Thursday, June 6, 2013

The largest criminal organizations in the world are governments. - The U.S. government is no exception.

"There have been periods of history in which episodes of terrible violence occurred but for which the word violence was never used.... Violence is shrouded in justifying myths that lend it moral legitimacy, and these myths for the most part kept people from recognizing the violence for what it was. The people who burned witches at the stake never for one moment thought of their act as violence; rather they thought of it as an act of divinely mandated righteousness. The same can be said of most of the violence we humans have ever committed" - Gil Bailie

"Give me the money that has been spent in war and I will clothe every man, woman, and child in an attire of which kings and queens will be proud. I will build a schoolhouse in every valley over the whole earth. I will crown every hillside with a place of worship consecrated to peace" - Charles Sumner

"O for a lodge in some vast wilderness, Some boundless contiguity of shade; Where rumor of oppression and deceit, Of unsuccessful or successful war, Might never reach me more". - William Cowper - Source: Task (bk. II, l. 1)

Free The Press, Buy The Tribune Company UPDATE

by other98

You asked so we answered! Here is some more info on our Free The Press, Buy The Tribune Company Campaign as well as some answers to frequently asked questions.

Thanks to our friends at Free Press collaborating with us on this video.

Make sure to contribute to the campaign at http://bit.ly/buythetribune

Meet the 'Friends of Jihad'

By Pepe Escobar

Western politicos love to shed swamps of crocodile tears about "the Syrian people" and congratulate themselves within the "Friends of Syria" framework for defending them from "tyranny".

http://www.informationclearinghouse.info/article35189.htm

Syria: UN Report Reveals Opposition Crimes as Imperialist Powers Push For Intervention

By Johannes Stern

The contents of the report are a devastating indictment of the imperialist powers in the United States and Europe and their regional allies.

http://www.informationclearinghouse.info/article35192.htm

Did an Israel Lobby Front Group Organize McCain's Trip to Syria?

By Maidhc Ó Cathail

The Syrian Emergency Task Force, however, appears to have close ties to one foreign government and its powerful American lobby.

http://www.informationclearinghouse.info/article35185.htm

The Anti-Empire Report

What Our Presidents Tell Our Young People

By William Blum

Bad enough they have to pay highway-robbery tuition, but they wind up brainwashed anyhow.

http://www.informationclearinghouse.info/article35187.htm

Bradley Manning: Prisoner of Conscience

By Francis A. Boyle

Where are the "good" Americans? Well, there are some good Americans. They are getting prosecuted for protesting against and resisting illegal U.S. military interventions and war crimes around the world.

http://www.informationclearinghouse.info/article35188.htm

Bradley Manning Is Guilty of "Aiding the Enemy" -- If the Enemy Is Democracy

By Norman Solomon

When the deceptive operation of the warfare state can't stand the light of day, truth-tellers are a constant hazard.

http://www.informationclearinghouse.info/article35181.htm

I Am Bradley Manning

Video

If you witnessed war crimes, what would you do?

http://www.informationclearinghouse.info/article35193.htm

Guantanamo Detainees Undergoing 'Genital Searches' : Lawyers Say

By FREDERIC J. FROMMER

Lawyers for Guantanamo Bay detainees urged a federal judge Wednesday to stop what they describe as new "genital searches" for detainees who want to meet with their lawyers.

http://www.informationclearinghouse.info/article35191.htm

Four Years Ago Obama Promised to Investigate Afghan Massacre; Has Anything Happened Since?

By Cora Currier

Survivors and other witnesses, were stuffed into shipping containers without food or water. Many died of suffocation. Others were allegedly killed when Dostum's men shot at the containers.

http://www.informationclearinghouse.info/article35182.htm

“Why aren’t the 50% living in poverty protesting in the streets?”

David William Pear

Thursday, 06 June 2013 08:22

1 Comment

By David William Pear.
People get the government they deserve.
Philosopher/scholar Joseph de Maistre said, "Every country has the government it deserves."
HL Mencken said, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."
Source: Yahoo Answers, yahoo.com.
The Stockholm Syndrome: A form of traumatic bonding, which does not necessarily require a hostage scenario, but which describes strong emotional ties [to an abuser]…the bonding is the individual’s response to trauma in becoming a victim. When a victim believes the same values as the aggressor, they no longer become a threat.
Source: Wikipedia
Opinion:
Through evolution and survival of the human race it has become “human nature” to need to belong to a group. Stability of the group meant the difference between survival and death. A stable group requires a dominant and decisive leader. The leader needed to be ruthless in order become the leader, stay the leader and to hold the group together.

