Friendly Feudalism: The Tibet Myth

(updated and expanded version, January 2007)

I. For Lords and Lamas

Along with the blood drenched landscape of religious conflict there is the experience of inner peace and solace that every religion promises, none more so than Buddhism. Standing in marked contrast to the intolerant savagery of other religions, Buddhism is neither fanatical nor dogmatic–so say its adherents. For many of them Buddhism is less a theology and more a meditative and investigative discipline intended to promote an inner harmony and enlightenment while directing us to a path of right living. Generally, the spiritual focus is not only on oneself but on the welfare of others. One tries to put aside egoistic pursuits and gain a deeper understanding of one’s connection to all people and things. “Socially engaged Buddhism” tries to blend individual liberation with responsible social action in order to build an enlightened society.

A glance at history, however, reveals that not all the many and widely varying forms of Buddhism have been free of doctrinal fanaticism, nor free of the violent and exploitative pursuits so characteristic of other religions. In Sri Lanka there is a legendary and almost sacred recorded history about the triumphant battles waged by Buddhist kings of yore. During the twentieth century, Buddhists clashed violently with each other and with non-Buddhists in Thailand, Burma, Korea, Japan, India, and elsewhere. In Sri Lanka, armed battles between Buddhist Sinhalese and Hindu Tamils have taken many lives on both sides. In 1998 the U.S. State Department listed thirty of the world’s most violent and dangerous extremist groups. Over half of them were religious, specifically Muslim, Jewish, and Buddhist. 1

In South Korea, in 1998, thousands of monks of the Chogye Buddhist order fought each other with fists, rocks, fire-bombs, and clubs, in pitched battles that went on for weeks. They were vying for control of the order, the largest in South Korea, with its annual budget of $9.2 million, its millions of dollars worth of property, and the privilege of appointing 1,700 monks to various offices. The brawls damaged the main Buddhist sanctuaries and left dozens of monks injured, some seriously. The Korean public appeared to disdain both factions, feeling that no matter what side took control, “it would use worshippers’ donations for luxurious houses and expensive cars.” 2

As with any religion, squabbles between or within Buddhist sects are often fueled by the material corruption and personal deficiencies of the leadership. For example, in Nagano, Japan, at Zenkoji, the prestigious complex of temples that has hosted Buddhist sects for more than 1,400 years, “a nasty battle” arose between Komatsu the chief priest and the Tacchu, a group of temples nominally under the chief priest’s sway. The Tacchu monks accused Komatsu of selling writings and drawings under the temple’s name for his own gain. They also were appalled by the frequency with which he was seen in the company of women. Komatsu in turn sought to isolate and punish monks who were critical of his leadership. The conflict lasted some five years and made it into the courts. 3

But what of Tibetan Buddhism? Is it not an exception to this sort of strife? And what of the society it helped to create? Many Buddhists maintain that, before the Chinese crackdown in 1959, old Tibet was a spiritually oriented kingdom free from the egotistical lifestyles, empty materialism, and corrupting vices that beset modern industrialized society. Western news media, travel books, novels, and Hollywood films have portrayed the Tibetan theocracy as a veritable Shangri-La. The Dalai Lama himself stated that “the pervasive influence of Buddhism” in Tibet, “amid the wide open spaces of an unspoiled environment resulted in a society dedicated to peace and harmony. We enjoyed freedom and contentment.” 4

A reading of Tibet’s history suggests a somewhat different picture. “Religious conflict was commonplace in old Tibet,” writes one western Buddhist practitioner. “History belies the Shangri-La image of Tibetan lamas and their followers living together in mutual tolerance and nonviolent goodwill. Indeed, the situation was quite different. Old Tibet was much more like Europe during the religious wars of the Counterreformation.” 5 In the thirteenth century, Emperor Kublai Khan created the first Grand Lama, who was to preside over all the other lamas as might a pope over his bishops. Several centuries later, the Emperor of China sent an army into Tibet to support the Grand Lama, an ambitious 25-year-old man, who then gave himself the title of Dalai (Ocean) Lama, ruler of all Tibet.

His two previous lama “incarnations” were then retroactively recognized as his predecessors, thereby transforming the 1st Dalai Lama into the 3rd Dalai Lama. This 1st (or 3rd) Dalai Lama seized monasteries that did not belong to his sect, and is believed to have destroyed Buddhist writings that conflicted with his claim to divinity. The Dalai Lama who succeeded him pursued a sybaritic life, enjoying many mistresses, partying with friends, and acting in other ways deemed unfitting for an incarnate deity. For these transgressions he was murdered by his priests. Within 170 years, despite their recognized divine status, five Dalai Lamas were killed by their high priests or other courtiers. 6

For hundreds of years competing Tibetan Buddhist sects engaged in bitterly violent clashes and summary executions. In 1660, the 5th Dalai Lama was faced with a rebellion in Tsang province, the stronghold of the rival Kagyu sect with its high lama known as the Karmapa. The 5th Dalai Lama called for harsh retribution against the rebels, directing the Mongol army to obliterate the male and female lines, and the offspring too “like eggs smashed against rocks…. In short, annihilate any traces of them, even their names.” 7

In 1792, many Kagyu monasteries were confiscated and their monks were forcibly converted to the Gelug sect (the Dalai Lama’s denomination). The Gelug school, known also as the “Yellow Hats,” showed little tolerance or willingness to mix their teachings with other Buddhist sects. In the words of one of their traditional prayers: “Praise to you, violent god of the Yellow Hat teachings/who reduces to particles of dust/ great beings, high officials and ordinary people/ who pollute and corrupt the Gelug doctrine.” 8 An eighteenth-century memoir of a Tibetan general depicts sectarian strife among Buddhists that is as brutal and bloody as any religious conflict might be. 9 This grim history remains largely unvisited by present-day followers of Tibetan Buddhism in the West.

Religions have had a close relationship not only with violence but with economic exploitation. Indeed, it is often the economic exploitation that necessitates the violence. Such was the case with the Tibetan theocracy. Until 1959, when the Dalai Lama last presided over Tibet, most of the arable land was still organized into manorial estates worked by serfs. These estates were owned by two social groups: the rich secular landlords and the rich theocratic lamas. Even a writer sympathetic to the old order allows that “a great deal of real estate belonged to the monasteries, and most of them amassed great riches.” Much of the wealth was accumulated “through active participation in trade, commerce, and money lending.” 10

Drepung monastery was one of the biggest landowners in the world, with its 185 manors, 25,000 serfs, 300 great pastures, and 16,000 herdsmen. The wealth of the monasteries rested in the hands of small numbers of high-ranking lamas. Most ordinary monks lived modestly and had no direct access to great wealth. The Dalai Lama himself “lived richly in the 1000-room, 14-story Potala Palace.” 11

Secular leaders also did well. A notable example was the commander-in-chief of the Tibetan army, a member of the Dalai Lama’s lay Cabinet, who owned 4,000 square kilometers of land and 3,500 serfs. 12 Old Tibet has been misrepresented by some Western admirers as “a nation that required no police force because its people voluntarily observed the laws of karma.” 13 In fact. it had a professional army, albeit a small one, that served mainly as a gendarmerie for the landlords to keep order, protect their property, and hunt down runaway serfs.

