Offshore News Digest for Week of May 9, 2005

GLOBAL BUSINESS

WELCOME TO LONDONGRAD

Armed with big wallets and bigger dreams, Russia’s elite make the British capital their home away from home. After seven decades of communism and two of gangster capitalism, an estimated 250,000 of them now live in London. Countless more have property or a financial presence there. It is a launching pad for personal or professional ambitions. Many are seeking Western partners for investment and are burnishing their image with a coterie of Western lawyers, investment advisers and public relations agents. They have injected hundreds of millions of pounds sterling into the U.K. economy, buying houses and luxury goods.

The best-known among them include the oligarchs, the cadre of men who walked off with Russia’s valuable natural resources and state-owned enterprises, often amid murky, corrupt and even violent privatizations. While many of these wealthiest Russians have also bought homes in France, New York or Israel, London has clearly emerged as a destination of choice. Russians are lured by its four-hour proximity to Moscow, strong capital markets and favorable tax laws. Nor does Moscow have a judicial system like Britain’s that protects them from unwelcome inquisitors. “I think they feel this is a country of law. They feel they are well protected here,” says a notable among Russian expats, Boris Berezovsky, in England since 2001

CHINA BRACES FOR A MORE VALUABLE YUAN

The possibility that China might revalue the yuan by even 5% – a move the euro or yen has sometimes managed in days or weeks against the dollar – has prompted a deluge of analysis. Some of the analysis remains valid, experts say, even if China lets the yuan move by only a percentage point or two at first but permits larger fluctuations later. For China, a small move of a few percentage points now runs the risk of a further surge in the flood of speculative investment already pouring into the country, as foreigners buy up apartments and other property in the hope that it will be worth more in their home currencies after further revaluation.

But a big revaluation soon would create the risk of social instability if factorys shut domestic operations and move abroad in search of cheaper labor, if Chinese food companies stop buying from peasants and import instead, and if Chinese companies find themselves on the wrong end of too many speculative bets on the currency. The most obvious effects of a revaluation would be to make imports cheaper in China and make Chinese goods more costly in foreign markets. The Bush administration has led efforts, increasingly supported by European nations and Japan as well, to persuade China to let the yuan rise.

IS THE IMF AN ENDANGERED SPECIES IN ASIA?

The reference here is to the so-called “Asian Monetary Fund”. Such an animal was mulled during Asia’s 1997-98 crisis and quickly died amid strong U.S. resistance to Asia creating a counterpoint to the IMF. Last week’s meeting of the Asian Development Bank marked its resurrection. At least that was the scuttlebutt in the hallways and watering holes of Istanbul, where the ADB’s annual confab was held this year. Its creation could have major consequences for the global elites and the so-called “Washington Consensus” on how developing nations should go about raising living standards for their swelling and often poor populations. The idea came up in September 1997, amid worsening crises in Thailand, Indonesia and South Korea. The IMF was holding its annual meeting in Hong Kong and Asia pushed the idea of an Asia- only bailout fund to provide assistance to economies with fewer strings attached than the IMF required. At the time, the IMF was demanding high interest rates and fiscal tightening, policies that worsened the crisis.

U.S. officials were beside themselves. At the time, I was traveling with Treasury Secretary Robert Rubin and his deputy Lawrence Summers. After the IMF meeting, we boarded a U.S. Air Force plane for Beijing. On the flight, Rubin and Summers were in an absolute panic that an Asian Monetary Fund funded by Japan and other nations would shut the U.S. out of efforts to end Asia’s crisis, if not its future. Fueling speculation the AMF is back was a statement by a top ADB official that currency-swap arrangements agreed to by the region have “the potential to become an Asian monetary fund.” That it was made by Masahiro Kawai, an adviser to ADB President Haruhiko Kuroda, made it all the more significant.

Japan was arguably the most vocal advocate of an IMF-like organization for Asia, and Kuroda is a former vice finance minister. To connect the dots a bit, Kuroda plans to use his time at the ADB to accelerate the economic integration and self-sufficiency of Asia. An Asian Monetary Fund seems a natural step in that direction. The currency swap arrangement to which Kawai referred is called the Chiang Mai Initiative. The $39.5 billion system to shield currencies from speculative attacks involving China, Japan, South Korea and 10 Southeast Asian nations is expected to double in value.

Yet Kawai agrees “full IMF delinkage would not be desirable at this point.” One reason: Nations involved in the Chiang Mai Initiative do not have the bureaucratic infrastructure to conduct the kinds of economic surveillance and data collection done by the IMF. Kawai says creating a secretariat to do just that is “clearly on the table”.

VIETNAMESE ECONOMIC GROWTH SPRINGS FORWARD

In a country where the average per-capita income is $450 a year, a newly well-to-do elite is emerging as the economy races ahead at an average annual growth rate of more than 7%. “The place is booming,” says Jonathan Pincus, an economist for the U.N. Development Program here. He notes that it is one of the fastest-growing economies in Asia. The boom reflects what business people and analysts say is a carefully planned reversal in policies since the first decade or so of economic hard times after the final defeat of the U.S.-backed South Vietnamese government on April 30, 1975. The U.N. team here dates the economic surge from the onset of reforms known as “doi moi” – renovation – in the late 1980s.

U.N. and World Bank economists worry that the wealthiest Vietnamese are seeing their incomes grow most rapidly. But, they say, most of the country’s 83 million people are sharing in economic success. “The incidence of recorded poverty has fallen sharply, and living standards are now more than three times higher than they were 20 years ago,” says a U.N. report. It adds that Vietnam “is increasingly integrated into the global economy.” Raymond Mallon, a consultant for the World Bank, recalls “abject poverty” in 1988 as the economy hovered on the brink of disaster. A critical change at the time was designating the household, not the commune, as the basic economic unit, encouraging families and individuals in small and medium enterprises. “You don’t see much poverty now,” says Mallon. “The changes are fairly dramatic.”

Vietnam shows remarkable promise in areas that are expected to keep growing for years. From such labor-intensive industries as footwear and clothing, Vietnam is moving into electronics. Crude oil, most of which was imported before and during the war, is now drilled offshore and ranks as the country’s biggest export, followed by textiles, shoes, fish products, rice, coffee and rubber.

U.S. TOURISM LOSING $BILLIONS BECAUSE OF A TARNISHED IMAGE AND BUREAUCRATIC VISA POLICIES

The U.S. is losing billions of dollars as international tourists are deterred from visiting because of a tarnished image overseas and more bureaucratic visa policies, travel industry leaders have warned. “It’s an economic imperative to address these problems,” said Roger Dow, chief executive of the Travel Industry Association of America, tourism’s main trade body, which concluded its annual convention this weekend in New York. Mr. Dow stressed that tourism contributed to a positive perception of the U.S., which spread across to business. “If we don’t address these issues in tourism, the long-term impact for American brands Coca-Cola, General Motors, McDonald’s could be very damaging,” he said.

The plea echoed that of other industry trade organisations which say bureaucratic visa procedures and stringent security after the September 11 terrorist attacks have deterred business travellers and foreign students. “The idea has gotten out that we’ve pulled in the welcome mat,” said Rick Webster, the association’s director of government affairs. The number of international visitors last year rose 12%, compared to 2003, to 46.1 million, according to the U.S. Commerce Department. They spent $93.7 billion, or 17% more than their counterparts the previous year. However, U.S. market share of foreign visitors is still down 38% since 1992, according to the TIA. “Our piece of the pie has shrunk by 5 million visitors,” said Mr. Dow. The weak US dollar has boosted the number of international visitors, but given favorable currency rates for many foreigners, those numbers should be far higher.

Mr. Dow said rising anti-Americanism has created a feeling that the U.S. is inhospitable and difficult to visit. “There’s a perception of ‘Fortress America’ that is much worse than it really is,” he said. Mr. Dow added that more competition from other destinations such as Australia, South Africa, Spain and Asia had siphoned off tourism to the U.S. The TIA urged U.S. policymakers to facilitate various security measures. An October 26 deadline that requires some foreign passports to have biometric facial-recognition technology is unrealistic and must be extended, according to the TIA. It also wants problems resolved with the US-Visit program, an initiative requiring photos and fingerprints of some visitors, which is scheduled to be in place at land borders and ports-of-entry by end the end of the year.

CANADIAN LEADER REJECTS A NO-CONFIDENCE VOTE

Parliament narrowly voted Tuesday to force Prime Minister Paul Martin to resign but the governing Liberals said they would not accept the no-confidence vote as binding. The 153-to-150 vote made for a rancorous spectacle as opposition leaders claimed a decisive victory over the Liberal government, which has been limping since its narrow victory in June’s election. The Liberals claimed that the opposition could not overthrow a government on a mere procedural motion requesting that a parliamentary committee recommend that the government resign. But even government officials conceded that the vote was a dress rehearsal for another showdown, perhaps next week, that Mr. Martin would have to recognize if the Liberals lost. “In my opinion Mr. Martin’s behavior has gone from dithering to desperate to dangerous,” said Stephen Harper, the Conservative Party leader, who said the government was acting against the Constitution to stay in power. “This government does not have the moral authority to govern this country.”

