II, Sec. 4)

[22] (The Constitution of the United States, Article I, Sec. 2, Clause 5)

Huntington, Fukuyama and their Intertwining Theories of Societal Organization

2009-11-18T16:06:00.001-05:00

As events of the new millennium continue unfolding, intellectuals have not hesitated to look back in history to make sense of the past eight years since the terrorist attacks of 2001. A turning point that forced a reassessment of the United States’ relationship toward, what Huntington classified as, one of two challenger civilizations: the Middle East. (1993, p.45) Many scholars agree that one of the reasons that we were so callously attacked was because of our Western values and our penchant as a society for largesse. Individualism, liberalism, constitutionalism, free market practices, the separation of church and state, and many other characteristics of the West clashed directly with authoritarian, theocratic, and fundamentalist regimes in the Middle East. This was a clear example of what Huntington believed was a repudiation against Western values, only this time, by extremists of the non-Western world. (1993, p.41) It expressed a repudiation of what the West believes is the best way to organize modern societies.

Fukuyama, on the other hand, offers a very different take on his theory of societal organization. He believes that Western ideals like economic and political liberalism are – for the lack of better viable alternatives – the final form of human government marking an “end point of mankind’s ideological evolution.” (1989, p.1) This, he argued, marked an “end of history.”

These two seemingly contradictory positions beg the question: Which theory is more compelling? But rather than picking one over the other, the theories are not as mutually exclusive as most people believe. Huntington’s theory expands Fukuyama’s general theory that says that liberalism, political and economic, is the best way to organize societies. It fits within the following statement:

Economic and political liberalism are the best forms of organizing human societies because of the total exhaustion of viable alternatives to this form of government; however, non-Western cultures have different sets of values that may not put a premium on Western values such as capitalism, individualism, liberty, and free markets, therefore, have little interest in adopting liberalism and marking an “end point” in their political evolution.

Is Liberalism Universal

According to Fukuyama, the triumph of Western values is evident in the exhaustion of viable systematic alternatives to Western liberalism. (1989, p.1) The empirical argument that Fukuyama uses is the fact that beginning in the 20th century, the world fought not just world wars but wars of political ideology, as liberalism fought absolute monarchism, bolshevism, fascism and ultimately Marxism. (1989, p.1) Slowly, economic and political freedom permeated new frontiers. “In 1807,” said Fukuyama, “there were 3 working democracies; in 1939, there were 13; while in 1989, there were over 60.” (1995, p.31) The increasing number of democracies and subsequent defeat of other forms of government is what Fukuyama described as ‘end of history,’ and was asserted with equal validity by Kojeve on the eve of World War II; and by Hegel in the aftermath of the Battle of Jena in 1807. (1995, p.31) In order to further understand why liberalism is universal, we must understand what is meant by History. Fukuyama states that “History,” or “universal history,” are “coherent and directional transformations of human societies that affect the whole, or nearly the whole, of mankind.” (1995, p.31)

Over time, improvements in the way goods are made, delivered and disposed of lead to a want of a more efficient system of societal organization. In other words, as the world continued advancing, since the beginning of time, through Rome, the Middle Ages, the discovery of the New World, to the foundation of the United States, the Industrial Revolution, to the World Wide Web, societies wanted certain aspects of economic and political organization. “The broad outlining of the process,” states Fukuyama, “urbanization, rational authority, bureaucratization, an ever-ramified and complex division of labor – can be found in all developing cultures.” (1995, p.32) So Fukuyama makes the argument that improvements in economic and technological systems provide mankind with new production possibilities, which in turn make them organize more liberally than before. What happens, however, when other countries which value those same advancements in technologic and economic modernization, do not necessarily value the West’s system of societal organization? Regardless of whether or not we believe that liberalism is the beast way to govern out of really bad choices, does that make it right for all?

Liberalism May Not Be Right for All

Some countries within the Middle East, which have vast oil reserves, modern economic systems, and technological know-how, still retain an absolute monarchy system of government that has lasted for many years. Why haven’t they changed to a liberal system of government with more freedom and equality given some of their countries’ advanced the highly technological society? What values do we hold dear in the West that societies in the Middle East, for example, do not? Values and attitudes in the West have changed rapidly during the past 100 years. Our views on homosexuality; interracial marriage; premarital sex; women’s suffrage; Prohibition; Jim Crow laws; and Plessy V. Ferguson, are just some examples of where we have come from. Our values and our morals have changed for the better, keeping pace with an ever-evolving society.
Non-Western societies like the Middle East, have had a tougher time adjusting from Ottoman Empire rule, to Pan-Arabism, to Arab nationalism in less than 100 years. In spite of the quick pace, the Middle East is poised to slowly change. “Values have changed rapidly in the West in the last several decades as revolutions in technology and society progressed. Islamic countries, which are now experiencing many of the same changes, may well follow suit,” wrote Dr. Ali Mazrui. According to Dr. Ahmet Akgunduz, Rector of the Islamic University of Rotterdam, in Islam there are basic norms that are extremely important: (1) self-interest vs. self-sacrifice; (2) extravagance vs. frugality; (3) greed vs. contentment; (4) generalizing a crime vs. personality in criminal law; and (5) peace and forgiveness. These are some of the reasons why individuality, liberalism, capitalism, democracy, and separation of church and state, core liberalist ideals of Western thought, have had a tough time catching on in countries that are primarily Muslim. These liberal ideals are simply not shared by the majority of the Muslim world. Huntington was right when he wrote that Western characteristics did not have any resonance with the non-Western societies. This, however, does not contradict Fukuyama, as he is also right when he states that nothing has come close to improving Western liberalism, it’s just that other people don’t see it as we do.