Empathy and kindness to individual members of the group is not a requirement for a strong leader. Quite the opposite: The leader had to be merciless towards individuals that challenged his leadership and threatened group cohesiveness. Punishment, torture, humiliation and death to individual members of the group served several purposes in holding the group together.
Punishment and even human sacrifice served as an example for would be troublemakers. It was used in religious ceremonies to strengthen the power of religious leaders. It also served as entertainment to relieved group tensions. Not that many years ago public executions were eagerly attended by the rabble in Europe and the Americas. Human sacrifice even served as a source of protein in the diet of many groups. According to Wikipedia: “Cannibalism was widespread in the past among humans in many parts of the world”.
The need for a strong and decisive leader is the natural order of groups. This is true in the observation of animal packs where a dominant alpha male emerges to lead the pack. The alpha male gets to eat first, eat the most and has the first rights on increasing his gene pool.
In nature the dominate leader need not be a male. In the case of the African Spotted Hyena, for example, the dominate leader is a female and all of the females of the hyena group are dominate over all of the males of the group. “The spotted hyena is the most social of the Carnivora in that it has the largest group sizes and most complex social behaviours” according to Wikipedia.
Today Western civilization thinks that it has shed its evolutionary past. We are supposed to be living in an age of enlightenment and reason. Democracy, the rule of just laws applied equally to all and Christian values are widely preached. The reality is quite different.
America is not a democracy and never has been. It is supposed to be a republic with representative local, state and federal governments. The representatives were supposed to be elected by the people. The “people” did not mean everyone. Those without property, African-Americans, Jews, Native Americans, women and others were not among the people who could vote. Just as today it was the elite, wealthy and powerful that got to choose the government. They passed and enforced laws that mostly favored themselves.
Still the Bill of Rights left open the hope that ordinary people would be allowed to live free from government abuse. Often that hope was not a reality as government controlled by the powerful and wealthy infringed on individual’s freedoms. Freedom of speech and the right to peacefully petition the government is often just an ideal written on paper and not a fact.
Anyone that attempted to organize labor strikes, protest working conditions, demand the right to vote or march on Washington for veteran’s benefits soon found the full force of the government coming down on them. The Ludlow Massacre occurred when striking coal miners were fired upon by the Colorado National Guard in 1914. The Rock Springs Massacre occurred when Chinese immigrants demanded to be paid the same wages as white miners in 1885. Women were not granted the right to vote in the US until 1920 and many women went to prison prior to that for peacefully protesting for the right to vote. The “Bonus Army” of WWI veterans was brutally attached by the military, led by Douglas MacArthur and Dwight Eisenhower, when veterans marched on Washington demanding their WWI bonus early during the depression year of 1932.
Social change and progressive movements in the USA are slow, bloody and often in vain. Even when progressive movement and justice prevail it is at a tremendous cost in sacrifices and lives. Often those that bring about change do not get to enjoy the benefit of it themselves.

