Category Archives: Uncategorized

Did the Governor Schwarzenegger secretly “terminate” a woman’s right to choose?

In a potential violation of the state constitution and several state statutes, the longstanding right in California to insurance coverage for abortions and other family planning services including some forms of contraception was dramatically cut back by a secret administrative action that took place while Governor Schwarzenegger was in office, internal state agency documents show.

The State’s Department of Managed Health Care (DMHC) approved the cut back in coverage for abortions and other services, the documents show, at the request of a “large religious organization,” which several sources now say was Loyola Marymount University, based in Los Angeles. While the request was made on behalf of a religiously affiliated entity, no precise definition of what constitutes a “religious organization” or “religious group” was provided nor was the basis of the term “affiliated” defined.

There is no indication by the DMHC that the special exemption is limited to entities with a religious affiliation, instead the documents indicate that an insurer can cut back coverage because it is not obligated under the state’s Health and Safety Code to provide “all” family planning services but only “any” family planning services. This finding appears to shift the choice of whether to terminate a pregnancy or use contraception from the patient to the insurer and employer. Thus, the new rule opens the door to the cut back or elimination of insurance coverage for abortion, contraception and other family planning services at any California workplace.

The DMHC approved the insurance cut back secretly in 2008, while Arnold Schwarzenegger was Governor, but the decision only came to light recently when Anthem Blue Cross, one of California’s major insurance providers, agreed to implement the cut back at Loyola Marymount University (LMU) in southern California. In the wake of the Anthem decision at LMU, several other religiously affiliated entities, including Santa Clara University and St. Mary’s College, announced an intent to follow the LMU example.

Because abortion, like other health care services, is cost sensitive, the denial of insurance coverage has a significant impact on the ability of a woman to choose freely whether or not to terminate a pregnancy. Research indicates that a genuine freedom to choose whether or not to terminate a pregnancy provides a wide range of social and health benefits to women and their families, as well as to society at large.

California’s constitution guarantees a woman’s right to privacy which has long been interpreted to include the right to choose to terminate a pregnancy. California’s Health and Safety Code obligates insurance companies that offer HMO plans to cover health care that is medically necessary. Both medical abortions (including the use of the drug RU-486) and surgical abortions have long been accepted in California as medically necessary to terminate a pregnancy.

A review of DMHC’s records indicates that insurance companies never deny coverage to abortions as, by definition, an abortion is “medically necessary” to terminate a pregnancy. Once a woman exercises her constitutional and statutory right to choose the Knox-Keene Act, a 1975 amendment to California’s Health and Safety Code, obligates an HMO to provide insurance coverage for any medically necessary procedure or service, including the use of RU-486 or a surgical abortion, that safely terminates the pregnancy.

California’s Administrative Procedures Act also requires state agencies such as the DMHC to follow a rigorous and publicly transparent process when it implements rule changes such as the one required to approve the insurance cut backs. In this instance, however, the records provided indicated Anthem made the requested change to the General Counsel’s office of the DMHC. No notice or opportunity to be heard was provided to the public. It is not clear why Anthem delayed implementation of the change, approved in 2008, until now. There is some indication that the change was delayed while the debate about changes in federal health care were worked out.

Finally, the California Reproductive Freedom Act forbids a state agency like the DMHC from “interfering” with a woman’s right to choose to terminate a pregnancy. The DMHC licenses insurers like Anthem to sell HMO insurance plans, thus providing a significant benefit. By carving out undefined “religious groups” such as LMU, the DMHC is likely trespassing on that statutory obligation.

The documents, obtained from California’s Department of Managed Health Care (DMHC) through a public records act request, indicate that Anthem originally requested approval from the DMHC to terminate coverage of a wide range of family planning services including abortion, sterilization and certain forms of contraception, including the intrauterine device (IUD). The DMHC objected only to the request to terminate coverage of the IUD, but gave the green light for the other cutbacks.

In one document provided by Anthem to the DMHC in the summer of 2013 it states:

“Per agreement with the Department, only for religious groups, the text of the provisions dealing with pregnancy, maternity care, infertility and birth control may be limited to a minimum number of a “variety of family planning services,” and some may be excluded. The following exclusion will only be included for religious groups and will be omitted for non-religious groups (See Filing No. 20081015 closed out July 8, 2008.)