Fukuyama is absolutely right when he states that liberalism is the best way to organize societies. It has fought battles with monarchism, fascism and Marxism and has forged ahead, breaking the grips of tyranny and cultivating the seeds of progress from Latin America, to Africa and Southeast Asia. However, just as we believe that democracy is the ultimate form of government, Huntington at the same time, argues that those values that we hold dear in the West, are not as highly valued in some areas of the world.

Regardless of the way man advances as a species, inventing, building and establishing new forms of government, providing mankind with wonderful production possibilities, our values dictate what form of government we legitimize as a people. Places in the Middle East such as Bahrain and Saudi Arabia have proved that regardless of their wealth, their conservative Muslim values are what guide their thought process. Self-sacrifice, frugality, contentment, forgiveness, are basic norms that are extremely important in Islam. They – for the moment – do not mesh well with the liberal ideals that liberal democracies share.

By: Julio Lainez

References

Akgunduz, Ahmet. “Norms and Values in Islam.”
<> Retrieved: 11/5/09.
Freedom House. 2003. “Democracy’s Century: A Survey of Global Political Change in the 20th Century.” New York: Freedom House.
Fukuyama, Francis. 1989. “The End of History?” The National Interest, Summer.
Fukuyama, Francis. 1995. “Reflections on the End of History, Five Years Later.” History and Theory, Vol. 34, No. 2, pp. 27-43.
Henderson, Errol 1997. “Culture or Contiguity? Ethnic Conflict, the Similarity of States, and the Onset of Interstate War, 1820-1989.” Journal of Conflict Resolution, Vol. 41, No. 5, pp. 649-608.
Huntington, Samuel P. 1993. “The Clash of Civilizations?” Foreign Affairs, Vol. 72, No. 3, pp. 22-49.
Huntington, Samuel P. 2001. “Japan’s Role in Global Politics.” International Relations of the Asia-Pacific, Vol. 1, pp. 131-142.
Mazrui, Ali A. 1997. “Islamic and Western Values.” Foreign Affairs, Vol. 76, No. 5, (Sep. – Oct. 1997), pp. 118-132.
Russett, Bruce; Oneal, John; Cox, Michaelene. 2000. “Clash of Civilizations, or Realism and Liberalism Déjà vu?” Journal of Peace Research, Vol. 37, No. 5, pp. 583-608.
Williamson, Chilton. 2004. The Conservative Bookshelf. New York: Citadel Press.

Justice Scalia and Professor Balkin and their “Originalist” Versus “Living” Constitutional Interpretation

2009-10-07T16:21:00.001-04:00

Justice Scalia classifies himself as a “textualist” or “originalist” when describing his views on the U.S. Constitution and his interpretation. Scalia argues that when he reads the Constitution, he does as the framers did, but without much regard for their original intent. He doesn’t think about what the framers had in mind when they adopted a particular amendment, but rather applies that amendment as it was written.

But what is behind his originalist approach? To Scalia, the framers intended to have a document that would live through the ages. He believes that when a people adopt a document as important as a “bill of rights,” they not only believe that society evolves, but also rots. Society today, according to Scalia, has given up fighting for what they believe in and have used the Constitution, and especially the Supreme Court, as a vehicle to promote national change from within a courtroom. This new way of looking at the Constitution, as an ever-evolving document in anthropomorphic terms, makes the Constitution seem like an “empty bottle with the aspirations of society.” Scalia believes that the true arbiter of the decency of a maturing society should be the Congress and not the Supreme Court. For true believers of the “evolving theory,” argues Scalia, then Marbury v Madison is wrong because the Supreme Court should not be “sticking its nose” into anything passed by the legislature at all.

The real concern, however, is not whether or not an originalist point of view is wrong, but if there’s anything better. The irony of it all, according to the Justice, is that we seem to be at a point where the meaning of the Constitution, more importantly the Bill of Rights, is being decided by the same body that the document was intended to guard the people from, namely the majority, or the federal government.

