Signs of the Economic Apocalypse 9-26-05

From Signs of the Times 9-26-05:

Gold continued its rise last week, closing at 467.40 dollars an ounce, up 1% from last week's 17-year record close of $462.90. Oil resumed its climb, closing at 64.19 dollars a barrel, up 1.9% from the previous week's close of $63.00 partly on fears of the effects of Hurricane Rita, which ended up not being as damaging as feared. The dollar closed at 0.8306 euros, up 1.6% from 0.8174, completing a 3% rise over two weeks against the euro. That puts the euro at $1.2040 compared to $1.2234 a week earlier. Gold in euros would be 388.21 euros an ounce at Friday's close, up 2.6% from the previous Friday's close of 378.37 and completing a 6.2% two-week rise. Oil in euros would be 53.31 euros a barrel at week's close, up 3.5% from the previous week's close of 51.50. The gold/oil ratio closed at 7.28 barrels of oil for an ounce of gold, down 1% from 7.35 last week. In the U.S. stock market, stocks were down for the week, with the Dow Jones Industrial Average closing at 10,419.59, down 2.1% from 10,641.94 at the previous week's close. The NASDAQ closed at 2,116.84, down 2.1% from last week's close of 2160.35. The yield on the ten-year U.S. Treasury note closed at 4.25%, down two basis points from last week's 4.27.

In spite of the clear weakness of the U.S. dollar in particular and the U.S. economy in general post-Katrina, the dollar rose against the euro. The drop in the euro can be partially attributed to the results of the German election. And we can call it a drop in the euro rather than a rise in the dollar because the dollar fell sharply again against gold.

Regarding the German election, once again, European voters had the sense to reject Anglo-American neoliberal policies, this time in Germany, earning German voters the condescension of both the Anglo-American and the European media.

International press pours scorn on German voters

By Peter Schwarz

21 September 2005

The international press has reacted to the German parliamentary (Bundestag) election held on Sunday with a mixture of horror and indignation. The message given by voters was clearly understood. The result expressed a rejection of the policies of welfare cuts and "free market" reforms which are currently being pursued by all European governments.

The anticipated clear-cut victory of the conservative opposition, consisting of the Christian Democratic Union (CDU), the Christian Social Union (CSU) and the Free Democratic Party, over the ruling coalition of the Social Democrats (SPD) and the Greens, failed to materialize. Instead, neither camp won a majority in the Bundestag, the German parliament, and both the Social Democrats and the CDU recorded lower votes than in the previous national election.

It was, above all, a sharp defeat for the CDU and its candidate for chancellor, Angela Merkel, who had until recently enjoyed a double-digit lead over the incumbent chancellor, Gerhard Schröder of the SPD, according to pre-election polls. In the aftermath of the election, both Merkel and Schröder were insisting that they would head a new government.

The result of Sunday's vote marked the first time in Germany's post-war history that a national election failed to produce a clear victor, ushering in a period of parliamentary horse-trading and political uncertainty.

The overwhelming response of the European and international press to the election was indicated by the Milan-based Corriere della Sera, which lamented that in Germany "fears of economic decline and the loss of its welfare state had won." The Spanish newspaper El País commented: "The Germans tend anyway towards the left. They seem to prefer a moderate reform in the form of the Agenda 2010 to a radical change of the social system, as the right-wing intended."

Following the "no" vote in the European Union referendum in France, the German election marks the second time voters in a major European country have delivered a decisive blow to plans by the ruling elite to reorganize Europe on the basis of strict "free market" criteria.

"European politics, which was already in crisis following the no to the European Union constitution in France, threatens to be more paralyzed than ever," complained the Paris-based Figaro. The Corriere della Sera came to a similar conclusion, writing, "[I]t will be Germany and all of Europe which will have to pay the price."

The British Daily Telegraph concluded: "Beyond that, the absence of a black-yellow partnership [a government of Germany's conservative opposition] will mean, at best, scant advance on the limited changes introduced in Mr. Schröder's second term. And that, in turn, could slow reform in countries such as France and Italy. Europe as a whole is a loser from this profoundly unsatisfactory result."

The Danish Jyllands Posten lamented: "The result of the elections in Germany was just about the last thing which Europe needs now from its largest and most important nation."