CAYMAN ISLANDERS GO TO THE POLLS

Fiercely contested elections today in the Cayman Islands pits two candidates who want greater autonomy from Britain for the Caribbean offshore banking haven. Both also do not want the territory to comply with EU rules on reporting taxes. Caymanian leader McKeeva Bush would have a new legislature change the constitution to give more power to elected officials and less to the British governor general. Rival Kurt Tibbetts would call a referendum on the issue.

It is the first election since Hurricane Ivan in September destroyed 70% of building on Grand Cayman and since a a major scandal in 2003 indicated Britain’s MI5 was buying secrets about Caymanian banking clients. Britain said its intelligence agencies may have helped in the investigation but never interfered in a failed money-laundering case. 45 candidates are vying for 15 legislative seats in the three-island territory that is the world’s 5th largest financial center. Some 13,000 of the 45,000 people are registered to vote. It is the first election shaped by political parties and clear candidates for government leader in the Caymans, where personalities and independent candidates dominated in the past.

Bush formed the United Democratic Party in 2001 to oust Tibbetts as Cayman leader, saying he had not done enough counter a slowing economy. Tibbetts had been chosen after 2000 elections in which voters ousted former leader Truman Bodden, apparently angry over the weakening of secretive banking laws that have made the islands wealthy. After MPs voted him out, Tibbetts formed the People’s Progressive Movement, which has six seats in the legislature to the Democratic Party’s nine. The emergence of the two parties has inspired fierce campaigning, with the opposition accusing the government of corruption.

SWISS BANKRUPTCIES CONTINUE TO INCREASE

Last year was the first time Swiss bankruptcies passed the 10,000 mark since 1996, which was a record year. Bankruptcies have been on the rise for the past four years, but the latest increase was especially strong, according to Andrea Grossi of the Federal Statistics Office. “Swiss companies are usually small and employ only a few people, making them particularly vulnerable in times of economic hardship,” he added. Most cantons recorded an increase of new bankruptcies. Zurich, Basel-Country, Neuchâtel, Geneva and Vaud were hardest hit, while life was better for businesses in Lucerne and St Gallen. The authorities also completed 10,280 bankruptcy procedures last year, the most ever recorded. The increase was nearly 10% over 2003. Grossi says the outlook is not much better for this year. He expects the number of bankruptcy procedures to continue increasing, but adds that they should not rise as much.

TAXES

NATIONAL SALES TAX A TERRIBLE IDEA

I have been opposed to the idea of a national sales tax from the first time I heard of it – so long as it does not involve a dramatic reduction in federal spending. Without a reduction in spending, it is just rearranging the burden of big government (which is also the case for any tax cut that does not involve a reduction in spending). And thus is a complete waste of our time and effort if we support it. I have said that, once the poor have been made exempt and all the politically strongest industries have exempted their products from the tax, the rate will have to be at least 30% – and probably even more than that. Because of this, it is very unlikely that the tax will ever even be enacted. Now Bryan Russel has written to me to provide a number of other reasons to shun the idea of a national sales tax. Here is some of what he said.

BILL TO ABOLISH HONG KONG ESTATE TAX GAZETTED

Legislation that seeks to abolish estate tax in Hong Kong was gazetted (published) last week. According to a government spokesman, the move is seen as vital in attracting and retaining foreign investment in Hong Kong, and is supported by the majority of respondents to a public consultation on the proposals, carried out last year. “In recent years, global financial services have experienced phenomenal growth. The financial markets in the Asia-Pacific region have also quickened the pace of their development. Hong Kong is looking at unprecedented opportunities in this sector, but at the same time faces increasing competition,” the spokesman observed, continuing, “A number of countries in the region, including India, Malaysia, New Zealand and Australia, have abolished estate duty over the past 20 years. Hong Kong must not lose out in this race.”

It is estimated that the proposal to abolish estate duty will cost the Government annual tax revenues of around $1.5 billion. However, the abolition of estate duty is expected to encourage investments in both financial assets and the property market in Hong Kong, thereby contributing additional revenue from stamp duty and other taxes. Under the proposal in the Bill, estates of persons who pass away after the commencement of the legislation will not be subject to estate duty. The Bill will be introduced into the Legislative Council on May 11.

GLOBAL TAX ALMOST A REALITY

At the spring meeting of the IMF/World Bank in Washington, D. C. it was announced that a number of countries will be used to test a $1 tax on airline tickets. This global tax idea has been around for the last twenty years and is now back as a tax that would be relatively easy to put in place. Furthermore, an “International Financing Facility” for immunization will also be set up on a test basis. How could we be this far?

With regard to global tax recommendations that are on the table for serious consideration, the greatest money makers are the Global Carbon Tax and the Tobin tax followed by the international aviation fuel. A general financial transaction tax was rated as having a high income stream. Those easiest to collect would be the global carbon tax, the international aviation fuel, the maritime pollution tax, a tax on arm sales, and a tax on the global commons.

A global tax would not be possible if the barriers between the nation-states had not been dismantled. The economic barriers fell with the creation of the IMF/World Bank in 1944; the political barriers fell with the creation of the United Nations; the trade barriers fell with the creation of the World Trade Organization; and the legal barriers fell with the creation of the International Criminal Court. These ideas will be on the table at the G8 in June and at the UN in September. Has the UN found a way to justify their existence? Yes. Can UN official Dr. Inge Kaul, co-author of the Human Development Report, feel gratified that she has done her job well? Yes. Will the people of the world ever recover? No.

OECD veers further to the left.

The Center for Freedom and Prosperity Foundation and several members of the Coalition for Tax Competition condemned the OECD for its recent ministerial statement that indicated sympathy for global taxation and called for massive increases in foreign aid spending. “The OECD has been pushing anti-American economic policies for years. The international bureaucracy’s anti-tax competition/pro-tax harmonization project is a direct attack on America’s free-market, pro-growth tax policies. Now the OECD is expressing sympathy for ‘innovative sources of financing’ – which is a clear reference to schemes for global taxes levied by the UN. It is time for the U.S. taxpayers, Congress and the Bush Administration to end financial support for the OECD,” said Andrew Quinlan, president of the Center for Freedom and Prosperity Foundation.

ASSET PROTECTION

OFFSHORE FINANCE – “DIRTY” OR JUST INEVITABLE?

The article below, “The Dirty Little Secret of Financial Globalization” by Lucy Komisar, fails to recognize the economic [result] of low domestic tax regimes – much of the international offshore banking is eliminated and a prosperous domestic economy is allowed to flourish. At a time when much of Western Europe is awakening to the huge potential for low and flat rated corporate and income tax scales, there are still many opponents of the current techniques the corporates and high net worth individuals use to avoid onshore tax liability. These international price transfer transactions cost huge amounts of taxpayer funds to police and prosecute, and are the inevitable result of excessive tax burden in the home jurisdiction.

With a pre-dominance of social engineering experiments and massive welfare spending remaining in much of the developed world, governments need to learn to develop citizens who accept personal responsibility for life outcomes. I cannot comment on the U.S. context of the author’s article but welfare dependency is a key issue elsewhere in the world. Until this is accepted philosophically at state level, the corporate world will continue to be expected to support those who simply cannot be bothered in life, and will continue to pursue offshore banking strategies to minimise the tax plunder.

OFFSHORE CASH COMING HOME

Silicon Valley companies are beginning to calculate how many billions of dollars they will be able to bring home from their overseas operations under a one-year tax loophole created by Congress last year as a stimulus to the economy. But most companies have little to say so far about how they will use the funds. The American Jobs Creation Act of 2004 lowered the tax on repatriated foreign earnings from 35% down to 5.25% for 2005, allowing multi-national companies to bring back to the U.S. income that they had reinvested in other countries. The Silicon Valley Leadership Group estimates that about $30 billion could be headed back to the valley from the tax break.

Because the IRS is still promulgating the rules and regulations governing use of the tax break, “Companies are being conservative,” says Tom Hopkins, partner in charge of the tax department at KPMG LLP’s Silicon Valley office. But clearly, Silicon Valley-based companies are planning to take advantage of the tax break.

Drug makers reap benefits of tax break.

A new tax break for corporations is allowing the biggest American drug makers to return as much as $75 billion in profits from international havens to the U.S. while paying a fraction of the normal tax rate. The break is part of the American Jobs Creation Act, signed into law by President Bush in October, which allows companies a one-year window to return foreign profits to the United States at a 5.25% tax rate, compared with the standard 35% rate. Any company with profits in other countries can take advantage of the law, but drug makers have been the biggest beneficiaries because they can move profits overseas relatively easily, independent analysts say.

The money the companies are bringing home has come from many years of using legal loopholes in the tax law to aggressively shelter their profits from U.S. taxes, tax lawyers say. Figures show that the drug makers have told the IRS for years that their profits come mainly from international sales, even though the prices of medicines are far higher in the U.S. and almost 60% of their sales take place in America. Though the companies stand behind their accounting, financial analysts and tax lawyers say that the drug makers’ claim defies reality and that their profits come mostly from sales in the U.S. But the IRS lacks the resources to challenge the companies effectively, the analysts and lawyers say.