The other side of the coin is represented by individuals who believe that the Constitution is a living, breathing document intended, according to John Marshall, “to endure for ages to come.” That is the view of Yale Law Professor Jack Balkin. “If you reject the living Constitution,” he adds, “you also reject constitutional guarantees such as Brown v Board of Education and Loving v Virginia, which struck down laws banning interracial marriage.”

In a stinging rebuke to Justice Scalia’s claims that the Constitution should not be regarded as an evolving document, Balkin argues that two of the Supreme Court’s most ardent originalists, Scalia and Justice Clarence Thomas, both believe in a living document. Scalia’s concurrence in Raich v Ashcroft and Thomas’s – along with Scalia’s – decision in Bush v Gore securing voting rights under the 14th Amendment was completely hypocritical since there’s no mention of “voting” in it. According to Balkin, today’s originalists make two standard objections to attack the idea of a living Constitution: (1) The fidelity to the law and the written Constitution requires a fidelity to the original understanding; and (2) A living Constitution offers insufficient constraints on judicial power. The problem with the fist objection is that a vast number of statutes and constitutional doctrines are inconsistent with the “original understanding” idea, i.e., affirmative action, right of privacy, etc. The second objection centers more firmly on judicial powers and – as far as originalists are concerned – a lack thereof from “living constitutionalists.” According to Balkin, constraints on the Supreme Court come from two sources, the professional legal culture and constitutional structure.

The real secret of why we have a living Constitution, according to Balkin, centers around the ever-evolving attitudes of the American people over time, and how the Supreme Court has had to keep up with the mood of the people. Sometimes, its better angels have even pulled it ahead of society, i.e., Brown v Board of Education. This embodies why many people believe in a living, breathing Constitution, because rather than a set of shackles, the framers gave us a document that adapts to the aspirations of each generation.

By: Julio Lainez

When a Coup is the Right Thing to Do...

2009-06-30T11:43:00.000-04:00

How far are countries willing to go to defend their democratic institutions in the face of danger? We got a glimpse of that this weekend in the Central American country of Honduras who – via a military coup d’etat – ousted its democratically-elected president, Manuel Zelaya. Via a court order issued by the country’s Supreme Court, the country’s military apparatus was put in motion to capture the president and fly him to Costa Rica to exile. Immediately following his touchdown in Costa Rica, he described the events as a “kidnapping” and a “coup” promulgated by his political opponents.

The reason for the sacking, and removal from office, had been the combative and insurgent-like demagoguery Zelaya used to incite the masses and score political points. Like his idols in Venezuela, Cuba and Bolivia, Zelaya wanted to further control the government in ways that the Honduran Constitution deemed illegal. And this is where this story begins to unravel for Zelaya. The strategy that he would begin to apply would be the one used by past despots with varying degrees of success throughout Latin America.

Zelaya intended to hold a referendum on whether or not the country should hold a constitutional convention to change the constitution and allow him to be re-elected president next year. Keep in mind that a presidential limit of one 4-year term only is expressly mandated by the Honduran constitution and was included as a result of the heightened probability and concern regarding the rise of would-be dictators, very common in Latin America. Thus, Zelaya’s views regarding the term limit clause was not a view shared by the vast majority of lawmakers, including some members of his own political party. Opponents argued that Zelaya wanted to change the term limit clause so he could hold on to power next year and beyond, possibly indefinitely.

According to government authorities, prior to June 28th, Zelaya covertly enacted a law – an illegal act in and of itself – that would have allowed him to bypass any referendum to request a new constitutional convention, thus allowing him to prevent new presidential elections from being held at all, and granting him authority to organize a new assembly empowered to draft a new Honduran constitution. The National Congress, hoping to thwart the power-hungry Zelaya, passed a law forbidding referenda no less than 180 days before the next general election. In addition, and most importantly, the Honduran Constitution expressly forbids amendments and reforms altering presidential term limits or allowing re-election, which explained Zelaya’s zealous approach journey to a new constitution, a clear and pathetic display of power grab. Zelaya urged the military to offer logistical support to hold the referendum, as is normally done by the armed forces, but the army chief denied his request because he didn’t want to break the law. Zelaya then fired him.

How Wrong is the World?

Zelaya was the democratically-elected president of the Honduran people when he was removed from his office for violating the country’s constitution. The world should be appalled not by his removal, but by the events that led to his removal. Zelaya’s utter disregard for that country’s constitution is as unbearable as President Obama disregarding the U.S. Constitution and deciding to change the term limits without amending the said constitution. It would be as if Obama were to say – like Andrew Jackson once said – to forget about the Supreme Court, they can enforce their own laws, similar to what Jackson did to then Chief Justice Marshall in the early 19th century when Marshall ruled against the former war hero. Jackson, however, never broke the law by going against the U.S. Constitution.