From Stockholm, the Dagens Nyheter complained: "The signal for friends of reform in Europe is bad: Those who dare to take up responsibility for necessary steps run a large risk of being punished."

The staunchly conservative Swiss newspaper Neue Zürcher Zeitung reminded German voters: "The fact that the situation which has now come about excludes any reasonable future option can only be termed catastrophic. One is tempted to say that this fact must now penetrate deep into general consciousness. The people must look into the mirror and ask themselves what they really want."

Other newspapers joined in heaping abuse on the German electorate. The most extreme example was the Paris-based Libération, which, like the German Greens and their house organ taz, has its roots in the 1968 protest movement, but has in recent years developed into a reliable prop of the bourgeois order.

"Europe will emerge even more unsure of itself... from this strange election in Germany," Libération grumbled. "Germany now joins the club of countries in which protesters and radicals can create such damage that any normal political change is blocked and long-term policy paralyzed."

Astonishing. Libération is complaining that "normal political change" and "long-term policy" are not things that the public should have any say in. Of course we always knew this, but for a left-wing publication to chime in like this shows the gulf that is opening between the European public and the elite of whichever ideology.

Almost unanimously, the British press adopted a similar tone, accusing German voters of being too stupid to understand the necessity for reforms. The Guardian, which has close links to Tony Blair's Labour Party, wrote:

"For all the comparisons with Margaret Thatcher, 'Angie' [Angela Merkel]... demonstrated neither the charisma of Britain's "iron lady" nor the sort of radical policies needed to take Germany out of the doldrums where it has languished for the last seven years... This election was marked by deep pessimism, profound disillusion with the big parties and volatile voters who recognized the need for change but feared the effects it may bring. Much horse-trading and haggling lies ahead as these extraordinary results are digested. Germans may well want reform. But now paralysis looms because their nerves appear to have failed them."

The conservative Daily Telegraph blustered:

"The German electorate yesterday failed to grasp the opportunity for reform presented by the Christian Democrats (CDU) under Angela Merkel."

Both the British head of the government, Tony Blair, and the British conservative opposition had made no secret prior to the German election of their sympathies for Merkel. Blair even precipitated a diplomatic tiff during his last trip to Berlin in June, when he demonstratively visited the leader of the opposition before meeting with Germany's Social Democratic chancellor, Gerhard Schröder. Now there is even greater disappointment over Merkel's debacle in the elections.

Nearly all international newspapers warn against a grand coalition of the SPD and conservative parties which, they claim, would lead to economic paralysis and stagnation.

The London Financial Times based its comments on economists who warned that "... such a coalition would make it difficult for Europe's largest economy to adopt the structural reforms needed to overcome stagnation and record unemployment." The newspaper then quoted an executive at the auto concern BMW: "This is exactly what the country didn't need - a long period of uncertainty and negotiations. We will all be losers."

The American Wall Street Journal took up the theme:

"The muddled result, with neither major party able to form a stable parliamentary majority, means that Germany will not be taking decisive action anytime soon to reform its unwieldy welfare state, which has helped bring it 11 percent unemployment and zero economic growth. That will not be good for the world... "

The New York Times came to the same conclusion:

"In a grand coalition any reform of the German economy would be virtually excluded, as well as any rapprochement with the United States, as Merkel had indicated."

The vehemence with which the entire international press attacks the election result must be understood as a warning. The ruling elite is less and less willing to accept democratic procedures if they stand in the way of its own business and political interests.

This applies not only to the international press, but also to the German media, which comes to very similar conclusions. Under the heading "A Debacle," the Frankfurter Allgemeine Zeitung intoned:

"There seems to be less chance of convincing citizens to see the sense of fundamental changes and be prepared for changes of policy than some have maintained."

Last and not least, at the end of a long article in which all of the parties were subjected to some biting criticism, the weekly magazine Der Spiegel claimed that the German election result presented a "great chance": Finally all principles and election promises could be thrown overboard in favor of unrestrained expediency.

Wrote Der Spiegel, "Because outside of the election campaigns everybody knows each other in the political arena, what differentiates the parties today are above all cultural differences and historical factors... After this election, SPD-Green projects and intellectual-moral maneuvers can be finally dumped in the garbage can of history in favor of a blithe pragmatism."