Young Tibetan boys were regularly taken from their peasant families and brought into the monasteries to be trained as monks. Once there, they were bonded for life. Tashì-Tsering, a monk, reports that it was common for peasant children to be sexually mistreated in the monasteries. He himself was a victim of repeated rape, beginning at age nine. 14 The monastic estates also conscripted children for lifelong servitude as domestics, dance performers, and soldiers.

In old Tibet there were small numbers of farmers who subsisted as a kind of free peasantry, and perhaps an additional 10,000 people who composed the “middle-class” families of merchants, shopkeepers, and small traders. Thousands of others were beggars. There also were slaves, usually domestic servants, who owned nothing. Their offspring were born into slavery. 15 The majority of the rural population were serfs. Treated little better than slaves, the serfs went without schooling or medical care, They were under a lifetime bond to work the lord’s land–or the monastery’s land–without pay, to repair the lord’s houses, transport his crops, and collect his firewood. They were also expected to provide carrying animals and transportation on demand.16 Their masters told them what crops to grow and what animals to raise. They could not get married without the consent of their lord or lama. And they might easily be separated from their families should their owners lease them out to work in a distant location. 17

As in a free labor system and unlike slavery, the overlords had no responsibility for the serf’s maintenance and no direct interest in his or her survival as an expensive piece of property. The serfs had to support themselves. Yet as in a slave system, they were bound to their masters, guaranteeing a fixed and permanent workforce that could neither organize nor strike nor freely depart as might laborers in a market context. The overlords had the best of both worlds.

One 22-year old woman, herself a runaway serf, reports: “Pretty serf girls were usually taken by the owner as house servants and used as he wished”; they “were just slaves without rights.”18 Serfs needed permission to go anywhere. Landowners had legal authority to capture those who tried to flee. One 24-year old runaway welcomed the Chinese intervention as a “liberation.” He testified that under serfdom he was subjected to incessant toil, hunger, and cold. After his third failed escape, he was merciless beaten by the landlord’s men until blood poured from his nose and mouth. They then poured alcohol and caustic soda on his wounds to increase the pain, he claimed.19

The serfs were taxed upon getting married, taxed for the birth of each child and for every death in the family. They were taxed for planting a tree in their yard and for keeping animals. They were taxed for religious festivals and for public dancing and drumming, for being sent to prison and upon being released. Those who could not find work were taxed for being unemployed, and if they traveled to another village in search of work, they paid a passage tax. When people could not pay, the monasteries lent them money at 20 to 50 percent interest. Some debts were handed down from father to son to grandson. Debtors who could not meet their obligations risked being cast into slavery.20

The theocracy’s religious teachings buttressed its class order. The poor and afflicted were taught that they had brought their troubles upon themselves because of their wicked ways in previous lives. Hence they had to accept the misery of their present existence as a karmic atonement and in anticipation that their lot would improve in their next lifetime. The rich and powerful treated their good fortune as a reward for, and tangible evidence of, virtue in past and present lives.

The Tibetan serfs were something more than superstitious victims, blind to their own oppression. As we have seen, some ran away; others openly resisted, sometimes suffering dire consequences. In feudal Tibet, torture and mutilation–including eye gouging, the pulling out of tongues, hamstringing, and amputation–were favored punishments inflicted upon thieves, and runaway or resistant serfs. Journeying through Tibet in the 1960s, Stuart and Roma Gelder interviewed a former serf, Tsereh Wang Tuei, who had stolen two sheep belonging to a monastery. For this he had both his eyes gouged out and his hand mutilated beyond use. He explains that he no longer is a Buddhist: “When a holy lama told them to blind me I thought there was no good in religion.”21 Since it was against Buddhist teachings to take human life, some offenders were severely lashed and then “left to God” in the freezing night to die. “The parallels between Tibet and medieval Europe are striking,” concludes Tom Grunfeld in his book on Tibet. 22

In 1959, Anna Louise Strong visited an exhibition of torture equipment that had been used by the Tibetan overlords. There were handcuffs of all sizes, including small ones for children, and instruments for cutting off noses and ears, gouging out eyes, breaking off hands, and hamstringing legs. There were hot brands, whips, and special implements for disemboweling. The exhibition presented photographs and testimonies of victims who had been blinded or crippled or suffered amputations for thievery. There was the shepherd whose master owed him a reimbursement in yuan and wheat but refused to pay. So he took one of the master’s cows; for this he had his hands severed. Another herdsman, who opposed having his wife taken from him by his lord, had his hands broken off. There were pictures of Communist activists with noses and upper lips cut off, and a woman who was raped and then had her nose sliced away.23

Earlier visitors to Tibet commented on the theocratic despotism. In 1895, an Englishman, Dr. A. L. Waddell, wrote that the populace was under the “intolerable tyranny of monks” and the devil superstitions they had fashioned to terrorize the people. In 1904 Perceval Landon described the Dalai Lama’s rule as “an engine of oppression.” At about that time, another English traveler, Captain W.F.T. O’Connor, observed that “the great landowners and the priests… exercise each in their own dominion a despotic power from which there is no appeal,” while the people are “oppressed by the most monstrous growth of monasticism and priest-craft.” Tibetan rulers “invented degrading legends and stimulated a spirit of superstition” among the common people. In 1937, another visitor, Spencer Chapman, wrote, “The Lamaist monk does not spend his time in ministering to the people or educating them. . . . The beggar beside the road is nothing to the monk. Knowledge is the jealously guarded prerogative of the monasteries and is used to increase their influence and wealth.”24 As much as we might wish otherwise, feudal theocratic Tibet was a far cry from the romanticized Shangri La so enthusiastically nurtured by Buddhism’s western proselytes.

