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October 8-12, 2001 - Global Policy Forum - Email 'Listserv' News
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October 8-12, 2001Greetings from Global Policy Forum!
War Rages
The US bombing campaign against Afghanistan nears the end of its first furious week, as waves of aircraft and missiles pound the country round the clock. Washington is assembling a huge military force, including naval battle groups, hundreds of air force planes, and tens of thousands of special warfare troops. Washington sources admit that the air campaign has done little to weaken the Taliban or Osama bin Laden. The bombing has nonetheless destroyed the headquarters of the UN de-mining team, killed a good number of civilians, and driven hundreds of thousands of people into flight.
President Bush has announced that his military campaign will eventually widen to other countries including the Philippines, Malaysia and the Central Asian republics. In Afghanistan, air strikes will be joined by special forces missions, clandestine operations, and lightening attacks by regular ground troops. Pentagon sources predict a war that will continue at least into the summer of 2002. But there appears no credible plan for success in this amorphous "war" and even Secretary of Defense Rumsfeld has said that "cruise missiles and bombers are not going to solve this thing." The public is increasingly concerned that the United States may be entering a quagmire of violence that may set off a chain of conflicts, provoke further terrorist retaliation, and undermine a wobbly world economy.
The US foreign policy establishment - the corporate chieftans, Wall Street barons and corporate lawyers -- are divided over what should be done. The influential New York-based Council on Foreign Relations, often considered the most important center of establishment views, has hurriedly organized meetings to consider the Afghan humanitarian and refugee crisis and the "risks of overreaction" in Washington.
Washington has started to air drop food into Afghanistan, where more than three million people are in danger of malnutrition or even starvation as winter comes on. The World Food Programme had to suspend its effort to supply 52,000 tons of wheat a month to feed needy Afghans when the bombing began. Oxfam, MsF and other relief groups have made strong statements critical of the US bombing and food drops, which are far short of the amount needed and often fail to reach those most in need. "We in the NGOs see random food dropping as the worst possible way of delivering food aid," said an Oxfam spokesman.
At UN headquarters, diplomats expressed frustration that the United States is again acting unilaterally and bypassing the UN. It remains to be seen whether the US can continue to act mostly on its own, or whether it will be forced to enter a multilateral process that will address terrorism both as a criminal activity and as an expression of real root causes that must be fixed if the world is to be a safe place for all.
The Growing Economic and Financial Crisis
In the weeks before 11 September, the US and the world economy already faced serious problems. Banks and financial companies saw their earnings plunge as securities markets softened, public offerings slowed and merger and acquisitions activities fell from record highs to nearly zero. Brokers were beginning to call in margin accounts. Even the powerful Bass family of Texas was facing a crisis of liquidity.
The terror attack deepened the crisis in a number of ways. It put tremendous pressure on virtually all the big financial houses by destroying some of their critical facilities. Many firms, including Credit Suisse First Boston, Morgan Stanley Dean Witter and the Bank of New York, lost their main computer centers. Some firms like American Express and Lehman Brothers lost use of their headquarters office. A number of smaller but important firms like Cantor Fitzgerald suffered almost complete destruction. Though backup equipment duplicated many critical computer records, the firms have been hard-pressed to maintain their trading and other business records and to find new operating locations.
Because of the destruction, firms have dismissed tens of thousands of employees for whom offices simply were no longer available. Sources estimate that as many as 100,000 jobs may have been lost in the city due to the immediate impact of the disaster.
The effect on the wider economy has been immediate and dramatic. Many industries face severe and unanticipated crises - airlines, hotels, media and entertainment companies, restaurant chains, and others have seen their bookings drop sharply and huge losses pile up. All this has created an economic downdraft that has fed back into the financial system, causing profits to plunge and stock prices to retreat.
While the financial companies struggle with their losses of space, records and colleagues, they also must embark on a deep downsizing as profits evaporate. According to many newspaper reports in the past two weeks, firms are planning to lay off as many as twenty percent of their workforce while reducing pay and bonuses for the rest. These steps will cut tens of thousands more jobs, particularly in New York and London - jobs that were highly-paid and pumped billions of dollars into the economy. Mayor Giuliani has called for cuts of 15% in the New York City budget to make up for anticipated losses in tax revenues. Despite further federal assistance, the New York economy will suffer a terrible setback. "Things are going to get ugly," commented a senior executive. In an op ed in the New York Times this week, investement banker Felix Rohatyn urged massive emergency assistance from Washington to prevent catastrophe.
All these problems are deepened by the 11 September crisis and the war that has followed. Though US and European authorities have pumped up their respective economies with interest rate cuts and tax cut packages, their efforts have not been enough to reverse the negative trends. Seaborne freight traffic has fallen dramatically, after years of globalization-fed growth. This cloudy economic future adds major uncertainty to the troubled international scene.
IMF Critic Gets a Nobel
On October 10 the Nobel Prize Committee announced that Joseph E. Stiglitz would be awarded the Nobel Prize in Economic Science, along with two other economists, George Akerlof and A. Michael Spence. Stiglitz is especially well-known as a critic of the International Monetary Fund and the neo-liberal policies it has pursued. Though a consummate political insider who served on the Council of Economic Advisors during much of the Clinton administration, Stiglitz grew disillusioned with official policy during his stint as Vice President and Chief Economist at the World Bank in the late 90s. Though the Nobel Prize honors his earlier, strictly academic work, it gives an indirect endorsement to his more political views, especially since the Nobel committee mentioned the importance of his broader work.
Stiglitz and the two others are honored for their work showing the "imperfection" in markets due to the lack of access of all market players to information. They also show that governments are essential to protect against these "information asymmetries." This work may appear arcane to non-economists, but it runs counter to much of the pure market dogma of the reigning neo-liberal school and it positioned Stiglitz to see the policy flaws and the hypocrisies better than most insiders.
Stiglitz, who has recently joined the faculty of Columbia University, was ousted from his post at the World Bank in late 1999, allegedly on orders from US Treasury Undersecretary Lawrence Summers. Since then, he has launched even sharper barbs at the IMF, as well as the Bank and the US Treasury. He has made embarrassing revelations about how privatization programs for Russia knowingly fostered corruption and propped up the unpopular Yeltsin government. These positions have won him admiration among many progressive economists and NGO campaigners. At GPF, we have posted many of his papers and comments on our site. An article posted on the site this week provides good insight into his recent thinking.
UN Reopens to NGOs
After exactly a month of lockdown, the United Nations abruptly opened its doors to NGOs again on October 11, returning almost completely to arrangements in place prior to 11 September. This was warmly welcomed by the whole NGO community, many of whom feared that they might face permanent exclusion or at least drastically reduced access. The UN must be thanked for this unequivocal affirmation of the NGO role at the organization.
Stop Press: UN and Kofi Annan win Nobel Peace Prize
On Friday morning, 12 October, we learned that the Nobel Peace Prize has been awarded to Secretary General Annan and the United Nations. This is good news and we hope it will help strengthen the UN in this period of crisis. Congrats, UN! Congrats, Secretary General!
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