Already, four of the six major drug makers have collectively announced plans to return $56 billion in profits to the U.S. Two others say they are still considering but could repatriate an additional $18 billion. After the break expires, companies will probably go back to stockpiling profits overseas as they wait for another tax holiday in a few years, tax lawyers say. The major drug makers use a variety of complex but legal tactics to move profits from the U.S. to low-tax countries like Ireland and Singapore where they have large manufacturing operations, said H. David Rosenbloom, director for the international tax program at New York University Law School. “The law is complicated, but what’s going on is perhaps less complicated,” he said. “They’re doing everything they can to maximize their profit in Ireland and minimize the profit in the countries where the sales occur.”

WE MUST SHED “TAX HAVEN” TAG, ACCORDING TO ISLE OF MAN’S TAX ASSESSOR

Dropping the “tax haven” label is critical for the Isle of Man to maintain credibility in the international community, according to Malcolm Couch, the Island’s tax assessor. Mr. Couch gave an update on the government’s tax strategy to this year’s Manx Compliance Conference. He predicted a growing division in offshore centers with some jurisdictions falling away due to a lack of regulation and a smaller number, including the Isle of Man, thriving as well-respected international financial centers. “My vision is that going forward we really have to put into a hole in the back garden and bury, the phrase ‘tax haven’,” he said. In a way, the word ‘offshore’ is also a bit dangerous, we are an ‘international finance center’. Offshore implies something different. As we evolve our tax center and regulatory framework, we are as well and better regulated than any of the usual suspects.”

He said the Isle of Man would be the first of the Crown Dependencies to implement a zero-10 tax policy next April, giving an advantage over the Channel Islands in terms of attracting new business. He added that the withholding tax, set to accompany the EU’s savings tax directive, is not designed to gather more tax, but was simply a measure to smooth cashflow to the Treasury. He confirmed that the EU’s savings directive was almost certain to be implemented on July 1 this year. He said that the Island was well ahead of certain European nations in its readiness to deal with the implications of the directive. Mr. Couch also confirmed that the government were committed to introducing an income tax cap to encourage high net worth individuals to relocate to the Island.

Isle of Man plans to market itself with new branding.

The Isle of Man is aiming to lure more tourists and businesses with the creation of a brand identity. The island has appointed market research firm HPI and branding consultancy Acanchi to develop an identity that will raise awareness of the island. The positioning will be based on the independent nature of the island and the Manx people. The Isle of Man’s goal is to encourage businesses in both the UK and overseas to relocate to the island. It also aims to increase visitor numbers by highlighting the attractions on offer.

PRIVACY

SMILE: YOU’RE UNDER GLOBAL SURVEILLANCE

A newly-published report warns that a global infrastructure of registration and surveillance is emerging through the efforts of groups such as the EU, G8 and ICAO. According to the report, anti-terror and security measures being driven largely by the U.S. are being used to roll back freedom, increase powers and exercise increasing control over individuals and populations. The report details a number of “signposts” on the road to global surveillance, and argues that these add up to a bigger picture where the aim is to ensure that “almost everyone on the planet is ‘registered’, that all travel is tracked globally, that all electronic communications and transactions can be easily watched, and that all the information collected about individuals in public or private-sector databases is stored, linked, and made available to state agents.” But, the report concludes, “There is a real danger that in trying to watch everyone you are actually watching no-one.”

YOUR IDENTITY, OPEN TO ALL

A search for personal data on ZabaSearch.com – one of the most comprehensive personal-data search engines on the net – tends to elicit one of two reactions from first-timers: terror or curiosity. Which reaction often depends on whether you are searching for someone else’s data, or your own. ZabaSearch queries return a wealth of info sometimes dating back more than 10 years: residential addresses, phone numbers both listed and unlisted, birth year, even satellite photos of people’s homes. ZabaSearch is not the first or only such service online. Yahoo’s free People Search, for example, returns names, telephone numbers and addresses. But the information is nothing more than what has been available for years in the White Pages.

Far more personal information is available from data brokers, including aliases, bankruptcy records and tax liens. That access typically requires a fee, however, which has always been a barrier to the casual snooper. But ZabaSearch makes it easier than ever to find comprehensive personal information on anyone. ZabaSearch may give away some data for free, but it charges for additional information – like background checks and criminal history reports, which may or may not be accurate. The company also plans to sell ads and other services on the search site, much like Google or Yahoo.

Launched in February, the site has emerged during a period of heightened sensitivity about data privacy and identity theft, now among the fastest-growing crimes in America. Critics say ZabaSearch is exploiting the lack of data privacy in America. We unknowingly leak personal information in countless ways, the argument goes, and neither the government nor private industry provides effective ways for us to control how our digital identities are shared or sold. But the founders of ZabaSearch maintain they are not villains, and that their service is a step toward data democratization. If your information is already out there, the logic goes, at least now you will know about it. Wired News sat down with Robert Zakari, ZabaSearch president and general counsel, and chairman Nicholas Matzorkis, to talk about ZabaSearch.

WHAT IS SO SCARY ABOUT A NATIONAL ID

An emergency funding measure earmarked for our fighting men and women overseas seems an odd place for a sweeping change to U.S. privacy policy. But that is just where House conservatives have tucked their proposal to impose federal requirements on state driver’s licenses—a proposal dubbed the Real ID Act. Civil libertarians hate the idea, because in the ACLU’s phrase, it “takes us one step closer to a national ID.” What is rarely stated is why a national ID would be such a bad thing.

Underlying all those concerns is the worry that the Real ID is a backdoor to a national identification card and what the ACLU calls a “show us your papers” society. Maybe we are already there. I mean, the federal government already knows my social security number, the names of my wife and kid, how much money I make, where I work, where I bank, and all other sorts of neat stuff. So it is not obvious that it would be a big deal for them to put a name and face together. What is the big deal?

“The simple answer is that it gives the government greater ability to control the actions of private individuals,” says Electronic Privacy Information Center executive director Marc Rotenberg. “It has generally been the view in this country that one of the core aspects of personal freedom is to be free of government control. Identification is a form of coercion,” Rotenberg continued. “It’s a way someone says you can’t do what you want to do unless you prove who you are.” Besides their objections to the National ID in principle, civil libertarians are irked that conservatives are trying to introduce such a fundamental change bit-by-bit through laws like Real ID.

IS SURVEILLANCE PROTECTION?

One of the biggest threats to our democracy is the loss of privacy protections. They have eroded under government attacks on our right to privacy, and they have eroded from corporate attacks on our privacy. Since one of the major customers of the corporate personal data collectors is the U.S. government, the two are intimately part of the same problem. The extensions of “surveillance” and “personal data collection” have reached alarming proportions. I fear that this creeping surveillance society will just be accepted as a “cost of doing business” or as a necessary loss in the cause of “national security”. In either case, with our privacy goes our freedom, and I do not accept the validity of either justification.

There is all kinds of pressure to have RFID (an identification system with biometric data). The vehicles for utilizing such a personalized identity come in many forms and from many quarters. There are suggestions for a national ID card, attached to passports, integrated into state driver’s licenses and identification cards, as well as implantable RFID in hospital patients. The possibilities seem to be endless. It is coming, and whoever’s interests are being served by this have clout. The “war appropriations” bill had the Real ID Act tagged onto it.

It is no surprise that the Bush administration supports Real ID, data collection, and massive public surveillance. From the day they entered the White House they have done everything they can to obscure what is happening in government, and make transparent the lives of the population. This is just the reverse of what was intended by the framers of the Constitution. They knew full well that you cannot have a democracy if the people could not see what the government was doing - and hold that government to account. And what do we pay for creating a system that tracks everyone? Does it make us safer? Somehow I doubt it, but it does make our daily lives much more transparent – and open to whatever “threat assessment” software which will be run over the massively growing databases.

Knowledge is power, and those who control the knowledge control the power. That is a truism and is operating at multiple levels in our current environment. In the case of data collection, there is (even under the most trusting of circumstances) concerns about intimidation. Do you ever consider how what you are doing might be interpreted? The possibilities for interpretation of our daily lives are endless. It concerns me that there is not more outcry and concern, but I think most are being lulled into acceptance.

No real debate for Real ID.

Hundreds of civil liberties groups, immigrant support groups and government associations oppose the Real ID Act, a piece of legislation that critics say would produce a de facto national ID card, cost states millions of dollars and punish undocumented immigrants. Yet despite widespread opposition to the bill, it passed through the House last week and is expected to easily pass through the Senate this week. The legislation is raising questions not only about privacy and costs but about the ways in which critical legislation gets passed in Congress.

Lawmakers slipped the bill into a larger piece of legislation – an $82 billion spending bill – that authorizes funds for the Iraq war and tsunami relief, among other things, and is considered a must-pass piece of legislation. It is not the first time Congress has slipped contentious bills into larger legislation that is almost guaranteed to pass. In 2003, Congress augmented Patriot Act surveillance powers with wording slipped into the Intelligence Authorization Act, a bill that authorized funding for intelligence agencies. Critics, such as the American Civil Liberties Union, say lawmakers slipped the Real ID Act into the relatively uncontroversial spending bill in order to avoid a congressional debate over the ID measure. “The legislation was created in the backrooms of Congress without hearings and without any real understanding or thought about what was being created,” said Barry Steinhardt, director of the ACLU’s technology and liberty program.