A bloody Civil War resulting in the Emancipation Proclamation did not end slavery. During the decades of Reconstruction much slave labor persisted as if nothing had happened. African-American slaves were not helped in the transition from slavery to freedom. Many stayed on the plantations as virtual slaves. Some because sharecroppers which was just another form of slavery. African-American slaves were harassed, exploited, discriminated against and lynched for being trouble-makers, revenge and to keep them quiet. Nor were they welcomed in the North because they took jobs from white workers and drove down wages. It would take another 100 years and more social disruption and blood in the streets for African-Americans to get a semblance of their civil rights.
Even when change does occur the elite, rich and powerful keep trying to claw it back. The Civil Rights movement of the 1960’s propelled many African-Americans into main stream America. The majority of African-Americans remained in the ghettos in poverty. Instead of Jim Crow laws beating them down they were faced with new barriers to equality.
The War on Crime and the War on Drugs has put millions of African-Americans into “preventive detention” fueling an explosion in the prison industry. Images of the “Welfare Queen” and Willie Horton have put presidents into office and keep African-Americans in poverty without safety-nets. The privatization of public education is going to rob future generations of African-Americans of even the slim chance they have now of getting an education. Most white Americans still blame the African-American victims for their own plight.
It was only after the perfect storm of the Great Depression, WWII and the Cold War that propelled many Americans into realizing the American Dream. The Great Depression frightened the elites, wealthy and powerful into enacting social programs that helped to lift people out of abject poverty.
Those Depression era social programs then helped to sustain a middle class after WWII. After WWII the USA was the only industrial power left on earth. The war had created tremendous pent up demand for housing, automobiles, consumer durable goods and created a shortage of labor. Wartime production was easily converted into peacetime prosperity. Labor was needed to run the factories and they could demand high wages and benefits.
The Cold War was a competition of economic models to prove that capitalism was better than communism at providing a workers’ and consumers’ paradise. The elites were more afraid of communism than they were of high taxes. Those tax revenues went into building the interstate highway system, public education and other social programs for “national defense”.
The arms race with the Soviets provided plenty of high paying jobs for the military-industrial complex. The shock of the Soviets putting a satellite named Sputnik (fellow traveler) into orbit set off massive spending on a race to the moon. The rich were willing to pay a marginal income tax rate of up to 90% to defeat communism.
The 2008 economic crash caused by the excesses of the banking industry presented progressives with another golden chance of opportunity. The election of Barack Obama brought new energy and excitement to the youth of America and progressives unlike anything the US has seen since the 1960’s. People’s expectations of what President Obama could and wanted to achieve in the way of “change” were unrealistic expectations.
Many people expected so much from Obama that their biggest fear was that a conspiracy of the elites and the CIA would have him assassinated. They needn’t have worried. Anybody paying attention should have seen that Obama was saying one thing but doing the opposite.
Yet the faithful kept making excuses for him and “waiting for the real Obama to step forward”. He already had when before he was inaugurated he said that there would be no inquiry into the war crimes and lawlessness of the Bush/Cheney administration. The Rule of Law, the US Constitution and International Law was thrown under the same bus that took out Jeremiah Wright earlier. Just like the “Single-Payer” health care bill it would not be the last victims of the Obama bus. Unfortunately the War Of Terror had nothing to fear from the killer bus.
How naive and foolish we were to have put so much hope and trust in Barack Obama. He broke promise after promise and our hearts over and over again. Many people gave up hope, turned their back on government and went back into political hibernation. Like the cicada it may be another 17 years for new “eggs” to hatch. There may not be a republic left when they reemerge in 2030.
If the War On Crime and the War On Drugs are any indication, the War Of Terror will still be going strong when the cicada returns. So too will the war on the US Constitution, the Bill of Rights and the Rule of Law. The elite, wealthy and powerful will still be thumbing their nose at justice, the prison industry will be thriving with African-American and Latino inmates, public education will be a vague memory, domestic spying will have become more invasive, government sanctioned assassinations will be endemic, drones will have inherited the earth and the poor will still be among us. Global warming deniers will still be going strong even as Manhattan and Florida have returned to the swamps.
The government learned its lessons very well in the streets of Chicago and the jungles of Vietnam in the 1960’s. In El Salvador, Honduras, Iraq, Afghanistan and elsewhere the US government did not make the same mistakes it made in Vietnam.
Forget about fighting a counter insurgency war to win the hearts and minds of the people. Petraeus and McChrystal know how to win wars. If there is a one-in-a-hundred chance that somebody is a terrorist then just kill them. Even one-in-a-thousand. Any male of fighting age is a target. Any women and children are acceptable collateral damage. Drone them, bomb them, assassinate them and disappear them. Send in the assassins of the Joint Special Operation Command (JSOC). Take no prisoners. “Just kill them all and let God sort them out”.
The same goes for the Streets of Chicago and anywhere else in the US where there is domestic unrest. The police are ready this time. They are fully combat militarized. They have armored personnel carriers, body armor, Kevlar helmets, face visors, night vision goggles, knee pads, gas masks, fully automatic assault rifles, snipers, Glocks, grenades, rubber bullets, pepper spray, poison gas, Tasers, stun guns, ear-drum bursting high-frequency microwave radiation, water cannons, drones, helicopter, dogs, horses, batons and riot shields. The police also have their spies and infiltrators. They have their provocateurs to make sure things turn bloody violent.
