Friday - May 07, 2010

 Socializing Loss, Privatizing Profit

 I've heard it bandied about a lot lately from critics of the government bailouts (whose ranks I have joined since the first hints of a bailout) that bailing out banks and car companies only serves to socialize the loss and privatize the profit.  That is, when the bank or car company made money, they kept the profit, but when they lost money, we had to pay for it.

 It seems obvious to me that when explained this way, the bailouts would seem to encourage risk taking by these companies.  If things go bad, there's no down side for them, so why not risk it all every day?  Supporters of the bailout say that these companies are too big to fail, and view the bailouts as isolated events that did not shape the course of events preceding them.  Except that this is not the case.  Chrysler has a fine history of getting bailed out, so there was precedent. 

We needn't even look to the close association of certain politicians with certain financial companies to realize that bailing out banks as a policy will lead to more bad risk taking by the banks.

But I'm no financial expert, so I can't really go much further than that simple analysis that is neither unique nor deep.  If you support bad behavior, you tend to get more bad behavior.

What is more interesting to me is how this policy of supporting bad behavior as an international policy has affected international law.

The Treaty of Westphalia is often regarded as the precursor to modern laws of war.  From this international agreement developed the modern ideas of civilized wars.  From this time comes the idea that wars are fought by governments and the people in the country are innocent spectators who deserve protection.

This sounds very nice, doesn't it?  Kings and other despots controlled most of the countries of Europe with little control by the people. Wars were waged using conscript armies and the people suffered though they had little say in whether to engage in the war.  Women, children and other noncombatants were now considered innocents who should be spared the ravages of war. 

What a pleasant thought, to spare the lives of noncombatants.  It warms the cockles of one's heart.  Little children are now safe and do not pay for the sins of the monarch and his armies.

It's kind of like how nice it is to think of all those poor children whose families who bought houses they couldn't pay for and now they're not being thrown into the streets because we tax payers will take care of that loan for them.  How sweet.

But these laws of war don't work for their intended purpose.  "Innocents" are still suffering during war, as they must.  In fact, wars have gotten more and more deadly for these innocents, largely because of advances in weapons technology, but also because of lack of advancement of human nature.  The Armenians were not saved by the laws of war.  The Jews suffered tremendously.  At least in WWII we tended not to be excessively bothered by the niceties of being afraid to bomb cities and thus ended that war a mere four years after the United States commenced fighting back openly.

In the War Between the States and even more in the Second World War, the United States demonstrated that the only moral way to wage a war is through total war.  When Sherman slashed through the southern states he quite openly declared that his intention was to destroy everything in his path and to expressly make the people of the south suffer for waging war.  In WWII, Curtis LeMay's bombers destroyed entire cities, fire bombing Tokyo and other major civilian centers with the knowlege that many more civilians would be harmed than any industrial capacity.  This was quite intentional. 

Is there any real question as to whether we were justified in burning Atlanta or firebombing Tokyo?  Perhaps there is a question, but the answer is provided by the results of the war:  We won and the war was shortened. The New York Times reported at the time, "Maj. Gen. Curtis E. LeMay, commander of the B-29s of the entire Marianas area, declared that if the war is shortened by a single day, the attack will have served its purpose."

What Sherman and LeMay understood is that it is the people of a warring nation that gives that nation its ultimate power.

Since then, we've seen how dictators have come to power and stayed in power by cowing their own people.  It's popular to think that unseen hands of the CIA can topple a foreign government but this is a myth of novels and movies that seems to have life in the real world only in the newspapers and political tracts.  In real life, such sordid manipulations are largely ineffective unless they are backed by the people in those countries.  Saddam Hussein could not be toppled.  Castro is still in power.  There are no instances of a CIA backed coup succeeding without people in the country wishing the coup to succeed.

So if a nation's government is ultimately controlled by its people, then why have the laws of war since the Treaty of Westphalia been protecting the people from the worst ravages of war? 

Now we have even governments claiming protected status.  Pakistan has been protected from its shielding of Al Qaeda.  Okay, maybe "shielding" is a bit overstating the matter.  In fact, Al Qaeda has conquered vast territories in Pakistan.  The Pakistani government has had no control in those areas yet has insisted that we are not allowed to deal with Al Qaeda there. 

The Saudis, the Pakistanis, the Syrians, and so many other third rate two-bit nations want to claim the benefits of statehood and sovereignty, but don't bother with the responsibility of being peaceful states.  They allow, if not encourage, rogue elements or protected elements to wage war on us and our civilization.

And the people of Pakistan, Afghanistan, and these pathetic places to live are not held accountable for allowing these governments to rule them.

Before we invaded Iraq, what was the motivation for an Iraqi to oppose Saddam Hussein?  If they fought him, they would die horrible deaths, and their families would likewise suffer horrid fates.  It's much easier to just go with the flow and hope to not stand out and get bad treatment from Saddam and hope that someone will come rescue them.

Suppose bank CEO's knew that if they lost billions of dollars that they and their families would have to live in poverty, do you think they would tend to take unreasonable risks?  Suppose bank CEO's were given golden parachutes even if they led their business to complete ruin, do  you think they would take unreasonable risks?  Even without government bailouts, no CEO will ever live in poverty.  His or her millions or billions of personal assets will be protected even without golden parachutes or government bailouts. 

Suppose the people of Afghanistan knew that if they supported Al Qaeda or allowed them to operate in their country that they and their entire families would be reduced to mere impurities in the glass that their nation is reduced to, do you suppose they would tend to take more actions to encourage good behavior by Al Qaeda?  

Instead, they know that they will be treated with love and affection and the United States will come and pave roads and build infrastructure.  It's "The Mouse that Roared" writ large.   They have no downside.

We will not win the war on terror until we change the equation.  We have to destroy the enemy's source of power.  Since their technology is limited, it couldn't be any clearer that their source of power is controlling people.  Until populations fear our wrath more than the immediate threats from the terrorists, we will always be fighting a losing war.  We cannot sustain the costs of a war where we spend hundreds of millions times more than the enemy.  They can continue to wage a low cost war and simply wait for us to run out of money and bankrupt ourselves – and that time seems to be coming sooner rather than later.

But I suppose many Americans now would think that some unknown universal force would bail us out. 

Winning hearts and minds to win a war sounds lofty and might work for a limited time as a strategy for one specific geographical area, but in the long run it will not win.  It will take too many generations for these impoverished areas to develop economies and cultures that can create the type of wealth that can recoup the costs of the war.  At the very least, we should wait until we win the war before we start our second generation of the Marshall Plan to rebuild the Middle East.  When we are finally bankrupted, the enemy will simply demonstrate again that these people have more to fear from them than from us and we'll be at their mercy.  The peoples of these countries will collect all the benefits of war against us, and little of the horrors.

The Westphalian Order was always a well-intended bad idea.  It is now a bad idea that may prove our ruin unless we find a Curtis LeMay or William T. Sherman to save us.

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