May 2008 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)

ETERNAL CITY, CHRONIC TROUBLE
May 10, 2008

A little more grist for the "Is America the new Rome?" mill, courtesy of the inimitable Bill Bonner.

No modern government policy is so stupid that the Romans did not think of it first.

A visitor to the Eternal City, even if he has been many times before, feels his jaw drop and his pulse rise. The city is still a magnificent ruin ... a vast memento mori recalling every absurdity and corruption known to man. Here we begin ab ovo, as the Romans used to say -- with the egg.

At the far end of the Largo di Torre Argentina, for example, is the spot where Julius Caesar's body was ventilated. Poor Julius. His wife warned him. His soothsayer warned him. Even his friends warned him that something was up. Still, the man who had conquered Gaul and brought Vercingetorix back to Rome in chains, and then triumphed in the civil war against one of Rome's greatest generals, Pompey, dismissed his guards and walked into a cheap ambush by politicians, one of whom was probably his own son. ... But that is the amazing thing about the Romans and modern man too. Even when the traps are as obvious as bailouts and Baghdad, they sashay right in.

And over there ... at the Domus Aurea, was Nero's golden palace; a place that saw such debauches as to make Britain's royals -- perhaps with the exception of that ancient Edward -- seem like archangels. Nero's mother was Caligula's sister, with whom she an "inappropriate relationship." She plotted against Caligula, and when he was out of the way, married her uncle, Claudius. She poisoned Claudius ... and his son, Britannicus, too, so that her own son from a previous marriage -- Nero -- could become Emperor. Then, fearing that she was losing her grip on her son, she seduced him. But by that time, he was so deep into carnality with slaves, senators' wives and castrated boys, that her motherly charms could not hold him. So, she tried to kill him. He beat her to the punch, sending his soldiers to skewer her. ...

Our beat is money, not history. But today we pick through Rome's huge trash pile to try to learn something.

Everything started to go wrong in the time of Marcus Aurelius, say most historians. Soldiers returning from the Parthian war brought the first major plague epidemic with them. There was a revolt in Egypt. And Germanic tribes pushed across the Danube and the Rhine.

But the real problem began much, much earlier, practically ab ovo. From the very beginning, the Romans picked fights with the neighbors. The small colony had a shortage of females, so the Romans carried off the women of a nearby tribe. ... From there, one local tribe after another was subdued. And each successful campaign elevated the power and wealth of Rome and led, like antipasto to primo platti, to the next campaign.

As a business model, Rome's strategy was obviously flawed. Like a credit bubble, it required constant expansion. Still it was nice in the beginning. The early days of the Roman Empire were like the early days of the British Empire or the American Hegemony. Expansion opened up new markets and brought in new supplies of raw materials at better prices. Not only was there booty; there were also slaves.

Nothing fails like success. The slaves had an effect on the domestic labor market of the time not unlike Chinese and Indian peasants on today's labor rates. The price of free labor fell. Another familiar consequence was an increase in speculation and what we would call "financialization" of the economy. Instead of farming themselves, ambitious Romans outsourced, setting up huge agricultural estates all over the empire, which were operated by slaves. This had a further effect of lowering prices on farm products. Small, independent landowners could not compete. They went to the cities. Or, they joined the army.

Eventually, Roman expansion reached its limits under Trajan. Then, the military machine gradually changed from a profit-making institution manned by Romans, to an expensive peace-keeping force staffed largely by barbarians. Worse, the clattering of chains was no more to be heard in the Delian slave market. Now the problems really began. The government had begun distributing free bread, in order to keep the urban mobs quiet, a program similar to today's tax rebate checks. Already, under Augustus, one in five people in Rome depended on the "dole".

Then, Rome's balance of trade grew increasingly negative. This gave rise to something else that will be familiar to us: inflation. Nero took 10% of the silver out of the denarius. Then, under Marcus Aurelius, it was down to 75%. Finally, by the third century, the denarius was made of brass, with a silver coating. Consumer prices soared. Diocletian's solution was very similar to what Richard Nixon would do many years later -- The Edict of Prices, a system of price controls.

With no more slaves shuffling into the city, Rome turned to its remaining small farmers. First, it subsidized the farmers -- with the "alimenta" -- like our own crop support programs. Then, desperate for food, it requisitioned grain and cattle from them directly ... and forced the farmers to stay with their land, like serfs. The farmers' situation became so miserable they began to sell themselves into slavery. This traffic became so heavy that the government banned the practice in 368 AD.