Indeed, what happened in Honduras is a blow to democracy, but only because there was no mechanism for the people to remove Zelaya from power. In the US, we have an impeachment process. The House of Representatives impeaches a President and the Senate tries him/her. The impeached president is removed from office and depending on the offence, could be tried by a civilian court. In Honduras, however, this process is lacked. The Honduran constitution, however, is clear regarding the illegality of changing its articles regarding presidential term limits: “No amendments, under any circumstance, shall be made… to the presidential term limits.”

It is also explicit in the way the Honduran Supreme Court should do its job, saying that the court has “original and exclusive jurisdiction” regarding whether any law is unconstitutional.
It is also very clear when it states that every public official is sworn by the following oath when they take their respective offices: “I swear to be loyal to the Republic, the Constitution and its laws.” A very explicit and concise phrase that encompasses all public officials, the president included.

How far are we willing to go to guarantee that our democratic institutions are there for us, but more importantly for our children and our children’s children? The crisis in Honduras has made many people ponder these same thoughts. Are we as a people in a democratic society going to sit idle while a president – elected democratically – maneuvers to the point where he is positioning himself to rule forever? Can we sit on our hands while this happens? Our own freedoms are trampled when a power-hungry individual attempts to cover our eyes while at the same time he tries to change the constitution to further his political goals.

What will happen with the deposed leader? Well, surely negotiations will take place and I wouldn’t be surprised if he were to return to Honduras. But, the people should remain resolute. If he were to regain power, it should definitely be only under the following circumstances:

(1) He will finish his term as president of Honduras till January of 2010 and no more;
(2) He will forgo planning referenda for the remainder of his term;
(3) He will be barred from again running for president in his lifetime;
(4) He will not incite people to violence

These are simple and protective measures designed to return law and order to the country and continue growing as a democracy. For Obama was right in that deposing leaders when they do something we don’t agree with is one thing, but deposing of leaders when they break the law – especially the country’s constitution – to strengthen their hold on power is another.It is the responsibility of the people and their elected leaders to act to defend their Republic. For sitting on the sidelines doing nothing is the greatest sin of all.

Neda and the Iranian Revolution

2009-06-25T09:39:00.000-04:00

The seeds of democracy are planted in the battlefields and in the streets of places where the oppressed are overwhelmed by the intrusiveness, abuses and violation of an absolute power.

Indeed, absolute power corrupts absolutely, and in Iran it has not only corrupted the highest levels, but - thanks to the Twitter and Facebook revolution - the power of the masses has touched every corner of the world.

The coldblooded murder of 26-year-old Neda Soltan was not just heartbreaking and powerful, but it has solidified a movement that not even the M-16 rifle nor the tank can corral. Watching the young Iranian girl bleed on the streets and watching her life leave her body was truly heartbreaking.

The horrific scenes of carnage by the Iranian republican guard have touched the most primitive of human emotions, it has made us, in the West, connect with the struggling Iranians by more than just sympathy. Those magical chords of affection, support and love of your fellow brother have grown and strengthened themselves like never before. We are all Iranians now. Free Iran!

The state however is using its iron first to squash this movement. The time has come for Iran to ask itself whether or not they want to continue to live as an oppressed people or is further bloodshed something they can stomach. Breaking the bonds of oppression is not free, it is paid in blood.

The Troubles of TARP

2009-04-22T15:21:00.000-04:00

The Troubled Asset Relief Program (TARP) created by the Emergency Economic Stabilization Act of 2008, commonly referred to as the “bailout” of the financial system, is a federal program managed by the federal government created to purchase “toxic assets” from many of the financial institutions that precipitated the current financial downturn.

These toxic assets, which are characterized as either (a) subprime mortgages or securities and (b) any other asset that the government would deem beneficial to purchase to help the financial institutions, were created mostly by the housing bubble that thrived for most of the early to mid 2000s.

The ‘Bubble’

The housing bubble saw average home prices increase by 37% from 2002 to 2007, from $228,000 to $313,600, respectively, creating a sense of wealth among the American consumer and led to a bullish attitude by many of the financial institutions that financed the demand. As more and more banks lent more money to Americans with low or “subprime” credit worthiness, they believed that home prices would continue to rise, as they had for the past forty years, therefore limiting their losses if they defaulted. This idealism and lack of preparedness, which was shared by other financial institutions around the globe, created a false sense of security that prevented them from making decisions that would make their companies financially solvent for the long term. Rather, they increased their lending of subprime mortgages to more Americans.

In the United Kingdom, as in America, the housing bubble reached unheard-of heights. Home prices in the UK went from around 70,000 pounds in the late 1970s, to over 170,000 pounds by 2006, or an increase of 142% in just 30 years.

In early 2007, the bubble that was built on the backs of hard-working people began to show cracks. In the United States, 25 subprime lenders declared bankruptcy, announcing losses and putting themselves up for sale. New Century Financial, the largest subprime lender at the time, declared for chapter 11 bankruptcy.

