The world survived 2006 without a major economic catastrophe, despite sky-high oil prices and a Middle East spiraling out of control. But the year produced abundant lessons for the global economy, as well as warning signs concerning its future performance.
Unsurprisingly, 2006 brought another resounding rejection of fundamentalist neo-liberal policies, this time by voters in Nicaragua and Ecuador. Meanwhile, in neighboring Venezuela, Hugo Chavez won overwhelming electoral support: at least he had brought some education and healthcare to the poor barrios, which previously had received little of the benefits of the country’s enormous oil wealth.
Perhaps most importantly for the world, voters in the United States gave a vote of no confidence to President George W. Bush, who will now be held in check by a Democratic Congress.
When Bush assumed the presidency in 2001, many hoped that he would govern competently from the center. More pessimistic critics consoled themselves by questioning how much harm a president can do in a few years. We now know the answer: a great deal.
Never has America’s standing in the world’s eyes been lower. Basic values that Americans regard as central to their identity have been subverted. The unthinkable has occurred: an American president defending the use of torture, using technicalities in interpreting the Geneva Conventions and ignoring the Convention on Torture, which forbids it under any circumstances. Likewise, whereas Bush was hailed as the first “MBA president,“ corruption and incompetence have reigned under his administration, from the botched response to Hurricane Katrina to its conduct of the wars in Afghanistan and Iraq.
The Middle East chaos wrought by the Bush years also represents a central risk to the global economy. Since the Iraq war began in 2003, oil output from the Middle East, which has the world’s lowest-cost producers, has not grown as expected to meet rising world demand. Although most forecasts suggest that oil prices will remain at or slightly below their current level, this is largely due to a perceived moderation of growth in demand, led by a slowing US economy.
Of course, a slowing US economy constitutes another major global risk. At the root of America’s economic problems are measures adopted early in Bush’s first term. In particular, the administration pushed through a tax cut that largely failed to stimulate the economy, because it was designed to benefit mainly the wealthiest taxpayers. The burden of stimulation was placed on the Fed, which lowered interest rates to unprecedented levels. While cheap money had little impact on business investment, it fueled a real estate bubble, which is now bursting, jeopardizing households that borrowed against rising home values to sustain consumption.
Making matters worse, unrestrained government spending further buoyed the economy during the Bush years, with fiscal deficits reaching new heights, making it difficult for the government to step in now to shore up economic growth as households curtail consumption. Indeed, many Democrats, having campaigned on a promise to return to fiscal sanity, are likely to demand a reduction in the deficit, which would further dampen growth.
Meanwhile, persistent global imbalances will continue to produce anxiety, especially for those whose lives depend on exchange rates. Though Bush has long sought to blame others, it is clear that America’s unbridled consumption and inability to live within its means is the major cause of these imbalances. Unless that changes, global imbalances will continue to be a source of global instability, regardless of what China or Europe do.
In light of all of these uncertainties, the mystery is how risk premiums can remain as low as they are. Especially given the sharp brake on growth in global liquidity as central banks have raised interest rates, the prospect of risk premiums returning to more normal levels is itself one of the major risks the world faces today.
For the last few years, some bearish economists have warned about America’s real estate boom, its consumption binge, global imbalances, and even unreasonably low risk premiums; but somehow America, and the world, has muddled through. Some conclude that this proves that, even with poor political leadership, we can muddle through for still another year. Perhaps so. But perhaps not: muddling through has in some respects worsened the underlying problems, making the inevitable adjustments all the more painful. Indeed, that may be the main lesson we learn in 2007.
Joseph E. Stiglitz
PROJECT-SYNDICATE.ORG

Iraq used chemical weapons on Iranian troops and against civilian Kurdish village of Halabjeh in northern Iraq. (IRNA File Photo)

We’ve shut him up. The moment Saddam’s hooded executioner pulled the lever of the trapdoor in Baghdad Saturday morning, Washington’s secrets were safe. The shameless, outrageous, covert military support which the United States gave to Saddam for more than a decade remains the one terrible story which our presidents and prime ministers do not want the world to remember. And now Saddam, who knew the full extent of that Western support--given to him while he was perpetrating some of the worst atrocities since World War II--is dead.
There is growing evidence across the Arab world that Saddam held a series of meetings with senior American officials prior to his invasion of Iran in 1980--both he and the US administration believed that the Islamic Republic would collapse if Saddam sent his legions across the border--and the Pentagon was instructed to assist Iraq’s military machine by providing intelligence on the Iranian order of battle. One frosty day in 1987, not far from Cologne, I met the German arms dealer who initiated those first direct contacts between Washington and Baghdad--at America’s request.