Modern politicians and central bankers have nothing on their ancient forebears. Bailouts ... monetary stimulus ... subsidies ... giveaways -- the Romans had a solution for every problem. And every solution brought new problems ... until the weight of them crushed the whole empire.

COME HOME, CONSERVATIVES! – TO THE ANTIWAR CONSERVATIVE MOVEMENT
May 7, 2008

Under Consideration: Bill Kauffman, Ain’t My America: The Long, Noble History of Anti-War Conservatism and Middle-American Anti-Imperialism.

Thomas E. Woods, Jr., bestselling author of seven books, including 33 Questions About American History You're Not Supposed to Ask and The Politically Incorrect Guide to American History reviews Bill Kauffman's latest book. We featured a review of Kauffman's now second most recent book, Look Homeward, America: In Search of Reactionary Radicals and Front-Porch Anarchists, here.

Winston Churchill once described the Soviet Union as the only country in the world with an unpredictable past. It was an impressive racket, really, in which the official version of history changed in accordance with the political demands of the present. If something in the past discomfited the regime and its propaganda, then it never happened, or happened quite differently.

In our own country, teachers and ordinary citizens alike are expected to conform to the Official Version of our history. Book publishers, to be sure, do not conspire behind closed doors to come up with ways to enslave the American people to their government. But suppose they did, and American history textbooks were written for the express purpose of turning American students into zombies who mindlessly repeated government propaganda and believed the state existed to protect the common good. How would the books be any different?

For a maverick historian, though, an ossified Official History has a silver lining: He can make a career out of exposing and correcting it, or filling in the gaps that court historians choose to ignore. Until Bill Watkins's 2004 volume Reclaiming the American Revolution, for instance, there had not been a single book on the Virginia and Kentucky Resolutions of 1798 in a hundred years -- as scores of studies of every bit of useless trivia lined the shelves.

Bill Kauffman has filled another such gap in delightful and dramatic style with Ain't My America: The Long, Noble History of Anti-War Conservatism and Middle-American Anti-Imperialism. Kauffman's book joins only a handful of titles on this interesting and important subject, including Justin Raimondo's excellent Reclaiming the American Right: The Lost Legacy of the Conservative Movement (which is being re-released with additional material this month), Justus Doenecke's Not to the Swift: The Old Isolationists in the Cold War Era, and Ronald Radosh's Prophets on the Right: Profiles of Conservative Critics of American Globalism. (Radosh, now a neoconservative, has doubtless repudiated this useful book, which is further indication of its worth.)

The figures and organizations Kauffman profiles do not fit into the received version of American history, in which only "leftists" who "hate America" might object to spending trillions of dollars feeding imperial ambition. The conservative John Randolph of Roanoke, who opposed the War of 1812, and Alexander Stephens, the Confederate vice president who had earlier opposed war with Mexico, are just two of the people discussed in Ain't My America who refuse to fit themselves into the proper categories.

A strange omission from this book is the War Between the States, for if violently suppressing the peaceful secession of sovereign states does not smack of imperialism -- especially in the context of the nation-building nineteenth century -- then nothing does. The depiction of that war as glorious and righteous is a central ingredient in the current regime's flattering portrayal of itself, and in the civic religion taught in the institutions of propaganda to which some still entrust their young. Robert E. Lee made the connection explicit, predicting that the "consolidation of the states into one vast republic" would produce an entity that was "sure to be aggressive abroad and despotic at home." This should have been perfect grist for Kauffman's mill.

This is not quite fair. We have only just started the book ourselves, but on page 16, discussing the opposition to Thomas Jefferson's Louisiana Purchase: "The spirit of separation, condemned by New Englanders with bombast and cannonblast threescore years later, was fanned by her representatives in the wake of the Purchase. The [bilious] Federalist Timothy Pickering, who despised 'the Moonshine philosopher of Monticello,' dreamed of a northern confederacy, 'exempt from the corrupt and corrupting influence and oppression of the aristocratic Democrats of the South.'"