The market, however, was slow to react to the dreary news. In July, the Dow Jones closed above 14,000 for the first time ever. In the New York Times Business section, Vikas Bajaj wrote: “The stock market has charged past concerns about surging mortgage default rates, rising oil prices and higher interest rates.” In the same article, however, Citigroup strategist Tobias Levkovich, said that the market “was not as attractive as it was before, but it is not unattractive.” The Dow Jones’ 14,000 milestone was led in large part by IBM’s strong numbers, Exxon Mobil’s $76/barrel, but financial stocks, beginning to show signs of the sickness that was looming, had another rough day due to subprime worries.

Still, many experts doubted about the weakness of the financial institutions and claimed that the ‘mixed nature’ of the economy was going to help it avoid a calamity. ''The economy is mixed but not as weak as when a lot of people made their earnings expectations at the end of the first quarter,'' said Leo P. Grohowski, chief investment officer at U. S. Trust, a division of Bank of America that serves wealthy clients.

Timeline of a Collapse

• January 24: The National Association of Realtors (NAR) announced that 2007 had the largest drop in existing home sales in 25 years, and "the first price decline in many, many years and possibly going back to the Great Depression."
• February 2008: British bank Northern Rock, was taken into state ownership by the British government after a ‘run on the bank’ by the public which was panicked by the current credit market crisis.
• March 10: Dow Jones Industrial Average at the lowest level since October 2006, falling more than 20% from its peak just five months prior.
• March 14–18: Dropping valuations of mortgage securities caused by skyrocketing default and foreclosure rates forces margin calls to the Wall Street bank Bear Stearns for debts the bank used to leverage mortgage issuances, and threatens BSC with bankruptcy and causes worldwide market jitters. In a weekend deal brokered by U.S. Treasury secretary Paulson and Fed chairman Ben Bernanke, JPMorgan bank agrees to purchase BSC for $2 per share, compared to their 2007 high of nearly $170, in exchange for the Federal Reserve Bank agreeing to accept BSC's devalued mortgage backed securities as collateral for public loans at the newly created Term Securities Lending Facility (TSLF), effectively providing a mechanism to bail out Wall Street banks threatened with insolvency.
• March 1–June 18: 406 people were arrested for mortgage fraud in an FBI sting across the U.S., including buyers, sellers and others across the wide-ranging mortgage industry.
• June 19: Ex-Bear Stearns fund managers were arrested by the FBI for their allegedly fraudulent role in the subprime mortgage collapse. The managers purportedly misrepresented the fiscal health of their funds to investors publicly while privately withdrawing their own money.
• July 30: Housing and Economic Recovery Act of 2008 changes the $250,000/$500,000 capital gains exclusion applying to second homes and rental property.

Congress Passes TARP

Public Law 110-343, more commonly known as the Emergency Economic Stabilization Act of 2008, was passed by Congress and signed by President George W. Bush on October 3rd, 2008. The 169-page law created a $700 billion Troubled Assets Relief Program (TARP) among other provisions, but for the purpose of this paper, however, the focus will be on the TARP program.

TARP allowed the US government to purchase $700 billion worth of troubled assets and equity from financial institutions in order to jumpstart short-term lending and restart a sagging economy. The targeted assets or collateralized debt obligations were initially sold in a booming market in 2007, when the Dow was topping 14,000, and then the world came crashing down when they were hit by widespread foreclosures. TARP intended to purchase these assets, thus allowing participating institutions to stabilize their balance sheets and avoid further losses.

Another important goal of TARP was to encourage banks to resume lending at levels seen before the crisis, both to each other and to consumers and businesses. The reasoning was that if TARP funds were able to remove the toxic assets from banks, they would in turn restart lending again, and therefore increase consumer confidence. As banks themselves gained increased lending confidence, the inter-bank lending would resume.

The Treasury had authority to only spend the first half of the $700 billion, while the second half would only come once a report was submitted to Congress from the Treasury outlining plans for the use of the second part of the TARP funds. The initial monies were released in October 3, 2008, while the second part was released on January 19th, 2009.

Mistrust Between Administration and Congress

In mid October 2008, then Treasury Secretary Hank Paulson and President Bush announced revisions for TARP. The Treasury reversed its earlier course and announced plans to purchase preferred stock and warrants in the nation’s largest banks instead of using the money to purchase toxic assets. The first allocation of the TARP money was, in essence, used to buy preferred stock, which is similar to debt in that it gets paid before common equity shareholders. This makes it possibly an ineffective way for banks to restart their lending because instead of clearing their balance sheets of toxic assets, they are repaying the government.