The Real ID Act, sponsored by House Judiciary Committee chairman James Sensenbrenner (R-Wisconsin), responds to recommendations made by the 9/11 Commission to make it more difficult for terrorists and undocumented immigrants to obtain legitimate identification documents and travel freely around the country. The bill also is designed to make it difficult for anyone to forge identification documents and use them for criminal purposes. A spokesman from Sensenbrenner’s office did not return a call for comment in time for publication. But proponents of the legislation say they are simply implementing recommendations that the 9/11 Commission wanted.

Among other things, the legislation would force states to produce standardized, tamper-resistant driver’s licenses that would include machine-readable, encoded data. States theoretically could choose not to comply with the standards, but residents of those states would not be able to use their license as identification to obtain federal benefits – such as veteran’s benefits or Social Security – or to travel on airplanes. The legislation does not specify what data states must encode in the driver’s license. The secretary of transportation and Department of Homeland Security secretary have authority to designate the data. The National Governors Association, the Council of State Governments and the American Association of Motor Vehicle Administrators are among those who say the law creates unnecessary bureaucracy for drivers and imposes hardship and undue cost on state offices.

Congress adopts ban on torture in military funding/Real ID bill.

In a move welcomed by the American Civil Liberties Union, Congress last night included in a supplemental military funding measure an explicit prohibition on federal funds for torture or “cruel, inhuman or degrading treatment” of anyone in the custody or control of the U.S. However, despite strong objections from civil rights, immigrants’ rights, and religious groups, Congress also included the Real ID Act, which rolls back asylum laws, attacks immigrants and sets the stage for a national ID.

The ACLU has long been calling for Attorney General Alberto Gonzales to appoint a special counsel to investigate and prosecute criminal mistreatment of those held by American forces in Guantanamo Bay, Abu Ghraib and Afghanistan. In recent weeks, an internal Army review absolved most of those implicated in the scandal, indicating that only an impartial review by investigators not beholden to military rank or party politics will clear the air.

Also included in the military funding measure was the Real ID Act, which was opposed by groups as diverse as the ACLU, the National Association of Evangelicals, the Ancient Order of Hibernians, the National Council of State Legislatures, the National Governors Association and the American Association of Motor Vehicle Administrators. The act takes us one step closer to a national ID, and a “show us your papers” society, by forcing states to link their databases – containing every licensed driver’s personal information – with other states, with no guidelines as to who will have access to that information.

Federal mandates would also determine what forms of identification are needed to obtain state drivers’ licenses, making it possible that law-abiding American citizens who lack certain key documents – like birth certificates and social security numbers, etc. – could be denied licenses. Additionally, state motor vehicle administrators would become de facto immigration officials, as new federal laws would link immigration status with the issuance of drivers’ licenses. A judge with the State Supreme Court in Manhattan ruled yesterday that state motor vehicle authorities may not deny driver’s licenses to immigrants who cannot prove their legal status.

The act also goes against international law and allows government officials to demand written “corroboration” from those seeking asylum. For instance, a Chinese woman seeking asylum after being forced to have an abortion could be required to obtain proof of her abuse from the doctors who performed the procedure. In a small victory for immigrants’ rights advocates, the final Real ID Act struck initial language that eliminated stays of removal before the court of appeals.

States set to fight, defy driver’s license rules.

States are threatening to challenge in court and even disobey new orders from Congress to start issuing more uniform driver’s licenses and verify the citizenship or legal status of people getting them. There is concern among some states that they will get stuck with a large tab to pay for implementing the new rules and that getting a driver’s license will become a bigger headache for law-abiding residents. “Governors are looking at all their options. If more than half of the governors agree we’re not going down without a fight on this, Congress will have to consider changing this unfunded federal mandate,” said Arkansas Gov. Mike Huckabee, vice chairman of the National Governors Association. A Huckabee aide said the options include court action.

States fear the new rules may force applicants to make more than one trip to motor vehicle departments, once to provide documents such as birth certificates that states must verify and a second time to pick up the license, state officials said. “What passed is something that will be an enormous amount of work and it’s questionable what it’s going to yield,” said Democrat Matt Dunlap, Maine’s secretary of state. “Is it going to yield national security or is it going to be hassle for people already complying with the law?”

All but one of the 19 hijackers in the Sept. 11, 2001, attacks had some form of U.S. identification, some of it fraudulent, the Sept. 11 Commission found. The commission recommended the federal government set standards for birth certificates and other identification documents, including driver’s licenses. Some states already have been increasing their license requirements, but their work may not be enough. Maine’s motor vehicle department is upgrading its computer system. But the upgrade doesn’t include computer coding to comply with at least one of the new rules: ensure driver’s licenses issued to temporary legal residents expire when the resident’s authorized time in the U.S. is up. “That adds to the cost and throws everything into the woods,” Dunlap said.

NATIONAL INSECURITY CARDS

As a security technologist, I regularly encounter people who say the U.S. should adopt a national ID card. How could such a program not make us more secure, they ask? The suggestion, when it is made by a thoughtful civic-minded person like Nicholas Kristof in The New York Times, often takes on a tone that is regretful and ambivalent: Yes, indeed, the card would be a minor invasion of our privacy, and undoubtedly it would add to the growing list of interruptions and delays we encounter every day – but we live in dangerous times, we live in a new world … . It all sounds so reasonable, but there is a lot to disagree with in such an attitude.

The potential privacy encroachments of an ID card system are far from minor. And the interruptions and delays caused by incessant ID checks could easily proliferate into a persistent traffic jam in office lobbies and airports and hospital waiting rooms and shopping malls. But my primary objection is not the totalitarian potential of national IDs, nor the likelihood that they will create a whole immense new class of social and economic dislocations. Nor is it the opportunities they will create for colossal boondoggles by government contractors. My objection to the national ID card, at least for the purposes of this essay, is much simpler. It will not work. It will not make us more secure. In fact, everything I have learned about security over the last 20 years tells me that once it is put in place, a national ID card program will actually make us less secure.

My argument may not be obvious, but it is not hard to follow, either. It centers around the notion that security must be evaluated not based on how it works, but on how it fails. It does not really matter how well an ID card works when used by the hundreds of millions of honest people that would carry it. What matters is how the system might fail when used by someone intent on subverting that system: how it fails naturally, how it can be made to fail, and how failures might be exploited. The first problem is the card itself. No matter how unforgeable we make it, it will be forged. And even worse, people will get legitimate cards in fraudulent names.

Two of the 9/11 terrorists had valid Virginia driver’s licenses in fake names. And even if we could guarantee that everyone who issued national ID cards could not be bribed, initial cardholder identity would be determined by other identity documents … all of which would be easier to forge. Not that there would ever be such thing as a single ID card. Currently about 20% of all identity documents are lost per year. An entirely separate security system would have to be developed for people who lost their card, a system that itself is capable of abuse. Additionally, any ID system involves people … people who regularly make mistakes. We all have stories of bartenders falling for obviously fake IDs, or sloppy ID checks at airports and government buildings. It is not simply a matter of training; checking IDs is a mind-numbingly boring task, one that is guaranteed to have failures. Biometrics such as thumbprints show some promise here, but bring with them their own set of exploitable failure modes.

But the main problem with any ID system is that it requires the existence of a database. In this case it would have to be an immense database of private and sensitive information on every American – one widely and instantaneously accessible from airline check-in stations, police cars, schools, and so on. The security risks are enormous. Such a database would be a kludge of existing databases; databases that are incompatible, full of erroneous data, and unreliable. As computer scientists, we do not know how to keep a database of this magnitude secure, whether from outside hackers or the thousands of insiders authorized to access it. And when the inevitable worms, viruses, or random failures happen and the database goes down, what then? Is America supposed to shut down until it is restored?

Proponents of national ID cards want us to assume all these problems, and the tens of billions of dollars such a system would cost – for what? For the promise of being able to identify someone? What good would it have been to know the names of Timothy McVeigh, the Unabomber, or the D.C. snipers before they were arrested? Palestinian suicide bombers generally have no history of terrorism. The goal here is to know someone’s intentions, and their identity has very little to do with that.

And there are security benefits in having a variety of different ID documents. A single national ID is an exceedingly valuable document, and accordingly there is greater incentive to forge it. There is more security in alert guards paying attention to subtle social cues than bored minimum-wage guards blindly checking IDs. That is why, when someone asks me to rate the security of a national ID card on a scale of one to 10, I cannot give an answer. It does not even belong on a scale.

NEW INVENTION DETECTS CACHES OF CASH

Ah, the smell of money. Soon people will be looking for ways to mask it. Drug traffickers who ship profits abroad in suitcases of cash are not apt to be thrilled with some new inventions being developed by federal scientists at the Idaho National Laboratory. One sniffs the air for currency’s chemical signature – it can pick up a stack of bills from about 10 feet away. Another device beams electrons through packages or luggage to detect trace metals in the green ink. A third project, not yet started, would actually scan serial numbers of individual bills into a database. The lab’s lead scientist, Keith Daum, says the goal is to intercept cash used in illegal drug or terrorism transactions. “When Joe the Druggie gets his $20 from an ATM and spends it on a (drug) pickup, and the money is later traced to a drug seller – to me, that’s evidence,” Daum said in an interview.

