Economic Lessons From Lenin’s Seer

NIKOLAI KONDRATIEFF was not exactly a faceless bureaucrat in post-revolutionary Russia. He had held an important economic post in the last, short-lived government of Alexander Kerensky before the Bolsheviks took charge; then he founded an influential research organization, the Institute of Conjecture, and became an important theorist of the New Economic Policy under Lenin.

But he would long ago have been consigned to the dustbin of history had it not been for his quirky academic passion, which he pursued in a series of books and papers through the 1920s. Reviewing economic history since the late 18th century, Kondratieff came to a startling, doomsday conclusion: that capitalist economies were fated to go through regular and predictable cycles of around 50 years, inevitably culminating in a depression.

Despite having become a committed Communist and the author of a theory of inevitable if periodic capitalist collapses, Kondratieff was executed in 1938, a victim of the Stalinist purges. Apparently, he had raised too-trenchant questions about the government’s newfound enthusiasm for heavy industry and agricultural collectives. After spending eight years in the gulag, he left behind a final letter to his daughter, poignantly urging her to be “a clever and good girl” and “not to forget about me.”

It was a fitting epitaph, for whenever it seems Kondratieff is about to be forgotten, the economy nosedives. And once again, perhaps the most dismal of the dismal science’s practitioners is back in the news, which his disciples try to fit into the cycles, or “Kondratieff waves,” that he described.

Kondratieff and his disciples — among whom was Joseph Schumpeter, who wrote about capitalism’s “creative destruction” — identified four stages in each cycle, corresponding to the seasons. After spurting ahead in the spring phase, they said, the economy cruises through the summer, experiences a scary drop as autumn sets in, and then — despite the TARPs, TALFs and whatever else governments do — descends into a winter phase that can last up to 20 years.

In case you hadn’t noticed, it has been getting quite chilly lately.

Over the years, Kondratieff’s appeal has waxed and waned in counterpoint to the economy, falling out of favor in good times but charging back when things look bleak. But his theory has never been accepted by mainstream economists, who consider it an occult hall of mirrors in which any sort of pattern can be discerned by shifting starting dates and definitions.

Kondratieff’s adepts have cried depression before, for example in 1982. Reporting on the buzz his theory was getting during that downturn, a New York Times correspondent, Paul Lewis, wrote: “According to Kondratieffian analysis, the world is caught in the fourth great economic downswing since the 1790’s, a period of global recession that will probably last until near the end of the century when a new age of prosperity will begin — and there is little anyone can do about it.”

Today, Kondratieff’s disciples (a dwindling band, by the way) are just as certain that the bad times began in 2000, with that year’s stock market crash. That was followed by the autumn phase of the Bush years, characterized by an enormous (Kondratieff would say desperate) expansion of debt and leverage in an attempt to maintain the prosperity of the spring and summer years.

Evidently, Kondratieff waves tend to be in the eye of the beholder, and whatever value they have is descriptive, rather than predictive. After all, the American economy ultimately shrugged off several market drops like that of 2000, allowing the 25 years that followed 1982 to be a period of largely uninterrupted growth. But in the last decade of that period, the United States’s growth was driven by debt in a desperate attempt to maintain an unsustainable level of consumption, a stage that Kondratieff’s theory quite accurately describes.

“The people who do the predicting are usually not central within the discussion of economics,” said David Colander, an economic historian at Middlebury College, and an expert in the discipline’s crank theorists. But economies do “have this tendency to exceed” that Kondratieff and others have grasped, he added, and that is largely lost in modern economic theory.

He offers the Austrian School as a possible rival to Kondratieff’s line of thought. Austrian economists tend to emphasize a laissez-faire approach and entrepreneurship (not the most popular policies at this moment) and strict limits on money supply growth, usually by hitching the currency to the gold standard.

While considered outside the mainstream, the Austrian School is far more respectable, counting in its ranks two Nobel Prize winners, Friedrich Hayek and James Buchanan. Peter Schiff of Euro Pacific Capital — an adviser to the libertarian presidential candidate Ron Paul and one of the most prominent doomsayers in the current collapse — also subscribes to its theories.