The cross-ideological American Anti-Imperialist League, formed in the wake of the American acquisition of (among other territory) the Philippines following the Spanish-American War, is right up Kauffman's alley. ... Now once in a while the anti-imperialists are taken to task for their alleged lack of racial enlightenment (the pro-war forces, of course, being their usual models of toleration). This description of the anti-imperialists is not even accurate in the first place; Moorfield Storey, a leader of the NAACP, is one of many obvious counter-examples. But Kauffman, who is able to put such matters into perspective, suggests that mass murder may actually be a worse crime than racial insensitivity: "If neither side distinguished itself by the elevated moral standards of the twenty-first century, when all men are brothers and peace rules our planet, at least the anti-imperialists wanted to leave the Filipinos alone rather than conquer and slaughter them."

Along the same lines Kauffman cites Sen. James K. Vardaman of Mississippi, who like most Americans at the time believed neither in integration nor racial equality but who sacrificed his career for the cause of peace as Woodrow Wilson was pushing his country into the Great War. His friends tried in vain to persuade him to support the president, but he would not budge. Losing his Senate seat was as nothing, he said, compared to the lives and liberties that Americans would lose if the country entered the war. In 1918 he was defeated for re-election by Democrat Pat Harrison—who, by the way, was pro-war and pro-segregation. (Wilson himself was not exactly known as a champion of the oppressed black man, but is still ranked among the "near great" presidents; taking the country to war evidently covers a multitude of sins.)

Vardaman, says Kauffman, "understood that standing athwart the empire would destroy his career." How easy it would have been "to trim, to temporize, to dissemble, to quietly slip out of the peace camp and vote for Death. But to his eternal credit, he did not." As he left the Senate, Vardaman called on the nations of the world to abolish conscription and to establish national referenda to decide on war. ...

But if that proposal held more potential peril than promise, opponents of the warfare state in the 1930s possessed equal parts cleverness, cynicism, and dark humor. Kauffman reminds us of the Veterans of Future Wars, a group organized at Princeton University in 1936 that went on to boast 584 chapters around the country. Then there was the Association of Gold Star Mothers of Future Veterans, born at Vassar College, as well as the Foreign Correspondents of Future Wars, established at the City College of New York. This latter group proposed "to establish training courses for members of the association in the writing of atrocity stories and garbled war dispatches for patriotic purposes." If only our own opposition to war and propaganda could be half as inspired.

Thanks to Ron Paul's campaign the term "Taft Republican" is being tossed around once again, and Kauffman reintroduces us to the Ohio senator. Taft, known in his day as Mr. Republican, declared on the Senate floor in January 1951 that "the principal purpose of the foreign policy of the United States is to maintain the liberty of our people. ... Its purpose is not to reform the entire world or spread sweetness and light and economic prosperity to peoples who have lived and worked out their own salvation for centuries, according to their customs, and to the best of their abilities." Taft identified the second goal of American foreign policy as peace. Writes Kauffman: "Liberty and peace; with those two words, [Taft] had placed himself as far outside postwar discourse as one could reasonably stand."

We are also treated to a sympathetic account of the anti-militarist side of Russell Kirk, whose seminal work The Conservative Mind became a revered text in the conservative canon. Among other things, Kirk was a staunch opponent of the first Persian Gulf War, writing privately to a friend that George H.W. Bush should be strung up on the White House lawn for war crimes. His lectures at the Heritage Foundation in the early 1990s decrying war and militarism were allowed, no doubt, only because the aging Kirk was considered too iconic not to be granted respect. Those speeches would never be permitted today, it hardly need be said, with war and bankruptcy now the most urgent conservative goals. Kirk, who had earlier dismissed libertarians as "chirping sectaries," praised them in the 1990s for having an "understanding of foreign policy that the elder Robert Taft represented." ...

For whatever reason, Ron Paul barely registers in Ain't My America -- perhaps because, compared to the others featured here, he is already relatively well known. Kauffman instead interviews Congressman Jimmy Duncan (R-Tennessee), who agrees with the Texas congressman that there was nothing conservative about the Iraq war. Duncan also has the crazy idea that the U.S. government might engage in too much military spending: "My goodness, we're spending as much as all other countries of the world combined on defense spending -- and they always want more." This alone makes Duncan a "liberal," according to the automatons.

Kauffman's writing style is a perfect medium for transmitting the flavor of these times and the character of these men. The old republic practically courses through his veins, and the words flow effortlessly from his pen -- even if they happen to be words like amaranthine, mephitic, esurient, and nepenthe. [As we commented in the 2-11 Digest posting, Kauffman's love of flowery words gets the best of him sometimes.] At times an understandable exasperation comes through. Thus: "War effaces and perverts everything that traditionalist conservatives profess. Every damn thing, from motherhood to the country church. And yet postwar conservatives, and especially the scowling ninnies of the Bush Right, revere war above all other values. It trumps the First Amendment; it razes the home; it decks the decalogue. And they don't care."