II. Secularization vs. Spirituality

What happened to Tibet after the Chinese Communists moved into the country in 1951? The treaty of that year provided for ostensible self-governance under the Dalai Lama’s rule but gave China military control and exclusive right to conduct foreign relations. The Chinese were also granted a direct role in internal administration “to promote social reforms.” Among the earliest changes they wrought was to reduce usurious interest rates, and build a few hospitals and roads. At first, they moved slowly, relying mostly on persuasion in an attempt to effect reconstruction. No aristocratic or monastic property was confiscated, and feudal lords continued to reign over their hereditarily bound peasants. “Contrary to popular belief in the West,” claims one observer, the Chinese “took care to show respect for Tibetan culture and religion.”25

Over the centuries the Tibetan lords and lamas had seen Chinese come and go, and had enjoyed good relations with Generalissimo Chiang Kaishek and his reactionary Kuomintang rule in China.26 The approval of the Kuomintang government was needed to validate the choice of the Dalai Lama and Panchen Lama. When the current 14th Dalai Lama was first installed in Lhasa, it was with an armed escort of Chinese troops and an attending Chinese minister, in accordance with centuries-old tradition. What upset the Tibetan lords and lamas in the early 1950s was that these latest Chinese were Communists. It would be only a matter of time, they feared, before the Communists started imposing their collectivist egalitarian schemes upon Tibet.

The issue was joined in 1956-57, when armed Tibetan bands ambushed convoys of the Chinese Peoples Liberation Army. The uprising received extensive assistance from the U.S. Central Intelligence Agency (CIA), including military training, support camps in Nepal, and numerous airlifts.27 Meanwhile in the United States, the American Society for a Free Asia, a CIA-financed front, energetically publicized the cause of Tibetan resistance, with the Dalai Lama’s eldest brother, Thubtan Norbu, playing an active role in that organization. The Dalai Lama’s second-eldest brother, Gyalo Thondup, established an intelligence operation with the CIA as early as 1951. He later upgraded it into a CIA-trained guerrilla unit whose recruits parachuted back into Tibet.28

Many Tibetan commandos and agents whom the CIA dropped into the country were chiefs of aristocratic clans or the sons of chiefs. Ninety percent of them were never heard from again, according to a report from the CIA itself, meaning they were most likely captured and killed.29 “Many lamas and lay members of the elite and much of the Tibetan army joined the uprising, but in the main the populace did not, assuring its failure,” writes Hugh Deane.30 In their book on Tibet, Ginsburg and Mathos reach a similar conclusion: “As far as can be ascertained, the great bulk of the common people of Lhasa and of the adjoining countryside failed to join in the fighting against the Chinese both when it first began and as it progressed.”31 Eventually the resistance crumbled.

Whatever wrongs and new oppressions introduced by the Chinese after 1959, they did abolish slavery and the Tibetan serfdom system of unpaid labor. They eliminated the many crushing taxes, started work projects, and greatly reduced unemployment and beggary. They established secular schools, thereby breaking the educational monopoly of the monasteries. And they constructed running water and electrical systems in Lhasa.32

Heinrich Harrer (later revealed to have been a sergeant in Hitler’s SS) wrote a bestseller about his experiences in Tibet that was made into a popular Hollywood movie. He reported that the Tibetans who resisted the Chinese “were predominantly nobles, semi-nobles and lamas; they were punished by being made to perform the lowliest tasks, such as laboring on roads and bridges. They were further humiliated by being made to clean up the city before the tourists arrived.” They also had to live in a camp originally reserved for beggars and vagrants–all of which Harrer treats as sure evidence of the dreadful nature of the Chinese occupation.33

By 1961, Chinese occupation authorities expropriated the landed estates owned by lords and lamas. They distributed many thousands of acres to tenant farmers and landless peasants, reorganizing them into hundreds of communes.. Herds once owned by nobility were turned over to collectives of poor shepherds. Improvements were made in the breeding of livestock, and new varieties of vegetables and new strains of wheat and barley were introduced, along with irrigation improvements, all of which reportedly led to an increase in agrarian production.34

Many peasants remained as religious as ever, giving alms to the clergy. But monks who had been conscripted as children into the religious orders were now free to renounce the monastic life, and thousands did, especially the younger ones. The remaining clergy lived on modest government stipends and extra income earned by officiating at prayer services, weddings, and funerals.35

Both the Dalai Lama and his advisor and youngest brother, Tendzin Choegyal, claimed that “more than 1.2 million Tibetans are dead as a result of the Chinese occupation.”36 The official 1953 census–six years before the Chinese crackdown–recorded the entire population residing in Tibet at 1,274,000.37 Other census counts put the population within Tibet at about two million. If the Chinese killed 1.2 million in the early 1960s then almost all of Tibet, would have been depopulated, transformed into a killing field dotted with death camps and mass graves–of which we have no evidence. The thinly distributed Chinese force in Tibet could not have rounded up, hunted down, and exterminated that many people even if it had spent all its time doing nothing else.

Chinese authorities claim to have put an end to floggings, mutilations, and amputations as a form of criminal punishment. They themselves, however, have been charged with acts of brutality by exile Tibetans. The authorities do admit to “mistakes,” particularly during the 1966-76 Cultural Revolution when the persecution of religious beliefs reached a high tide in both China and Tibet. After the uprising in the late 1950s, thousands of Tibetans were incarcerated. During the Great Leap Forward, forced collectivization and grain farming were imposed on the Tibetan peasantry, sometimes with disastrous effect on production. In the late 1970s, China began relaxing controls “and tried to undo some of the damage wrought during the previous two decades.”38

In 1980, the Chinese government initiated reforms reportedly designed to grant Tibet a greater degree of self-rule and self-administration. Tibetans would now be allowed to cultivate private plots, sell their harvest surpluses, decide for themselves what crops to grow, and keep yaks and sheep. Communication with the outside world was again permitted, and frontier controls were eased to permit some Tibetans to visit exiled relatives in India and Nepal.39 By the 1980s many of the principal lamas had begun to shuttle back and forth between China and the exile communities abroad, “restoring their monasteries in Tibet and helping to revitalize Buddhism there.”40

As of 2007 Tibetan Buddhism was still practiced widely and tolerated by officialdom. Religious pilgrimages and other standard forms of worship were allowed but within limits. All monks and nuns had to sign a loyalty pledge that they would not use their religious position to foment secession or dissent. And displaying photos of the Dalai Lama was declared illegal.41

In the 1990s, the Han, the ethnic group comprising over 95 percent of China’s immense population, began moving in substantial numbers into Tibet. On the streets of Lhasa and Shigatse, signs of Han colonization are readily visible. Chinese run the factories and many of the shops and vending stalls. Tall office buildings and large shopping centers have been built with funds that might have been better spent on water treatment plants and housing. Chinese cadres in Tibet too often view their Tibetan neighbors as backward and lazy, in need of economic development and “patriotic education.” During the 1990s Tibetan government employees suspected of harboring nationalist sympathies were purged from office, and campaigns were once again launched to discredit the Dalai Lama. Individual Tibetans reportedly were subjected to arrest, imprisonment, and forced labor for carrying out separatist activities and engaging in “political subversion.” Some were held in administrative detention without adequate food, water, and blankets, subjected to threats, beatings, and other mistreatment.42

Tibetan history, culture, and certainly religion are slighted in schools. Teaching materials, though translated into Tibetan, focus mainly on Chinese history and culture. Chinese family planning regulations allow a three-child limit for Tibetan families. (There is only a one-child limit for Han families throughout China, and a two-child limit for rural Han families whose first child is a girl.) If a Tibetan couple goes over the three-child limit, the excess children can be denied subsidized daycare, health care, housing, and education. These penalties have been enforced irregularly and vary by district.43 None of these child services, it should be noted, were available to Tibetans before the Chinese takeover.