Effective protest, free speech and petitioning of the government for a redress of grievances needs organization. It also takes a permit to hold a demonstration. Even just two people walking down the sidewalk with a sign is a parade that needs a permit. The government can isolate demonstrations to defined areas out of sight of anyone or anything that matters.
Organizing protests is hard to do when the government has hi-tech domestic spying of the internet, social media, cell phones and data bases of troublemakers. There are cameras everywhere watching everybody. The government knows who the leaders are and they can be arrested and detained in advance. The government has the Patriot Act and all that is needed is to call troublemakers terrorists. Invoke the government’s secrecy laws and there is no need for any evidence or for the government to prove anything to a judge. People can now be imprisoned for no known reason and kept indefinitely. US citizens can even be assassinated.
The government also has effective control over the mainstream media. Most people who follow the news depend on the mainstream media. If the media ignores something then it never happened. The mainstream media depends on the titans of government and business for its life blood of access to information it calls news.
The main stream media is not going to alienate their most important sources of news. Nor are they going to alienate their social network of friends. The main stream media and the titans of government and business are all friends. They live in the same neighborhoods, their children attend the same private schools, they belong to the same country clubs and they attend the same places of worship.
Social movements do not have the support of the people and probably never did have widespread support. If one is old enough and can remember back to the anti-war protesters of the 1960’s, it was the construction workers and blue collar workers who confronted the war protesters in the streets. The very same people whose children were most likely to be drafted and die in Vietnam where the ones who were the most hostile to the war protesters.
People want to belong to the group. As children we are brought up to respect authority and to love our country. We are taught a myth about America that does not and never did exist. We are indoctrinated that America is a democracy and has a capitalist economic system.
Most people know very little about American history or economics. Most religious institutions preach mythical American ideology as gospel. Most people would not understand if they were told that America is not a democracy and does not fit the capitalistic model of Adam Smith. If one told them that America is an oligarchy and a plutocracy they would feel personally insulted.
As with the Stockholm Syndrome people take on the identity and values of their abusers. If people are abused by the American system they feel that it is their own fault. They feel shame. They must have done something wrong and deserve the punishment they get. If their abuser shows them a little mercy or even kindness they feel that it is undeserved.
The American propaganda machines are also very good at turning victimized groups against each other. People are conditioned to hate Welfare Queens, Willie Horton, illegal immigrants, Mexicans and Muslims.
Even those receiving government programs such as Medicare and Social Security feel that others are getting “entitlements” unjustly and at their expense. Teachers and other government workers are viewed as greedy, lazy, overpaid and milking fat pensions that they do not deserve.
The public becomes enraged when told that a large percentage of the population pays no income taxes, even when it is explained to them that it is because they are living in poverty. However the public is not outraged that GE, Exxon, JP Morgan and many other large corporations pay no income taxes.
The public does not get enraged when told that Jamie Diamon got a $20 million bonus after his company was bailed out by the government with billions of tax payer dollars. They do not get enraged when they are told that Mitt Romney pays less than 15% in taxes on his millions in come.
Like Joe the Plumber they think it would be unfair for the government to tax the wealthy. Their irrational reasoning is that someday they too might be rich. The chances of them getting rich are the same as hitting the lottery. It isn’t going to happen. Never the less they identify and empathize with the values of their captors.
The government keeps people frightened of an enemy tribe that wants to kill them. As during the Cold War when there was a communist under every bed, there is now a terrorist under every bed. People say that they admire Bush/Cheney because they “kept us safe” even though through their negligence, or worse, it was on their watch that the worst terrorist attack in US history took place. People want authoritarian strong ruthless leaders.
People still argue that waterboarding, torture, extraordinary rendition, assassinations and the killings of innocents are justified. People are not horrified or feel any empathy for the deaths of Muslims and Arab women and children.
When the nation was outraged about the shooting of Travon Martin, an African-American teenager who was shot and killed in Florida by a self-appointed neighborhood watcher, Obama said that if he had had a son he would have looked like Travon. When Obama orders a drone strike in Yemen on the innocent 16 year old son of Anwar al-Awlaki, an American citizen, he expressed no such empathy. The droning was soon forgotten by the press and most Americans.
So, “Why aren’t the 50% living in poverty protesting in the streets?” Because they are patriotic Americans that love their country and feel that it is ordained by The Almighty. They hate Muslims because “all terrorists are Muslims” and they think Islam is an evil religion. They want to be part of the American Empire and spread democracy throughout the world. They cheer for war and enjoy seeing people vaporized on “kill TV”. They proudly fly their flag on their front porch. They have a “Support the Troops” sticker on their car. They say “Thank you for your service” to anybody in a military uniform. They know that the police would crush them and they don’t want their blood flowing in the streets. They don’t want to spend even a night in jail let alone the rest of their life naked, in a stress position in a 10x8 ft. cell 23 hours a day. They cannot get organized. They think rich people got that way by the Christian values of hard work. They think they do not deserve any better and are thankful for what little they got. They got the government they deserve “good and hard”.