“Mr. Fisk, ... at the very beginning of the war, in September of 1980, I was invited to go to the Pentagon,“ he said. “There I was handed the very latest US satellite photographs of the Iranian front lines. You could see everything on the pictures. There were the Iranian gun emplacements in Abadan and behind Khorramshahr, the lines of trenches on the eastern side of the Karun River, the tank revetments--thousands of them--all the way up the Iranian side of the border toward Kurdistan. No army could want more than this. And I traveled with these maps from Washington by air to Frankfurt and from Frankfurt on Iraqi Airways straight to Baghdad. The Iraqis were very, very grateful!“
Iran’s official history of the eight-year war with Iraq states that Saddam first used chemical weapons against it on Jan. 13, 1981. AP’s correspondent in Baghdad, Mohamed Salaam, was taken to see the scene of an Iraqi military victory east of Basra. “We started counting--we walked miles and miles in this fucking desert, just counting,“ he said. “We got to 700 and got muddled and had to start counting again ... The Iraqis had used, for the first time, a combination--the nerve gas would paralyze their bodies ... the mustard gas would drown them in their own lungs. That’s why they spat blood.“
At the time, the Iranians claimed that this terrible cocktail had been given to Saddam by the US. Washington denied this. But the Iranians were right. The lengthy negotiations which led to America’s complicity in this atrocity remain secret--Donald Rumsfeld was one of President Ronald Reagan’s point men at this period--although Saddam undoubtedly knew every detail.
But a largely unreported document, “United States Chemical and Biological Warfare-Related Dual-Use Exports to Iraq and Their Possible Impact on the Health Consequences of the Persian Gulf War,“ stated that prior to 1985 and afterward, US companies had sent government-approved shipments of biological agents to Iraq. These included Bacillus anthracis, which produces anthrax, and Escherichia coli (E. coli). That Senate report concluded that: “The United States provided the government of Iraq with ’dual use’ licensed materials which assisted in the development of Iraqi chemical, biological and missile-systems programs, including ... chemical warfare agent production facility plant and technical drawings, chemical warfare filling equipment.“
In 1988, for example, Saddam gave his personal permission for Lt-Col. Rick Francona, a US defense intelligence officer--one of 60 American officers who were secretly providing members of the Iraqi general staff with detailed information on Iranian deployments, tactical planning and bomb damage assessments--to visit the Fao peninsula after Iraqi forces had recaptured the town from the Iranians. He reported back to Washington that the Iraqis had used chemical weapons to achieve their victory. The senior defense intelligence officer at the time, Col. Walter Lang, later said that the use of gas on the battlefield by the Iraqis “was not a matter of deep strategic concern.“
I saw the results, however. On a long military hospital train back to Tehran from the battle front, I found hundreds of Iranian soldiers coughing blood and mucus from their lungs--the very carriages stank so much of gas that I had to open the windows--and their arms and faces were covered with boils. These same gases were later used on the Kurds of Halabja. No wonder that Saddam was primarily tried in Baghdad for the slaughter of Shiite villagers, not for his war crimes against Iran.
We still don’t know--and with Saddam’s execution we will probably never know--the extent of US credits to Iraq, which began in 1982.
Robert Fisk
INDEPENDENT.CO.UK

By most measures, it would seem the Israelis are winning the Palestinian-Israeli war. They control and colonize Arab lands, enjoy military superiority and total American support, and unilaterally define most diplomatic parameters of the conflict. Yet this may be a mistaken assessment: The Palestinians and Arabs are perhaps starting to win some battles, while Israel is losing some of its dominance. Six events in the past five months seem to lend credence to this view.
The first was Hizbullah’s ability to fight Israel for 34 days this summer, and on the 34th day to keep firing hundreds of rockets into Israeli territory. Morality and political consequences aside, this reflected a truly historic combination of political will, technical military proficiency, and a capacity to remain shielded from Israeli, Western and Arab spies and infiltrators. No Arab party had ever crossed this threshold in the century-long conflict with Zionism and Israel.
The second event was Israel’s (and Washington’s) having to accept the August cease-fire resolution at the United Nations, after the United States had given Israel weeks of extra warfare to hit Hizbullah. A determined Arab group forced Israel and the US to accept a political resolution instead of military victory, and the cease-fire resolution included measures that Israel had previously always rejected--addressing the occupied Shebaa Farms area in the context of the Israel-Lebanon conflict, rather than as occupied Syrian land, and specifying the return or exchange of Israeli and Lebanese prisoners.