For the rich lamas and secular lords, the Communist intervention was an unmitigated calamity. Most of them fled abroad, as did the Dalai Lama himself, who was assisted in his flight by the CIA. Some discovered to their horror that they would have to work for a living. Many, however, escaped that fate. Throughout the 1960s, the Tibetan exile community was secretly pocketing $1.7 million a year from the CIA, according to documents released by the State Department in 1998. Once this fact was publicized, the Dalai Lama’s organization itself issued a statement admitting that it had received millions of dollars from the CIA during the 1960s to send armed squads of exiles into Tibet to undermine the Maoist revolution. The Dalai Lama’s annual payment from the CIA was $186,000. Indian intelligence also financed both him and other Tibetan exiles. He has refused to say whether he or his brothers worked for the CIA. The agency has also declined to comment.44

In 1995, the News & Observer of Raleigh, North Carolina, carried a frontpage color photograph of the Dalai Lama being embraced by the reactionary Republican senator Jesse Helms, under the headline “Buddhist Captivates Hero of Religious Right.”45 In April 1999, along with Margaret Thatcher, Pope John Paul II, and the first George Bush, the Dalai Lama called upon the British government to release Augusto Pinochet, the former fascist dictator of Chile and a longtime CIA client who was visiting England. The Dalai Lama urged that Pinochet not be forced to go to Spain where he was wanted to stand trial for crimes against humanity.

Into the twenty-first century, via the National Endowment for Democracy and other conduits that are more respectable sounding than the CIA, the U.S. Congress continued to allocate an annual $2 million to Tibetans in India, with additional millions for “democracy activities” within the Tibetan exile community. In addition to these funds, the Dalai Lama received money from financier George Soros.46

Whatever the Dalai Lama’s associations with the CIA and various reactionaries, he did speak often of peace, love, and nonviolence. He himself really cannot be blamed for the abuses of Tibet’s ancien régime, having been but 25 years old when he fled into exile. In a 1994 interview, he went on record as favoring the building of schools and roads in his country. He said the corvée (forced unpaid serf labor) and certain taxes imposed on the peasants were “extremely bad.” And he disliked the way people were saddled with old debts sometimes passed down from generation to generation.47During the half century of living in the western world, he had embraced concepts such as human rights and religious freedom, ideas largely unknown in old Tibet. He even proposed democracy for Tibet, featuring a written constitution and a representative assembly.48

In 1996, the Dalai Lama issued a statement that must have had an unsettling effect on the exile community. It read in part: “Marxism is founded on moral principles, while capitalism is concerned only with gain and profitability.” Marxism fosters “the equitable utilization of the means of production” and cares about “the fate of the working classes” and “the victims of . . . exploitation. For those reasons the system appeals to me, and . . . I think of myself as half-Marxist, half-Buddhist.49

But he also sent a reassuring message to “those who live in abundance”: “It is a good thing to be rich… Those are the fruits for deserving actions, the proof that they have been generous in the past.” And to the poor he offers this admonition: “There is no good reason to become bitter and rebel against those who have property and fortune… It is better to develop a positive attitude.”50

In 2005 the Dalai Lama signed a widely advertised statement along with ten other Nobel Laureates supporting the “inalienable and fundamental human right” of working people throughout the world to form labor unions to protect their interests, in accordance with the United Nations’ Universal Declaration of Human Rights. In many countries “this fundamental right is poorly protected and in some it is explicitly banned or brutally suppressed,” the statement read. Burma, China, Colombia, Bosnia, and a few other countries were singled out as among the worst offenders. Even the United States “fails to adequately protect workers’ rights to form unions and bargain collectively. Millions of U.S. workers lack any legal protection to form unions….”51

The Dalai Lama also gave full support to removing the ingrained traditional obstacles that have kept Tibetan nuns from receiving an education. Upon arriving in exile, few nuns could read or write. In Tibet their activities had been devoted to daylong periods of prayer and chants. But in northern India they now began reading Buddhist philosophy and engaging in theological study and debate, activities that in old Tibet had been open only to monks.52

In November 2005 the Dalai Lama spoke at Stanford University on “The Heart of Nonviolence,” but stopped short of a blanket condemnation of all violence. Violent actions that are committed in order to reduce future suffering are not to be condemned, he said, citing World War II as an example of a worthy effort to protect democracy. What of the four years of carnage and mass destruction in Iraq, a war condemned by most of the world—even by a conservative pope–as a blatant violation of international law and a crime against humanity? The Dalai Lama was undecided: “The Iraq war—it’s too early to say, right or wrong.”53 Earlier he had voiced support for the U.S. military intervention against Yugoslavia and, later on, the U.S. military intervention into Afghanistan.54

III. Exit Feudal Theocracy

As the Shangri-La myth would have it, in old Tibet the people lived in contented and tranquil symbiosis with their monastic and secular lords. Rich lamas and poor monks, wealthy landlords and impoverished serfs were all bonded together, mutually sustained by the comforting balm of a deeply spiritual and pacific culture.

One is reminded of the idealized image of feudal Europe presented by latter-day conservative Catholics such as G. K. Chesterton and Hilaire Belloc. For them, medieval Christendom was a world of contented peasants living in the secure embrace of their Church, under the more or less benign protection of their lords.55 Again we are invited to accept a particular culture in its idealized form divorced from its murky material history. This means accepting it as presented by its favored class, by those who profited most from it. The Shangri-La image of Tibet bears no more resemblance to historic actuality than does the pastoral image of medieval Europe.

