Today's Stories

March 3, 2009

Conn Hallinan
Ethnic Cleansing and Israel

Fawzia Afzal-Khan
The Long, Dark Night of Pakistan

Brian M. Downing
The Changing Game in Afghanistan

March 2, 2009

Andrea Peacock
A Poisoned Town's Shot at Justice

Paul Craig Roberts
Obama's Budget

Peter Lee
Pakistan Lurches Toward the Abyss

John Blair
Locking Down Big Coal

Peter Morici
Treasury's Flawed Plan for Citigroup

Uri Avnery
10 Ways to Kill Fatah

Michael Donnelly
Resistance to the War on the Wild

Fred Gardner
The Judge Who Ruled Marijuana is Medicine

Sonia Nettnin
Middle East Medical Mission Heroes

Andrew Lehman
A New Deal for the Web

Website of the Day
Pentagon Papers II?

Feb. 27 - March 1, 2009

Alexander Cockburn
Is Nancy Pelosi Really Against War Crimes?

Harry Browne
Where the Cheats Have No Shame

Anthony DiMaggio
From Bush to Obama: Seven Years of Wartime Propaganda

Sasan Fayazmanesh
Dennis Ross and Iran: the Fox and the Chicken Coop

Mischa Gaus
The Banks' War on Workers

Felice Pace
The Economy and the Big Picture

Mike Whitney
Is Free Market Capitalism Possible Without Accountability?

Lee Sustar
Blaming the Autoworkers

Peter Lee
The Other Side of the Coin in Afghanistan

Nicole Colson
Ruining Young Lives for Profit

Roger Burbach
Et Tu, Daniel? The Betrayal of the Sandinista Revolution

Rannie Amiri
King Abdullah Has No Robes

Missy Beattie
Owning Disaster

Dave Lindorff
America's Stupid Health Care Debate

Robert David Steele Vivas
Intelligence for the President--and Everyone Else

John Ross
Teotihuacan Gets Mickey-Moused

Ralph Nader
Civic Heroism Awards

Yves Engler
Haiti's Harsh Realities

Alan Farago
The Story of Leonard Abess, Banker

Zulfikar Majid
Understanding Kashmir

David Yearsley
Don't Stay Up Too Late, Johan!

Charles R. Larson
Sleeping with Dogs

Kim Nicolini
Spitting at Dark Times: Mike Leigh's "Happy-Go-Lucky"

Lorenzo Wolff
So You Wanna Be a Garage Rock Star

Poets' Basement
Puthoff, Payne, Gaffney and Gray

Website of the Weekend
Sleep Now in the Fire

February 26, 2009

Dave Lindorff
Obama's Address to Congress

Jonathan Cook
Israel's Military Mephistopheles

Patrick Cockburn
Did the US Learn Anything in Iraq?

Mike Whitney
The Geithner Put

Eamonn McCann
"Make Bono Pay Tax"

Tim Wise
Eric Holder and the Whitewashing of Racism

Tom Barry
Napolitano's Hard Line

Harvey Wasserman
Obama's Excellent Atomic Omission

Adam Turl
The Enemies of Unions and the Lies They Tell

David Macaray
When People are Fired Illegally

James McEnteer
Rush to the Rescue: Limbaugh's Secret Plan to Save the Economy

Website of the Day
The Carbon Casino

February 25, 2009

Chris Sands
Afghanistan: Chaos Central

M. Shahid Alam
Israel in 1948: Poised for Expansion

Chris Floyd
Obama's Non-Withdrawal Withdrawal Plan

Dave Lindorff
Wall Street and Bernanke: the Blind Leading the Blind

Norman Solomon
The Slow Pullout Method

Rachel Godfrey Wood
Neoliberals Do The Amazon

Niranjan Ramakrishnan
Teacher and Student: the New Class Struggle

Ron Jacobs
It Ain't Over Till It's Over

Nadia Hijab
The First Waltz

Dennis Loo
The Water Line

Website of the Day
Hitchens Gets Stomped by Syrian Nerd

February 24, 2009

Paul Craig Roberts
How the Economy was Lost

Uri Avnery
Coalition Theory

Peter Morici
Is Nationalization Inevitable?

Jonathan Cook
Arab Parties Face Most Hostile Knesset in History

Paul Fitzgerald /
Elizabeth Gould
The Man Who Shouldn't be King (of Afghanistan)

Andy Worthington
Who is Binyam Mohamed?