The spooky unanimity with which the elite policy makers and the elite media parrot the neoliberal line is disturbing. Why do they so quickly reject the German model of social democracy (social insurance, high productivity, high cooperation between labor, industry and government), especially given its remarkably successful track record in the past sixty years? Sure, the U.K. can point to higher growth levels than Germany, but the U.K. was in much worse shape than Germany at the point when the neoliberal plans began to be implemented there. And the aggregate "growth," we are finding, has little to do with social health in societies where the gap between rich and poor is high. And long term economic health, as opposed to short term economic growth, depends on social and ecological health, two things likely to get worse under the neoliberal prescription. Here is the Prime Minister of Sweden on social and economic health:

We don't need no stinkin' US style capitalism! Sweden tells Europe to hold its head high

In defense of the welfare state, by Jonathan Power, International Herald Tribune:

(Stockholm) The statistics had arrived on the Swedish prime minister's desk … It was good news. Goran Persson, now in his ninth year of office, told me that the growth rate for this year will be near 3 percent and next year more than 3 percent - enough, he said, to maintain Sweden's trajectory of the last decade, which was "above the average for the European Union" and, in particular, "as good as the Anglo-Saxons, Britain and the U.S." ... This raised the first question - how does this self-confessed socialist state do it? What is the secret for success when Swedish taxes are the highest in the world and the welfare state is the country's single largest employer?

…"If you have a free economy," explained the prime minister, "a highly educated work force, a very healthy people, very high productivity and a sound environment then you can create the critical size of resources to create good growth." That has to be joined with adequate public financing of universities, research and development. As long as we are efficient and constantly challenging ourselves we continue to be productive. "Then if we produce successful growth, the government gets the public's support for high taxes. If the quality of the public sector is good, then a prosperous people will continue to vote for funding it."

…Persson … ends the conversation with two quick jabs. "Europe has a lack of confidence vis-à-vis the U.S.," he said. "The U.S. is competitive, but not as competitive as we think. We are too self-critical in Europe, even though we have a much better social system and in Sweden are just as productive. On unemployment, it is overlooked that the U.S. has approaching two million people in jail and out of the labor market."…

Xymphora has more on inequality and social health:

The problem of excessive inequality

From a review by Polly Toynbee of "The Impact of Inequality: How to Make Sick Societies Healthier" by Richard G. Wilkinson:

"Equality has gone out of fashion. Social justice under Labour means heaving the poorest over the poverty threshold and lifting the life chances of children from lower social classes. Tony Blair said early on that he was not bothered about wealth, only about abolishing poverty. Talk of inequality sounds like the old politics of envy. Equality of opportunity, yes, but equality for its own sake, why?

"Here is the answer. Richard Wilkinson is a professor of social epidemiology, an expert in public health. From that vantage point he sees the world in terms of its physical and psychological wellbeing, surveying great sweeps of health statistics through sociological eyes. He has assembled a mountain of irrefutable evidence from all over the world showing the damage done by extreme inequality.

However rich a country is, it will still be more dysfunctional, violent, sick and sad if the gap between social classes grows too wide. Poorer countries with fairer wealth distribution are healthier and happier than richer, more unequal nations."

and:

"Life expectancy in rich nations correlates precisely with levels of equality. So Greece, with half the GDP per head, has longer life expectancy than the US, the richest and most unequal country with the lowest life expectancy in the developed world. The people of Harlem live shorter lives than the people of Bangladesh. When you take out the violence and drugs, two-thirds of the reason is heart disease. Is that bad diet? No, says Wilkinson, it is mainly stress, the stress of living at the bottom of the pecking order, on the lowest rung, the stress of disrespect and lack of esteem. Bad nutrition does less harm than depression."

This runs exactly counter to the praises of excessive capitalism that is all we hear churned out by the usual propaganda machines that seem to be run by the corpse of Ayn Rand. From a discussion of Wilkinson's work by James Lardner (and see here):

"If inequality damages health, it probably operates through a variety of pathways. As George Kaplan and John Lynch at the University of Michigan point out, low income (even if it isn't low enough to meet the official definition of poverty) means limited access to education, health care, and other services, with long-term consequences for health. At the University of British Columbia in Vancouver, Clyde Hertzman has done extensive work on the latent effects of socioeconomically influenced differences in prenatal care and early childhood development. In the June 3rd issue of The Journal of the American Medical Association, Paula Lantz and James House, who work with Kaplan and Lynch at the University of Michigan, analyze the link between income and such forms of self-destructive behavior as smoking, alcohol abuse, and over-eating.