Nor do most Americans, if their voting patterns and apathy are any indication. "The American Century, alas, did not belong to the likes of Moorfield Storey, Murray Rothbard, or Russell Kirk," Kauffman laments. "But the American soul does."

I agree, or at least I want to. Ours is a great anti-colonial tradition, and our founders cautioned us about the perils of war and entangling alliances. Charles Pinckney warned his countrymen that global ambition was incompatible with republicanism. And the feisty individualism, the aversion to propaganda, and the plain-speaking common sense of the conservatives who populate Bill Kauffman's book have a distinctly American flavor.

Yet one nagging argument just will not go away: If this truly is the American soul, someone must have forgotten to tell the American people. William James, aghast at the colonial occupation of the Philippines that followed the Spanish-American War, declared that the U.S. had "puked up its ancient soul ... in five minutes." That soul, such as it is, has been sold time and again. And not to particularly high bidders, either. What people possessed of an antiwar, anti-imperial soul, that wishes only to do justice and pursue the ordinary things of life, could have been led into an immoral absurdity like the Iraq war?

With very rare exceptions, Kauffman observes, the American people have never really been presented with a choice for or against the empire. All too true -- but are the people really blameless here? Some of their stupid electoral decisions may be the result of an ignorance for which they are not entirely responsible, but what remotely educated or even half-conscious living being could consider John McCain a fit candidate for anything?

I am not entirely sure why the old America is so unpopular, though part of the reason is that few Americans have been allowed to discover it. When they do, many want to recover it. That is why, if I were looking to transform a neoconservative into a normal human being, Ain't My America would be one of the first books I would hand him in my proselytizing mission.

THE LONG NIGHT
May 10, 2008

Charley Reese warns where the systematic disregard for the rule of law and the aggregation of power into the U.S. Executive branch's hands will lead.

Have you ever wondered how human beings can be so cruel? And how cruelty crosses all the boundaries -- national, racial and ethnic? I have. Rereading an autobiography published in 1941 by a communist agent reminded me of the dark side of human nature.

The book, Out of the Night, was written -- under the pseudonym "Jan Valtin" -- by a German who lived through the chaos of the collapse of the Weimar Republic and the rise of Nazism. Broken by Gestapo torture, he ended up being pursued by both the Nazi and the communist manhunters and killers.

Murders by these two forms of socialism are measured in the millions during the 20th century. That alone should warn all people off any form of collectivism, because all of those millions, in the minds of their killers, were sacrificed "for the greater good." They -- flesh-and-blood individual human beings -- were all murdered in the name of an abstraction, a stupid theory of how society should be organized. I doubt if the head thugs on both sides actually believed the theories. What they really believed in was power over their fellow man.

If you look at the French Revolution and the Bolshevik Revolution, the message is clear: Intellectuals and the common people can produce a blood bath. Latching on to some "ism" for justification, their greed for power and desire for revenge can run amok. Butchering women and children because they were born into the "wrong" class is surely insane.

In our time, when people are saying we must sacrifice liberty for security, that scrapping the Constitution is necessary to win the "war" against terrorism, I would suggest that you take your choice of genocides in the past 100 years and remind yourself what happens when people buy into the false proposition that the end justifies the means. People who preach that are always more interested in the means than in any end.

The only safe environment for a human being is under a weak government with very restricted powers. Normal people do not need much to be happy -- food, shelter, dignity and freedom from marauders. They need a rule of law that applies to everyone equally and at all times and in all circumstances. In established societies, legislators should meet rarely -- perhaps once every two or three years -- because a continuing cascade of new laws will eventually drown freedom.

The Founding Fathers, whether through luck, wisdom or divine guidance, gave us an almost perfect form of government, and we have been busy ever since trying to take it apart. Human beings are dangerous predators and cannot be trusted with power over their fellows. Many Americans have forgotten that the power of government comes out of the barrel of a gun. Governments coerce; they do not persuade.

There are people living among us at this very moment capable of the cruelty so evident in the Holocaust. All they are waiting for is the opportunity. No greater opportunity exists than when a government enlists such people and says whatever you do is now justified for the sake of the "greater good."