“Family Planning. No services are provided under this plan for: diagnosis and testing for infertility: sterilization of females or males; shots or implants for birth control; diaphragms; doctor’s services to prescribe and fit a diaphragms; or for voluntary abortion, except when medically necessary.  As indicated under “What’s covered,” “Birth Control,” family planning (counseling and consultation) is covered.”

The final version of LMU’s “Evidence of Coverage,” which must be provided by the insurance company to all plan members, is not yet available so it is not clear if their new plan will track this language. However, Anthem is now free to offer this kind of cut back to any “religious group,” however that term is understood.

The announcement at LMU caused a firestorm on its campus as staff and faculty objected to the changes. Similar reactions were heard at Santa Clara University. On both campuses faculty objected to the changes as a violation of established norms of “shared governance,” a longstanding principle that faculty must be formally engaged in major decisions about an academic institution. However, the Boards of Trustees at both campuses reaffirmed the decision to cut back insurance coverage arguing the institutions’ religious values trumped the rights of faculty in this instance.

While public attention to the universities’ decision has focused on the affiliation of the two schools with the Catholic church, the designation “religious group,” used by Anthem and approved by the DMHC, has no formal basis in current California law. There is an exemption available for a religious entity that meets a strict four part test. Thus, a religious order or seminary can obtain certain favorable exemptions from some aspects of the state’s Constitution or statutes. However, it is widely agreed that neither university fits that definition.

Thus, the new rule change by the DMHC either creates, without any legislative or judicial process, a new broader legal classification that would presumably include any employer loosely affiliated with a religious faith or the DMHC has, perhaps unintentionally, opened the door to allowing any employer expressing certain moral or religious beliefs to claim the same ability to eliminate coverage of abortion and other family planning services from the HMO’s. It appears that any employer who can claim to fit the undefined designation “religious group” would qualify for the new DMHC approved exemption.

This kind of argument is now being raised in litigation in other parts of the country in reaction to the Affordable Care Act, or “Obamacare” as it is widely known. Private corporations that clearly do not meet the existing four part test for a “religious exemption” have claimed that their insurance companies should nonetheless be exempted from the ACA’s requirement that they provide contraception coverage free of charge because the owners of the business object to contraception on religious grounds. Because there is no grounding of the California rule change in the formal definition of a “religious entity,” the change could be read as opening the door to similar arguments in California, long seen as a bastion of a woman’s right to choose.

My resignation from the Markkula Center for Applied Ethics at Santa Clara University

As my decision to resign from my position as an “Ethics Scholar” at the Markkula Center for Applied Ethics at Santa Clara University has been gathering increased media attention, including from our local press and the AP but now also from the Chronicle of Higher Education and some folks in the right wing blogosphere, I thought it important to make available my full letter of resignation.

This should help as well with some of the inaccuracies that have appeared. I did not resign my position as a faculty member, as some have reported, only from my post at the Ethics Center. To leave the University, where I am a tenured member of the School of Law faculty, because of the decision by the President would not be compatible with the view I expressed in the letter that there are two souls, so to speak, within the Santa Clara community. I remain because I am supportive of what I consider the more open, transparent approach to governance of a university including the right of my female colleagues to exercise their individual right to make decisions about their health and well being.

As this is a matter of significant public concern (indicated by the media coverage) and also an area of my own research (I write and teach about governance extensively and recently published a book about the Nicaraguan Revolution that includes a chapter on the role of the Catholic Church, including the Jesuits) it is an issue that I feel is relevant and important to speak up about as a faculty member.

In addition, I express in the letter my shared concern with the Pope for certain aspects of the abortion issue. In this regard, my view is that we should as a society try to create the conditions that would make abortion less likely without trampling on a woman’s right to choose. This is not easy to do but it is the only solution in my mind. I think the Pope’s recent comments about the mistake the Church has made by obsessively focusing on this issue points in this direction.

The text:

I appreciate that there are deeply held differences within the SCU community over the question of abortion. I myself have long had concerns about the use of abortion in a “throwaway” fashion as Pope Francis recently described it. However, I firmly believe that the question of whether an abortion is acceptable is a question to be resolved by a woman after receiving appropriate medical advice from her doctor.