"But as Lantz and House point out, these specific risk factors explain only a comparatively small part of the socioeconomic gradient in health, which Wilkinson himself believes may, at bottom, have more to do with psychosocial factors - with what inequality does, for example, to friendship and the will to take part in social and community activities. 'I think that social relations - friendships and alliances - should be seen as horizontal relations between equals in contrast to the vertical hierarchy of power relations,' he says. 'Friendship and hierarchy are opposite principles of social organization. In friendship one is talking about mutuality and reciprocity - your needs being my needs. Hierarchy is about power, coercion, and access to resources regardless of other people's needs... It's strength and power that determine who gets what, and I think that's the fundamental reason why as inequality increases the social environment deteriorates.' We have much to learn, he says, from the 'vigilant sharing' of hunter-gatherer societies, where people 'don't compete for the essentials of life.'"

In the current climate of the dog-eat-dog world it is like farting in church to even mention it, but the single most important thing that those who set public policy can do to improve the health and happiness of society is to reduce inequality. The two ways to do this are through income redistribution through tax policy, and the public funding of education and health care (and in particular an early childhood development strategy). In the current political climate of the United States it is impossible to conceive of how these type of policies would be possible, but all those countries not suffering from the current American political malaise should be hopping to it. This issue is directly connected to the issue of social mobility.

As for ecological health, here is Urban Survival:

Accounting for the actual value of natural resources, including resource depletion and population growth, shows that net savings per person are negative in the world's most impoverished countries, particularly in sub-Saharan Africa, according to a new World Bank publication, Where is the Wealth of Nations?, launched on the eve of the 2005 U.N. World Summit…

"Where is the Wealth of Nations further substantiates the realization," said Steve McCormick, President and CEO, The Nature Conservancy, "that if we can't get a handle on the deconstruction of natural systems, then we will seriously jeopardize our efforts to make lasting, substantial progress on improving the standard of living of the world's poorest people. Put simply, healthy ecosystems are the foundation of healthy economies."

As we have alluded to over at our http://www.peoplenomics.com/ site, the problem for bankers is that they mostly live in a world of just 14 items (10 digits and the +,-,/,and * signs). The paradox is that in order to solve the problems of sustainable development there will have to be monetary values placed on things which don't lend themselves to investment.

Take a migratory path for salmon in the North Pacific. How do you capitalize that? What's the value of leaving it alone and safe from long liners and draggers from Japan, Russia, and Korea which have happily raped the ocean's insides?

Maybe it is time to join geology with economics. In that regard, many observers are sensing the possibility of some sort of Big Bad Event which manifests itself in both geological and economic ways. The Signs of the Times discussed economic issues last Friday, so if you haven't read it check out the archive of that page. Without repeating everything said, the editors made this prediction:

For many months we have been predicting that the American economy will collapse before the end of 2005. Given the available signs and evidence, we are now of the opinion that the current severe hurricane season, triggering a major earthquake and volcano on the US mainland, may well be the precursor to just such a collapse and its dire consequences for millions of American people. In essence, the scenes at the end of last month in New Orleans will soon be common throughout large areas of the North American continent.

Interestingly, the forecaster at Urban Survival who analyzes web-bot word scan results to predict near future events, sees heightened risk of earthquakes in California:

So there I was, just getting off the evening conference call with my friend Cliff of http://www.halfpasthuman.com/ and we were speculating on the possibilities of what the Big Event will be between September 26 and October 3-5th. I suggested that it might be a market crash, but Cliff still leans toward something else - yet to be revealed, perhaps another hurricane behind Rita - while the November 21st window in the linguistic scans looks mighty ugly for California in general and around earthquakes in particular. Still, even with Houston emptying out, we're less than half way to the emotive values that will arrive by the first half of December. Something wicked this way is coming, predicts the linguistic shift software.

With this cheerful mindset (not), I decided to call Robin Landry, an ex-Merrill, ex-Stifel-Nicolas VP… My first question for Landry was, with the market down under 10,400 at the close on Wednesday, how soon does the ultimate disaster - a second coming of 1929 Crash take place?