Who would have guessed that George W. Bush, who seemed to be a genial good old boy, would turn out to be a tyrant, launching wars of aggression, arresting and confining people without charges or access to a lawyer, condoning torture and lying to the American people? A government that can without trial destroy you by simply putting on a list your name or the name of an organization with which you are associated is a tyranny. A government that invades other countries and that feels free to murder people in any country it chooses is a tyranny.

Americans are on the edge of a long night. We had better wake up and step back before it is too late.

LAND OF THE FREE?

Liberty in America is not quite as revered as its leaders pretend.

The headline question is a standard rhetorical lead-in by libertarians, anarchists, and certain leftists when they are the receiving end of arbitrary power. Their answers is most cases would be "Not very." When The Economist and Freedom House, a middle-of-the-road advocate for worldwide freedom, ask the same question that is something else again. While expectedly restained in their words compared to what one usually reads on these pages, they are nevertheless unmistakeably critical of road the U.S. and the Bush administration have traveled over this century. Let us hope they are correct in the faith expressed in America's capacity for self-correction.

No other country puts as much emphasis on "freedom" as the United States. Patrick Henry demanded "liberty or death". The national anthem calls America "the land of the free". Great reformers from Abraham Lincoln to Martin Luther King have urged America to live up to its ideal of "freedom". When a group of French Americanophiles wanted to flatter the U.S., they sent the Statue of Liberty.

And no other country boasts as much about its mission to give freedom to the rest of the world. Woodrow Wilson thought that he had a God-given duty to bring liberty to mankind. George Bush regards his foreign policy as a crusade for freedom -- "the right and hope of all humanity".

But how good is America at living up to its own ideals? A new study by Freedom House tries to answer this question. The fact that Freedom House has devoted so much attention to the U.S. is significant in its own right. Founded in 1941 by a group of Americans who were worried about the advance of fascism, Freedom House is now the world's leading watchdog of liberty. The fact that "Today's American: How Free?" is such a thorough piece of work makes it doubly significant.

The judicious tone of "How Free?" will undoubtedly disappoint leftists. Freedom House bends over backwards to give the authorities the benefit of the doubt. Other countries have recalibrated the balance between freedom and security in the face of terrorists who want to inflict mass casualties on civilians. America's recent sins, however, are minor compared with those of its past. Newspapers have published highly sensitive information without reprisals. Congress and the courts have repeatedly stepped in to restore a more desirable constitutional balance.

But the verdict on the Bush years is nevertheless sharp. "How Free?" not only details and condemns the administration's familiar sins, from Guantanamo to extraordinary rendition to warrantless wiretapping. It reminds readers of its aversion to open government. The number of documents classified as secret has jumped from 8.7 million in 2001 to 14.2 million in 2005 -- a 60% increase over three years. Decade-old information has been reclassified. Researchers report that it is much more difficult and time-consuming to obtain information under the Freedom of Information Act.

Government whistleblowers have repeatedly been punished or fired -- even when they have been trying to expose threats to national security that their bosses preferred to overlook. Richard Levernier had his security clearance revoked for revealing that some of the country's nuclear facilities were not properly secured. Border security agents have been punished for pointing out that the border is inadequately monitored, and airport baggage-handlers and security people for pointing to weaknesses in the security system. The Office of Special Counsel, which was established to enforce laws designed to protect the rights of such people, is widely regarded as "inept and even hostile to whistleblowers".

"How Free?" also has some hard things to say about America's criminal-justice system. The incarceration rate exploded from 1.39 per 1,000 in 1980 to 7.5 in 2006, driven, among other things, by the war on drugs. America now has one of the highest rates of imprisonment in the world: 5.6 million Americans, or one in every 37 adults, has spent time behind bars. Even though prison-building is one of the country's great growth industries, overcrowding is endemic, with federal prisons operating at 131% of capacity. America is also one of the few countries to ban felons and, in some states, ex-felons from voting. At any one time 4 million Americans -- one in every 50 adults -- is disenfranchised because of past criminal convictions. This includes 1. million blacks, or 14% of the black male population.

Freedom House's strictures are, if anything, too soft. America insists on criminalizing victimless crimes such as prostitution. Last week Deborah Jeane Palfrey, the so-called DC Madam, committed suicide. The government had thrown the book at her, including racketeering and mail fraud, because it really wished to penalize the arranging of assignations between consenting adults. In her suicide note to her mother she wrote that she could not "live the next six-to-eight years behind bars for what you and I have both come to regard as this 'modern-day lynching'."

