China Moves Against World Bank Hegemony

A major shift in global power has been slowly developing over the past 18 months and is now coming to fruition as China puts the finishing touches on the new Asian Infrastructure Investment Bank (AIIB). The AIIB is a direct rival to the post-World War II world order principally the World Bank.

China has been able to successfully get countries across the world to sign on the bank even key American allies including France, Germany, and the United Kingdom. The United States has been joined by Japan and Colombia in holding off on even applying for membership.

The shift of power east is causing concern throughout the US establishment perhaps most pronounced from former Treasury Secretary and Wall Street consultant Larry Summers who painted the growing membership of AIIB in apocalyptic colors.

This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. True, there have been any number of periods of frustration for the US before, and times when American behaviour was hardly multilateralist, such as the 1971 Nixon shock, ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the US to persuade dozens of its traditional allies, starting with Britain, to stay out of it.  

This failure of strategy and tactics was a long time coming, and it should lead to a comprehensive review of the US approach to global economics. With China’s economic size rivalling America’s and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the US have rendered it increasingly dysfunctional.

Summers blames US political divisions as well as the decentralized aspects of federalism for the US decline in power saying both the right and left have stymied expansion of World Bank and IMF power by not supporting the adoption of its rules at home and that federalism creates too many different authorities for international investors to deal with.

Summers also offered, ironically given his own history, that the "global agenda" offered by the Western system relies too much on "elite concerns" to the exclusion of the "working class." No kidding? Wait until he finds out about this guy Larry Summers.

In any case, the empowerment of the Western financial and business elite has led to little benefits for workers in the West over the previous generation. A little diminishment of power by a rebalancing of the global economy could even help workers in the West by forcing multinational firms to stay more anchored in their home territory and, whilst being trapped, force them to distribute gains more equitably.

Rolling Stone Retracts UVA Rape Story Condemned As 'Journalistic Failure'

Rolling Stone magazine has formally retracted its story "A Rape On Campus." The story, published in 2014, alleged that a University of Virginia student named "Jackie" had been brutally sexually assaulted on campus by multiple assailants at the Phi Kappa Psi fraternity house. The allegations sparked a national outcry and high lighted the problem of sexual assault on college campuses across the country.

It now appears as though most if not all of Jackie's account is untrue and the story's authors and editors failed to do basic diligence to confirm key events in the story before publication. A police investigation found no evidence to support the claims in the story and a review by the Columbia School of Journalism called the article a "journalistic failure."

The reporter, Sabrina Erdely, and her editor on the story, Sean Woods, will not be terminated nor will managing editor Will Dana according to Rolling Stone publisher Jann Wenner.

From the CSJ review:

Rolling Stone's repudiation of the main narrative in "A Rape on Campus" is a story of journalistic failure that was avoidable. The failure encompassed reporting, editing, editorial supervision and fact-checking. The magazine set aside or rationalized as unnecessary essential practices of reporting that, if pursued, would likely have led the magazine's editors to reconsider publishing Jackie's narrative so prominently, if at all. The published story glossed over the gaps in the magazine's reporting by using pseudonyms and by failing to state where important information had come from. 

In late March, after a four-month investigation, the Charlottesville, Va., police department said that it had "exhausted all investigative leads" and had concluded, "There is no substantive basis to support the account alleged in the Rolling Stone article."

The complete collapse of the story could have the opposite effect the story was intended to have. Erdely said she was looking for a single story to crystallize the problem of sexual assault on campus in order for the problem to be taken more seriously. Unfortunately, the CSJ review warned that the blown story "may have spread the idea that many women invent rape allegations."

So while the staff at Rolling Stone has not suffered any substantive consequences, women who have been sexually assaulted on a college campus may have even more trouble getting their allegations taken seriously. Epic fail.

Pentagon Did Not Keep Records For $45 Billion Worth of Spending In Afghanistan

Another sorry tale from the financial black hole known as the Department of Defense. Though overall Pentagon finances are still inauditable, specific programs are supposed to provide some level of financial documentation to show how US taxpayer funds are being used. But as a recent example from Afghanistan shows, even the meager oversight and accountability that exists within the system has been easily bypassed.