I am also as you know a strong advocate of shared governance as an essential principle of the modern university. I believe shared governance to be critical to the success of academic freedom. Thus, I am very concerned that the President, presumably with the support of the Trustees, unilaterally and without notice or discussion with faculty, imposed a material change in our benefits with respect to a false and unsustainable distinction between therapeutic and elective abortion insurance coverage.

As you may know, I grew up in the Catholic Church. My uncle was a parish priest for more than 50 years. My great uncle founded one of the Chicago area’s leading Catholic Churches nearly a century ago. Several of my cousins completed seminary training. One of my cousins was a close aide to Cardinal Bernardin. My parents were leading members of our parish.

My entire family worked diligently for many years to bring to fruition the teachings of John the 23d and Vatican II, particularly with respect to the rights of women and minorities. At the heart of those reforms was a commitment to a more open, transparent and accountable church. This decision by the President reminded me that these lessons have yet to reach many in the Church.

In light, then, of my support of a woman’s right to choose and my support and belief in shared governance and in light of the role the Markkula Center is playing in imposing this decision on our community, I no longer believe my views of what is considered ethical and those of the Center are in agreement and thus I am tendering my resignation as an Ethics Scholar at the Center.

I remain willing to participate in Center activities on an individual basis, including my scheduled role as a moderator of the Feinberg visit next week, as appropriate. Certainly, however, if you feel that is not appropriate I will understand. I appreciate the opportunity to have been a part of the Center’s work over the past several years.

Results are in for SAG-AFTRA elections: employers declare victory

The key to power for Hollywood’s unions has always been leadership by the flagship of the industry, the Screen Actors Guild. When SAG leads there is a real chance for actors, writers, directors and crew to make real progress in collective bargaining. Without SAG, those guilds drift.

The best example of the problem was in 2008 when the entire industry thought SAG, under the leadership of the energetic Membership First party, would be critical to a coalition that would include the WGA. But Membership First stumbled badly and the WGA was forced to go it alone, and first, against the studios. Their strike was well organized and popular but fell short of its full potential because of the small size of the Guild.

The hope of Hollywood labor was that the larger SAG, with its recognizable A-list stars hitting the bricks, would pave the way for the smaller guilds. In the wake of that annus horribilis for SAG, the union moved instead towards merger with its smaller sister guild, AFTRA. Long both partner and thorn in the side of SAG, AFTRA has a history of being far more employer friendly. The effect of the merger was to further isolate the Membership First party.

The most recent election results, the first national elections for the newly merged SAG-AFTRA, demonstrate the impact. The two leaders of the pro-merger groups, Roberta Reardon of AFTRA and Ken Howard of SAG, had a falling out, over what exactly is not entirely clear although there are rumors that AFTRA’s financial condition has turned out to be far weaker than was understood prior to the merger. As a result of the falling out, Howard refused to support Reardon for the position of Vice President of the new union as had been long expected. And Reardon lost the support of NY-based SAG members where she lost narrowly to a pre-merger SAG leader for President of the New York local.

But the election results for SAG-AFTRA President indicate that pre-merger AFTRA voters came together with the NY-based SAG moderates to defeat the charismatic and popular Esai Morales who seems to have been the only figure willing to take on the thankless task. This follows the pattern that I predicted prior to the merger – the real goal was to insure that the MF party could never muster sufficient votes to take over leadership of the industry’s key union again.

That only leaves one real problem: a union that was once split in two is now split into three factions. And that means SAG-AFTRA is not likely to find its way to playing the leadership role it must play if talent and crew are to advance. The challenges facing the guilds are heightened by the fact that the industry is under severe challenge from the digital powerhouses in northern California, including Netflix, Google and Apple. Digital delivery undermines the control the industry has long enjoyed over its content. When content creators started to realize the impact of You Tube and other technologies it began to jack up prices and make its libraries less accessible. That means lower quality material on Netflix but it means that those same entities are incentivized to produce their own content, some of it under union agreements but with vast amounts of other material produced union-free.

A coalition of talent and crew guilds united around a strategy for the future of entertainment could break out of its dependence on the studio system and begin dealing directly with the new industrial structure being built in Silicon Valley. That is the only way for unionization to survive in the industry.

The lesson of the music industry and the auto industry and the steel industry should be hanging over the heads of every union member in Hollywood. Labor organizations that do not get ahead of new technology and new industrial forms will find themselves in very serious trouble.