It is unclear whether the legal system would view such evidence as admissible, and privacy advocates fear such inventions would infringe on civil liberties if adopted. [Gee … do ya’ think? Ed] Of course, carrying cash – even large amounts of it – is not illegal, athough there is a limit of $10,000 in cash anyone may carry in or out of the U.S. Still, intercepting large sums of money would at least put a dent in the drug trade, argued lab spokesman Ethan Huffman.

The third project, a relatively new device, looks like a typical bill counter used by banks to count stacks of cash. But on the back of the machine, an add-on box about the size of a file folder reads and stores the serial numbers of every bill it counts. The machine is of little strategic value by itself. But if it was distributed worldwide, and if there was a database of serial numbers, it would become possible to trace money across the globe. That worries people like Melissa Ngo of the Washington-based Electronic Privacy Information Center. “This is just another step toward a complete lack of anonymity,” Ngo said. “There are many reasons people wouldn’t want information about where they spend their money, from stopping mass marketers to people thinking it’s nobody’s business what books or CDs they buy.”

LAW

SWISS POLICE BANK ON EUROPEAN DATABASE

Swiss police forces and border guards have come out in favour of closer security and asylum cooperation with the European Union. They say the Schengen accord, the subject of a nationwide vote on June 5, would give them access to a common information system to combat crime. Heinz Buttauer, the president of the Swiss Federation of Police Officers, can be seen in numerous advertisements in the country’s newspapers encouraging people to vote yes in June. Buttauer is in good company as many police officers and heads of police in the country’s cantons have called on voters to approve the accord. The Schengen Information System (SIS) computer database, with its central server in Strasbourg, France, lists suspects or objects linked to a suspected crime. And it takes only minutes to issue a search warrant in the Schengen member countries.

As part of the security cooperation between member countries, border guards can use the shared information to check people applying for asylum. Under another EU agreement, the Dublin accord, the authorities can refuse to consider an asylum request if a person has handed in a similar application in another member country. Linked to the SIS is the Eurodac database, which contains fingerprints of asylum seekers in member countries. This allows the police to identify people without personal documents or those trying to abuse the asylum system.

But not everyone believes that SIS is a wonder tool – scepticism reigns among the members of Switzerland’s security forces. Jacques Strahm, a regional commander of the border guards in western Switzerland, fears that the Schengen/Dublin agreements will put pressure on the country to fall into line with other regulations in EU countries. He acknowledged that Switzerland had achieved the best possible results so far in its negotiations with the EU. But Strahm doubts whether Schengen will actually lead to improved security.

KICKBACK SCHEME ALLEGED FOR KODAK EXEC INVOLVED SHELL COMPANY

A tax accountant for Eastman Kodak faces charges of money laundering and mail fraud stemming from a kickback scheme that allegedly cost the company more than $4 million. Director of state and local taxes Mark S. Camarata was accused in U.S. District Court in Rochester, New York, of authorizing inflated payments to Kodak vendors in exchange for payments to his own shell company, according to the Rochester Business Journal. The complaint, signed by FBI agent Albert Zenner, stated that the investigation began with a tip on Kodak’s confidential ethics hotline, noted the Journal.

CLASH OVER JUDICIAL FILIBUSTERS NEARS BOILING POINT

As the Senate returns from a week-long recess, Republicans are reminding everyone that four years ago today, President Bush nominated Priscilla R. Owen and Miguel A. Estrada to federal appellate courts. Neither received a Senate confirmation vote, Republicans note, because of Democratic filibusters. The issue has simmered ever since, and many lawmakers say they believe it will reach a full boil this month, as conservative activists press Majority Leader Bill Frist (R-Tennessee) to try to change Senate rules to bar filibusters of judicial nominees. Groups on the left and right are spending millions on broadcast ads and holding dozens of rallies, telethons, news conferences and other events to argue for and against Frist’s effort.

The ads and rallies have targeted at least 10 states with 20 senators. But insiders agree that only a few GOP senators – perhaps four or five – might truly be undecided and crucial to the outcome. Senators hope to resolve a major transportation bill and other legislation before the chamber is consumed by what could be a bitterly partisan confrontation. That is why numerous aides say a filibuster showdown is most likely in about two weeks, shortly before the Memorial Day recess. But Frist spokesman Bob Stevenson said Friday the issue “could come up at any time.”

Collateral damage from the “nuclear” anti-filibuster option.

Republicans and conservatives are in high dudgeon over Senate Democrats’ refusal to let the Senate vote on some of President Bush’s judicial nominations. “This filibuster is nothing less than a formula for tyranny by the minority,” says Senate Majority Leader Bill Frist. Frist speaks for many conservatives who want to change the rules of the Senate on a simple majority vote, to eliminate the filibuster for judicial nominations. Fifty-five Republicans, 55 votes to change the Senate’s rules, case closed.

But those conservatives are being ahistorical, short-sighted, and unconservative. Judicial nominations are important, but so are our basic constitutional and governmental structures. Conservatives are not simple majoritarians. They do not think a “democratic vote” should trump every other consideration. The Founders were rightly afraid of majoritarian tyranny, and they wrote a Constitution designed to thwart it. Everything about the Constitution – enumerated powers, separation of powers, two bodies of Congress elected in different ways, the electoral college, the Bill of Rights – is designed to protect liberty by restraining majorities.

The Founders did not invent the filibuster, but it is a longstanding procedure that protects the minority from majority rule. It should not be too easy to pass laws, and there is a good case for requiring more than 51% in any vote. And supermajorities make more sense for judicial nominations than they do for legislation. A bill can be repealed next year if a new majority wants to. A judge is on the bench for life. Why should not it take 60 or 67 votes to get a lifetime appointment as a federal judge?

Throughout the 20th century, it was liberal Democrats who tried to restrict and limit filibusters, because they wanted more legislation to move faster. They knew what they were doing: they wanted the federal government bigger, and they saw the filibuster as an impediment to making it bigger. As Norman Ornstein of the American Enterprise Institute writes, the filibuster “is a fundamentally conservative tool to block or retard activist government.”

BID FOR MONEY LAUNDERING TREATY FAILS

Rich countries blocked a drive by developing nations for a new global treaty against money laundering, saying existing laws were enough to do the job but not being used. A draft communiqué issued on the final day of a UN crime conference in Bangkok urged all nations to implement “existing instruments”, upgrade national laws and boost cooperation against the growing security threat posed by cross-border crimes. But the Bangkok Declaration did not call for talks on proposed treaties against money laundering, cybercrime, trafficking in cultural property and the extradition of criminals. Donor countries, mainly Japan, the U.S. and EU, had opposed negotiating new treaties while most UN member states were still busy ratifying existing conventions against organized crime, corruption and terrorism.

The meeting gathered 3,000 officials, police and social activists who tackled issues ranging from computer crime and transnational networks of people smugglers to the links between organized crime and terrorism. Developing nations had pushed hard for a new UN convention against money laundering, arguing that current rules were of little use in cash-based economies. They also noted that money launderers had shifted away from bank transactions targeted by a G8-sponsored watchdog, the FATF, into real estate and other businesses. African nations were particularly vulnerable as the crime evolved, said South African Safety and Security Minister Charles Nqakula. “This is an international matter and these criminal gangs are connected to one another. There must be an instrument that cuts across the world and deals specifically with this kind of thing,” Nqakula told Reuters. But donor countries want to see better adherence to FATF recommendations against money laundering, which, according to some estimates, is worth up to $600 billion worldwide.

Bahamas Central Bank issues new anti-money laundering guidelines.

The Central Bank of the Bahamas has announced the release of new Guidelines on the Prevention and Detection of Money Laundering for Licensees for industry consultation. The amendments made in December 2003 to the Financial Transactions Reporting Act, 2000 and the Financial Transactions Reporting Regulations, 2000, had the effect of facilitating a risk-based approach to customer due diligence on the part of financial sector institutions. Consequently, the anti-money laundering guidelines issued to licensees of the Central Bank by the Financial Intelligence Unit (FIU) required revision in line with the above statutory amendments.

These draft Guidelines seek to address customer due diligence issues arising in respect of, inter alia, foundations, investment funds, segregated accounts companies, financial and corporate service providers, as well as the treatment of accounts in existence prior to 29th December, 2000. The draft Guidelines do not address suspicious transactions reporting which is to be addressed by the FIU.

CRITICS ASK CONGRESS TO TEMPER PATRIOT ACT

Critics of the USA Patriot Act on Tuesday called for the Senate to temper the anti-terrorism law’s provisions that let police conduct secret searches of people’s homes or businesses, but defenders say since no abuses have been documented the law should be renewed. The Bush administration wants Congress to make permanent all 15 provisions of the law that expire at the end of the year, some of which have aroused civil liberties concerns among liberals and conservatives. The law’s national standards for what are sometimes known as “sneak and peek” searches are permanent. Sens. Larry Craig, R-Idaho, and Dick Durbin, D-Illinois, told the Senate Judiciary Committee that while they cannot show any specific abuses, the anti-terrorism law is written in a way that could allow abuses. “Our law cannot be written for the best and the brightest. They must also anticipate enforcement from the worst and the weakest,” said Craig, who is pushing a bill with Durbin that would scale back some of the Patriot Act’s powers.