An article from War is Boring details how the Pentagon lost track of $45 billion in spending in Afghanistan due to a technicality in the procurement rules prior to 2010 that did not require tracking money doled out by DoD to contractors making money from the Afghanistan war. Because the Pentagon did not have to track the funds going to contracts in Afghanistan they didn't.

Now the Pentagon claims going back to investigate who got what, how much, and when would be too costly and time consuming. Obviously they are all about not wasting money.

Whenever the Pentagon needs something done, such as building a new base or constructing a prison, it asks businesses for bids and awards a contract. The Pentagon then writes up the contract and stores it in a computer database called the Federal Procurement Database System. The Defense Department and other agencies pay for these contracts in Afghanistan out of several large pools of money. 

The problem is that prior to 2010, regulations didn’t require the Pentagon to identify which pool of money paid for which contract when it came to foreign military sales — such as arming and equipping Afghan troops. “Identifying all of the contract data for obligated [security forces] is … hindered by an inability before July 2010 to connect information in contract data systems with accounting information that could connect contracts with the budget account that funded the contract,” the Pentagon wrote to SIGAR in a July 2014 response letter.

Poof, there goes $45 billion - completely untraceable according to DoD. Might the money have gone to projects riddled with waste, fraud, and abuse - who can say? We'll never know.

Remember this little episode the next time someone claims there is not enough accountability and oversight for spending on the food stamp program.

Netanyahu Determined To Sabotage Iran Nuclear Deal

After yesterday's announcement on the agreement of a framework for a comprehensive deal between Iran and the P5+1, Israeli Prime Minister Benjamin Netanyahu let it be known that he was clinging to his pre-election reactionary positions. Netanyahu claimed the deal posed an existential threat to Israel saying "This deal would pose a grave danger to the region and to the world and would threaten the very survival of the state of Israel."

Despite all evidence to the contrary, Prime Minister Netanyahu asserted that the deal would "legitimize Iran's illegal nuclear program. It would leave Iran with a vast nuclear infrastructure," and that "Such a deal does not block Iran's path to the bomb. Such a deal paves Iran's path to the bomb."

That Netanyahu is asserting such strange views that even his own intelligence agency disagrees with may reveal a deeper anxiety. A rapprochement between Iran and the West could put further pressure on Israel to stop brutalizing the Palestinians and, given that Netanyahu has declared the two state solution dead, the result could be sanctions on Israel.

Iran has been a useful foil for Netanyahu and if relations normalize between Iran and the rest of the world then Israel has lost another trick in its game of distraction. The world has already grown tired of Netanyahu's rhetoric and excuses for inaction on the peace process and flagrant violation of international law vis a vis settlements. With the Iranian issue off the table Israel becomes the main course.

Therefore it should not be so surprising that Prime Minister Netanyahu is doing everything he can to sabotage a Iran nuclear deal - a diplomatic solution is bad news for him. Now the question becomes how far will he go to stop the deal? Will Israel launch a military strike on Iran to blow it all up?

Senator Robert Menendez Indicted On Corruption Charges

Senator Robert Menendez (D-NJ) has been federally indicted on corruption charges. The indictment alleges that Menendez used the power of his office to do inappropriate favors for a major campaign contributor and personal benefactor named Dr. Salomon Melgen. Melgen is a multimillionaire who became noteworthy by being number one in Medicare billing in 2012.

The indictment notes that Menendez helped Melgen by fighting Medicare for a reversal after the agency fined Melgen for overbilling, getting foreign visas for Melgen's girlfriends, and trying to pressure the State Department to help Melgen keep a contract in the Dominican Republic. In exchange it is alleged that Menendez received campaign money from Melgen and, most problematically, free flights on Melgen's private jet.

After the free flights became public Senator Menendez reimbursed Melgen for the trips at the cost of $58,000 initially. Later, Menendez conceded there had been more flights than he initially admitted and reimbursed Melgen an additional $11,250.

In a post-indictment press conference yesterday Menendez claimed he would not resign from office and would fight the charges. Many in the New Jersey Democratic Party expressed support for Menendez while both the Asbury Park Press and Newark Star-Ledger called on Menendez to resign.