Hayek is said to have successfully predicted the Great Depression and some Austrian School devotees are taking credit for calling this one. “The financial meltdown the economists of the Austrian School predicted has arrived,” Mr. Paul wrote in September, 11 days after Lehman Brothers filed for bankruptcy.

In the 1930s, John Maynard Keynes displaced Hayek and the Austrian School in intellectual popularity, establishing his “general theory” as the economic bible of the postwar decades. The Austrian line of thought made something of a comeback in the Reagan years, but never quite gained acceptance in the economic fraternity, Mr. Colander says.

“It probably should,” he says.

“A good profession should take its outsiders more seriously,” Mr. Colander says. “They make you look at things in different ways. The worst thing for policy makers is to think they are right.”

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Author: KYLE CRICHTON
Original Source: New York Times
Date Published: February 15, 2009
Web Source: http://www.nytimes.com/2009/02/15/weekinreview/15crichton.html
Date Accessed Online: 2009-02-15

Do We Need a New Internet?

Two decades ago a 23-year-old Cornell University graduate student brought the Internet to its knees with a simple software program that skipped from computer to computer at blinding speed, thoroughly clogging the then-tiny network in the space of a few hours.

The program was intended to be a digital “Kilroy Was Here.” Just a bit of cybernetic fungus that would unobtrusively wander the net. However, a programming error turned it into a harbinger heralding the arrival of a darker cyberspace, more of a mirror for all of the chaos and conflict of the physical world than a utopian refuge from it.

Since then things have gotten much, much worse.

Bad enough that there is a growing belief among engineers and security experts that Internet security and privacy have become so maddeningly elusive that the only way to fix the problem is to start over.

What a new Internet might look like is still widely debated, but one alternative would, in effect, create a “gated community” where users would give up their anonymity and certain freedoms in return for safety. Today that is already the case for many corporate and government Internet users. As a new and more secure network becomes widely adopted, the current Internet might end up as the bad neighborhood of cyberspace. You would enter at your own risk and keep an eye over your shoulder while you were there.

“Unless we’re willing to rethink today’s Internet,” says Nick McKeown, a Stanford engineer involved in building a new Internet, “we’re just waiting for a series of public catastrophes.”

That was driven home late last year, when a malicious software program thought to have been unleashed by a criminal gang in Eastern Europe suddenly appeared after easily sidestepping the world’s best cyberdefenses. Known as Conficker, it quickly infected more than 12 million computers, ravaging everything from the computer system at a surgical ward in England to the computer networks of the French military.

Conficker remains a ticking time bomb. It now has the power to lash together those infected computers into a vast supercomputer called a botnet that can be controlled clandestinely by its creators. What comes next remains a puzzle. Conficker could be used as the world’s most powerful spam engine, perhaps to distribute software programs to trick computer users into purchasing fake antivirus protection. Or much worse. It might also be used to shut off entire sections of the Internet. But whatever happens, Conficker has demonstrated that the Internet remains highly vulnerable to a concerted attack.

“If you’re looking for a digital Pearl Harbor, we now have the Japanese ships streaming toward us on the horizon,” Rick Wesson, the chief executive of Support Intelligence, a computer consulting firm, said recently.

The Internet’s original designers never foresaw that the academic and military research network they created would one day bear the burden of carrying all the world’s communications and commerce. There was no one central control point and its designers wanted to make it possible for every network to exchange data with every other network. Little attention was given to security. Since then, there have been immense efforts to bolt on security, to little effect.

“In many respects we are probably worse off than we were 20 years ago,” said Eugene Spafford, the executive director of the Center for Education and Research in Information Assurance and Security at Purdue University and a pioneering Internet security researcher, “because all of the money has been devoted to patching the current problem rather than investing in the redesign of our infrastructure.”

In fact, many computer security researchers view the nearly two decades of efforts to patch the existing network as a Maginot Line approach to defense, a reference to France’s series of fortifications that proved ineffective during World War II. The shortcoming in focusing on such sturdy digital walls is that once they are evaded, the attacker has access to all the protected data behind them. “Hard on the outside, with a soft chewy center,” is the way many veteran computer security researchers think of such strategies.