Critics of the law want Congress to pass the SAFE Act to limit the Patriot Act in several ways, including requiring government officials to inform suspects about the “sneak and peek” searches within seven days if a judge does not intervene. The current law does not specify when the government has to inform suspects about the secret search. Sen. Jon Kyl, R-Arizona, defended the anti-terrorism law, saying that since no one can come up with specific abuses, the expiring provisions should be renewed.

FINANCIAL COMPANIES PLEAD FOR FEWER “SUSPICIOUS ACTIVITY” ALERTS

U.S. financial services companies are urging the federal government to adopt new rules on the filing of “suspicious activity reports”, warning that a flood of such reports is costing billions of dollars and hampering government efforts to crack down on money laundering and terrorist financing. The Financial Services Roundtable, which represents many of the largest U.S. banks, insurance and securities firms, yesterday asked the Treasury Department, the Federal Reserve and other regulatory agencies to launch a formal process aimed at reducing the number of filings. Suspicious activity reports (SARs) are intended to alert regulators and criminal investigators to transactions that might indicate money laundering or financial support for terrorist groups. In the wake of the September 11 attacks, the volume of SARs filed by financial institutions grew sharply.

That began to tail off in 2003 but then spiked again last year following a $40 million fine levied against AmSouth, an Alabama bank, for failing to file suspicious activity reports, and similar penalties against Riggs Bank. In March of this year banks filed 43,500 such reports, an increase of 40% from the same period in 2004. Industry officials say the increase is largely due to fears that financial service companies could face huge fines, or even crippling criminal indictments, for failing to flag suspicious transactions. That has led to a flood of “defensive filings” aimed at avoiding future liability.

The industry estimates it will spend nearly $11 billion on money laundering compliance this year, up 50% since 2002. Washington has already acknowledged the increase in filings has overwhelmed its processing capabilities and hampered efforts to combat money laundering and terrorist financing. The head of the Treasury Department’s financial crimes enforcement network (FinCEN) wrote last month that such defensive filings “have little value, degrade the valuable reports in the database and implicate privacy concerns.” The industry is urging the government to abandon what it calls “zero tolerance” for banks that fail to file timely reports. Instead, companies say the government should set basic standards and then penalize them only if they fail to follow those guidelines.

OPINION & ANALYSIS

ON NIGHTMARES

A gentleman I know once told me of a recurrent nightmare he had. He dreamed of falling asleep, and dreaming that within that dream he fell asleep again, and then again, and so on until an evil eternity of these concentric layers of unconsciousness lay between him and waking life. He said it was a horrible experience, and then added something that I had not expected to hear from someone who is not a Christian and altogether likes the East more than he likes Europe. He said that the only thing in these dreams that appeared to keep his mind from total despair and dissolution was a faith in reality – a lingering spark of will that insisted that the real world was still there and the whole universe of bad dreams was just that, a thing of nothing. It was this, he felt, that made possible the final awakening – not the waking from one dream into another, but the ultimate upward thrust towards reality that pierced the webs of illusion like a spear.

I find this a very powerful image. Not only does it illustrate a very practical need for faith (or first principles, if that is more agreeable), it also shows that faith is a point, not merely a direction. The man who is drowned three feet below the surface of the water is not much better off than the one drowned three hundred feet below it. The sick man does not want another, less virulent, disease – he wants health. Compromise is humbug.

But apart from showing the need for a definite point, a piton hammered into the cliff of the universe, this vision of successive nightmares is a good parable of a human soul that, in a series of successive steps, has gone a long way away from sanity. And just as it seems impossible to wake up from the 100th nightmare and not merely pass into the 99th, so it appears that there are degrees of estrangement from truth and common sense for which no direct cure is possible, from which no single mental leap will lead back to normality. Layer upon layer of error, misunderstanding, fancy, ignorance and passion can create a whole world of their own.

There are more and more people whose views are the result of a partial misunderstanding of a false idea based on an abuse of something that is mistakenly considered a consequence of something else that should never have been there in the first place. The right questions are never even remotely imagined, let alone answered. This works as an effective armour, making recovery – at least a quick recovery – virtually impossible. You cannot pierce all the layers with a single thrust. Truth cannot be shown directly, because it would look like a monster from another planet, funny or scary or offensive, but always irrelevant. You find that you cannot give a definition of what is right because all the terms you use, and all attempts to explain these terms, are sure to be misunderstood.

HONOUR RUSSIA’S SACRIFICE BUT DO NOT FORGET STALIN’S CRIMES AND THE ALLIES’ CULPABILITY

President George W. Bush’s attendance at ceremonies in Moscow commemorating the 60th anniversary of the Soviet Union’s victory over Germany in 1945 is both right and wrong. Right, because many North Americans and British mistakenly believe their nations alone defeated National Socialist Germany. In fact, Stalin’s Soviet Union, not the western democracies, played the decisive role in defeating Adolf Hitler and his European allies. While rightly honoring our own heroic veterans, it is time we also recognize and pay homage to Russia’s dauntless courage, endurance and suffering. The Soviet Union inflicted 75% of all World War II German casualties in titanic battles involving millions of men. Soviet forces killed 3 million German troops, and lost 11.3 million, with 18.3 million wounded. 20 million Russian civilians died.

Britain lost 340,000 men, Canada 43,000, and the U.S. about 150,000 in the European Theater. The $11 billion of U.S. military aid to the U.S.S.R. helped Stalin, but was not decisive. When Allied forces landed at Normandy, the Wehrmacht’s “guts had been ripped out by the Soviets,” said Winston Churchill. Had the Allies met 1940’s strength and quality German troops, with an intact Luftwaffe, they would have been driven into the English Channel. However battered, the Wehrmacht fought ferociously from 1944 to ‘45, recalling Churchill’s dictum, “You will never know war until you fight Germans.”

So it is right to honour Russia’s valiant soldiers. But it is also wrong to keep on ignoring the Soviet Union’s monstrous crimes or the Allies’ alliance with the tyrant who committed them. Nazi concentration camps like Buchenwald and Auschwitz are household names. But who recalls even more murderously prolific Soviet death camps like Kolyma, Vorkuta and Magadan? Stalin told Churchill he had killed 10 million farmers in the early 1930s, and hailed the butcher of 6 million Ukrainians, Commissar Lazar Kaganovich, as “our Himmler”. The best current estimate of Stalin’s victims is 20 million murdered before WWII, and 10 million from 1941 to 1953. Hitler’s toll was around 12 million after 1941.

Nor did German aggression alone begin the war in Europe. German-Soviet aggression did. We forget Hitler and Stalin jointly invaded, then partitioned Poland under the notorious Molotov-Ribbentrop Pact, that Moscow has never renounced. Seven million Poles died, half of them were Jews. The U.S.S.R. then went on to invade Finland, Estonia, Latvia and Lithuania. In 1939, Hitler, whose major crimes still lay ahead of him, was seen by many Europeans as a hero who had pulled Germany out of economic collapse, restored national dignity and provided the main bulwark against the very real threat of communist mass murder engulfing western Europe. Yet Britain and the U.S. chose to become war partners with Stalin, by then history’s worst mass killer. Churchill and particularly Franklin Roosevelt must share indirect guilt for Stalin’s crimes, just as they would had they joined Hitler.

This aspect of the war remains taboo. At Yalta, the left-leaning Roosevelt, besotted by “Uncle Joe” Stalin’s power, delivered half of Europe to communist rule, replacing a greater tyranny for a lesser one. It is time Canada, the U.S. and Britain face their culpability in abetting Stalin. They should demand Russia come clean over Stalin’s crimes and prosecute Soviet officials and police who are still alive. Bush at least took a first step by rebuking the Kremlin for its invasion of the Baltic states. Continuing to beat the drums about Nazi crimes, however horrible, while ignoring egregious communist crimes is profoundly dishonest.

Bush, Putin and the Hitler-Stalin pact.

To Americans, World War II ended with the Japanese surrender on August 15, 1945, following detonation of atom bombs over Hiroshima and Nagasaki on August 6 and 9. But for Russians, who did not enter the war on Japan until August 8, 1945, “The Great Patriotic War” ended on May 9, with the surrender of Nazi Germany. Which raises a question: What exactly is President Bush celebrating in Moscow?

The destruction of Bolshevism was always the great goal of Hitler. And the Red Army eventually bore the brunt of battle, losing 10 times as many soldiers as America and Britain together. But were we and the Soviets ever fighting for the same things, as FDR believed? Or was Stalin’s war against Hitler but another phase of Bolshevism’s war to eradicate Christianity and the West? Vladimir Putin, a patriot and nationalist who retains a nostalgia for the empire he served as a KGB agent, refuses to renounce the Hitler-Stalin Pact of August 23, 1939. Under the secret protocols of that pact, Lithuania, Latvia, Estonia and the Romanian provinces of Bessarabia and Northern Bukovina were ceded to Stalin, as was eastern Poland.