Brian Horejsi
Crisis Creates Hope for Reality

Julia Stein
I was a Writer for the Government

Norm Kent
How Judges Disgrace the Bench

Rachel Smolker /
Brian Tokar
Biofuels, Promise or Threat?

Dennis Loo
The Water Line: Doing What Must be Done

James McEnteer
The Oscar for Denial

Website of the Day
How to Destroy a Fox News Anchor

February 23, 2009

Michael Hudson
The Language of Looting

Mike Roselle
On Cherry Pond: Going Up Against Big Coal in W. Virginia

Patrick Cockburn
The New War in Iraq

Franklin Spinney
Obama Steps on the Pentagon Escalator

Einar Már Guðmundsson
A War Cry From the North

Ralph Nader
How Credit Unions Survived the Crash

Jordan Flaherty
A New Orleans Intifada?

Helen Redmond
Ted's Table: Kennedy and the Corporate Lobbyists Craft a Health Plan

Dennis Loo
The Water Line

Harvey Wasserman
Jet Crashes and Nuclear Reactors: Feds Ignore a Serious Risk

Terry Lodge
The Intelligence is Wrong

Website of the Day
BadCreditReport.Com

February 20 / 22, 2009

Alexander Cockburn
The Lawyer's Tale

Michael Neumann /
Osha Neumann
Remove Our Grandmother's Name from the Wall at Yad Vashem

Ismael Hossein-zadeh
Herbert Hoover Copycats

Paul Craig Roberts
Bill of Rights Under Fire

Linn Washington Jr.
The NY Post's Chimpanzee Cartoon

Saul Landau
On the Road Again

Marjorie Cohn
War Criminals Must be Prosecuted (And Their Lawyers Too)

Binoy Kampmark
Cricket and Cartels: the Fall of Sir Allen Stanford

Dave Lindorff
Using the Recession to Hammer Workers

David Yearsley
Edward Said's Greatest Musical Writings

David Macaray
A Closer Look at the Employee Free Choice Act

James McEnteer
Last Mambo in Minnehaha

Rick Salutin
A Canadian Looks at Obama

Wayne Clark
South Carolina Nears the Abyss

Richard Rhames
Got Farms?

Stephen Martin
Silver Mist Descending

Mitu Sengupta
Slumdog Millionaire's Dehumanizing View of India's Poor

Charles R. Larson
Slumdog Reality?

Richard Morse
Carnival Ramble in Haiti

Lorenzo Wolff
Desperation in an Unavoidable Groove

Poets' Basement
Three Poems of Tu Fu (Trans. K. Rexroth)

Website of the Weekend
Ron Paul: What If the People Wake Up?

February 19, 2009

Norman Finkelstein
The Cleanser: Lobbyists Whistle Up Cordesman to "Prove" Israel Waged a Clean War in Gaza

Harry Browne
How Ireland Went Bust

Robert Bryce
Why the Promise of Biofuels is a Lie

Brian M. Downing
The Winding Road: From Western Europe to Kyrgyzstan

Fred Gardner
The DEA Chief's $123,000 Flight

Andy Worthington
Obama's Uighur Problem

Wajahat Ali
Aftermath of a Beheading

Laura Carlsen
A New Attitude at the White House Toward Bolivia and Venezuela?

Deb Reich
Gaza: Choose Life!

Christopher Ketcham
Crisis? What Crisis?

Website of the Day
Taking Back NYU

February 18, 2009

Paul Craig Roberts
President of Special Interests

Mike Whitney
Trouble at Treasury

M. Shahid Alam
Afghan Pitfalls

Patrick Cockburn
A Real Surge at Last

Conn Hallinan
Death's Laboratory

Dave Lindorff
Whatever Happened to Antitrust?

Rannie Amiri
The Perils of Blogging in Egypt

Gareth Porter
Pushing Back Against Petraeus on Pullout Risks

Eric Hobsbawm
Remembering V. G. Kiernan

Christopher Brauchli
The Pope's Predicament

Martha Rosenberg
It's the Cymbalta Stupid

Website of the Day
Red Gold

February 17, 2009

Michael Hudson
The Oligarchs' Escape Plan

Mike Whitney
The Global Ditch

Ralph Nader
The One-Dimensional Congress

Joanne Mariner
Benchmarking Obama: How to Evaluate the New Administration's Counter-Terrorism Policies

John Ross
Commodifying the Revolution: Zapatista Villages Become Hot
Tourist Destinations

Belén Fernández
The Venezuelan Referendum From the Back of a Pickup Truck

Mats Svensson
Who is a Terrorist?