Let’s make sure we fight the right war in Syria

Officially, the Obama Administration is firmly behind Syria’s democratic revolution organized to oust the brutal authoritarian Assad regime.  If that were indeed the case it could, under certain conditions, represent an important step to assuring a bright future for Syria.  There reportedly remains, however, substantial opposition inside the Administration and in Congress to the intervention.

Some of these opponents of U.S. involvement are invoking the problematic policies of the Reagan era when the United States created and armed Nicaragua’s counter-revolutionaries, or contras, to overthrow the Sandinista Government there in the mid-1980s.  This is a misleading and cynical maneuver.  In fact, Nicaragua offers a very different lesson when it comes to Syria.

There is little doubt that the intervention of the world’s sole superpower into a complex national conflict is fraught with challenges.  In the wake of a decade of war, few Americans are enthusiastic about yet another intervention in the Middle East.  And there are, naturally, suspicions in the region about the actual goals of U.S. policy.  To be successful the strategy that guides the United States in Syria must reflect our democratic values, both to engender domestic U.S. support and to insure a successful transition to post-revolution stability in Syria.

In the wake of the battle of Qusayr, it is clear the rebels face daunting odds.  We must recall, though, the rebels did not ask for war.  The movement began peacefully, yet another chapter of the rolling social process know as the “Arab Spring.”  But the Syrian dictatorship knew that a peaceful “civil rights” style challenge undermined their legitimacy and it began a brutal crackdown that forced the opposition to take up arms.  While they have been joined by some dissident military figures, these ordinary Syrians are also now competing for leadership of their revolution with hard-core Islamic fundamentalists, some of them mercenaries from surrounding states, who are well organized and well armed.

That competition is, in fact, reminiscent of the Nicaraguan experience, but not of the contra war of the 1980’s that failed to oust the Sandinistas.  Rather, as I show in my recently published book Rights and Revolution: The Rise and Fall of Nicaragua’s Sandinista Movement, the situation is analogous to the earlier 1970’s insurrectionary period that led to the ouster of the brutal and authoritarian Somoza regime.  In that insurrection, the United States took a largely hands off stance, only distancing itself from Somoza very late.  As a result, a democratic mass movement of ordinary Nicaraguans was, as in Syria, pushed into armed conflict by a violent dictator.  Then, as may happen in Syria, that same movement turned to the small but well armed and well-organized neo-Stalinist Sandinista Front, or FSLN, the only alternative leadership force available.

When the Somoza regime fell at great human and social cost it was those disciplined FSLN cadre who took the reins of the state.  They promised to rule democratically, but then delayed elections and set up new authoritarian institutions, using the credibility that their leading role in the insurrection had won them.  It took a brave population, which knew the revolution belonged to them, too, a decade to reemerge and oust the FSLN peacefully and democratically.   The armed contra force organized by Somoza era figures backed by the United States actually worked to undermine and delay that peaceful effort.  The FSLN was able, skillfully, to use this U.S. proxy war as an excuse to crack down on peaceful domestic opponents.  It should be recalled that such regimes are artful at exploiting foreign intervention against their domestic opponents.

In other words, the Syrian situation is most similar to what happened in Nicaragua before the FSLN took power.  That period offers a lesson about the risks of not intervening, instead allowing a well-armed and disciplined minority to hijack a democratic revolution.  In such a case, the fervent authoritarianism of the Islamic forces works in their favor.   After the FSLN took power, on the other hand, there was sufficient democratic space even at the peak of the FSLN’s power for the population to turn against it peacefully.  The Nicaraguan contras had only limited support among the population.  This is the opposite of the situation in Syria where the opposition clearly has no choice but to defend itself and its movement with arms.

In these circumstances, the principles and conditions that accompany U.S. aid are crucial.  Not the principles and conditions that we impose on the Syrians, rather those we impose on ourselves.  We got it wrong not once but twice in Nicaragua.  The lesson we should have learned is that the way in which we aid those fighting for freedom in other lands is critical to their success.  We cannot let the fact of our aid be used propagandistically by either Assad or al Qaeda to undermine the Syrian democrats.  That is what we did in Nicaragua and only the FSLN gained as a result.