Hitler’s attack on Poland, the success of which was guaranteed by that pact, came on September 1, 1939. On September 17, Stalin, who had hidden in the weeds to see how Britain and France would react to Hitler’s invasion, stormed into Poland from the east and claimed his share of the martyred nation. Six years of terror for Poles began, ending in 44 years of captivity in the bowels of what Ronald Reagan bravely called an “evil empire”.

As a result of this war, Hitler’s 1,000-Year Reich lasted 12 years and Germany was destroyed as no other nation save Japan. Hamburg, Cologne, Dresden and Berlin were reduced to rubble. Between 13 million and 15 million Germans were ethnically cleansed from the Baltic region, Poland and Czechoslovakia. Two million, mostly women and children, perished in an orgy of murder, rape and massacre that attended that greatest forced exodus in European history. As a result of the Great Patriotic War, Finland had its Karelian Peninsula torn away by Stalin and 10 Christian countries – Latvia, Lithuania, Estonia, Poland, Czechoslovakia, East Germany, Romania, Bulgaria, Hungary and Yugoslavia – endured Stalinist persecution and tyranny for half a century. Again, what, exactly, is Bush celebrating in Moscow?

How good was the “Good War”?

On May 8, 1945, the war against Hitler’s Third Reich was won – and some of the victors’ most cherished myths were born. “No English soldier who rode with the tanks into liberated Belgium or saw the German murder camps at Dachau or Buchenwald could doubt that the war had been a noble crusade.” Forty years ago the historian A.J.P. Taylor eloquently expressed what has become a universal belief. Other wars are looked back on with horror for their futile slaughter, but the conflict that ended in Europe in May 1945 is today seen as what Studs Terkel called his famous oral history of it, “The Good War”.

In one way it will always remain so. A revisionist case, that defeating Hitler was a mistake, would be not only perverse and offensive, but simply absurd. And yet we have all been sustained since V-E Day, 60 years ago today, by what Giovanni Giolitti, the Italian prime minister of a century ago, once called “beautiful national legends”. By “we” I mean the countries that ended the war on the winning side (the Germans and Japanese have some national legends of their own).

Was it “a noble crusade”? For the liberation of western Europe, maybe so. Was it a just war? That tricky theological concept has to be weighed against very many injustices. Was it a good war? The phrase itself is dubious. No, there are no good wars, but there are necessary wars, and this was surely one.

Roosevelt and his critics.

I see that HBO is doing a movie honoring Franklin Delano Roosevelt, who “brought us out of the Depression and through World War II.” Why this endless celebration of FDR? The Germans are expected to repent the Hitler era everlastingly. The Japanese are supposed to apologize for their role in the same war, while they are also being hounded by the Chinese for their impenitence about invading the mainland. The Russians are repudiating the Soviet era. Everyone is issuing apologies for history these days. I am always a little leery of people who repent other people’s sins, because one suspects hypocrisy – or what C.S. Lewis called the sin of detraction masquerading as the virtue of contrition. I cannot honestly repent the massacres of the American Indian, because I did not take part in them. They were largely crimes of the U.S. Government, which I can only helplessly deplore, as I deplore its current crimes at home and abroad. Still, we can recognize crimes as crimes, which brings me back to Roosevelt. Why are Americans still treating this monster as a hero?

I hardly know where to start. His contempt for the U.S. Constitution he was sworn to defend, in everything from creating a national welfare state to putting U.S. citizens in concentration camps, is almost a minor item on his ledger. So are his deceits in getting the U.S. into World War II, while assuring the American public that he was doing everything he could to keep us at peace. Long before that war began, he befriended Joseph Stalin by granting diplomatic recognition to the Soviet Union, shortly after it had deliberately starved millions of Ukrainians. During the war, he made an alliance with Stalin, not as a regrettable necessity, but with effusive praise for “Uncle Joe”. He even urged Hollywood to make pro-Soviet films to dispel “prejudice” against Soviet Communism and lent a hand in the production of the egregious propaganda movie Mission to Moscow. (Jack Warner later called the film the worst mistake of his long career.)

As the war progressed, Roosevelt ordered the massive bombing of Japanese and German cities for the express purpose of killing as many civilians as possible. His victims, from Tokyo to Berlin, numbered in the millions. He was uninhibited by the ancient principle of Christian civilization that warfare should spare noncombatants. But that was not enough. Meanwhile Roosevelt launched the Manhattan Project to develop the atomic bomb, which could obliterate whole cities in a flash. He thereby took the world into a dreadful new era in history, which concerned him not at all. Long after Pearl Harbor is forgotten, the name of Franklin Roosevelt should “live in infamy”. Yet the United States still officially honors him when an official apology to the entire human race would be more fitting.

TRUE PATRIOTS SHOULD WORRY MORE ABOUT FREEDOM AT HOME

President George W. Bush claims that he is spreading freedom throughout the world. However, for him “freedom” appears to be more a slogan, devoid of content and used to harness U.S. nationalism for his own purposes. Freedom meant much more to the Founders of the American republic. They would be appalled at the president’s crusade to impose democracy abroad and its resulting, but unnecessary, erosion of liberties at home. Bush’s attempts to renew expiring USA PATRIOT Act provisions, which were supposed to be a temporary enhancement of government police powers in the wake of 9/11, show his shallow commitment to freedom where it is needed most – here at home.

President Bush’s State Department is now suppressing statistics that support the conclusion that his reckless invasion of Muslim Iraq has dramatically increased the number of significant terrorist attacks in the world. Any future retaliatory terrorist attacks in the U.S. could make renewal of the PATRIOT Act, or an even more severe crackdown on civil liberties, a slam dunk.

During passage of the Act, the Executive Branch’s law enforcement bureaucracies used the 9/11 attacks to broadly enhance their powers of search and surveillance for investigations unrelated to terrorism. Also, the Act eroded the checks and balances enshrined in the Constitution by limiting traditional judicial review of Executive Branch search warrants. In the wake of the post-9/11 hysteria that pressured Congress to show progress in “doing something” to prevent a future attack, the legislature got cold feet and required especially draconian provisions of the Act to sunset at the end of 2005. Yet the “freedom loving” Bush administration is busily lobbying Congress to make those provisions permanent.

The purported tradeoff between civil liberties and national security is a false one. No need for dubious usurpations of freedom like the PATIOT Act would exist if the U.S. would avoid unnecessarily creating and inflaming anti-American groups overseas with its overly interventionist foreign policy. A more restrained policy abroad would better preserve both liberty and security at home.

U.S. AMBITIONS NEED REALITY CHECK

The American invasion of Afghanistan and Iran has ignited hopes among Washington’s neoconservatives that the U.S., taking advantage of the post-Cold War unipolar moment and its dominant military power, would be gradually transformed into a global empire. So the debate among neocons range over such topics as, will Iran and/or Syria and/or North Korea be the next target for American-led “regime change”? Will American take steps to contain the rise of China as a potential challenger to its hegemonic power which could lead to war between the two powers? Is the U.S. encouraging a split in Europe to prevent the emergence of a powerful EU that could contain US economic and military power? But the insurgency in “liberated” Iraq two years after U.S. President George W. Bush declared that “major combat operations in Iraq have ended” against the backdrop of a banner proclaiming “Mission Accomplished”, have raised doubts about whether Washington can produce reruns of Iraq in Iran or other countries.

In the Real World, as opposed to the universe of “pseudo events” – the toppling of Saddam’s statue, the handing of documents of sovereignty from coalition leader L Paul Bremer to Iraqi leader Iyad Allawi, the voters happily waving their purple fingers – and wishful thinking, there are some indications that economic and military pressures are making it a Mission Impossible to accomplish the imperial fantasies concocted in think tanks in Washington by American intellectuals who have never met a war they did not like (as long as they do not have to actually fight in it).

Both the New York Times and the Los Angeles Times reported last week that the chairman of the Joint Chiefs of Staff concluded in a classified analysis presented to Congress that the strains imposed by the wars in Iraq and Afghanistan have made it far more difficult for the US military to beat back new acts of aggression and launch a preemptive strike or prevent conflict in another part of the world. Indeed, in what the LA Times described as “a sober assessment of the Pentagon’s ability to deal with global threats,” General Richard B Myers concluded that the American military is at “significant risk” of being unable to prevail against enemies abroad in the manner that Pentagon war plans mandate. It seems that empire building is a costly and risky business, and according to several polls that is certainly the conclusion of the American people.

Diary from Mosul.

The three months it took to cobble together a government in Iraq after January’s election shows the depth of the divisions between the Shia, Sunni and Kurdish communities. In the north of the country the Sunni Arabs and the Kurds are close to civil war. Their savage skirmishes, around the oil city of Kirkuk and in the streets of Mosul, are generally unreported in Baghdad. The war of 2003 made the Kurds the north’s dominant power. They are no longer penned in their mountains, or in their decrepit cities crowded with refugees from the 3800 villages destroyed by Saddam Hussein. But their advance south is contested by the Sunni Arabs, everywhere on the retreat but able to stage daily suicide bomb attacks, ambushes and assassinations. On 4 May a man with explosives attached to his body blew himself up in a queue of young men trying to join the police in Arbil, killing 60 of them and wounding 150. Ghassan Attiyah, a political commentator in Baghdad, told me that “the Kurds were able to destabilize Iraq for half a century under Saddam Hussein and his predecessors. The Sunni Arabs are certainly strong enough to do the same thing if they want to.”