Despite a thriving global computer security industry that is projected to reach $79 billion in revenues next year, and the fact that in 2002 Microsoft itself began an intense corporatewide effort to improve the security of its software, Internet security has continued to deteriorate globally.

Even the most heavily garrisoned military networks have proved vulnerable. Last November, the United States military command in charge of both the Iraq and Afghanistan wars discovered that its computer networks had been purposely infected with software that may have permitted a devastating espionage attack.

That is why the scientists armed with federal research dollars and working in collaboration with the industry are trying to figure out the best way to start over. At Stanford, where the software protocols for original Internet were designed, researchers are creating a system to make it possible to slide a more advanced network quietly underneath today’s Internet. By the end of the summer it will be running on eight campus networks around the country.

The idea is to build a new Internet with improved security and the capabilities to support a new generation of not-yet-invented Internet applications, as well as to do some things the current Internet does poorly — such as supporting mobile users.

The Stanford Clean Slate project won’t by itself solve all the main security issues of the Internet, but it will equip software and hardware designers with a toolkit to make security features a more integral part of the network and ultimately give law enforcement officials more effective ways of tracking criminals through cyberspace. That alone may provide a deterrent.

This is not the first time a replacement has been proposed for the current Internet. For example, modern Windows and Macintosh computers already come equipped to support a new Internet protocol known as IPv6 that would fix many of the shortcomings of the current IPv4 version. However, because of cost, performance and compatibility questions it has languished.

That has not discouraged the Stanford engineers who say they are on a mission to “reinvent the Internet.” They argue that their new strategy is intended to allow new ideas to emerge in an evolutionary fashion, making it possible to move data traffic seamlessly to a new networking world. Like the existing Internet, the new network will almost certainly have no one central point of control and no one organization will run it. It is most likely to emerge as new hardware and software are built in to the router computers that run today’s network and are adopted as Internet standards.

For all those efforts, though, the real limits to computer security may lie in human nature.

The Internet’s current design virtually guarantees anonymity to its users. (As a New Yorker cartoon noted some years ago, “On the Internet, nobody knows that you’re a dog.”) But that anonymity is now the most vexing challenge for law enforcement. An Internet attacker can route a connection through many countries to hide his location, which may be from an account in an Internet cafe purchased with a stolen credit card.

“As soon as you start dealing with the public Internet, the whole notion of trust becomes a quagmire,” said Stefan Savage, an expert on computer security at the University of California, San Diego.

A more secure network is one that would almost certainly offer less anonymity and privacy. That is likely to be the great tradeoff for the designers of the next Internet. One idea, for example, would be to require the equivalent of drivers’ licenses to permit someone to connect to a public computer network. But that runs against the deeply held libertarian ethos of the Internet.

Proving identity is likely to remain remarkably difficult in a world where it is trivial to take over someone’s computer from half a world away and operate it as your own. As long as that remains true, building a completely trustable system will remain virtually impossible.

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Author: JOHN MARKOFF
Original Source: New York Times
Date Published: February 15, 2009
Web Source: http://www.nytimes.com/2009/02/15/weekinreview/15markoff.html
Date Accessed Online: 2009-02-15

Oil Apocalypse Now? (Documentary)

Oil Apocalypse Now?

This British Documentary tries to look at, investigate and understand the current history of oil (i.e. "Peak Oil") and the effect of this limited supply of oil will have on our human future including our ability to transport ourselves, our products and, ultimately, our food supply across the world.

Moscow, Tehran force the US's hand

It may seem there could be nothing in common between the blowing up of a bridge in the Khyber, the usage of an air base nestling in the foothills of the Pamirs and the launch of a 60-pound (37.2 kilogram) satellite into the night sky that will circle the Earth 14 times a day.

But band them together and they trigger the political and diplomatic equivalent of what is known in the game of chess as zwischenzug, which means an intermediate move that improves a player's position.

Persians, who invented chess, would have mastery over zwischenzug.