The initial plan in which the Treasury was supposed to buy the troubled assets form banks was scrapped in favor of purchasing preferred stock after Secretary Paulson met with British Prime Minister Gordon Brown. The British government, going through similar circumstances across the pond, merely infused capital into banks via preferred stock in order to clean up their balance sheets and in some economists’ view nationalizing the banks. “All these are investments being made by the government which will earn a proper return for the taxpayer,” added the Prime Minister at a news conference announcing the government’s plan. The British plan spends 50 billion pounds to partly nationalize major banks and a further 250 billion pounds to guarantee bank loans to shore up its beleaguered sector. “We are not talking about running banks,” said Alistair Darling, the Chancellor of the Exchequer, “the banks are going to be run as commercial operations, albeit with government help in restructuring.”

Problems with TARP

(a) Foreclosures not addressed - One of the major omissions of TARP was that it did not directly address the issue of foreclosures for middle-income Americans. The program passed by the Senate and signed into law by President Bush only addressed the economic impact that financial institutions would have on the overall economy if they did not resume lending. "Wake me up, can this really be happening?" the 42-year-old Bohnen says. As she tries to describe how it feels to have the nation's financial crisis land in her living room, the phone rings. She ignores it. "It's probably the bank -- again," she says.

(b) No oversight - The banks were left without proper oversight when they were given taxpayer money, and therefore, they spent it as they saw fit, on everything except new loans. Now making matters worse is the fact that the same banks who took bailout money, Bank of America, JPMorgan, Goldman Sachs, etc., want to pay off the money as quickly as they can so they can avoid further regulation. However, it is not as easy as it sounds since the way that TARP is currently structured, a bank would have to go out and raise a staggering amount of new capital to replace the government’s stake before it is permitted to return it.

(c) Banks returning to old ways - Since TARP was launched last October, banks have increased charges on a wide range of routine transactions, hiked rates on credit cards and continued making predatory loans. According to an ABC News story, the Congressional Oversight Panel, the body named by Congress to oversee the bailout, is working on a report examining instances of potentially inappropriate lending by banks that got taxpayer capital. This issues stems back to the speed with which TARP was passed in the first place, without finalizing oversight to avoid these types of scams. Accountability has been sorely lacking. Elizabeth Warren, chair of the TARP oversight committee, believes banks are engaging in predatory practices. "The people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending. In a sense, we're asking taxpayers to pay twice."

(d) PR nightmare – Since the early discussions of the bailout, Congressional staffers did not use correct words to effectively communicate the message to the American people. The term ‘bailout’, especially when families are hurting all over, created resentment among the public. Questions like: “How is it that large banks that got us here in the first place are the first to get bailed out by the government?” were being asked from Santa Ana, CA to Montpelier, VT. Americans did not understand how the government could give more money to the same financial institutions that were bringing the country to its knees.

New Administration, New Stewardship

Timothy Geithner, sworn in as President Barack Obama’s new Secretary of the Treasury went before congress in February to explain to lawmakers what he proposed to do with the second half of the bailout money looking to assuage concerns in Capitol Hill. He proposed to create one or more “bad banks” to buy and hold toxic assets using a mix of private and public money. He also proposed to expand a lending program that would spend as much as $1 trillion to cover the decline of the insurance of securities backed by consumer loans. He further proposed to give banks new infusions of capital with which to lend. In exchange, banks would have to cut the salaries and perks of their executives and sharply limit dividends and corporate acquisitions. This, however, could be a recipe for disaster because the same circumstances that lead us in this mess in the first place are beginning to spring up once again. The administration’s plan of insuring almost all of the losses of toxic assets for investors would make it extremely easy for them to gorge on them and repeat the mess that got us into this situation in the first place.

Joseph Stiglitz writes on the New York Times the following:

The two have little to do with each other. The government plan in effect involves insuring almost all losses. Since the private investors are spared most losses, then they primarily “value” their potential gains. This is exactly the same as being given an option. Consider an asset that has a 50-50 chance of being worth either zero or $200 in a year’s time. The average “value” of the asset is $100. Ignoring interest, this is what the asset would sell for in a competitive market. It is what the asset is “worth.” Under the plan by Treasury Secretary Timothy Geithner, the government would provide about 92 percent of the money to buy the asset but would stand to receive only 50 percent of any gains, and would absorb almost all of the losses. Some partnership!

On the other hand, the toxic assets are continuing to choke the financial markets and unless the administration does something drastic to change the course of the crisis, they will continue to be a drag on the financial institutions which are so crucial for the health of the overall economy.

How to Get The Bailout Going Again

(1) Repackage the Message: The first thing that the administration needs to do is to explain to the American people – in layman’s terms – why the bailout is needed. This was the first thing that needed to be done when the package first came out last fall, but since Secretary Paulson was in ‘emergency mode’ visiting every Congressman as far as the eye could see, getting the message across to the American people was the furthest things from everyone’s mind.