The third noteworthy development was Israel’s accepting a cease-fire with the Palestinians in Gaza in late November, after it had said that it would not end its attacks and would do anything required to retrieve Israeli soldier Gilad Shalit, whom Palestinian guerrillas had snatched from an Israeli Army post on the Gaza-Israel border. The juxtaposition of events in Lebanon and Gaza this summer was powerfully telling. Israel’s once vaunted military prowess and frightening deterrence failed to stop Lebanese and Palestinian fighters from abducting three of its soldiers from border areas.
Israel’s subsequent severe, savage military attacks and mass punishment of civilian populations failed to make the Arabs cough up the soldiers. Weeks or months later, Israel swallowed its words, put away its ultimatums and threats, and accepted cease-fires in both cases.
The fourth important recent development is that Israel has been unable to stop the firing of rudimentary Qassam rockets into its southern region by Palestinian militants. Israeli military might and intelligence capabilities--along with killing some 400 Palestinians since June--have not stopped determined young men from firing these rockets into Israel.
The fifth striking incident occurred in early November, when Israel had pinned down a group of Palestinian fighters in a mosque in Beit Hanun in northern Gaza, expecting them to surrender or be killed. Instead, over 200 Palestinian women broke through the siege, swarmed the mosque, and provided cover for the young fighters to escape, with two women being killed and a dozen injured. Battle lines that had been defined by Israeli troops fighting a handful of Palestinian youths were transformed into the Israeli Army’s finding itself helpless--and defeated--in the face of the Palestinian civilian population.
The sixth incident happened in mid-November, when the Israeli Army telephoned the home of a Palestinian militant in Jabaliya refugee camp in Gaza and warned the inhabitants to leave the three-story residential building because it was going to be destroyed. Instead of fleeing as they had usually done, hundreds of civilians swarmed into the residence, stood on the rooftop, and dared the Israelis to kill them all. Faced with civilians who no longer feared death, the mighty Israeli killing machine and its befuddled political leaders suddenly became much less impressive--for they had lost much of their capacity to intimidate.
DAILYSTAR.COM.LB

As Darfur’s conflict enters its fourth year and fighting engulfs main towns, the world’s largest humanitarian operation in Sudan’s remote west has become increasingly threatened.
The clashes which drove some 2.5 million Darfuris from their homes and killed an estimated 200,000 were concentrated in remote villages in the early stages of the conflict. But the terror has spread to Darfur’s main towns, affecting many of the 14,000 aid workers based there.
“These places were safe havens before,“ said Alun MacDonald, spokesman for British aid agency Oxfam. “Our headquarters are in the town, so it does affect operations,“ he said. “It’s frustrating.“
Many war victims fled to the relative safety of the three Darfur state capitals during the conflict and formed mass makeshift camps surrounding the towns.
But that feeling of safety was shattered when militia ran riot several times in recent months or clashed with former rebel forces inside Darfur’s main towns. In December U.N. and aid agencies evacuated hundreds of staff from Darfur cities, paralysing some humanitarian operations.
“The situation here remains like a tinderbox,“ said one aid worker who witnessed clashes in December in el-Fasher town before before evacuated.
With a May peace deal signed by only one rebel faction, violence has escalated as many other rebel commanders formed a new military alliance and renewed hostilities with the government. U.N. officials say Khartoum remobilised proxy militia, known locally as Janjaweed, to combat the rebellion.
U.S. academic Eric Reeves says the militia are in the towns because the new rebel alliance had inflicted heavy losses in remote areas on government forces and their proxy militia.
Aid compounds in many of Darfur’s major towns have been targeted by armed men in the past few months. In North Darfur’s Tawila town, all the international aid agencies have left, leaving tens of thousands of victims without help.
Oxfam’s MacDonald said with the May deal, there were many more armed factions in the towns as former rebel forces have gained legitimacy but have not yet laid down their weapons.
“There are lots more men with guns inside the towns,“ he said.
Most agencies are reluctant to leave Darfur, which U.N. officials call the world’s worst humanitarian crisis, but many are operating dangerously close to the edge, stretching normal operational rules.
“They are all operating in the red zone, beyond acceptable levels of security,“ said Reeves. “They would never think of entering a situation like Darfur if they weren’t already there.“
Mia Farrow, the goodwill ambassador for the U.N. Children’s Agency (UNICEF), warned hundreds of thousands were already out of reach of the aid operation because of the growing violence and the situation was likely to get worse especially if evacuations of aid workers continued.
“The people of Darfur are utterly helpless to protect themselves and their children from the tsunami of violence that is about to engulf them,“ she said.
REUTERS.COM