Iranian Foreign Ministry spokesman Hassan Qashqavi said in Tehran on Wednesday, "Iran has no plans to stop its nuclear activity. At its forthcoming meeting, the 'Iran Six' should draw up a logical approach and accept the fact that Iran is a nuclear state."

The Taliban don't play chess
It is unlikely the Taliban factored Iran's imminent zwischenzug when they blew up the 30-meter iron bridge in the Khyber Pass 24 kilometers west of Peshawar in northwest Pakistan on Monday, which halted the supplies for North Atlantic Treaty Organization (NATO) troops in Afghanistan. But the disruption of traffic once again exposed the vulnerability of the main NATO supply route and focused attention on Tehran.

This is forcing NATO into a major policy shift. NATO's top military commander in Afghanistan, General John Craddock, admitted that the alliance would not oppose individual member nations making deals with Iran to supply their forces in Afghanistan. To quote Craddock, a four-star American general who is also NATO's supreme allied commander, "Those would be national decisions. Nations should act in a manner that is consistent with their national interest and with their ability to resupply their forces. I think it is purely up to them."

Craddock was transferring rapidly to the operational plane what the alliance's secretary general Jaap de Hoop Scheffer had said only a week ago that NATO member countries, including the United States, should engage Iran to combat the Taliban in Afghanistan.

Scheffer wouldn't have spoken without Washington's nod. Craddock underscored it. NATO is keen to use the new highway built by the Indian government from central Afghanistan to the Iranian border at Zaranj, which would allow access to Iran's deep-sea Persian Gulf port at Chabahar. The road is largely unused. The Indians completed work on the highway hardly a fortnight ago.
NATO is scrambling. It must somehow reduce dependence on Pakistani supply routes, which are currently used for ferrying about 80% of supplies. The irony cannot be lost on onlookers. NATO seeks an Iranian route when Tehran is demanding a US troop pullout from Afghanistan.

Last Thursday, Iranian Foreign Minister Manouchehr Mottaki remarked that Iran had paid attention to the plans of US President Barack Obama's administration to withdraw US troops from Iraq and "we believe this should be extended to Afghanistan as well".

The irony deepens insofar as a fortnight ago US Secretary of Defense Robert Gates in his first congressional testimony in the new administration leveled allegations about increased Iranian "interference" and doublespeak in Afghanistan, and implied that Tehran was fueling the insurgency.

Russia's zwischenzug
The heart of the matter is that the US's efforts to open supply routes from the north across the Amu Darya have got caught up in the great game in Central Asia. American spokesmen blithely claimed Russia and the Central Asian states were providing supply routes. But the geopolitics do not bear that out.

Kyrgyzstan President Kurmanbek Bakiyev dropped a bombshell on Tuesday by demanding the closure of the US military base in Manas, which is used for ferrying supplies for Afghanistan. He said this after talks with Russian President Dmitry Medvedev, during which Moscow pledged to Bishkek that it was writing off $180 million debt and would also provide Kyrgyzstan with a $2 billion soft loan and an outright grant of $150 million.

NATO's envoy to Central Asia, Robert Simmons, rushed to Bishkek in a last-ditch attempt to stall the Kyrgyz move, but only to regret the development and admit that NATO's Afghan operations would be adversely affected. Washington still hopes to salvage the situation, but that involves taking Moscow's help.

Moscow is willing, as always - provided the US is prepared to shelve its untimely geopolitical agenda to broaden and deepen its (and NATO's) strategic presence in Central Asia on the pretext of developing new supply routes for Afghanistan. Plainly put, Moscow feels irritated about Washington's abrasive diplomacy in Central Asia in recent weeks.

The US signed an agreement with Kazakhstan, Russia's key ally, offering to procure "a significant part" of its supplies for Afghanistan from that country. and in turn is pressuring it to make troop deployments in Afghanistan. Conceivably, Moscow (and Beijing) view with disquiet the US move to court their key Shanghai Cooperation Organization (SCO) and Collective Security Treaty Organization (CSTO) ally into the Western strategic orbit. Conceivably, Moscow's zwischenzug to evict the US military from Kyrgyzstan would enjoy tacit Chinese encouragement as well.