The American legal system also seems to have lost any sense of proportion. Christopher Ratte, a professor of archaeology, recently tried to buy his 7-year-old son a bottle of lemonade at a baseball game. He was handed a bottle of Mike's Hard Lemonade, an alcoholic drink, by mistake. Officials noticed the boy sipping the drink and immediately whisked him off to hospital. He was fine. But the family was condemned to legal hell. The police at first put the 7-year-old into a foster home and a judge ruled that he could go home only if his father moved out. It took several days of legal wrangling to reunite the family.

This is not just the legal system. This is the whole bureaucratic mentality that makes any rule violation a major offense. Every 2-bit worker in some position of responsibility and power becomes a potential Torquemada. This cultural shift is reflected in the legal system.

"How Free?" repeatedly argues, even as it dredges through the most depressing material, that the American system has proved admirably self-correcting. The response of civil-liberties advocates has been swift and dogged. The Supreme Court has forced the administration to extend the Geneva conventions to inmates in Guantánamo and other military prisons. Congress has reined in warrantless wiretapping. The press has repeatedly published leaked material.

This is perhaps a little optimistic -- the courts have been slow and Congress half-hearted. But nevertheless the self-correction is now entering a higher gear. All the current presidential candidates, Democratic and Republican alike, have condemned torture and rendition and declared their desire to close Guantanamo. Freedom House's new publication will be an important contribution to this process of self-correction.

TAX TREATMENT TEMPTS BUSINESSES TO CHANGE COUNTRIES
May 12, 2008

The headline would warrant a nomination for the "Keep Grasp of the Obvious" award of the month, except that so many tax policy makers act as if they are oblivious to it. Or have acted. With a recent flood of relocation announcements, national governments are paying attention.

When Halliburton moved its headquarters from Houston to Dubai last year, the oil services group provoked a political storm. Despite assurances that the company was not seeking to avoid tax or scrutiny, the move was lambasted by Democrats as an example of corporate greed. Senator Hillary Clinton led the attack, denouncing the move as "disgraceful".

On the other side of the Atlantic, the spotlight is also on corporate defections after two big UK companies said last month they were shifting to Ireland for tax reasons. Others have also hinted at leaving. When United Business Media, a trade publisher, announced the move of its headquarters to Ireland, Vince Cable, the Liberal Democrats' Treasury affairs spokesman, criticized this as "blatant tax avoidance".

Politicians fear loss of jobs and tax revenues when companies move their headquarters. But their moral indignation cuts little ice with multinationals whose ties with their home countries have diminished because of international expansion and cross-border mergers.

Over the last decade, 6% of multinationals have relocated, partly for tax reasons, according to research from Oxford University's Centre for Business Taxation. Companies competing with rivals based in lower-tax regimes are under pressure to cut their tax bills. Moreover, they are being wooed as never before by small countries keen to attract skilled jobs or create a larger tax base.

UBS, the investment bank, predicts a "gradual erosion of governments' ability to tax". When Shire, the UK pharmaceutical company, announced its move to low-tax Ireland last month, Amit Kara, director of UBS, said: "This is the kind of tax competition we should expect. The pressure will remain on countries such as the UK to continue lowering corporation tax especially for the fleet-footed. The tax burden may shift to smaller companies."

At first sight, there is little reason for governments to panic about the threat of shifting headquarters. Companies will still pay tax on the factories, sales and other profitable activities in the countries where they operate. But finance ministries fear that migrating companies will find new ways to strip the tax base of the countries where they operate. Academic research published last year showed that foreign-owned manufacturers in Europe paid less than half as much tax as domestically owned businesses.

A very interesting statistic, and not really surprising. When a company has operations in multiple jurisdictions it is only a matter of time before it starts to look at ways to take advantage of the situation vis a vis reducing taxes.

Julian Alworth, an associate fellow at Oxford's Saïd Business School, sees fiscal reasons as dominant in determining relocations. He told a recent conference: "When you look at why companies are moving headquarters, it is often to reduce the liability in the country where their headquarters are located and where they have their operations." He cited a controversial attempt by Stanley Works, the U.S. tool manufacturer, to move its headquarters to Bermuda in 2002, which was ditched after a political outcry.

The suspicions of finance ministries are also aroused by the mobility of the income that companies derive from intellectual property or financing operations. Many big countries attempt to trap this income in their tax net using anti-avoidance rules. By moving to a more lenient regime, companies hope to escape these restrictions.