The support we give should, therefore, be given openly not covertly and the process by which we do it should be transparent.  Our engagement with the Syrian people should be open to monitoring on the ground by both Congress and representatives of our civil society, including labor, religious and community groups.  It must be clear to all that our aid is aimed only at facilitating the success of a new Syrian democracy not at advancing a narrow self-interest.  We must commit to long-term support because the country will require an extensive period to rebuild once peace is established.

The mistake we made in Nicaragua was to leave behind our own long-standing commitments to democracy, sustainable development and human rights.  We ended up on the side, first, of a hated dictatorship, and, then, of death squads, as the Nicaraguan contra war spread throughout Central America.  In Syria we have a chance to rewrite our past and help Syria write its future.

Yet another “flash crash,” but why?

Although not on the same scale as the $800 billion May 2010 “flash crash,” markets were again spooked this week when some $150 billion in market value disappeared in an instant only to reappear five minutes later.

The apparent explanation is that hackers associated with the pro-Assad regime “Syrian Electronic Army” hacked into the Associated Press’ Twitter account. They then sent out what looked to followers of the AP to be a legitimate tweet stating that there had been a terrorist attack on the White House and that President Obama himself was injured.

A flurry of sell signals hit the markets and with buy orders disappearing there was a free fall in prices. Only when some traders expressed doubts and others made calls to friends in D.C. to try to confirm the tweet did buy orders reappear. The market quickly recovered.

Although many were quick to blame Twitter for being too easy to hack, it also seems likely that the dominance of algorithmic “high frequency” traders is at least partly responsible. Twitter is now fed into the computer programs such traders use to make trading decisions. If the proprietary algorithm receiving the AP tweet was set up to sell in reaction to a serious terrorist attack that could have started the cascade of sell orders. Other “algos” might have been set up to sell upon news that there was a sudden increase in sell orders and the crash would be a logical result.

Only the intervention of sceptical humans led to discovery of the actual situation and put an end to the crash.

Our research suggests that a deeper problem is now at work in the markets. The SEC put in place a set of rules known as Reg NMS (for “national market system”) in 2007 that created a favorable environment for HFTs and for new trading platforms such as “electronic communications networks” (ECN’s).  As a result the trading floor of the New York Stock Exchange, with its longstanding use of human “specialists” to provide liquidity, has lost a significant amount of daily trading volume to these ECN’s where trading between computers dominates for most of the trading day. We find that bid-ask spreads, a proxy for risk, for shares listed on the NYSE increase significantly when those shares are traded on alternative trading platforms.

The result, we believe, is a more fragile and volatile market. While the new trading platforms may offer lower costs to traders and greater speed of execution, these come at the cost of less efficient markets that are subject to runaway events like this week’s flash crash.

Unlike the old NYSE’s specialists, the HFTs who trade on ECN’s are not obligated to provide support to a crashing market. Today many view the old NYSE as an archaic club that took advantage of investors. In fact, specialist firms often put their own capital at risk trying to meet their obligation to provide liquidity. Many such firms went out of business trying to stem the tide of the Dow’s “Black Monday” in 1987.

HFT’s are unwilling to provide this stabilizing role in the markets. Today’s investors live in a world that resembles that circus ride that spins around and around as the the floor drops out from underneath the riders.

The NYSE is set to be sold to new owners who promise to attempt reforms that strike a new balance more favorable to human traders. They should pay close attention to this week’s events but more may be required. A starting point may be to reconsider Reg. NMS implemented by the SEC in 2007.

The day I blogged like a Pulitzer Prize winner…or vice versa.

The Wall Street Journal is proud that its foreign policy columnist Bret Stephens has won a Pulitzer for his columns. I am, too, as it would appear my writing helped shape Mr. Stephens writing style. Or maybe not. You can be the judge by reviewing the case here.

Upcoming events

I will be lecturing EMBA’s at the SCU Business School next month on cross border transactions and securities regulation.

And the following month I will be talking with SCU’s Markkula Center for Applied Ethics about reform of the global financial system.  A podcast will be made of this event.

Right to work but not a right to their own truth at Fox

You had to be sharp tonight to see through the provocateur antics of Fox News “reporter” Steven Crowder. Crowder went to Lansing to “report” on the labor demonstration against the new right to work legislation. But his real purpose was to raise a “ruckus” as he himself tweeted several hours earlier: “All aboard the ruckus wagon.”

Crowder had no visible identity card indicating that he was media. And as he himself admitted on Hannity he engaged in action to “defend” anti-union protestors. In other words, he went beyond reporting the demonstration and became the story, which is arguably a violation of his obligation as a reporter.