Bradley Manning Is Guilty of “Aiding the Enemy” -- If the Enemy Is Democracy

Norman Solomon

Thursday, 06 June 2013 08:20

0 Comments

By Norman Solomon
Of all the charges against Bradley Manning, the most pernicious -- and revealing -- is “aiding the enemy.”
A blogger at The New Yorker, Amy Davidson, raised a pair of big questions that now loom over the courtroom at Fort Meade and over the entire country:
*  “Would it aid the enemy, for example, to expose war crimes committed by American forces or lies told by the American government?”
*  “In that case, who is aiding the enemy -- the whistleblower or the perpetrators themselves?”
When the deceptive operation of the warfare state can’t stand the light of day, truth-tellers are a constant hazard. And culpability must stay turned on its head.
That’s why accountability was upside-down when the U.S. Army prosecutor laid out the government’s case against Bradley Manning in an opening statement: “This is a case about a soldier who systematically harvested hundreds of thousands of classified documents and dumped them onto the Internet, into the hands of the enemy -- material he knew, based on his training, would put the lives of fellow soldiers at risk.”
If so, those fellow soldiers have all been notably lucky; the Pentagon has admitted that none died as a result of Manning’s leaks in 2010. But many of his fellow soldiers lost their limbs or their lives in U.S. warfare made possible by the kind of lies that the U.S. government is now prosecuting Bradley Manning for exposing.
In the real world, as Glenn Greenwald has pointed out, prosecution for leaks is extremely slanted. “Let’s apply the government's theory in the Manning case to one of the most revered journalists in Washington: Bob Woodward, who has become one of America’s richest reporters, if not the richest, by obtaining and publishing classified information far more sensitive than anything WikiLeaks has ever published,” Greenwald wrote in January.
He noted that “one of Woodward's most enthusiastic readers was Osama bin Laden,” as a 2011 video from al-Qaeda made clear. And Greenwald added that “the same Bob Woodward book [Obama’s Wars] that Osama bin Laden obviously read and urged everyone else to read disclosed numerous vital national security secrets far more sensitive than anything Bradley Manning is accused of leaking. Doesn't that necessarily mean that top-level government officials who served as Woodward’s sources, and the author himself, aided and abetted al-Qaida?”
But the prosecution of Manning is about carefully limiting the information that reaches the governed. Officials who run U.S. foreign policy choose exactly what classified info to dole out to the public. They leak like self-serving sieves to mainline journalists such as Woodward, who has divulged plenty of “Top Secret” information -- a category of classification higher than anything Bradley Manning is accused of leaking.
While pick-and-choose secrecy is serving Washington’s top war-makers, the treatment of U.S. citizens is akin to the classic description of how to propagate mushrooms: keeping them in the dark and feeding them bullshit.
In effect, for top managers of the warfare state, “the enemy” is democracy.
Let’s pursue the inquiry put forward by columnist Amy Davidson early this year. If it is aiding the enemy “to expose war crimes committed by American forces or lies told by the American government,” then in reality “who is aiding the enemy -- the whistleblower or the perpetrators themselves?”
Candid answers to such questions are not only inadmissible in the military courtroom where Bradley Manning is on trial. Candor is also excluded from the national venues where the warfare state preens itself as virtue’s paragon.
Yet ongoing actions of the U.S. government have hugely boosted the propaganda impact and recruiting momentum of forces that Washington publicly describes as “the enemy.” Policies under the Bush and Obama administrations -- in Iraq, Afghanistan, Yemen and beyond, with hovering drones, missile strikes and night raids, at prisons such as Abu Ghraib, Bagram, Guantanamo and secret rendition torture sites -- have “aided the enemy” on a scale so enormous that it makes the alleged (and fictitious) aid to named enemies from Manning’s leaks infinitesimal in comparison.
Blaming the humanist PFC messenger for “aiding the enemy” is an exercise in self-exculpation by an administration that cannot face up to its own vast war crimes.
While prosecuting Bradley Manning, the prosecution may name al-Qaeda, indigenous Iraqi forces, the Taliban or whoever. But the unnamed “enemy” -- the real adversary that the Pentagon and the Obama White House are so eager to quash -- is the incessant striving for democracy that requires informed consent of the governed.
The forces that top U.S. officials routinely denounce as “the enemy” will never threaten the power of the USA’s dominant corporate-military elites. But the unnamed “enemy” aided by Bradley Manning’s courageous actions -- the people at the grassroots who can bring democracy to life beyond rhetoric -- are a real potential threat to that power.
Accusations of aid and comfort to the enemy were profuse after Martin Luther King Jr. moved forward to expose the Johnson administration’s deceptions and the U.S. military’s atrocities. Most profoundly, with his courageous stand against the war in Vietnam, King earned his Nobel Peace Prize during the years after he won it in 1964.
Bradley Manning may never win the Nobel Peace Prize, but he surely deserves it. Close to 60,000 people have already signed a petition urging the Norwegian Nobel Committee to award the prize to Manning. To become a signer, click here.
Also, you can preview a kindred project on the "I Am Bradley Manning" site, where a just-released short video -- the first stage of a longer film due out soon -- features Daniel Ellsberg, Oliver Stone, Maggie Gyllenhaal, Phil Donahue, Alice Walker, Peter Sarsgaard, Wallace Shawn, Russell Brand, Moby, Tom Morello, Michael Ratner, Molly Crabapple, Davey D, Tim DeChristopher, Josh Stieber, Lt. Dan Choi, Hakim Green, Matt Taibbi, Chris Hedges, Allan Nairn, Leslie Cagan, Ahdaf Soueif and Jeff Madrick.
From many walks of life, our messages will become louder and clearer as Bradley Manning’s trial continues. He is guilty of “aiding the enemy” only if the enemy is democracy.
Norman Solomon is co-founder of RootsAction.org and founding director of the Institute for Public Accuracy. His books include “War Made Easy: How Presidents and Pundits Keep Spinning Us to Death.”