Boasting an attractive tax regime for intellectual property has become part of the marketing pitch for countries wanting to attract foreign corporations, particularly the regional European headquarters of U.S. multinationals. Kraft, Google, Electronic Arts and Yahoo have all recently switched their European headquarters from the UK to Switzerland. eBay, Amazon and Microsoft have moved to Luxembourg. The Netherlands boasts names such as Cisco Systems, Nike and Starbucks.

As multinationals become more skillful at managing their intellectual property, there are tax as well as commercial advantages. By holding brands and patents in low-tax countries and charging other subsidiaries for their use, profits are lowered in high-tax countries.

W.I.L. first described this tactic (see here) almost 10 years ago, and it has been going on for a lot longer than that. Companies are finally implementing the idea en masse.

Unsurprisingly, these shifts of intellectual capital are unpopular with many tax authorities. Two years ago, Mark Everson, former commissioner of the U.S. Internal Revenue Service, warned that the increasing transfer of intangibles was a "high-risk compliance concern", adding: "Taxpayers, especially in the high technology and pharmaceutical industries, are shifting profits offshore."

"High-risk compliance concern" nothing. It is an outright loss of taxable profits concern!

The small, low-tax countries that encourage profit-shifting of this sort are also criticized. Ireland's success at attracting knowledge-based companies is seen as overly aggressive by some rival governments. Arnauld Montebourg, a French politician, last year accused low-tax Switzerland of "predatory practices". The Netherlands -- which attracted Ikea from Sweden and Gucci from Italy -- was lambasted for its approach to taxing mobile income by the Amsterdam-based Center for Research on Multinational Corporations, a non-profit research group. "All the empirical evidence indicates that the Netherlands is a tax haven," it said.

These criticisms are shrugged off by tax competition advocates, who believe tax competitiveness encourages investment. But resentment from larger rivals poses risks for small countries eager for foreign business. One of the worst fears of Ireland's politicians is that the republic will be arm-twisted into adopting the European Commission's proposals for a common method of computing corporate taxes. When Christine Lagarde, French finance minister, said last month that France would push this concept forward in its European Union presidency, Bertie Ahern, the outgoing Irish prime minister, dismissed it as a "daft" idea.

Big countries are meanwhile strengthening their defences. In the U.S., the IRS is fighting the migration of intellectual property, inflicting tax demands running into billions of dollars on pharmaceutical companies. Germany has just reinforced its rules on the transfer of assets to foreign companies. The UK has proposed tightening its anti-avoidance rules by taxing the worldwide "passive" income of companies with UK headquarters.

These measures have a "Fool me once, shame on you. Fool me twice, shame on me" quality to them. Sure, you can nail companies the first time. Then they adjust. Companies will make darn sure that the assets do not end up residing in Germany or the U.S. in the first place. Then what is there left to tax the next time around? Of course, that is in the future -- not a time frame governments are known for paying much attention to.

But the problem is that these tougher regimes impose a hefty compliance burden on companies and expose them to the risk of double taxation. In the UK, the complexities of the proposed anti-avoidance system have exasperated big businesses already disenchanted with Britain's tax regime. Richard Lambert, director-general of the CBI, the British employers' federation, says companies "are seriously concerned about the high level and rising complexity of taxation in the UK and are increasingly prepared to vote with their feet".

Shire said it was leaving to "help protect the group's tax position". UBM said its long-term interests would be helped by Ireland's "less complex system of taxation". But nobody can confidently predict whether this trickle will become a flood. There are some powerful factors that deter companies from migrating, including the prospect of capital gains tax bills and the threat of reputational damage.

Also, for all the criticism of Britain's tax regime, it has an enduring appeal for some multinationals because of its generous treatment of interest costs and payments to shareholders. Barclays, Britain's 3rd-largest bank, thought hard about moving its tax domicile when it tried to acquire ABN Amro last year but calculated that its shareholders would be better off if it stayed in Britain.

Nonetheless, more big companies are considering leaving the UK. International Power, WPP, AstraZeneca and GSK have all hinted that the matter is under review. A few years ago, this could have been viewed as saber-rattling. But a big barrier to migration has recently been lifted: companies are no longer required to have a UK base to be included in the FTSE index.

Nor can the government rely on exit taxes to stem the tide. Unlike the U.S., which has tried to devise laws to keep companies on American soil, European governments are under pressure to remove barriers to movement within the single market.