Seen in all its grim realities, old Tibet confirms the view I expressed in an earlier book, namely that culture is anything but neutral. Culture can operate as a legitimating cover for a host of grave injustices, benefiting a privileged portion of society at great cost to the rest.56 In theocratic feudal Tibet, ruling interests manipulated the traditional culture to fortify their own wealth and power. The theocracy equated rebellious thought and action with satanic influence. It propagated the general presumption of landlord superiority and peasant unworthiness. The rich were represented as deserving their good life, and the lowly poor as deserving their mean existence, all codified in teachings about the karmic residue of virtue and vice accumulated from past lives, presented as part of God’s will.

Were the more affluent lamas just hypocrites who preached one thing and secretly believed another? More likely they were genuinely attached to those beliefs that brought such good results for them. That their theology so perfectly supported their material privileges only strengthened the sincerity with which it was embraced.

It might be said that we denizens of the modern secular world cannot grasp the equations of happiness and pain, contentment and custom, that characterize more traditionally spiritual societies. This is probably true, and it may explain why some of us idealize such societies. But still, a gouged eye is a gouged eye; a flogging is a flogging; and the grinding exploitation of serfs and slaves is a brutal class injustice whatever its cultural wrapping. There is a difference between a spiritual bond and human bondage, even when both exist side by side

Many ordinary Tibetans want the Dalai Lama back in their country, but it appears that relatively few want a return to the social order he represented. A 1999 story in the Washington Post notes that the Dalai Lama continues to be revered in Tibet, but

. . . few Tibetans would welcome a return of the corrupt aristocratic clans that fled with him in 1959 and that comprise the bulk of his advisers. Many Tibetan farmers, for example, have no interest in surrendering the land they gained during China’s land reform to the clans. Tibet’s former slaves say they, too, don’t want their former masters to return to power. “I’ve already lived that life once before,” said Wangchuk, a 67-year-old former slave who was wearing his best clothes for his yearly pilgrimage to Shigatse, one of the holiest sites of Tibetan Buddhism. He said he worshipped the Dalai Lama, but added, “I may not be free under Chinese communism, but I am better off than when I was a slave.”57

It should be noted that the Dalai Lama is not the only highly placed lama chosen in childhood as a reincarnation. One or another reincarnate lama or tulku–a spiritual teacher of special purity elected to be reborn again and again–can be found presiding over most major monasteries. The tulku system is unique to Tibetan Buddhism. Scores of Tibetan lamas claim to be reincarnate tulkus.

The very first tulku was a lama known as the Karmapa who appeared nearly three centuries before the first Dalai Lama. The Karmapa is leader of a Tibetan Buddhist tradition known as the Karma Kagyu. The rise of the Gelugpa sect headed by the Dalai Lama led to a politico-religious rivalry with the Kagyu that has lasted five hundred years and continues to play itself out within the Tibetan exile community today. That the Kagyu sect has grown famously, opening some six hundred new centers around the world in the last thirty-five years, has not helped the situation.

The search for a tulku, Erik Curren reminds us, has not always been conducted in that purely spiritual mode portrayed in certain Hollywood films. “Sometimes monastic officials wanted a child from a powerful local noble family to give the cloister more political clout. Other times they wanted a child from a lower-class family who would have little leverage to influence the child’s upbringing.” On other occasions “a local warlord, the Chinese emperor or even the Dalai Lama’s government in Lhasa might [have tried] to impose its choice of tulku on a monastery for political reasons.”58

Such may have been the case in the selection of the 17th Karmapa, whose monastery-in-exile is situated in Rumtek, in the Indian state of Sikkim. In 1993 the monks of the Karma Kagyu tradition had a candidate of their own choice. The Dalai Lama, along with several dissenting Karma Kagyu leaders (and with the support of the Chinese government!) backed a different boy. The Kagyu monks charged that the Dalai Lama had overstepped his authority in attempting to select a leader for their sect. “Neither his political role nor his position as a lama in his own Gelugpa tradition entitled him to choose the Karmapa, who is a leader of a different tradition…”59 As one of the Kagyu leaders insisted, “Dharma is about thinking for yourself. It is not about automatically following a teacher in all things, no matter how respected that teacher may be. More than anyone else, Buddhists should respect other people’s rights—their human rights and their religious freedom.”60

What followed was a dozen years of conflict in the Tibetan exile community, punctuated by intermittent riots, intimidation, physical attacks, blacklisting, police harassment, litigation, official corruption, and the looting and undermining of the Karmapa’s monastery in Rumtek by supporters of the Gelugpa faction. All this has caused at least one western devotee to wonder if the years of exile were not hastening the moral corrosion of Tibetan Buddhism.61

What is clear is that not all Tibetan Buddhists accept the Dalai Lama as their theological and spiritual mentor. Though he is referred to as the “spiritual leader of Tibet,” many see this title as little more than a formality. It does not give him authority over the four religious schools of Tibet other than his own, “just as calling the U.S. president the ‘leader of the free world’ gives him no role in governing France or Germany.”62

Not all Tibetan exiles are enamoured of the old Shangri-La theocracy. Kim Lewis, who studied healing methods with a Buddhist monk in Berkeley, California, had occasion to talk at length with more than a dozen Tibetan women who lived in the monk’s building. When she asked how they felt about returning to their homeland, the sentiment was unanimously negative. At first, Lewis assumed that their reluctance had to do with the Chinese occupation, but they quickly informed her otherwise. They said they were extremely grateful “not to have to marry 4 or 5 men, be pregnant almost all the time,” or deal with sexually transmitted diseases contacted from a straying husband. The younger women “were delighted to be getting an education, wanted absolutely nothing to do with any religion, and wondered why Americans were so naïve [about Tibet].”63

The women interviewed by Lewis recounted stories of their grandmothers’ ordeals with monks who used them as “wisdom consorts.” By sleeping with the monks, the grandmothers were told, they gained “the means to enlightenment” — after all, the Buddha himself had to be with a woman to reach enlightenment.

The women also mentioned the “rampant” sex that the supposedly spiritual and abstemious monks practiced with each other in the Gelugpa sect. The women who were mothers spoke bitterly about the monastery’s confiscation of their young boys in Tibet. They claimed that when a boy cried for his mother, he would be told “Why do you cry for her, she gave you up–she’s just a woman.”

The monks who were granted political asylum in California applied for public assistance. Lewis, herself a devotee for a time, assisted with the paperwork. She observes that they continue to receive government checks amounting to $550 to $700 per month along with Medicare. In addition, the monks reside rent free in nicely furnished apartments. “They pay no utilities, have free access to the Internet on computers provided for them, along with fax machines, free cell and home phones and cable TV.”