Nyet to selective engagement
Washington prefers "selective engagement" without addressing the underlying factors that caused the chill in relations. The Kremlin remains cautiously optimistic that Obama may address relations from a fresh perspective. The mood is reflected in a pithy comment by former Russian president Mikhail Gorbachev that "there are grounds for optimism, so far".

But an underlying sense of exasperation is visible. As a Moscow commentator put it, the George W Bush era may be over, but the "consequences are still there"; Obama might have new ideas, but the "old wire-pullers" are still there in the establishment in key positions; and, therefore, Obama might need "years rather than months to shape a new foreign policy".

So, Moscow resorted to zwischenzug. Last Saturday, the influential Moscow paper Nezavisimaya Gazeta reported that Russia proposed to reopen the key Soviet air base of Bombora on the Black Sea coast in Abkhazia. On Tuesday, Russia signed an agreement with Belarus setting up an integrated air defense system. On Wednesday, Medvedev used the CSTO forum to reiterate he was open to cooperation with the US in the fight against terrorism in Afghanistan.

Again, in related comments on Wednesday, Russian Deputy Foreign Minister Grigory Karasin said, "We hope that we and the United States will hold special and professional talks on this issue [of transit routes to Afghanistan] in the near future. We will see how effectively we can cooperate ... The US, Central Asia, China - we are all interested in a successful anti-terrorism operation in Afghanistan."

Karasin assured that the US's eviction from Manas "would not prove an obstruction". He said, "We [Russia] hope that we and the United States will hold special and professional talks on the issue in the near future. We will see how effectively we can cooperate."

In sum, the ball is in Obama's court. The big question is whether he can bulldoze the hardliners and jettison the heavy baggage of geopolitics that his faltering Afghan war is needlessly carrying.

Meanwhile, the shadow of US-Russian relations falls on the Hindu Kush. The Russian media reported that a high-level Afghan military delegation is expected in Moscow in the "near future". With a growing possibility that Obama may withdraw support for Afghan President Hamid Karzai, Moscow will be weighing its options.

The US is perched on a slippery slope in Afghanistan. The Taliban resurgence continues and the security situation is deteriorating, but NATO is unable to increase its force level or evolve an effective strategy. NATO supply lines have come under threat, but alternate routes are yet to be negotiated. The US's rift with the Karzai regime is widening, but a replacement is never easy to be catapulted into power in Kabul. Again, Washington should pressure Islamabad, but the situation in Pakistan is far too fragile to take any greater pressure.

It is against this complex backdrop that Iran's satellite took off into the star-studded night sky on Monday. Named Hope, its launch has a multiplier effect on geopolitics. Warning bells are ringing in Western capitals that any expectation of Tehran lowering its guard is misplaced. The launch can be seen as a technological feat, which it indeed is, but Hope also gives a hard message about Iran's military capability.

Experts estimate that the two-stage rocket used for its launch could easily carry a small warhead to a target 2,500 kilometers away. It may not be an inter-continental ballistic missile, but southern Europe comes within its range, as indeed the whole of Israel. Simply put, Iran has in hand a credible deterrent against a US-Israeli military attack.

White House press secretary Robert Gibbs described the launch as of "acute concern to this administration". German Foreign Minister Frank-Walter Steinmeir said after his first meeting with US Secretary of State Hillary Clinton, "We want to be helpful in making sure that the outstretched hand of President Obama is a strong hand." No doubt, these are strong words.

But an unmatchable German word is more to the point - zugzwang. It literally means "compelled to move". That is, a situation develops on the chessboard when any move a player makes can only weaken his position, but he is nonetheless compelled to make his move.

It may be far-fetched to say that Moscow and Tehran coordinated their respective zwischenzug, but certainly both keenly await Washington's zugzwang .

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

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Author: M K Bhadrakumar
Original Source: Asia Times
Date Published: Feb 6, 2009
Web Source: http://www.atimes.com/atimes/Central_Asia/KB06Ag02.html
Date Accessed Online: 2009-02-09