The strength of the armed resistance is misunderstood outside Iraq. It has always been fragmented. Unlike the National Liberation Front in Vietnam or the Provisional IRA and Sinn Fein in Northern Ireland, it is not well organized. It grew so fast after the fall of Saddam and proved so effective because the American occupiers managed to make themselves extraordinarily unpopular within days of entering Baghdad. The insurgents have many weaknesses. They have no political wing. The fanatical Sunni fundamentalists, commonly called the Salafi or the Wahhabi, see Iraqi Shias and Christians as infidels just as worthy of death as any U.S. soldier. When American forces damaged two mosques in Mosul in the fighting last November, the resistance blew up two Iraqi Christian churches. Such sectarianism makes it impossible for the resistance to become a truly nationalist movement, but there are four or five million Sunni Arabs – a strong enough base for an insurgency.

The war will go on in Iraq because no community has got what it wants and none has given up hope of getting it. The Shias, 60% of the population, want power. They turned out to vote in January despite suicide bombers. They now believe that the U.S., the Kurds and the Sunni Arabs are plotting to marginalize them. Political authority in Iraq has always been exercised through the security agencies. That is why, during the three months of negotiations to form a government, the Shias, under the new prime minister, Ibrahim Jaafari, insisted on getting the Interior Ministry. The U.S. is resisting a full Shia takeover and wants to stop them getting the Defence Ministry as well.

The Sunni Arabs are divided and unclear in their aims. They want the U.S. occupation to end. But, having boycotted the election, they are not sure how they will relate to the new government. Despite the Sunni boycott, the government was elected by popular vote and has a legitimacy its predecessors lacked. The Kurds, almost to their own surprise, are the community which made the biggest gains after Saddam’s fall: they hold Kirkuk, they are allied to the U.S., Jalal Talabani – one of their leaders – is president of Iraq, and they enjoy a degree of autonomy close to independence. But they fear that this may be as good as it gets. The government in Baghdad will get stronger in time, and as it does so it may try to restore its authority over Kurdistan.

AN ATTACK ON LIBERTY, 100-0

Tuesday marked an important day in the long history of the United States of America. The Senate unanimously approved the Iraq Supplemental Spending Bill as expected, passing along with it a very important rider: The REAL ID Act. What is the REAL ID Act? Simply put it is an erosion of freedom, balance of powers, and states rights under the guise of safety. The erosion of freedom is simple, your government will be able to track you with uninhibited ease compared to the past. Language within the bill gives the Department of Homeland Security unequivocal control over the implementation of the new national ID. One of the “security features” will be an identification method, it could be similar to the magnetic strip already contained on the back of your driver’s license. Do not count on this being the technology that will be used.

The Department of Homeland Security has a strong inclination for RFID technology (which is also being used in future passports). Yes, tracking technology. This is the same technology Wal-Mart uses to track its billions of dollars in inventory as it moves through distribution centers and stores. Why on earth would the Department of Homeland Security want to use tracking technology in licenses? The question answers itself, why wouldn’t they. Mandating citizens to carry a card on their person that has a tracking chip is not as Orwellian and draconian as having an implant to keep tabs on citizens.

Do not count on these cards being secure either. We all know how successful corporations have been at implementing secure digital media. Their failure rate has been immense, even given the unconstitutional Digital Millennium Copyright Act which was designed to severely punish those who “hack” and “crack” encryption technologies. One can only guess at how well a growing bureaucracy will do at ensuring our ID’s we have to carry with us will be secure. As the technology stands, you can “sniff” RFID tags from several hundred meters away, once cracked this is a dangerous proposition. Ignoring any Orwellian fears a minute, the simple fact it can be exploited for nefarious purposes by criminals is reason enough to cause alarm. The security of a system is only as strong as its weakest link. How many weak links can we find within the massive and ever growing federal government? If you think using RFID’s is the end to this, you have another thing coming. RFID tags will only be the beginning of ever more control by the government. Government never stops growing and assuming powers it has no right to take.

Along with the RFID tags there will be extensive databases, all linked, to compile information on the citizens of the “free” United States. The new national ID must be used to open a new bank account, receive government benefits, and a host of other activities. They will track everything you do. But I guess the only people that have something to hide will worry, it is not like history repeats itself.

Section 102 of this bill should cause worry to all Americans, past and present. Congress is attempting to remove the Supreme Court from the balance of power. Giving the Department of Homeland Security unbridled power to legislate as they see fit is unacceptable from the standpoint of ensuring freedom for all Americans. Who are we to hold responsible in the Department of Homeland Security? They are not elected officials, yet they cannot be held in contempt of violating our Constitutional Rights as Americans, our God given rights to live free and not be held slaves of our own government. One must ask, do you really think the Supreme Court will rule against itself having the power to declare laws unconstitutional? The Supreme Court deciding they do not have that power has as much chance of happening as Congress cutting the size of government in half. Now you must ask yourself, how will this be implemented?

Implementation will take place through extortion. Let us not forget extortion is illegal, unless you are the federal government. If a state refuses to implement the REAL ID Act it will not be a beneficiary of federal dollars or programs. The citizens of the state will not be purvey to federal programs, incentives, and even travel. Your tax dollars are taken away and held hostage in exchange for your rights.

And let us not forget the gross perversion of power that has allowed this bill to pass as is. The simple fact this bill was attached to emergency spending to ensure our troops are safe while at war is despicable. All members of Congress should feel disgusted at their attempts to subjugate the freedoms we enjoy as Americans while not standing up against this bill. The fact not one member of the Senate had the courage to vote against this bill should be proof to all Americans that our representatives are not upholding the Constitution they swore to obey. The bill failed to pass on its own last year. It would have done the same this year. It was bad legislation, it is still bad legislation, and it will be bad legislation.

FRED REED TO SAVE COUNTRY

It has become apparent that I am going to have to reform the government of the United States. Frankly I would rather remove one of my lungs with a ballpoint pen. Still, I am nothing if not perfervidly public-spirited. I will not stand around like Nehru fiddling while Rome burned. Noblesse oblige, that sort of thing. To begin, we have much too much democracy. We need to discourage people from voting. In fact, the gravest obstacle to the restoration of civilization in North America is universal suffrage. Letting everybody vote makes no sense. Obviously they are no good at it. The whole idea smacks of the fumble-witted idealism of a high-school Marxist society.

At least 80% of the electorate lives in blank medieval darkness regarding any matter of public policy or history. They might as well vote on the incisions needed in cardiac surgery as try to govern themselves. Poll after poll shows that even graduates of America’s pathetic Halloween universities (where the young disguised as students are hornswoggled by mountebanks disguised as professors), which means most of the universities, do not know who fought in WWI, or within a century when the Civil War took place, or who Galileo was. These are the better informed. The rest barely know what century they live in. Unalloyed ignorance is not an obvious qualification for governing, despite all appearances.

Only two possible reasons exist for universal suffrage, both bad. The first is that if you let idiots vote, the Democrats will sometimes be elected. The only good thing that can be said about Democrats is that, when they are in power, the Republicans are not. The second reason is that, in principle, the idiot vote will keep idiots from being maltreated by the bright. It does not, however, keep the bright from being maltreated by idiots, who are far more numerous. They run the schools, for example, which is why students often cannot read after twelve years. Obviously we need to restore something like the old literacy tests for voting. I am not suggesting that we ask hard questions, even ask simple questions like when did Reconstruction end, or who was Neville Chamberlain. However, potential voters would be required to find the U.S. on an outline map of the world. This would eliminate half the public. Ask them to find Japan and you would be down to 10%. Then I would have them read a randomly chosen paragraph from the Constitution and see whether they had the foggiest idea what it meant. Few would.

Next, nobody under the age of 25 should vote. A recent college graduate is a sorry cheese-brained late adolescent. With maturity he may be approximately rational, but at 21 maturity he don’t got yet. Next, only foreign correspondents should be permitted to run for president. He has spent three years each in, say, Buenos Aires, Teheran, and Singapore, and speaks a couple of the languages. He actually knows something about the world outside of the U.S. A reporter spends his time learning about things, not in buying votes or grinning. He knows the cities and governments of Asia, Africa, and Europe, the bars, villages, economies. He has seen wars at the level of ruptured abdomens and probably is not enchanted by them the way some draft-dodging amateur from Houston might be. He knows the people of these countries, and knows that they are people, which seems never quite to penetrate to jejune occupants of the great double-wide on Pennsylvania Avenue.

Finally I would set out to promote aristocracy. Though the Floundering Fathers did not intend it, we now see that representative government quickly turns into the dictatorship of the proletariat. If you doubt this, I congratulate you on not having a television. Today, the worst impose themselves on all, because they can.