Roger Myerson’s Paean to Plutocracy

William Black

Thursday, 06 June 2013 08:17

0 Comments

By William K. Black
Introduction
This article begins a project to critique the work by economists concerning regulation that has led to the award of Nobel prizes. The prize in economics in honor of Alfred Nobel is unique. It is not part of the formal Nobel Prize system. It was created by a large Swedish bank and it is the only “science” prize frequently given to those who proved incorrect. The theme of my series is how poorly the work has stood the test of predictive accuracy. Worse, it has led to policies in the private and public sector that are criminogenic and explain our recurrent, intensifying financial crises.
I want to stress that the reason that the work has proven so faulty is not that the Nobel Laureates in economics are incompetent or evil. Indeed, that is part of my theme. Economics is not a hard science and its pretensions that it is have helped make even brilliant economists vulnerable to grievous error, particularly those who were most dogmatic about their hostility to even democratic governments. A recurrent defect that will emerge is the failure of economics to take ethics seriously.
This article responds to the Prize Lecture of Roger Myerson, who was made a Laureate in 2007 for his work on “mechanism design.” Mechanism design theory was developed in parallel to Michael Jensen’s work that led to modern executive compensation. Jensen criticized existing executive compensation as paying CEOs as if they were “bureaucrats” and argued that it led CEOs to shirk effort and avoid taking productive risks. These variants of the classic “unfaithful agent” problem were reminiscent of Ayn Rand’s premise of the CEOs going on a mass strike, but here the strike was against the board of directors and the cause was their “inadequate” pay. Myerson’s Prize Lecture uses a variant of CEO compensation as central to his argument on mechanism design. CEO compensation is the subject of Myerson’s most interesting policy recommendation – the CEOs of large firms need to be billionaires and his most controversial conclusion – capitalism’s unique strength is plutocracy.
http://www.nobelprize.org/nobel_prizes/economics/laureates/2007/myerson-lecture.html
Myerson’s Prize Lecture returns repeatedly to the theme of demonstrating the inferiority of what he refers to as “socialism” (but appears to be referring to communist systems) and to advancing the views of Friedrich August von Hayek. Hayek’s most famous work warned that the democratic governments of the West were headed inexorably on The Road to Serfdom because of their mixed economies. Myerson’s Prize Lecture’s twin laments are that economics had proven unable to prove the inferiority of government programs and Hayek’s dismissal of the utility of mathematical economics.
Ethics, we don’t need no stinkin’ ethics
At first glance, it might appear that mechanism design involves an emphasis on ethics.
“First, to the extent that our social plan depends on individuals’ private information that is hard for others to observe, we need to give people an incentive to share their information honestly. This problem of getting people to share information honestly is called adverse selection. Second, to the extent that our social plan requires people to choose hidden actions and exert efforts that are hard for others to monitor, we need to give people an incentive to act obediently according to the plan. This problem of getting people to act obediently to a social plan is called moral hazard. If it is a rational equilibrium for everyone to be honest and obedient to the central mediator who is implementing our social coordination plan, then we say that the plan is incentive compatible.
There are two important things to say about such incentive-compatible coordination plans. First, they can be characterized mathematically by a set of inequalities called incentive constraints that are often straightforward to analyze in many interesting examples. Second, although we defined incentive compatibility by thinking about honesty and obedience in communication with a central mediator, in fact these incentive-compatible plans characterize everything that can be implemented by rational equilibrium behavior in any social institution or mechanism. This assertion of generality is called the revelation principle.
The revelation principle asserts that any rational equilibrium of individual behavior in any social institution must be equivalent to an incentive compatible coordination plan. Given any possible informational reports from the individuals, the equivalent incentive-compatible plan recommends the results of simulated lying and disobedience in the original institution or mechanism, as illustrated in Figure 1. Thus, without loss of generality, a trustworthy mediator can plan to make honesty and obedience the best policy for everyone” [pp. 322-323].
It is a bit subtle, but Myerson’s position on ethics is that we can never rely on ethics and must instead consistently create financial incentives that reward ethical behavior with increased wealth if we wish to have people act ethically. If a CEO can increase his wealth through unethical conduct then his “rational” behavior is to act unethically. If CEOs have a financial incentive to cheat, and fail to do so, they are acting irrationally. Myerson predicts that CEOs will act “rationally” by cheating whenever doing so would increase their wealth. I have criticized this approach in prior articles as “Mankiw morality.”
Myerson and Economists’ Naïve View of Fraud
It is essential, therefore, that Myerson prove that markets inherently and consistently create financial incentives for CEOs in which unethical conduct does not increase their wealth. Ethics provides no constraints on CEOs (or anyone else) in Myerson’s models. Fiduciary duties disappear even though Myerson’s claim is that CEOs will violate their core fiduciary duties unless they are bribed to act as if they were honest. Myerson claims that ensuring that only honesty pays for a CEO is a simple process: “these incentive-compatible plans characterize everything that can be implemented by rational equilibrium behavior in any social institution or mechanism.” Further, “a trustworthy mediator can plan to make honesty and obedience the best policy for everyone.” The mediator is primarily an expositional construct for Myerson. What he is claiming in these two clauses is that the markets can shape the incentives to ensure honesty by market participants, even elites like CEOs. Further, he claims that the principals (shareholders in this context) will shape the CEO’s incentives to be “incentive-compatible” in order to produce a “rational equilibrium” that is wealth-maximizing for the principals.
Myerson presented his Prize Lecture on December 8, 2007 – as the financial world was exploding from the most spectacularly incentive incompatible mechanism design and the greatest epidemic of accounting control fraud in history. The Riksbank either has a wonderful sense of irony or spectacularly bad timing in its awards.
Billionaires only need apply to be CEOs
Economists do not study control fraud and do not read the criminology literature on control fraud. Even when they write about fraud they do not research the most relevant literature. The idea that one can create a contract that will make it impossible for CEOs to increase their wealth through fraud indicates that Myerson views markets as nirvana. Myerson premises his claim on the advantages to society of wealthy CEOs and returns to praising Hayek.
“Second, we consider a simple production example, involving moral hazard in management. This example illustrates how incentives for good management may require that managers must have a valuable stake in their enterprise.
Third, we consider an example that introduces politics into a productive economy, involving moral hazard in the government. This example shows how unrestrained power of government over the economy can be inefficient, as capital investors require credible political guarantees against the government’s temptation to expropriate them. The latter two moral-hazard models here may particularly illustrate the kinds of theoretical frameworks that can be used to exhibit practical disadvantages of socialism, which Hayek sought to show” [p. 324].