They also receive a monthly payment from their order, along with contributions and dues from their American followers. Some devotees eagerly carry out chores for the monks, including grocery shopping and cleaning their apartments and toilets. These same holy men, Lewis remarks, “have no problem criticizing Americans for their ‘obsession with material things.’”64

To welcome the end of the old feudal theocracy in Tibet is not to applaud everything about Chinese rule in that country. This point is seldom understood by today’s Shangri-La believers in the West. The converse is also true: To denounce the Chinese occupation does not mean we have to romanticize the former feudal régime. Tibetans deserve to be perceived as actual people, not perfected spiritualists or innocent political symbols. “To idealize them,” notes Ma Jian, a dissident Chinese traveler to Tibet (now living in Britain), “is to deny them their humanity.”65

One common complaint among Buddhist followers in the West is that Tibet’s religious culture is being undermined by the Chinese occupation. To some extent this seems to be the case. Many of the monasteries are closed, and much of the theocracy seems to have passed into history. Whether Chinese rule has brought betterment or disaster is not the central issue here. The question is what kind of country was old Tibet. What I am disputing is the supposedly pristine spiritual nature of that pre-invasion culture. We can advocate religious freedom and independence for a new Tibet without having to embrace the mythology about old Tibet. Tibetan feudalism was cloaked in Buddhism, but the two are not to be equated. In reality, old Tibet was not a Paradise Lost. It was a retrograde repressive theocracy of extreme privilege and poverty, a long way from Shangri-La.

Finally, let it be said that if Tibet’s future is to be positioned somewhere within China’s emerging free-market paradise, then this does not bode well for the Tibetans. China boasts a dazzling 8 percent economic growth rate and is emerging as one of the world’s greatest industrial powers. But with economic growth has come an ever deepening gulf between rich and poor. Most Chinese live close to the poverty level or well under it, while a small group of newly brooded capitalists profit hugely in collusion with shady officials. Regional bureaucrats milk the country dry, extorting graft from the populace and looting local treasuries. Land grabbing in cities and countryside by avaricious developers and corrupt officials at the expense of the populace are almost everyday occurrences. Tens of thousands of grassroot protests and disturbances have erupted across the country, usually to be met with unforgiving police force. Corruption is so prevalent, reaching into so many places, that even the normally complacent national leadership was forced to take notice and began moving against it in late 2006.

Workers in China who try to organize labor unions in the corporate dominated “business zones” risk losing their jobs or getting beaten and imprisoned. Millions of business zone workers toil twelve-hour days at subsistence wages. With the health care system now being privatized, free or affordable medical treatment is no longer available for millions. Men have tramped into the cities in search of work, leaving an increasingly impoverished countryside populated by women, children, and the elderly. The suicide rate has increased dramatically, especially among women.66

China’s natural environment is sadly polluted. Most of its fabled rivers and many lakes are dead, producing massive fish die-offs from the billions of tons of industrial emissions and untreated human waste dumped into them. Toxic effluents, including pesticides and herbicides, seep into ground water or directly into irrigation canals. Cancer rates in villages situated along waterways have skyrocketed a thousand-fold. Hundreds of millions of urban residents breathe air rated as dangerously unhealthy, contaminated by industrial growth and the recent addition of millions of automobiles. An estimated 400,000 die prematurely every year from air pollution. Government environmental agencies have no enforcement power to stop polluters, and generally the government ignores or denies such problems, concentrating instead on industrial growth.67

China’s own scientific establishment reports that unless greenhouse gases are curbed, the nation will face massive crop failures along with catastrophic food and water shortages in the years ahead. In 2006-2007 severe drought was already afflicting southwest China.68

If China is the great success story of speedy free market development, and is to be the model and inspiration for Tibet’s future, then old feudal Tibet indeed may start looking a lot better than it actually was.
Notes:

1. Mark Juergensmeyer, Terror in the Mind of God, (University of California Press, 2000), 6, 112-113, 157.
2. Kyong-Hwa Seok, “Korean Monk Gangs Battle for Temple Turf,” San Francisco Examiner, 3 December 1998.
3. Los Angeles Times, February 25, 2006.
4. Dalai Lama quoted in Donald Lopez Jr., Prisoners of Shangri-La: Tibetan Buddhism and the West (Chicago and London: Chicago University Press, 1998), 205.
5. Erik D. Curren, Buddha’s Not Smiling: Uncovering Corruption at the Heart of Tibetan Buddhism Today (Alaya Press 2005), 41.
6. Stuart Gelder and Roma Gelder, The Timely Rain: Travels in New Tibet (Monthly Review Press, 1964), 119, 123; and Melvyn C. Goldstein, The Snow Lion and the Dragon: China, Tibet, and the Dalai Lama (University of California Press, 1995), 6-16.
7. Curren, Buddha’s Not Smiling, 50.
8. Stephen Bachelor, “Letting Daylight into Magic: The Life and Times of Dorje Shugden,” Tricycle: The Buddhist Review, 7, Spring 1998. Bachelor discusses the sectarian fanaticism and doctrinal clashes that ill fit the Western portrait of Buddhism as a non-dogmatic and tolerant tradition.
9. Dhoring Tenzin Paljor, Autobiography, cited in Curren, Buddha’s Not Smiling, 8.
10. Pradyumna P. Karan, The Changing Face of Tibet: The Impact of Chinese Communist Ideology on the Landscape (Lexington, Kentucky: University Press of Kentucky, 1976), 64.
11. See Gary Wilson’s report in Worker’s World, 6 February 1997.
12. Gelder and Gelder, The Timely Rain, 62 and 174.
13. As skeptically noted by Lopez, Prisoners of Shangri-La, 9.
14. Melvyn Goldstein, William Siebenschuh, and Tashì-Tsering, The Struggle for Modern Tibet: The Autobiography of Tashì-Tsering (Armonk, N.Y.: M.E. Sharpe, 1997).
15. Gelder and Gelder, The Timely Rain, 110.
16. Melvyn C. Goldstein, A History of Modern Tibet 1913-1951 (Berkeley: University of California Press, 1989), 5 and passim.
17. Anna Louise Strong, Tibetan Interviews (Peking: New World Press, 1959), 15, 19-21, 24.
18. Quoted in Strong, Tibetan Interviews, 25.
19. Strong, Tibetan Interviews, 31.
20. Gelder and Gelder, The Timely Rain, 175-176; and Strong, Tibetan Interviews, 25-26.
21. Gelder and Gelder, The Timely Rain, 113.
22. A. Tom Grunfeld, The Making of Modern Tibet rev. ed. (Armonk, N.Y. and London: 1996), 9 and 7-33 for a general discussion of feudal Tibet; see also Felix Greene, A Curtain of Ignorance (Garden City, N.Y.: Doubleday, 1961), 241-249; Goldstein, A History of Modern Tibet, 3-5; and Lopez, Prisoners of Shangri-La, passim.
23. Strong, Tibetan Interviews, 91-96.
24. Waddell, Landon, O’Connor, and Chapman are quoted in Gelder and Gelder, The Timely Rain, 123-125.
25. Goldstein, The Snow Lion and the Dragon, 52.
26. Heinrich Harrer, Return to Tibet (New York: Schocken, 1985), 29.
27. See Kenneth Conboy and James Morrison, The CIA’s Secret War in Tibet (Lawrence, Kansas: University of Kansas Press, 2002); and William Leary, “Secret Mission to Tibet,” Air & Space, December 1997/January 1998.
28. On the CIA’s links to the Dalai Lama and his family and entourage, see Loren Coleman, Tom Slick and the Search for the Yeti (London: Faber and Faber, 1989).
29. Leary, “Secret Mission to Tibet.”
30. Hugh Deane, “The Cold War in Tibet,” CovertAction Quarterly (Winter 1987).
31. George Ginsburg and Michael Mathos Communist China and Tibet (1964), quoted in Deane, “The Cold War in Tibet.” Deane notes that author Bina Roy reached a similar conclusion.
32. See Greene, A Curtain of Ignorance, 248 and passim; and Grunfeld, The Making of Modern Tibet, passim.
33. Harrer, Return to Tibet, 54.
34. Karan, The Changing Face of Tibet, 36-38, 41, 57-58; London Times, 4 July 1966.
35. Gelder and Gelder, The Timely Rain, 29 and 47-48.
36. Tendzin Choegyal, “The Truth about Tibet,” Imprimis (publication of Hillsdale College, Michigan), April 1999.
37. Karan, The Changing Face of Tibet, 52-53.
38. Elaine Kurtenbach, Associate Press report, 12 February 1998.
39. Goldstein, The Snow Lion and the Dragon, 47-48.
40. Curren, Buddha’s Not Smiling, 8.
41. San Francisco Chonicle, 9 January 2007.
42. Report by the International Committee of Lawyers for Tibet, A Generation in Peril (Berkeley Calif.: 2001), passim.
43. International Committee of Lawyers for Tibet, A Generation in Peril, 66-68, 98.
44. im Mann, “CIA Gave Aid to Tibetan Exiles in ’60s, Files Show,” Los Angeles Times, 15 September 1998; and New York Times, 1 October, 1998.
45. News & Observer, 6 September 1995, cited in Lopez, Prisoners of Shangri-La, 3.
46. Heather Cottin, “George Soros, Imperial Wizard,” CovertAction Quarterly no. 74 (Fall 2002).
47. Goldstein, The Snow Lion and the Dragon, 51.
48. Tendzin Choegyal, “The Truth about Tibet.”
49. The Dalai Lama in Marianne Dresser (ed.), Beyond Dogma: Dialogues and Discourses (Berkeley, Calif.: North Atlantic Books, 1996)
50. These comments are from a book of the Dalai Lama’s writings quoted in Nikolai Thyssen, “Oceaner af onkel Tom,” Dagbladet Information, 29 December 2003, (translated for me by Julius Wilm). Thyssen’s review (in Danish) can be found at http://www.information.dk/Indgang/VisArkiv.dna?pArtNo=20031229154141.txt.
51. “A Global Call for Human Rights in the Workplace,” New York Times, 6 December 2005.
52. San Francisco Chronicle, 14 January 2007.
53. San Francisco Chronicle, 5 November 2005.
54. Times of India 13 October 2000; Samantha Conti’s report, Reuter, 17 June 1994; Amitabh Pal, “The Dalai Lama Interview,” Progressive, January 2006.
55. The Gelders draw this comparison, The Timely Rain, 64.
56. Michael Parenti, The Culture Struggle (Seven Stories, 2006).
57. John Pomfret, “Tibet Caught in China’s Web,” Washington Post, 23 July 1999.
58. Curren, Buddha’s Not Smiling, 3.
59. Curren, Buddha’s Not Smiling, 13 and 138.
60. Curren, Buddha’s Not Smiling, 21.
61. Curren, Buddha’s Not Smiling, passim. For books that are favorable toward the Karmapa appointed by the Dalai Lama’s faction, see Lea Terhune, Karmapa of Tibet: The Politics of Reincarnation (Wisdom Publications, 2004); Gaby Naher, Wrestling the Dragon (Rider 2004); Mick Brown, The Dance of 17 Lives (Bloomsbury 2004).
62. Erik Curren, “Not So Easy to Say Who is Karmapa,” correspondence, 22 August 2005, www.buddhistchannel.tv/index.php?id=22.1577,0,0,1,0.
63. Kim Lewis, correspondence to me, 15 July 2004.
64. Kim Lewis, correspondence to me, 16 July 2004.
65. Ma Jian, Stick Out Your Tongue (Farrar, Straus & Giroux, 2006).
66. See the PBS documentary, China from the Inside, January 2007, KQED.PBS.org/kqed/chinanside.
67. San Francisco Chronicle, 9 January 2007.
68. “China: Global Warming to Cause Food Shortages,” People’s Weekly World, 13 January 2007

Hubris defined imo

Constant Conflict

US Army War College Quarterly

There will be no peace. At any given moment for the rest of our lifetimes, there will be multiple conflicts in mutating forms around the globe. Violent conflict will dominate the headlines, but cultural and economic struggles will be steadier and ultimately more decisive. The de facto role of the US armed forces will be to keep the world safe for our economy and open to our cultural assault. To those ends, we will do a fair amount of killing.

We have entered an age of constant conflict. Information is at once our core commodity and the most destabilizing factor of our time. Until now, history has been a quest to acquire information; today, the challenge lies in managing information. Those of us who can sort, digest, synthesize, and apply relevant knowledge soar--professionally, financially, politically, militarily, and socially. We, the winners, are a minority.

For the world masses, devastated by information they cannot manage or effectively interpret, life is "nasty, brutish . . . and short-circuited." The general pace of change is overwhelming, and information is both the motor and signifier of change. Those humans, in every country and region, who cannot understand the new world, or who cannot profit from its uncertainties, or who cannot reconcile themselves to its dynamics, will become the violent enemies of their inadequate governments, of their more fortunate neighbors, and ultimately of the United States. We are entering a new American century, in which we will become still wealthier, culturally more lethal, and increasingly powerful. We will excite hatreds without precedent.

We live in an age of multiple truths. He who warns of the "clash of civilizations" is incontestably right; simultaneously, we shall see higher levels of constructive trafficking between civilizations than ever before. The future is bright--and it is also very dark. More men and women will enjoy health and prosperity than ever before, yet more will live in poverty or tumult, if only because of the ferocity of demographics. There will be more democracy--that deft liberal form of imperialism--and greater popular refusal of democracy. One of the defining bifurcations of the future will be the conflict between information masters and information victims.