(2) Hearings, hearings, hearings!: Once the plan was chugging along, the government failed to show the American people who was really in charge of their money. This was in part due to the timing of the plan, a national campaign was in full swing, Congress was going to go into recess soon, and – once again – the message got lost in the translation. Oversight of the largest bill ever created in the history of man was put in the backburner. This created a sense of desperation for the American people because not only did they have to give up an exorbitant amount of dollars, but at the same time they saw that it went straight to the banks with the impression of being without “strings attached.” The only way that Congress can show the American people that it is in charge of their money and how it is spent is by having more hearings on where the money is going. The new administration has done a great job with websites that show where the money of the stimulus plan is going to, but Congress has to do a better job showing the American people where TARP funds are going as well. The information is out there but it is difficult to find.

(3) Oversight: This dovetails from the second recommendation for improvement. Congress needs to take a more active approach overseeing the people’s money and policing that these institutions do not take advantage of the public.

(4) Foreclosure help: This is beginning to be addressed by the administration. The problem is very difficult to address because it is such a sensitive issue with a lot of people. Responsible Americans that took out loans that they could pay for are screaming “bloody murder!” at the thought that a fraction of the foreclosures are people that irresponsibly borrowed money that they could not pay for. That is a small fraction however. Some people were taken advantage of by predatory lenders and promised different terms than the ones they signed up for.

In conclusion, the highly unusual circumstances that lead to the collapse of many financial giants within the past year and have lead the world economy to this slowdown could have been prevented if the right tools would have been put in place. The shortsightedness of CEOs and the greed and irresponsibility of many Americans have hopefully taught us a valuable lesson about borrowing and lending.

_____

Sources:

1. United States Senate Committee on Banking, Housing and Urban Affairs.

2. US Government Accountability Office

3. A CBO Report: The Troubled Asset Relief Program: Report on Transactions Through December 31, 2008.

4. Median and Average Sales Prices for New Homes in the United States. United States Census Bureau (http://tinyurl.com/caoxe9). Retrieved Wednesday, April 15, 2009.

5. Nationwide Building Society of the United Kingdom.

6. “Dow Caps a 4-Month Surge, Closing Above 14,000,” by Vikas Bajaj. The New York Times. July 20, 2007. (http://tinyurl.com/dmpwy6) Retrieved: Monday, April 13, 2009.

7. “Home Prices Fell in ’07 for First Time in Decades,” by Michael Grynbaum. The New York Times. January 24, 2008. (http://tinyurl.com/cnatl4)Retrieved: Monday, April 13, 2009.

8. “The Growing Foreclosure Crisis,” by Dina ElBoghdady and Sarah Cohen. The Washington Post. January 17, 2009. (http://tinyurl.com/9uysgk) Retrieved: Tuesday, April 14, 2009.

9. “Bailed-Out Banks Face Probe Over Fee Hikes: Report.” ABC News Website. April 13, 2009. (http://tinyurl.com/dzxgvn) Retrieved: Wednesday, April 15, 2009.

10. “Bailout is a Windfall to Banks, if not to Borrowers,” by Mike McIntire. The New York Times. January 17, 2009. (http://tinyurl.com/9kxwbw) Retrieved: Wednesday, April 15, 2009.

Religion as the Opium of the Rulers

2008-12-16T17:39:00.000-05:00

WASHINGTON -- Throughout the dawn of civilization, humanity has moved from nomadic tribes which had a simple ruling structure in which the elders told the younger members what to do and how to do it, through more complex city-states where power rested with either a sole proprietor or with a handful of people. Often using religion to legitimate their rule, many city-states drew on that power to their advantage.

Today in Latin America, countries still use religion – the church – to help them legitimize their rule in the eyes of the people often leading to autocratic rule as opposed to a more free democratic society. However, not all countries which are considered highly religious tend to see themselves as autocratic or vice-versa. Roman Catholic Latin American countries like Mexico, Peru, Chile, El Salvador practice democratic ideals whereas others, for example, Bolivia, Ecuador, Venezuela and Cuba are moving are have moved towards a more autocratic state. How can this be explained? This paper will try to answer that question.

Woodrow Wilson wrote in The State:

The probable origin of government is a question of fact, to be settled, not by conjecture, but by history. Some traces we can still discern of the history of primitive societies. As fragments of primitive animals have been kept for us sealed up in the earth's rocks, so fragments of primitive institutions have been preserved, embedded in the rocks of surviving law or custom, mixed up with the rubbish of accumulated tradition, crystallized in the organization of still savage tribes, or kept curiously in the museum of fact and rumor swept together by some ancient historian.

Wilson observed that government was adapting. It adapted to the times as its “primitive institutions” are preserved and codified in laws and customs. This, however, is one aspect of government and does help in solidifying support around the institution, but in order to be legitimate in the eyes of the people, government as represented by a ruler had to be legitimized from above.

As more and more people inhabited the planet, more and more people had to be governed, and governed more efficiently. The rulers of these different city-states or fiefdoms looked towards divinity to guide their hand and legitimize their rule in the eyes of the people. Many saying that their lineage was royal blood, or sangreal, and that their legitimacy came straight from heaven.