David Macaray
Why America Needs Labor Unions

Gregory Vickrey
$400 in Change

M. Junaid Levesque-Alam
Another Hamastan?

Michael Dickinson
Unrest in Istanbul

Website of the Day
Take a Stand for Open Access

February 16, 2009

Patrick Cockburn
Iraq Reconstruction: the Greatest Fraud in US History?

Oscar Guardiola-Rivera
The Truth About Colombia's New Emperor

Paul Craig Roberts
Who Remembers Guns and Butter?

Uri Avnery
Livni's Bitter Options

P. Sainath
The Meltdown: Whose Crisis Is It?

Dedrick Muhammad / Michael Brown
White Recession, Black Depression

Carla Blank
A New New Deal for the Arts

Patrick Irelan
Venezuela Ends Term Limits

Dan Bacher
Is Delta Pumping Driving Salmon and Orca Decline?

Fidel Castro
Chavez's Clarion Call

Harvey Wasserman
Hail to the Spleef: Did George Washington Smoke Pot?

Website of the Day
Mining Black Mesa

February 13 - 15, 2009

Alexander Cockburn
On the Rocks

Joshua Frank
The Myth of Clean Coal

Mike Whitney
Geithner's Coming Out Party

George Ciccariello-Maher
Venezuela's Term Limits: More Hypocrisy From the NYT

Nikolas Kozloff
Venezuela Beyond the Referendum

Brian M. Downing
Pakistan on the Brink

Paul Craig Roberts
Deficit Nonchalance

Christopher Ketcham
Israel's Ball Boys

Ron Jacobs
At a Campus Sit-In Against Israeli Occupation

Dave Lindorff
Why Can Judd Gregg See What Obama Can't?

Alan Maass
Lincoln at 200

Chuck Spinney
Grassley Sounds Off on Obama's Man at the Pentagon

Phil Gasper
Mr. Darwin's Reluctant Revolution

Stephen Lendman
A Short History of Business Handouts

Charles Thomson
Tate Cruises: Caveat Emptor on the High Seas

Kathy Sanborn
The Suicide Rush

Saul Landau
Bowled Over

Len Wengraf
The Nightmare in Somalia

Harvey Wasserman
Striking a Blow Against Nuclear Power

David Macaray
An Easy Call for Obama on Joining a Union

Tom Stephens
Four Freedoms, Four Changes

Seth Sandronsky
Lincoln and the Collective Mind

David Yearsley
On the Road Again

Lorenzo Wolff
Freaking Out With Danny Barnes

Kim Nicolini
The Body of the Worker: What "The Wrestler" Says About the State of America

Poets' Basement
Anderson, Buknatski and French

Website of the Weekend
The Iranian Revoution and the US Dual Containment Policy: a Presentation

March 3, 2009

Companies are Designed for Destruction

External Damnation

By ROBERT LARSON

3.6 million jobs into this recession, insult has been added to injury. The Peanut Corporation of America, nut supplier to Kellogg and the lower-rent peanut butters, deliberately sold peanuts contaminated with the salmonella bacterium. Twelve times in the last two years. The current headline-grabbing salmonella outbreak is the most recent result of these knowingly–tainted shipments. Now, the FDA could have been on top of this, but companies aren’t obliged to inform the food regulator of the results of their own tests. And then, even after the contaminated plant was found by the FDA, the full recall couldn’t be announced for almost three more weeks because the FDA has to obtain corporate approval of the wording of product recall announcements. While a few hundred more people enjoy nausea, vomiting, and diarrhea.

Pretty cold, I know, but this is just another example of what economists call “externalities.” An externality is an impact of an economic transaction that falls on someone outside the transaction. The nice smell of your neighbor’s barbecue is an example of a positive externality, and your insomnia when he buys new sub-woofers would be a negative one. These externalities are treated as rare occurrences in economic theory, but the reality is that external effects of our actions are everywhere. As the Harvard Business Review puts it, “Virtually every activity in a company’s value chain touches on the communities in which the firm operates, creating either positive or negative social consequences.” And for the business world, negative social consequences can mean big corporate savings.