He got into the ruckus he went looking for and in the process a protestor falls or is pushed to his knees and only then takes a swing at Crowder, understandably.

The right wing blogosphere went nuts. But Crowder posted a doctored video that cut out the picture of the union man down on his knees. Instead his doctored clip makes it look like the union guy came out of nowhere to take a punch at Crowder. At least Hannity posted the full tape and it clearly showed the union man on all fours, seconds after Crowder approached him with his hands raised.

Update Wed afternoon: Crowder himself was asked this afternoon on Twitter (@scrowder) how Union guy ended up on his knees at feet of Crowder and Crowder said he had pulled the man away from the tent.

Update Wed. PM: On Hannity tonight one guest said he watched entire footage of event and said it showed Crowder throwing Union guy to ground. In response, Crowder screamed, in so many words, “he was pulling on the tent and he went down.”

Update: The Times catches up late last night here.

Crowder’s doctored version is here.

The full version showing union guy (in black cap) on all fours is here. Key moments start around 1:20.

Obama’s “light footprint” ignores global reality – time for a new “Solidarity Doctrine”

Jackson Diehl at the Washington Post has put his finger on the elephant that is Obama’s foreign policy and declared it, well, something, if not exactly an elephant. Instead of “leading from behind” he suggests that Obama actually shares the longstanding bipartisan commitment to global leadership that has informed U.S. foreign policy since the end of World War II. The difference, Diehl argues, is that Obama thinks he can maintain that leadership position with a “light footprint.”

Diehl is right to suggest that it is Obama’s doctrine, not the decisions of lower level bureaucrats, that lies behind the emerging crisis in the MENA region but he does not quite get to the point. Why has Obama implemented this “light footprint”? Is he a peacenik who is trying to recreate U.S. isolationism? Or is it something else?

Once one poses the question it becomes clear that what Diehl says is Obama’s doctrine is in fact just a strategy not a doctrine. It is the method of implementing his doctrine. And what is that doctrine? It is “relativism” – a world view that suggests that other countries’ ideologies and political systems including Islamic fundamentalism, Latin American “21st century socialism” or “socialism with Chinese characteristics,” are all legitimate expressions of those nations’ political will. This is what I have suggested here before explains Obama’s original 2008 campaign commitment to “engagement” without preconditions with authoritarian regimes like that of Syria, Iran, Venezuela and China.

This relativist world view emerged as a distinct ideology in the late 1960s when the radical milieu that Obama later joined in the 1980s came to the conclusion that the “enemy of my enemy is my friend.” For many this meant that the United States should simply not intervene as aggressively as it had in the past to change the path of political developments abroad.

For many others, though, it became the basis for a more aggressive turn to “third worldism,” meaning the actual advocacy of the political victory of authoritarian regimes in the developing world. Thus, mentors and allies of Obama like Bill Ayers, Tom Hayden, Carl Davidson, Bernardine Dohrn and Mike Klonsky became (and remain) advocates of the stalinist regimes of Cuba, China, North Vietnam and Algeria. This same milieu later supported neo-stalinist movements in Nicaragua, South Africa and El Salvador, even in the presence of democratic alternatives. It was during this later phase of relativism that Obama “crossed paths” with this milieu, in the memorably misleading phrase of Scott Shane in The New York Times. Their relativist approach to international issues is echoed in their domestic advocacy of divisive forms of multiculturalism, diversity and racialism in arenas like education policy. One example of a modern day expression of this approach can be found in an essay in the left wing newspaper In These Times which views Obama as a modern and rebellious “Friday,” a “post-colonial” President.

The problem of course is that neither the relativism of Obama nor the aggression of the neo-conservatives provides a rational framework for dealing with current global realities. What is at the core of that reality? It is the impact of the end of the Cold War. We underestimated the rough form of “stability” that era provided in the developing world. That is not to endorse it, of course, but only to recognize its impact. Both the Soviet Union and the United States used forms of authoritarianism to shepherd the largely agricultural peasant economies of that part of the world towards modern capitalist economic institutions.