"I have been monitoring the wave structure on the 15-minute chart and watching the count and it's following, with clocklike precision, the Elliott Wave structure, We are due for a few small rallies in wave 4's to complete the Fourth Wave on this decline and then the 5th wave down to complete the first wave down of the Third Wave."

For those not familiar with Elliott theory, what the heck does that mean?

"It means that after a small rally in another decline to the approximate 1180 on the S&P 500 and the 10,200 of the Dow, then there will be a larger rally that will last a day or two. Then all hell breaks loose."

When you say "all hell" what does that mean in terms of the numbers?

"If my wave count is correct, when we break through the 1190-1200 area of the S&P, the uptrend line from the lows of April of this year, which were down around 1136 on the SP, at that point, the odds of this just being a corrective before the rally goes higher, the odds go over 50 percent and we jump up to 70% chance.

What that means at a minimum is that we will visit the 7,100 area of the October 2002."

Fine, but what's the real downside over the next year - with all the infrastructure damage, turning off oil, the shut-in gas, and millions of refugees plus the popping of housing and soaring unemployment - what is the possible downside once the whole derivatives house of cards begins to unwind because of massive defaults that will follow these natural disasters that were unforeseen as coming in two's and three's and four's when derivatives were drafted?

"In our past conversations I have mentioned to you many times that there was no question in my mind that we would visit 6,400 - no question. The next target below that is 5,000 and then below that I have a target at the 3,600 area.

The problem in the counts is how fast these events will happen. The targets, you might say, are pretty well established with the wave structures of the past - the things Gary Lammert talks about - but the wave structure is very clear when it breaks the 1190 and then the 1136 level.

In the Dow, a break below 10,000 is dangerous - after that there is no strong support until you reach the low of October of last year (9,700) but I believe that support will be very very easily broken because the trend line from that low up through the low of April at 10,000 drawn up through today shows it broke down yesterday.

Remember the rally from the 7,100 level in October 2002 went up and then tested that area around 7,400 in March of 2003. From March 2003 to February of 2004, that rally was strong and continuous. There are no stopping points along the way. You get a little bit of support from the bounce at up to 9,000, but looking at the wave structure, I believe the 9,000 is hardly worth thinking about because it was a short two day kind of thing on the way up. In short, you can't point to anything substantial and say "Ah, that's support..."

Well, if I put a dollar on the table today, regardless of what the market does in today's session, do you think the Dow will be above say 9,000 by the end of this year?

"No."

How about 8,000?

"Possibly"

Could it be as low as say 6,400 by New Years?

"That is entirely possible. You have to remember, in the wave structure count, a third wave decline (c). A third wave down (or up) is the longest and strongest. That doesn't mean the most time, it usually means the distance traveled is the longest. And the third wave is when people begin to realize that the direction of the market is going to be there for a good long while. We call what's on the horizon the "point of recognition" - which is where even the novices "get it" that the market is going down for a long time. Then you see the momentum swell and the selling goes through the roof and you won't be able to get out fast enough. The market will open down so fast that you won't be able to get out. Sure, we'll get sharp rallies, because that will complete the wave structure in the decline.

I believe the most likely time period for us to reach the 7,100 area or below is by October-November of 2006, but it's entirely possible that if you have a crash on the order of the ones in 1929 or the A wave down after the 2000 top, being a third wave now, these could could be a Fibonacci 1.618 times the size of those.

George the first one was from the top about 5/18/2001 at 11,350 and from there down to the 8,100 area on 9/21/2001. In five months, the market fell almost 5,000 points! The second crash came after the rebound off that which peaked around the week of 3/22/2002 at 10,676. Then the market fell to the intraday low of the 7,100 area on 10/11/2002. So here we had a period of not quite seven months. But here again, the decline was a little larger."

So if everyone saw this at once, and throw in a major California quake and a couple of more big hurricane hits, just to really push it over the top - and maybe a defeat of some size in Iraq, what does the 1.618 decline from what top look like.

"If you were to take that, I believe the next 5,000 points on the Dow could come off in short order. How fast that happens is a question mark. But I do believe that at the point of recognition (which we're coming to) we will have a one day decline of a thousand points."