If Senator Menendez is genuinely planning on entering a courtroom and not playing for a better deal he has a difficult task ahead of him. Count one of the indictment is a rather solid charge and claims "Robert Menendez and Salmon Melgen did knowingly combine, conspire, confederate, and agree with each other... to commit an offense against the United States," and that "Menendez concealed things of value he solicited and accepted by knowingly and willfully omitting them from the annual Financial Disclosure Reports he was statutorily required to complete under the Ethics in Government Act. Specifically, in reports Menendez filed between 2007 and 2012, he never disclosed any of the reportable gifts that he received from Melgen."

The evidence appears to show that to be true.

UN: Yemen 'On Verge Of Total Collapse,' Saudis Killing Civilians With US Weapons

The United Nation has warned that the effects of the war in Yemen have pushed the contrary to the "verge of total collapse." The UN focused particularly on civilians who are caught in the crossfire between a Saudi-led forces bombing campaign and Houthis rebels who have taken the capital and are battling local government forces.

The air campaign along with ground battles has crippled the country with military attacks occurring in civilian areas. The Houthis have blamed the Saudis for civilian deaths in refugee camps whereas the Saudis have blamed the Houthis for locating forces in densely populated areas. The Houthis were cited as having been involved in attacks on hospitals.

The airstrikes killing civilians and militants in Yemen are coming from US made military equipment sold to Saudi Arabia.

Yemen spiraled further into chaos on Wednesday night, with a Saudi Arabia-led Arab coalition launching a military intervention marked by airstrikes by dozens of fighter jets and the deployment of thousands of ground troops and tanks on its Yemeni border. U.S. officials said they will offer intelligence and logistical support to the Saudis, but that’s really only a piece of it: The Saudi military is equipped with billions of dollars in advanced American-made weapons.  

Between October 2010 and October 2014, Washington and Riyadh reached more than $90 billion in weapons deals, according to a report published in January by the Congressional Research Service. The sales have included everything from war planes to armored vehicles, along with powerful missiles and bombs.

Since Friday at least 93 civilians had been killed according to the UN with 62 of the dead being children. Why do they hate us?

Will the US (at least) condemn what Amnesty International cited as indiscriminate killing in Yemen by the Saudis? Obviously it would be too much to ask to cut off arm sales to a state that has been sponsoring terrorism around the world including 9/11. 

Arkansas Legislature Follows Indiana And Passes Bill Allowing Discrimination Against LGBT Community

As Indiana Governor Mike Pence tries to redefine what the law he signed meant in real time, the Arkansas legislature passed a similar law through its legislature. Yesterday the Arkansas legislature passed its own "religious liberty" law with Arkansas Governor Asa Hutchinson saying he will sign it.

Much like in Indiana, a backlash is growing in Arkansas with the business community calling on Governor Hutchinson to veto the bill. Retail giant Walmart, headquartered in Bentonville, Arkansas, said the bill "threatens to undermine the spirit of inclusion present throughout the state of Arkansas and does not reflect the values we proudly uphold."

Walmart joins a list of companies openly opposing state laws that allow discrimination against homosexuals including Apple, Eli Lily, Salesforce, Angie's List, Yelp, Starbucks, the NBA/WNBA and - wait for it - NASCAR.

The Arkansas bill, which has been criticized by Wal-Mart, other businesses and rights groups, has not yet become the focal point that the Indiana law has become. This latest bill was approved Tuesday in Little Rock despite a last-minute attempt to send it back to a legislative committee so that an anti-discrimination amendment could be added. 

State Rep. Clark Tucker, a Democrat, spoke on the House floor in favor of adding such language. “I think everyone in this room is aware that this bill has attracted a lot of attention,” he said. “I think every member of this body and the vast majority of the general public supports protecting religious liberty. I do believe it’s attracted a lot of public attention because it creates the perception that it affirmatively authorizes discrimination.”

The legislature was, not surprisingly, unwilling to add an amendment preventing the bill from being interpreted as authorizing discrimination.

The debate on such bills is essentially a rerun of the same debate concerning the Civil Rights Act which included provisions forcing local business owners that wanted to discriminate against racial minorities to serve those it did not want to. That coercion was seen as illegitimate by many conservatives and libertarians at the time most famously Senator Barry Goldwater who partly inspired the so-called "Reagan Revolution." 

Conservatives are getting a second bite at the apple and this time they hope to win.