Kevin Drum

The Shah and Us

| Thu Oct. 16, 2008 8:54 PM EDT

THE SHAH AND US....Here's a bit of interesting historical work on the roots of the Iranian revolution:

A new report based on previously classified documents suggests that the Nixon and Ford administrations created conditions that helped destabilize Iran in the late 1970s and contributed to the country's Islamic Revolution.

....The report, after two years of research by scholar Andrew Scott Cooper, zeros in on the role of White House policymakers — including Donald H. Rumsfeld, then a top aide to President Ford — hoping to roll back oil prices and curb the shah's ambitions, despite warnings by then-Secretary of State Henry Kissinger that such a move might precipitate the rise of a "radical regime" in Iran.

....Analysts and historians often contend that President Carter, a Democrat, fumbled Iran, allowing the country to eventually become one of the chief U.S. opponents in the region. But the report suggests that his Republican predecessors not only contributed to the shah's fall but also were inching toward a realignment with Saudi Arabia as the key U.S. ally in the Persian Gulf.

....We should get credit for what happened at [OPEC's Doha summit in December 1976]," Kissinger told Ford. "I have said all along the Saudis were the key. . . . Our great diplomacy is what did it."

But it would prove to be a Pyrrhic victory....The shah's government, shaken by the loss of oil revenue, imposed a harsh austerity budget that threw thousands out of work, collapsed investor confidence and panicked middle-class Iranians. Economic chaos and unemployment quickly spread.

Within a year of the Doha summit, the first mass demonstrations that grew into revolution broke out on the streets of the Iranian capital.

The collapse of oil prices in the mid-80s, also engineered by the Saudis, was one of the key factors in the disintegration of the Soviet Union. So apparently Saudi Arabia can claim at least partial credit for both the rise of the Iranian revolution and the fall of communism. Not bad for a country with a population of 20 million or so.

Advertise on MotherJones.com

Recapitalization

| Thu Oct. 16, 2008 8:18 PM EDT

RECAPITALIZATION....Via a link from John Quiggin, here's some raw data for you. It's several years old (too old to include data on Japan's banking crisis), but it includes historical data on the initial cost of recapitalizing banking systems after most of the other financial crises of the past few decades. Given the different nature of every crisis, and the different nature of small countries vs. big countries, it's hard to suggest that there's any kind of "average" recapitalization required after a banking collapse. Nonetheless, the historical records suggest that 5% of GDP would be a reasonable guess and 10% would hardly be out of line, especially given the epic nature of our current meltdown.

And how are we doing in comparison? So far the Treasury has committed $250 billion as part of the Paulson bailout plan and another $100 billion or so to Bear Stearns, AIG, and Fannie/Freddie. To get to 5% of GDP we'd need to increase that to $700 billion. To get to 10% we'd need to increase it to $1.4 trillion. Just some benchmarks to keep in mind.

Quote of the Day - 10.16.08

| Thu Oct. 16, 2008 5:43 PM EDT

QUOTE OF THE DAY....From Joe Klein:

Ronald Reagan used to say that the most frightening nine words in the English language were "I'm from the government and I'm here to help." That is no longer true. This year, the most frightening eight words are "I'm John McCain and I approved this message."

Actually, that's just the best prepackaged zinger from the linked post. The most genuinely penetrating piece of wordsmithing was this:

We have had 30 years of class warfare, in which the wealthy strip-mined the middle class.

That's a very good metaphor. Personally, I'm not very interested in income redistribution. I'm interested in getting the distribution right in the first place. For three decades we've artificially kept middle class wage increases far below the growth rate of the economy, and this trend has been even more pronounced over the past eight years. This has created an enormous pool of extra money that's been — yes — strip mined and redirected to the rich, and fixing this is Barack Obama's biggest and longest-term challenge. If we restore the normal growth of middle class wages, it provides a sustainable consumer base for the entire economy; it reduces the demand for endless credit card debt; it brings down income inequality naturally; and it goes a long way toward keeping the financial sector under control and reining in Wall Street salaries without putting in place a bunch of artificial (and probably fruitless) regulations.

And that's just for starters. Stop the strip mining and economic vigor will follow. It's at the core of everything.

Priorities

| Thu Oct. 16, 2008 5:11 PM EDT

PRIORITIES....Pakistan's economy is about to implode and they're looking for help:

President Asif Ali Zardari arrived in Beijing on Tuesday for a four-day state visit as concern has surged over a possible debt default by Pakistan that could cripple its economy and spark more civil unrest. While the amount of money Pakistan needs in the short term is relatively small — $4 billion to $6 billion — analysts say the climate of crisis and public anger over domestic bailouts in the United States and Western Europe have made even a modest infusion from its Western allies politically difficult.