Since the early 1990s the USSR gave up its role in controlling their share of that environment, backing out of Afghanistan for example and of course dropping their financial support for countries like Cuba, Nicaragua and Zimbabwe. The United States, too, reduced its backing of its allies in the developing world. In one key example, the west dropped its price support for coffee beans. The impact on many agricultural countries was devastating. In Rwanda, the price declines hurt export earnings and triggered a deep economic crisis that played a significant role in the genocide of 1994.

It took the first 9/11 to bring home to Americans how pathological politics had turned in the developing world. The vacuum left by the Cold War retreat of the two superpowers was now being filled by rogue forces. And the United States has spent the last decade swinging between the neo-con and relativist pole in response. The neo-con approach of the Bush era, for example, led to the disastrous intervention in Iraq, while the relativist approach undergirded Obama’s decision to ignore the Iranian Green movement as well as an opportunity to help the nascent democracy movement in Syria. Now Iraq is home to al Qaeda again, Iran crushed the Greens and moves steadily to a nuclear weapons capability, and Syria has descended into a sectarian civil war.

A new approach must be developed. The left has spent too little time debating these issues. That has allowed the relativist/neo-stalinist approach of people like Ayers, Dohrn, Davidson, Klonsky and Hayden to fill the gap. Thus, the movement organized in 2003 against the Iraq war was led by an authoritarian neo-stalinist group called “ANSWER” alongside of many others who adopted the simplistic “the enemy of my enemy is my friend” world view. Obama was a part of this movement and is now implementing a version of it in his so-called “light footprint” approach.

No independent movement has emerged that articulates a democratic as opposed to relativist approach to U.S. foreign policy. Such an approach, I believe, must start by recognizing that the United States has an immense array of resources it can apply in the international arena. This power, though, must be used in a responsible, transparent and accountable manner linked to promotion of the values we believe are genuinely American. That would, of course, require a thorough debate and discussion here in the United States. Certainly a starting point must be a reassertion of the long lost fact that America was once a revolutionary democratic society. It was born through a revolution and it matured through a civil war (in the 1860s) and a social war (in the 1930s) to establish the kind of democratic civic space that we now almost take for granted. In my view, a commitment to freedom of speech and association would be key, as would a commitment to the rule of law (which the socialist historian E.P. Thompson rightly called an “unqualified human good”). If a new values consensus, at least among the left, can be reached, then there must be a commitment built to stand in solidarity with those in other countries who are attempting to support these values.

I think a concept of solidarity can be a critical cornerstone of a new approach. Call it a “Solidarity Doctrine” if you will. This does not mean that we are always willing, or able, to intervene physically in other countries. In fact, that is far more often likely to be problematic because it can provide political excuses to the opponents of freedom to clamp down on those very people we are trying to support. But it does mean that we will look across the array of resources we have and use them every way we can to help those attempting to bolster democracy and freedom in their own societies. Too often we have made such a commitment only to withdraw when it no longer served our narrower economic or domestic political interests. The withdrawal of coffee price support is one example. More recently, I am told, U.S. unions have sometimes engaged in cross-border efforts to support other nation’s union organizing campaigns only to withdraw from that effort when the domestic U.S. target of the campaign reached an agreement with U.S. unions. This leaves the much weaker resourced foreign unions in a perilous position.

The larger context here is that the global economy continues to drive billions of people off the land into mega-cities. But it is no longer succeeding, as it did in a fashion during the Cold War, in integrating these masses into the global capitalist economy. This is a problem, though on a far larger scale, similar to the deindustrialization of western Europe and North America. This problem provides the raw material for Mexican drug gangs, African child armies, and fundamentalist movements like Al Qaeda just as deindustrialization feeds into Chicago’s drug-related gun violence as much as it does to stimulate middle class movements like Occupy Wall Street.

We have the technological and economic resources to solve these problems and build healthier alternatives. We know the institutional framework – democracy and freedom – that must be in place for those resources to be effective. Instead of developing a foreign policy that matches our resources with that institutional framework, we have instead used the crude tools of neo-conservative intervention or the dangerously naive relativism of spent late-60s ideology. A “Solidarity Doctrine” offers a new approach.

Jackson Diehl: The red flags in Obama’s foreign policy – The Washington Post.

Did President Obama really save General Motors? Or, “Al Qaeda lives, and GM is moving to China”

One of the key campaign themes this year is that President Obama is responsible for saving General Motors. VP Biden is well known for his slogan: “Osama Bin Laden is dead and GM is alive.”