Take the energy industry, where gas prices increased in recent years as demand grew. BusinessWeek reports “Even though it seems like the market is working in this regard, it really isn’t. There’s widespread agreement that the current price of oil doesn’t reflect its true cost to the economy,” such as “the more than $100 billion cost of having troops and fighting wars in the Persian Gulf.” It turns  out that the market can’t make a price for everything: “The tricky part is pricing these externalities...More dollars come from adding in numbers for the costs of air pollution, oil spills, and global warming.” The magazine also invites us to “imagine” that “in an ideal world, we could settle on the size of the externalities.” This is one reason why economists prefer to sweep externalities under the rug—they make the economy much more complicated.

And speaking of complicated things, externalities are also a crucial element of the credit crisis. The immediate cause of the banks’ dire straights is their overinvestment in risky credit derivatives—financial products representing pieces of loans, often “subprime” ones. Banks spend millions on executives and staff who are expert at risk-management, yet clearly the risk of these assets was underestimated by the banks, as our billions or trillions of bailout dollars prove.

The Financial Times says the paradox “echoes a fundamental problem about banking…the social cost of a systemic disaster is greater than the private cost to the individual bank. In the end, it is the task of regulators, not investors, to address this externality.” So a bank will view its assets as representing a certain risk to the company, and cannot afford to think of the broader “external” risk created for the system if the bank collapses from holding excessively risky assets. In other words, the stability of the system is someone else’s problem, and while investors may not want to see the system collapse, “their fiduciary obligations prevent them from taking a broader, systemic view.” The result is that risk is chronically underpriced in the financial markets.

Beside external costs, other related developments lie behind the crisis, like the bipartisan consensus to bail out big companies. As the business press reports, “Private-sector companies and individual bankers have been making huge profits in the bubble. Their risk appetite has been enhanced by previous bailouts and…by the government’s implicit guarantee. Yet their market pricing does not reflect the potential cost to the system of their own collapse.” The business world recognizes that “This inability to handle externalities” has worsened the financial crisis at every stage, such as when hedge funds further weakened the banks and insurers by short-selling their stock.

In fact, the market’s failure to value external costs and benefits helped lead the banks to hold so much subprime debt in the first place. Law professor and corporate governance expert Janis Sarra explains that before debt was packaged into derivatives, the banks created a “positive externality” for investors: “corporate stakeholders…could be confident that the bank was engaged in a measure of monitoring and oversight of the firm’s solvency,” so bank loans created a standard of trust for investors . But since banks now package and sell off loans, “The exponential growth in use of credit derivatives has shifted the externalities in a way that may contribute to market destabilization…originating lenders may be less willing to expend the time and resources to undertake due diligence in undertaking credit arrangements, as risk is laid off through derivatives under the originate and distribute model…previous positive externalities are lost and new negative externalities are created, creating more systemic risks across the market.”

The foreclosure crisis also owes something to externalies: “credit derivatives impede the normal negotiations between creditors and debtors in that borrowers can less easily renegotiate terms and conditions with lenders…Spread across the economy, the freezing of such relationships may increase systemic financial risk.” Again, bad for everyone, but highly profitable in the short term.

So it comes out that corporations don’t pollute because they’re evil villains, but because the very real costs of pollution can be made to fall on others, or “externalized.” Likewise banks load up on unregulated, risky assets because they don’t consider the risks to the whole financial system, beyond themselves. In general, companies have compelling reason to externalize any costs they can—lowered costs improve profitability. So global climate change, air pollution, contaminated food, an unstable financial system—all are external impacts that firms are obliged to ignore.

Regulation has been the traditional way of limiting the external impacts of corporate activity, as the business press recognizes. But firms will always resist regulatory restraints on their income, and historically companies have worked together to cajole the government to relax regulations. Besides, in the end it’s not good enough to just put a leash on institutions that can’t sustain their own financial system, let alone value long-term ecological health. As long as our economy is run by companies that see the world as an externality, then your health, the environment, and the overall economy will be things the market has an “inability to handle.”

True, more regulation would lower profitability, so America’s executives and equity holders may have to cut back on the caviar and foie gras. Let them eat peanuts.

Robert Larson is sharing the external benefits of his cigar smoke with everyone else on the elevator. He’s Assistant Professor of Economics at Ivy Tech Community College in Bloomington, Indiana, and blogs at http://theprofitmargin.blogspot.com.

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