....The Bush administration and Congress have been shaping a long-term economic and military assistance package for Pakistan, but there is no indication the United States is able to step in with a short-term financial lifeline.

Pakistan is going to the Chinese now "because you go to the guys with the money," a senior International Monetary Fund official said. "And right now, the Chinese are the ones with the money."

By itself, this isn't a big deal. Pakistan has long been friendly with China, so there's no reason they shouldn't ask them for assistance.

Still, this is the kind of thing that's a canary in the coal mine. Global power generally flows to "the ones with the money," and to the extent that this is China, not the United States, our influence in the world inevitably wanes. In other words, it's not just a platitude to say that getting our economic shop in order really is at least as important as the fact that we can project military power into places like Iraq and Afghanistan. In fact, considering how well that projection has gone lately, it's probably more important — and that means that it's time to get our priorities in order. This is decidedly not the right way to do it.

UPDATE: Dan Drezner says, "this is a very small canary." I agree.

Joe the....Um....Whatever

| Thu Oct. 16, 2008 4:23 PM EDT

JOE THE....UM....WHATEVER....Chris Orr is agog at the attention conservatives are paying to supposed weathervane du jour Joe the Plumber:

Do not expect this ardor to be dampened by the facts that Wurzelbacher is not an independent, makes nowhere near the $250,000 that prompted his question to Obama, and is not, in fact, a licensed plumber.

Okay, but at least his name really is Joe, isn't it? That counts for something.

UPDATE: I was just kidding, but it turns out his name isn't Joe. It's Samuel. Sheesh. But I guess he goes by Joe.

Oil Bubble Watch

| Thu Oct. 16, 2008 2:24 PM EDT

OIL BUBBLE WATCH....The latest on oil prices:

In New York, oil futures fell as much as 8 percent to $68.57 a barrel on Thursday, their lowest since June 2007. Oil has lost half its value since hitting a record closing price of $145.29 a barrel in July.

....Global oil demand is undeniably slowing, particularly in developed nations. Japanese oil consumption dropped 12 percent in August, while in the United States, demand has been cut by 8 percent in September.

Still, consumption is growing in developing nations, albeit at a slower pace. The International Energy Agency expects global oil demand to grow by just 400,000 barrels a day this year, to 86.5 million barrels a day. At the beginning of the year, the agency was expecting growth of more than 2 million barrels for 2008.

So does this mean that this year's runup in oil prices was a speculative bubble after all? At first I didn't think so, but by the middle of the year I was beginning to wonder. Still, even at the height of the bubble in June, the best I could say was that the price spike "had a bit of a bubbly feel to it" but that I didn't really have any solid evidence to back that up.

I still don't, really. The problem is that there were genuine supply and demand issues pushing prices up beginning in 2007. But as prices skyrocketed, demand eventually went down. Then the banking crisis kicked into high gear and everyone got afraid that we were headed for a global recession. Those are both perfectly normal reasons for the price of oil to fall.

On the other hand, the "Enron loophole" that the bubble pushers kept talking about got closed in June too. And a couple of months ago the CFTC discovered that "financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency." So maybe it really was a speculative bubble after all.

Bottom line: Occasionally you get a massive, long-running thing like the housing bubble, which is visible (to some people at least) even while it's happening. Most of the time, though, bubbles are pretty hard to identify. This particular runup is hard to call even in hindsight.

POSTSCRIPT: However, one thing is obvious: this kind of price instability is going to be with us for a long time as oil demand bumps up against maximum oil production. Full story here.

Advertise on MotherJones.com

Shorthand

| Thu Oct. 16, 2008 12:59 PM EDT

SHORTHAND....Via Sullivan, John Podhoretz says McCain screwed up last night:

The problem, in my view, is that the shorthand in which McCain spoke about these matters made them comprehensible only to those of us who are already schooled in them. In almost every case, Obama answered McCain's shorthand with longhand — with detailed, even long-winded answers that gave the distinct impression he was more in command of the details of these charges than the man who was trying to go after him on them.

That's what I meant last night when I said McCain was talking in "code." Over and over he'd respond to Obama with a brief staccato outburst — "health of the mother," "statute of limitations," "marketing assistance program," "helping FARC," etc. — that political junkies might have understood, but probably no one else. He sounded like a guy who had so many preplanned attacks lined up that he could barely spit all of them out in the allotted time. At times he almost seemed like he was gasping for air.

Overall, I don't take too seriously the insta-polls that are released right after the debate. They show that Obama won, but a lot of that was just because Obama has high support levels right now, and you're way more likely to think your guy won the debate than the other guy. Still, I think this was the worst of McCain's debate performances. He might have pepped up the base a bit, but he didn't help himself with anybody else.