In Britain, the threat of an exodus has sparked a debate about how policymakers should respond. Insurers are lobbying the Treasury for concessions to stem migrations to Bermuda. Deloitte, the professional services company, has argued for a special tax rate on mobile income such as trademarks. Another radical option being discussed is imposing a minimum tax for multinationals on their UK profits, as an alternative to stringent anti-avoidance measures.

The Treasury has an awkward dilemma. It depends on corporate taxpayers for 1/10 of its revenue. It does not want to make overly generous concessions. Nor does it wish to single out specific sectors or types of income for concessions, which might create new loopholes for avoidance.

So far, the Treasury's focus has been on making the tax regime more attractive for multinationals by exempting foreign profits from tax. This move could help stop corporate migrations, were it not accompanied by tougher anti-avoidance rules. One of the main reasons why DaimlerChrysler based itself in Germany rather than the U.S. after its 1998 merger (subsequently unwound) was that Germany exempted foreign profits from tax.

The UK has also promised to cut the corporation tax further, following a 2 percentage point fall to 28% this year. Gordon Brown last week told business leaders that one of his aims as prime minister was "to reduce corporation tax even further when we can afford to do so". Some businesses are clamoring for radical cuts. A recent CBI taskforce called for the corporation tax rate to fall, over time, to 18%.

A view sometimes aired in government is that large countries such as the UK should be more sanguine about losing the headquarters of big domestic businesses and focus on attracting "real business" into the country, regardless of who owns or controls it. Genuine investment goes to countries where it can be deployed. Tax is far less important in these considerations than proximity to markets, infrastructure and the availability of skilled staff.

Yet if countries such as Britain become reconciled to losing headquarters to lower-tax rivals, they will pay a price. As well as shedding well-paid jobs and advisory work, they risk a decline in influence and investment as decision-makers go elsewhere. When world-leading businesses uproot themselves, more is at stake than national pride.

FUJITSU RELEASES FULLY-ENCRYPTED HARD DISK DRIVE
May 14, 2008

This product from Fujitsu looks like a breakthrough in automatically and efficiently securing the contents of your PC's hard disk drive. A steady stream of news items about stolen or misplaced notebooks containing intimate personal data means this product and future competitors should have a large market.

Fujitsu, a maker of hard disk drives (HDDs) and a variety of electronics ... announced its new hard drive that features full encryption with 256-bit AES key, something never before seen in consumer class of devices. ... [T]he new product sports high performance and capacity./

256-bit AES encryption is sufficiently strong that the the U.S. National Security Agency (NSA) has declared: "The design and strength of all key lengths of the AES algorithm (i.e., 128, 192 and 256) are sufficient to protect classified information up to the SECRET level. TOP SECRET information will require use of either the 192 or 256 key lengths." The largest successful publicly-known brute force attack has been against a 64-bit length key with a simpler structure than AES. In short, the Fujitsu drive has very strong encryption protection.

Fujitsu MHZ2 CJ-series of hard disk drives in 2.5" form-factor offer 80GB, 120GB, 160GB, 250GB and 320GB capacities, and are designed for Serial ATA-150/300 interface. The HDDs sport 7200rpm motor, 16MB cache and declare average read seek time of 10.5ms and average write seek time of 12.5ms.

The main feature of the Fujitsu MHZ2 CJ family of hard disk drives is 256-bit AES encryption. The drives implement the AES hardware encryption directly into the processor chip of the hard disk drive, resulting in more robust security and faster system performance than software-based encryption. Even though Fujitsu is not the first to introduce AES-encrypted HDDs, competing solutions from companies like Seagate Technologies offer 128-bit long keys.

The built-in AES automatically encrypts all data when storing it on the hard disk drive and decrypts the data when read. All data stored on the hard disk drive can be erased instantly, in less than a second, using the advanced secure erase feature that erases the key itself.

The new hard drives from Fujitsu will be useful for public institutions and companies that handle large amounts of personal and other confidential data, this dramatically lowers the time and cost involved in wiping clean the hard drives of computers that are disposed of or reused.

While fully-encrypted hard disk drives substantially lower [anyone's] ability to access the data without permission, even when personal computer itself is stolen, the PC should still be vigorously protected against attacks from the Internet whose ultimate goal may be stealing or corrupting data.

With the instant-erase feature one can envision attacks that try to erase the encryption key and effectively destroy all the data on the hard drive.