Moral Hazard

Myerson provides two examples of how the CEO could choose to deliberately harm his principals (shareholders). The first example is moral hazard.
“[H]ere we can introduce problems of moral hazard, because valuable inputs that are required for production may be misused or diverted by the manager of the production process” [p. 332].
Myerson asserts that the answer to the CEO’s perverse incentives is to require him to invest in the firm. Myerson claims that if the CEO invests enough of his personal wealth in the firm the principals will know that he will act to maximize their wealth.
Myerson fails to understand the most elemental aspect of accounting control fraud. His naïve view of such frauds is revealed in this passage:
“The manager’s pay cannot depend on his hidden effort, which is not directly observable, but his pay can depend on whether the project is a success or not.”
Myerson concedes that pay cannot depend on matters that can be “hidden,” but assumes implicitly that the “success” of a firm is obvious. No one with the faintest understanding of firms or accounting could have such a naïve view. By December 2007, as Myerson was delivering his Prize lecture, scores of mortgage banking firms specializing in making fraudulent loans that had once reported superb earnings had failed – and that ignores their massive liability for the fraudulent sale of fraudulent loans to the secondary market.
Adverse Selection
Myerson has a limited concept of how “bad” CEOs can be.
“To compare moral hazard and adverse selection, we might consider an analogue of the above problem where the incentive constraint is about the manager’s hidden information rather than about the manager’s hidden action. In this analogous adverse-selection example, the project’s probability of success depends on the manager’s hidden type, which may be good or bad” [p. 332].
Myerson defines “bad” CEOs as “incompetent” CEOs. Incompetence is a problem among CEOs, but fraudulent CEOs cause vastly greater harm than mere incompetents – and the frauds are often incompetent and venal as well as fraudulent.
Myerson’s treatment of adverse selection is exceptionally poor. He assumes that the principals can differentiate between good and bad CEOs. He provides a flawed claim that socialism might be superior in preventing adverse selection because “socialist” systems supposedly do not differentiate between competent and incompetent managers.
Pandering to Plutocrats
It gets better. The CEO not only needs to be wealthy and gets to leverage his investments with the firm’s assets, if he is “not very rich” (relative to the size of the firm) he needs to be paid a bonus for making such investments beyond the profits he receives from the investment (in what used to be condemned as an “usurpation of corporate opportunities”). Myerson asserts that if the CEO is “not very rich” he “must be allowed to get a moral-hazard rent” from the firm when he invests in the firm.
I noted that Myerson’s argument defines “not very rich” CEOs relative to size of the firm and the perverse incentive CEOs have because of moral hazard.
“That is, to deter abuse of power without an expected loss to the rest of society, the manager must have stakes in this project worth at least 40% of the cost of the capital input here. If no one has such a large personal wealth to offer as collateral to this investment, as might be the case in an egalitarian socialist society, then society at large cannot profitably undertake this investment.
Thus, moral-hazard incentive constraints can also provide an analytical framework where the initial allocation of property rights may affect the possibility of productive investments. Indeed, this simple example may provide an analytical perspective on problems of socialism, as Hayek was seeking.
Modern industrial production requires integrated managerial control over large scale assets, and whoever exercises that control will have great moral hazard temptations, which are represented by the parameter B in this model.
When managers have great temptations B, the moral-hazard incentive constraint cannot be satisfied unless managers have large stakes in success of their projects” [p.334].