The Campaign in a Nutshell

| Thu Oct. 16, 2008 12:27 PM EDT

THE CAMPAIGN IN A NUTSHELL....This picture is a microcosm of the entire campaign. It's totally unfair, it could happen to any of us, it's just an unfortunate trick of timing and angle, but....well, nothing is going right for John McCain this year, is it? The guy is cursed.

Speaking of that, though, here is Jacob Hacker:

We political scientists generally subscribe to the "minimal effects" view of campaigns, in which both sides are savvy enough that their efforts cancel each other out. And this certainly seems like an election in which the fundamentals have swamped any campaign strategies either side has used. But I think it's time to recognize that Obama has done something more profound in this cycle than simply run a smart campaign; he is showing that the old Republican strategy on economic policy of calling for tax cuts and criticizing government, while thowing mud in every other area, has real limits when the other side directly confronts it with arguments for "investment" and more carefully targeted tax policies.

I really think this is off base. Yes, Obama has run a good, disciplined campaign, but I think Jacob was right the first time around: the fundamentals have dominated every step of the way. Sure, Obama's calls for investment might deserve some small credit for his success, but come on: every Democrat has learned to call their spending programs "investments." That's a no-brainer. What's more, this isn't the cornerstone of Obama's economic program anyway. His cornerstone is a platform of huge tax cuts, which he's been publicizing with massive advertising blitzes in every battleground state in the country. Joe the Plumber might not be happy with Obama's plan, but as Obama himself keeps hammering away at, 95% of the country should like it just fine.

Aside from all the other fundamentals pointing to a Democratic victory this year, Obama has been successful mainly because (a) he's fought tax cuts with tax cuts, and (b) the financial crisis has swamped everything else. I would really, really like to think that Obama has found the magic bullet for fighting the tax cut loonies at the Journal and the Club for Growth, but the evidence just doesn't back it up. Unfortunately for the cause of liberalism, he's chosen instead to cave in and fight entirely on their turf. This is almost certainly a tactically wise decision, but it's not something progressives should be very happy about.

Roe v. Wade

| Thu Oct. 16, 2008 11:59 AM EDT

ROE v. WADE....I don't want to spend a ton of time rehashing last night's debate, but what did John McCain mean in this exchange about Supreme Court nominees?

Schieffer: But even if it was someone — even someone who had a history of being for abortion rights, you would consider them?

McCain: I would consider anyone in their qualifications. I do not believe that someone who has supported Roe v. Wade that would be part of those qualifications. But I certainly would not impose any litmus test.

First, he'd consider anyone "in their qualifications." Then he says that support for Roe v. Wade would be a qualification that would cause him to reject a candidate. But then he says there's no litmus test.

What did that mean? Just random incoherence? Or is there some subtlety I'm missing?

Debate Miscellany***

| Wed Oct. 15, 2008 11:37 PM EDT

DEBATE MISCELLANY....Some miscellaneous notes:

  • On CNN, John King just said "19 days is a long time." Really? Does anyone else think 19 days is really all that long a time?

  • Conventional pundit wisdom seems to accept that a vigorous attack shows strength. But that's not true. Think of all the genuinely strong people you've known in your life. What sets them apart is that they stay calm when other people are attacking. McCain doesn't seem to get this, and neither do the conservatives who were insisting that McCain needed to haul out the heavy artillery tonight. Obama does.

  • From Ezra Klein: "The angry energy showed on McCain's face as clearly as in his answers. CNN, at least, had the split screen, and McCain was grimacing, twitching, blinking, sighing, smirking, eye-rolling. Scores of YouTubers are, as we speak, constructing videos that will be nothing but a three minute collection of McCain's angry tics."

  • Here's a remarkable thought: John McCain was almost certainly the Republican Party's strongest candidate this year. Any of the others would be doing even worse right now. If Mitt Romney or Rudy Giuliani had won the nomination we'd be heading toward the biggest landslide in half a century.

  • Todd Gitlin asks: "If almost all the postgame pundits thought McCain had a good night; but the snap polls show that overwhelming percentages thought Obama "won"...what does the discrepancy tell you? Either (a) the pundits had some extraordinary insight denied to ordinary benighted Americans, or (b) the pundits' snap judgments are worthless — in fact, a negative indicator."

    Guess #1: Pundits really like fireworks, and they think sharp attacks show strength and vitality. But the public, outside of the hardcore base on both sides, mostly views them as petty and mean. Guess #2: The pundits gave McCain way too much credit for the quality of his attacks. Sure, he delivered them with a sort of crotchety energy, but most of them were actually pretty lame. Guess #3: They all felt sorry for him and were just trying to think of something good to say about him before they declared the race irrevocably over.