What is in some sense disturbing is that more and more mainstream pundits are seeing the Apocalypse in the headlights. A couple of weeks ago we saw David Broder say that we are headed for 1929. Now Marshall Auerback is seeing fascism in the policies of the Bush regime:

Neither Compassionate, Nor Conservative

Marshall Auerback

September 20, 2005

"Couple a multi-state disaster of Katrina's magnitude, (including some of the poorer and less well-governed states in the union), add on a dysfunctional federal bureaucracy that had deteriorated in recent years, and a chief executive whose motto seemed to be, until yesterday, the buck stops there, and we get a helluva mess." – Richard Murray, Houston-based public policy expert quoted in the Washington Post

"The worst storm in our history proved perfect for exposing this president because in one big blast it illuminated all his failings: the rampant cronyism, the empty sloganeering of 'compassionate conservatism,' the lack of concern for the 'underprivileged' his mother condescended to at the Astrodome, the reckless lack of planning for all government operations except tax cuts, the use of spin and photo-ops to camouflage failure and to substitute for action." – Frank Rich, NY Times

Describing the President's panicked political response to his falling poll numbers as "compassionate conservatism", (as New York Times columnist David Brooks did last Sunday, "A Bushian Laboratory", September 18, 2005), borders on the ludicrous. Mr Bush has now overseen the fastest increase in domestic spending of any president in recent history. Furthermore, he has never resolved the inherent contradiction between his so-called "compassionate" spending policy and his small-government tax policy (which was ostensibly designed to "kill the beast" of Big Government once and for all, according to the President's conservative apologists). And his casual dismissal of the remnants of civilian authority in the Gulf basin – "It is now clear that a challenge on this scale requires greater federal authority and a broader role for the armed forces -- the institution of our government most capable of massive logistical operations on a moment's notice" – evokes something more along the lines of Mussolini-style fascism than any coherent, mainstream conservative, philosophy.

Hurricane Katrina is only the latest example of the President's extraordinary fiscal largesse – this time, borrowing hundreds of billions of dollars under the guise of "clear[ing] away the legacy of inequality." Sixty-two billion dollars has already been appropriated in the storm's aftermath, but total spending on hurricane relief could hit $200bn before all is said and done. This for an area in which a substantial proportion of people are unlikely to return. Occurring so late in the fiscal year, the hurricane will have little effect on federal spending in 2005, when the deficit is forecast to come in around $330bn, but the 2006 deficit is looking likely to hit the $450bn mark. No wonder the gold price hit a fresh 17-year high last week.

Not even the most liberal social engineers would dare to have been as bold as the Bush administration. The President gives no accounting of how the money will be found. His governing philosophy appears to be: "It's going to cost whatever it's going to cost" in contrast to the vision of "focused and effective and energetic government", David Brooks imputes to him. Mr Bush has left the oversight in the hands of his political operative, Karl Rove, suggesting that this a major PR exercise, rather than (per Brooks) "a positive use of government that is neither big government liberalism nor antigovernment libertarianism". (As an aside, maybe Mr Rove should have been placed in charge of the initial rescue effort. Without a single mishap, the Bush "rescue team" delivered to central New Orleans its own generators, lights, the camouflage netting designed to conceal the surrounding devastation, and its own communications equipment; the city almost looked whole again. The Federal government, it appears, cannot run an evacuation and relief effort properly, but it does a magnificent job of televised stage-setting in a disaster area.)

For all of the talk of the President's radical foreign policy, an even more remarkable metamorphosis has taken place domestically: The Republican Party has come full circle from, "Government is not the solution to our problem; government is the problem" to an acceptance of the primacy of government responsibility for all things. The man elected ostensibly to curb the excesses of the "spendthrift Democrats" has presided over an expansion the likes of which put FDR and LBJ to shame. According to the Heritage Foundation (not exactly a liberal propagandist), the rebuilding effort in New Orleans follows a 33 percent expansion of the federal government since 2001, a period that saw:

- The 2001 No Child Behind Act, the most expensive education bill in American history, which led to a 100 percent increase in education spending;
- The 2002 Farm Security and Rural Investment Act, the most expensive farm bill in American history;
- The 2003 Medicare Modernization Act, the most expensive Great Society expansion in history;
- A war in and the rebuilding of Iraq that, while justified, could cost between $300 and $600 billion, in total;
- International spending leap 94 percent;
- Housing and Commerce spending surge 86 percent;
- Community and regional development spending jump 71 percent;
- Health research spending increase 61 percent;
- Veterans' spending increase 51 percent; and
- The number of annual pork projects leap from 6,000 to 14,000.