The adjective Myerson chose to describe the intensity of the perverse incentives CEOs inherently have is “great.” He describes the “abuse of power” CEOs would engage in as causing “an expected loss to the rest of society.” He emphasizes that the CEO of a large firm must have immense wealth to avoid causing this “great” “abuse of power.” The example he gives is that the firm must “design” a “mechanism” requiring a CEO must make a personal investment of 40% of the firm’s total cost of capital to create an “incentive-compatible” mechanism. Recall that Myerson’s position is that markets will insure that firms adopt “incentive-compatible” governance systems. (Anything else would not be a “rational equilibrium.”) Myerson argues that it would be inefficient (and that is forbidden in his model because it would be irrational) for a large firm to employ a mere multi-millionaire as its CEO because such a “not very rich” CEO would have to be paid a “rent” equivalent to the scale of his “great” moral hazard in addition to his investment profits.
For large firms, the Myerson example would require CEOs to be billionaires. Under Myerson’s theory, the larger the firm the more perverse the CEOs’ incentives and only plutocracy can counter the CEOs’ endemic, perverse incentives. Myerson asserts that the unique benefit of massive inequality provides the proof of capitalism’s superiority to socialism that “Hayek was seeking.” The plutocrats love the idea – and we do not have to pay them “great” “moral hazard” “rents.” We just have to make them plutocrats with billions of dollars in net worth – you know, “efficient.” We couldn’t just have CEOs receive exceptionally high incomes (say $600,000) and work hard and honestly. Only a chump would do that. Myerson tells us that if large firms hire mere millionaires as CEOs they will loot the firm – yet this poses no ethical issue worthy of note by Myerson.
Having explained that Hayek’s “market” solution is an invitation for CEOs to loot “their” firms and that the only way to prevent this is to ensure that large firms employ only billionaires as their CEOs one might expect Myerson to condemn this result as a travesty. Myerson, however, treats his paean to plutocracy as proving Hayek’s claims that markets are marvelous. Myerson saw his plutocracy plan as the ultimate indictment of “socialism.” Myerson claims that an “egalitarian” nation is inherently inferior to a plutocracy. CEOs of large firms that are “not very rich” (mere multi-millionaires) are so rapacious under market systems that they can only be bribed not to loot “their” firms through expensive payments of “rents” by the principals to the CEO.
“If, unlike capitalist entrepreneurs, socialist managers do not have substantial personal assets that they can invest in their projects, then the necessary stakes can only be achieved by allowing socialist managers to take a large share of the benefits from successful projects. So considerations of moral hazard cast doubt on the egalitarian socialist ideal that profits from industrial means of production should all belong to the general public” [p. 334].

Myerson’s policies optimize the criminogenic environment for control fraud

The most fundamental problem with Myerson’s analysis of moral hazard and adverse selection is that they both predict accounting control fraud and Myerson assumes that his mechanism design prevents accounting control fraud. It does not and cannot. Indeed, by creating complacency through the fabulous claims that plutocrats are pure and principled, markets self-correct, and regulators cause injury Myerson’s proposals would make our economy even more criminogenic. Firm outputs are “hidden” by fraudulent accounting and as George Akerlof and Paul Romer explained in 1993, accounting control fraud is a “sure thing” (“Looting: The Economic Underworld of Bankrutpcy”). Indeed, if a large firm is failing the billionaire CEO who has hundreds of millions of dollars invested in the failing projects has a powerful incentive to falsify the accounting to declare the project was successful and pay himself off with a firm buyout of his “profitable” interest in the project.
Myerson ignores the fact that plutocracies produce crony capitalism, making “free markets” and real democracies impossible. Plutocracy greatly increases the ability of corrupt CEOs to loot with impunity, making a mockery of incentive-compatibility.
Myerson’s pro-plutocracy policy is even more criminogenic with regard to other forms of control fraud. The “dominant strategy” of a plutocrat CEO who has hundreds of millions of dollars invested in a firm project is, according to Myerson’s theory, to engage in anti-purchaser, anti-employee, and anti-public control fraud because each of these forms of fraud add enormously to firm and the CEO’s personal profitability.

btw...

hey alabama

Particulate Matters

Thursday, June 6, 2013

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Roger Myerson’s Paean to Plutocracy

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