Of course, Bin Laden is gone and very few people in the world regret this. (See my assessment of that event in the context of Obama’s strange approach to foreign policy here, here and here.) But the value of his passing for Obama is limited as it is now very clear that his death did not mean the end of Al Qaeda. The brave and articulate journalist Lara Logan made clear that even in Afghanistan the terror group remains a significant force.  And as recent events indicate, it has also spread to many other areas of the world.

So that leaves the other half of the Administration’s slogan, that GM is alive. How valid is this claim?

I have been following the auto industry, and the UAW and GM in particular, for many years. I have advised UAW members as far back as the closing of the GM plant in Fremont, California, in the mid-80s. (See my letter then in the New York Times here.)  More recently, I advised UAW members impacted by the concessions demanded in 2008 by GM, including petitioning the Securities and Exchange Commission on their behalf to try to prevent the massive cuts in pay and benefits these workers have suffered over the years.

The bottom line is that General Motors is, to this day, being kept afloat by massive financial support from the UAW and the government. Without that support its stock price would likely collapse, its cost of borrowing would skyrocket and its employees would suffer further cuts in wages and benefits.

How do I know this is the case? It is a (relatively) simple matter of following the money, or, in business school terms, analyzing the capital structure of the company.

The starting point of this analysis is 2008 when the UAW gave in to demands from GM to convert the GM health care plan into a Voluntary Employee Beneficiary Association, or VEBA. I have analyzed this in detail here and here. But the long and short of the VEBA is that it did GM a huge favor by forcing the UAW to take over responsibility for funding health care for all current and future GM retirees.

GM was supposed to fund this VEBA with $30 billion in assets and cash. But that never happened. Only part of the cash ever turned up. Instead, GM went through a White House supervised bankruptcy (and here Governor Romney is right) that was little different in the end than a normal bankruptcy under the well established, and socially progressive, federal law that was put in place by FDR. The White House claims that they intervened in order to protect the GM workforce but in fact they intervened to impose further cuts in pay and benefits and to further weaken the VEBA. I outlined alternative progressive approaches in Dissent and on the Real News Network here, here and here.

Out of this White House bankruptcy proceeding came a new GM reorganized with the financial support of the United States Treasury and the UAW VEBA. The Treasury owned more than 60% of GM’s shares and the VEBA 17.5%. (The UST now owns 30% after the IPO and the VEBA 10%.)  Instead of the cash and diversified asset base it should have the VEBA was forced to accept a massive chunk of stock in GM. That left the VEBA dangerously over invested in GM, a violation of every conceivable fiduciary principle.

New GM then conducted an IPO in 2010 which was supposed to allow the VEBA and the Treasury to sell their stakes in the company at a profit. But the IPO never got to the needed break even price of $53 per share and likely never will. (I analyzed the risky IPO here in 2010.) One recent assessment by Reuters says GM stock is “struggling” as European demand remains weak and the transition to new more competitive models has been slow.

According to The Detroit News, “The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That’s 15 percent higher than its previous forecast.”  Forbes thinks GM could be headed back into bankruptcy, noting that more competitive companies like VW “are eating GM’s lunch.”

While some in the auto industry are critical of the Forbes analysis, they nonetheless admit that the success of GM is dependent on moving outside the US to places like China. In other words, President Obama saved GM for the 1% not for the 99%.

Treasury invested approximately $50 billion in GM, sold shares worth half that amount in the IPO and has watched the value of the remainder sink to slightly more than half its original value. They are sitting on an unrealized loss of $16 billion. GM’s stock has never regained its IPO price, which suggests, of course, that it was over-hyped.

Today, GM is trading at $24.50 per share. The Treasury sold a piece of its holdings in 2011 further reducing its stake to 30%. Despite pressure from GM management, which wants to shake off government oversight, to sell the remaining stake, the Treasury has held on to its 500 million remaining shares. This is likely for political reasons because a final sale would mean a final tally of the Obama strategy of throwing away taxpayer money on a company whose core strategy is to shift production to China, Russia and Mexico.

A stock sale of that magnitude, by either Treasury or the UAW’s VEBA, would create tremendous downward price pressure. And, of course, it would rob Joe Biden of the second half of his slogan, just as the recent “Tet Offensive” by Al Qaeda in the middle east and North Africa destroyed the first half.