This from a Federal government, which has hitherto shown a singular inability to conduct an evacuation and relief effort properly, but is now expected to lead the way in reconstructing New Orleans, a city in which the school system is virtually bankrupt and racked by corruption (the U.S. Education Department reported in February that $70-million in federal funds for low-income students had been misspent or could not be accounted for), presumably to be part-administered by a mayor whose stunning failure to mobilize resources to evacuate car-less residents and hospital patients - despite warning signals from the city's botched response to the threat of Hurricane Ivan in September 2004 – demonstrates that ineptitude extends to all levels of government.

What a change in course from just a mere year ago when the administration pressured Congress to cut $71 million from the budget of the Army Corps' New Orleans district despite warnings of the epic hurricane seasons close at hand. In fact, during the early stages of the Bush Presidency, then director of FEMA, former Bush campaign manager Joe M. Allbaugh, (now a lobbyist for Kellogg Brown & Root Services, a subsidiary of Halliburton), decried disaster assistance as "an oversized entitlement program" and urged Americans to rely more upon the Salvation Army and other faith-based groups.

The reality today is that there remains a fundamental contradiction between the planned Gulf Opportunity Zone approach (is there a Wizard of GOZ?) which rhetorically fits the Ownership Society theme of this Administration, and the actual botched dirigiste response to date, which further begs the question: what good has all that money dropped into homeland security done if the government cannot execute natural disaster relief effectively? So much for a consistent governing philosophy!

To be fair, one element of consistency has always been evident during the Bush Presidency: that of cronyism. Within days of this disaster striking, Halliburton was awarded a Navy contract for repairing naval installations. This company's ongoing involvement in the operations of the US Federal government is nothing new, but it is not the only beneficiary from the latest example of "compassionate conservatism". Many other Bush-allied companies that have performed so well in the field of Iraqi "reconstruction" are getting the lion's share of new no-bid contracts, while smaller, local businesses (which arguably have a far greater stake in the economic survival in the region) are essentially being locked out of the rebuilding effort….

Among the other recipients who did hear from the Bush administration were California-based Fluor Corp., which has contributed more than $800,000 to political campaigns this decade, about three-fourths of it to the GOP, the Shaw Group Inc. of Louisiana, (another client of consultant Joe Allbaugh), and Kellogg, currently working under a $500 million contract with the Navy on repairs of Navy facilities damaged in the hurricane. President Bush's "compassionate conservatism" appears neither particularly compassionate, nor conservative (nor particularly efficient: with all of the reconstruction work largely conducted via contractors and sub-contractors, it is difficult to see how the government will effectively monitor the funds provided for this exercise). But it does reward political loyalty.

If Halliburton et al actually provided value for money for the American taxpayer, it would be one thing. The reality is quite different: Henry Waxman, a Democrat and the ranking minority member on the House of Representatives Committee on Government Reform has uncovered evidence that Vice President Cheney's former company was being grossly overpaid by the American occupation authorities for the petrol it was importing into Iraq from Kuwait, at a profit of more than $150 million. Waxman and his assistants found, for example, that Halliburton was charging $2.64 a gallon for petrol for Iraqi civilians, while American forces were importing the same fuel for $1.57 a gallon.

The reconstruction of Louisiana, Mississippi, and Alabama provides a fascinating picture of how the Bush administration actually works. His government represents an odd melding of corporatism and cronyism, more in tune with the workings of 1930s Italy or Spain. In fact, if one looks at fascist regimes of the 20th century, it is appears that the Bush administration draws more from these sources than traditional conservatism. Dr. Lawrence Britt has examined the fascist regimes of Hitler (Germany), Mussolini (Italy), Franco (Spain), Suharto (Indonesia) and several Latin American regimes. Britt found 14 defining characteristics common to each:

1. Powerful and Continuing Nationalism - Fascist regimes tend to make constant use of patriotic mottos, slogans, symbols, songs, and other paraphernalia. Flags are seen everywhere, as are flag symbols on clothing and in public displays.