As John Simmons writes in his book Moral Principles and Political regarding the Doctrine of St. Paul:

The Doctrine of St. Paul was nearly universally accepted by political theorist and layman alike: Let every person be subject to the governing authorities. For there is no authority except from God, and those that exist have been instituted by God. Therefore, he who resists the authorities, resists what God has appointed, and those who resist will incur judgment.The ruling authority of kings came straight from God and people could not question their authority unless they questioned God. This was a very powerful tool in granting legitimacy to rulers and the Catholic Church was the culprit for the castration of ideas as well as the lack of questioning of authority.

The Roman Catholic Church played a vital role in the early forms of government in the middle ages as many popes took parts in the coronations of kings in England, France, Spain, Portugal and later the Holy Roman Empire. This close tie between the Church and the State proved to be a very powerful symbiotic relationship.

Today, even though Catholic Church membership is in decline throughout the world, including Latin America, there still remains a strong presence in that region. Half of the world’s 1 billion Catholics consider Latin America their home. In Brazil, for example, a relatively stable – by Latin American standards - democratic country there are 100 million Catholics in a country of 180 million. Mexico, the country with the second -highest number of Catholics at 88 million- is by all contrasts a democracy which was able to withstand widespread riots in its last election.

How has the Catholic Church helped these countries move towards a more democratic society? Leaders of the Church took notice early on that authoritative governments committed atrocities to the poor and their justice systems were nothing more than words on paper. Oscar Romero, the beloved Archbishop of San Salvador, El Salvador, was murdered in cold blood by a right-wing death squad of the government for preaching fairness against the poor in his weekly sermons. He was one of the early casualties of the transformation of El Salvador from an oppressive authoritarian government to a democracy thanks to the Peace Accords of 1992.

When Mexicans went to the polls in 2000 to elect opposition presidential candidate Vicente Fox, they did more than simply change their government. His election ended 70 years of corrupt, single-arty oligarchy of the PRI, and helped Mexico become a more inclusive democracy. The Catholic Church in 1986 played a very important role in fomenting change in gubernatorial elections in the state of Chihuahua. There was fraud and disputed results in that election and the church through Archbishop of Chihuahua ordered all of the Catholic churches to go on strike. He said after the vote, “Someone was robbed last Sunday. That person was robbed on the way to the voting booth, and that person was the Chihuahuan voter.” His homily urged all the priests to shut down the churches in protest. Eventually, the Interior Minister intervened with the Vatican, and the word came down, “Stop messing in politics.” (Dillon, 2005)

Why has the Catholic Church felt the need to get involved in the political process in these countries as opposed to staying out of the matters of the state in the United States? There’s a very important reason at play here: There is a lack of democratic institutions used as springboards for change. Without these institutions, the church has brought it upon itself to move the masses, often advocating for them through their priests and bishops. They have used their legitimate power through divinity to foment change and bring about hope for their “subjects.” This is the reason why some Catholic countries have changed from authoritarian governments to democracies.

It has not been easy, however, as socialist ideals of equality for all lead countries like the United States to stigmatize these movements as “Communist” often leading to direct or indirect involvement.

This has cause two things, (1) to create a sense of anti-Americanism, and (2) to further move these movements toward the left in response. It is this second part that has lead to a cooling of relations between some Latin American countries and created an opportunity to rally behind a more autocratic state. This is the reason why countries like Bolivia, Venezuela, and Ecuador have found it easier to move from democracy to autocracy.

The state has usurped the institution of the church, at least temporarily to gain control of the hearts and minds of the people, to further their political capital. They have used the unquestioned loyalty of the people and turned it upside down for their political gain.

In Venezuela, the clash of these two institutions have created chaos in its society. Sara Miller Llana of the Christian Science Monitor writes:

Many expect the confrontation between church and state to pick up steam. Nikolas Kozloff, author of the "Revolution! South America and The Rise of The New Left," calls it inevitable. Unlike other Latin American countries, the Catholic Church in Venezuela never fully embraced the tenets of liberation theology. Yet today, Catholics and Protestants across the country have signed onto Chávez's message. "If you go to these [social] missions, you see a lot of people supporting Chávez, placing a big emphasis on social work," Mr. Kozloff says. "There is an overlap.

Chavez has not helped matters by verbally insulting church officials and creating a ‘me against them’ attitude which only creates more division. Sometimes, the church has just been a bystander in history and allowed the forces of populism to change their political system. In Bolivia and Ecuador, two charismatic leaders came to power through a wave of change which tapped into their countries cries for a new way of doing things. Evo Morales and Rafael Correa offered a new hope for the oppressed, for the unfairly treated, the oft-stepped on, the peasant, the person that has continually been forgotten by the elites, the indigenous. The same emotion that the Catholic Church used to foment change in countries like El Salvador, was used to bring about a socialist change which some people fear will look more like Venezuela and Cuba in the coming years.