2. Disdain for the Recognition of Human Rights - Because of fear of enemies and the need for security, the people in fascist regimes are persuaded that human rights can be ignored in certain cases because of "need." The people tend to look the other way or even approve of torture, summary executions, assassinations, long incarcerations of prisoners, etc.

3. Identification of Enemies/Scapegoats as a Unifying Cause - The people are rallied into a unifying patriotic frenzy over the need to eliminate a perceived common threat or foe: racial, ethnic or religious minorities; liberals; communists; socialists, terrorists, etc.

4. Supremacy of the Military - Even when there are widespread domestic problems, the military is given a disproportionate amount of government funding, and the domestic agenda is neglected. Soldiers and military service are glamorized.

5. Rampant Sexism - The governments of fascist nations tend to be almost exclusively male-dominated. Under fascist regimes, traditional gender roles are made more rigid. Divorce, abortion and homosexuality are suppressed and the state is represented as the ultimate guardian of the family institution.

6. Controlled Mass Media - Sometimes to media is directly controlled by the government, but in other cases, the media is indirectly controlled by government regulation, or sympathetic media spokespeople and executives. Censorship, especially in war time, is very common.

7. Obsession with National Security - Fear is used as a motivational tool by the government over the masses.

8. Religion and Government are intertwined - Governments in fascist nations tend to use the most common religion in the nation as a tool to manipulate public opinion. Religious rhetoric and terminology is common from government leaders, even when the major tenets of the religion are diametrically opposed to the government's policies or actions.

9. Corporate Power is protected - The industrial and business aristocracy of a fascist nation often are the ones who put the government leaders into power, creating a mutually beneficial business/government relationship and power elite.

10. Labor Power is suppressed - Because the organizing power of labor is the only real threat to a fascist government, labor unions are either eliminated entirely, or are severely suppressed.

11. Disdain for Intellectuals and the Arts - Fascist nations tend to promote and tolerate open hostility to higher education, and academia. It is not uncommon for professors and other academics to be censored or even arrested. Free expression in the arts and letters is openly attacked.

12. Obsession with Crime and Punishment - Under fascist regimes, the police are given almost limitless power to enforce laws. The people are often willing to overlook police abuses and even forego civil liberties in the name of patriotism. There is often a national police force with virtually unlimited power in fascist nations.

13. Rampant Cronyism and Corruption - Fascist regimes almost always are governed by groups of friends and associates who appoint each other to government positions and use governmental power and authority to protect their friends from accountability. It is not uncommon in fascist regimes for national resources and even treasures to be appropriated or even outright stolen by government leaders.

14. Fraudulent Elections - Sometimes elections in fascist nations are a complete sham. Other times elections are manipulated by smear campaigns against or even assassination of opposition candidates, use of legislation to control voting numbers or political district boundaries, and manipulation of the media. Fascist nations also typically use their judiciaries to manipulate or control elections.

(Source: The Fourteen Defining Characteristics of Fascism, Dr. Lawrence Britt, Spring 2003, Free Inquiry)

Perhaps it is unfair to characterise the Bush Presidency in these terms, because it would imply the existence of a coherent governing philosophy. In fact, the President's actions in regard to the "war on terror", Iraq, and now the reconstruction efforts in the Gulf basin smack of panic and political expediency: When there's a problem, throw money at it. For all of the talk about the President "accepting responsibility" for the fiasco, his speech was certainly no Trumanesque "The buck stops here" oratory; it was rather a promise to rebuild New Orleans with other people's money, saying that his people (not the President himself, mind you) had made mistakes and they would fix them. Of course, part of the point of fiscal responsibility, after all, is that disasters do happen and the government should have fiscal leeway to respond to them. But the US today has no leeway at all, thanks to this president and his party. The "compassion and resolve of our nation" are amply demonstrated by a whopping huge expenditure, the costs of which are to be imposed on future generations of American taxpayers. Or more accurately, coming during a week which also saw the annual rate of growth in the current account deficit hitting nearly $750 billion, (more than 6% of GDP), the President's latest act of "compassionate conservatism" puts the rest of the world on notice that it is going to have to stump up even more credit for this Argentina of the northern hemisphere. One wonders whether these particular creditors' goodwill is likely to prove as durable as the levees of New Orleans.