In the past, information empowerment was largely a matter of insider and outsider, as elementary as the division of society into the literate and illiterate. While superior information--often embodied in military technology--killed throughout history, its effects tended to be politically decisive but not personally intrusive (once the raping and pillaging were done). Technology was more apt to batter down the city gates than to change the nature of the city. The rise of the modern West broke the pattern. Whether speaking of the dispossessions and dislocations caused in Europe through the introduction of machine-driven production or elsewhere by the great age of European imperialism, an explosion of disorienting information intruded ever further into Braudel's "structures of everyday life." Historically, ignorance was bliss. Today, ignorance is no longer possible, only error.

The contemporary expansion of available information is immeasurable, uncontainable, and destructive to individuals and entire cultures unable to master it. The radical fundamentalists--the bomber in Jerusalem or Oklahoma City, the moral terrorist on the right or the dictatorial multiculturalist on the left--are all brothers and sisters, all threatened by change, terrified of the future, and alienated by information they cannot reconcile with their lives or ambitions. They ache to return to a golden age that never existed, or to create a paradise of their own restrictive design. They no longer understand the world, and their fear is volatile.

Information destroys traditional jobs and traditional cultures; it seduces, betrays, yet remains invulnerable. How can you counterattack the information others have turned upon you? There is no effective option other than competitive performance. For those individuals and cultures that cannot join or compete with our information empire, there is only inevitable failure (of note, the internet is to the techno-capable disaffected what the United Nations is to marginal states: it offers the illusion of empowerment and community). The attempt of the Iranian mullahs to secede from modernity has failed, although a turbaned corpse still stumbles about the neighborhood. Information, from the internet to rock videos, will not be contained, and fundamentalism cannot control its children. Our victims volunteer.

These noncompetitive cultures, such as that of Arabo-Persian Islam or the rejectionist segment of our own population, are enraged. Their cultures are under assault; their cherished values have proven dysfunctional, and the successful move on without them. The laid-off blue-collar worker in America and the Taliban militiaman in Afghanistan are brothers in suffering.

It is a truism that throughout much of the 20th century the income gap between top and bottom narrowed, whether we speak of individuals, countries, or in some cases continents. Further, individuals or countries could "make it" on sheer muscle power and the will to apply it. You could work harder than your neighbor and win in the marketplace. There was a rough justice in it, and it offered near-ecumenical hope. That model is dead. Today, there is a growing excess of muscle power in an age of labor-saving machines and methods. In our own country, we have seen blue-collar unions move from center stage to near-irrelevance. The trend will not reverse. At the same time, expectations have increased dramatically. There is a global sense of promises broken, of lies told. Individuals on much of the planet believe they have played by the rules laid down for them (in the breech, they often have not), only to find that some indefinite power has changed those rules overnight. The American who graduated from high school in the 1960s expected a good job that would allow his family security and reasonably increasing prosperity. For many such Americans, the world has collapsed, even as the media tease them with images of an ever-richer, brighter, fun world from which they are excluded. These discarded citizens sense that their government is no longer about them, but only about the privileged. Some seek the solace of explicit religion. Most remain law-abiding, hard-working citizens. Some do not.

The foreign twin is the Islamic, or sub-Saharan African, or Mexican university graduate who faces a teetering government, joblessness, exclusion from the profits of the corruption distorting his society, marriage in poverty or the impossibility of marriage, and a deluge of information telling him (exaggeratedly and dishonestly) how well the West lives. In this age of television-series franchising, videos, and satellite dishes, this young, embittered male gets his skewed view of us from reruns of Dynasty and Dallas, or from satellite links beaming down Baywatch, sources we dismiss too quickly as laughable and unworthy of serious consideration as factors influencing world affairs. But their effect is destructive beyond the power of words to describe. Hollywood goes where Harvard never penetrated, and the foreigner, unable to touch the reality of America, is touched by America's irresponsible fantasies of itself; he sees a devilishly enchanting, bluntly sexual, terrifying world from which he is excluded, a world of wealth he can judge only in terms of his own poverty.

Most citizens of the globe are not economists; they perceive wealth as inelastic, its possession a zero-sum game. If decadent America (as seen on the screen) is so fabulously rich, it can only be because America has looted one's own impoverished group or country or region. Adding to the cognitive dissonance, the discarded foreigner cannot square the perceived moral corruption of America, a travesty of all he has been told to value, with America's enduring punitive power. How could a nation whose women are "all harlots" stage Desert Storm? It is an offense to God, and there must be a demonic answer, a substance of conspiracies and oppression in which his own secular, disappointing elite is complicit. This discarded foreigner's desire may be to attack the "Great Satan America," but America is far away (for now), so he acts violently in his own neighborhood. He will accept no personal guilt for his failure, nor can he bear the possibility that his culture "doesn't work." The blame lies ever elsewhere. The cult of victimization is becoming a universal phenomenon, and it is a source of dynamic hatreds.

It is fashionable among world intellectual elites to decry "American culture," with our domestic critics among the loudest in complaint. But traditional intellectual elites are of shrinking relevance, replaced by cognitive-practical elites--figures such as Bill Gates, Steven Spielberg, Madonna, or our most successful politicians--human beings who can recognize or create popular appetites, recreating themselves as necessary. Contemporary American culture is the most powerful in history, and the most destructive of competitor cultures. While some other cultures, such as those of East Asia, appear strong enough to survive the onslaught by adaptive behaviors, most are not. The genius, the secret weapon, of American culture is the essence that the elites despise: ours is the first genuine people's culture. It stresses comfort and convenience--ease--and it generates pleasure for the masses. We are Karl Marx's dream, and his nightmare.

Secular and religious revolutionaries in our century have made the identical mistake, imagining that the workers of the world or the faithful just can't wait to go home at night to study Marx or the Koran. Well, Joe Sixpack, Ivan Tipichni, and Ali Quat would rather "Baywatch." America has figured it out, and we are brilliant at operationalizing our knowledge, and our cultural power will hinder even those cultures we do not undermine. There is no "peer competitor" in the cultural (or military) department. Our cultural empire has the addicted--men and women everywhere--clamoring for more. And they pay for the privilege of their disillusionment.

American culture is criticized for its impermanence, its "disposable" products. But therein lies its strength. All previous cultures sought ideal achievement which, once reached, might endure in static perfection. American culture is not about the end, but the means, the dynamic process that creates, destroys, and creates anew. If our works are transient, then so are life's greatest gifts--passion, beauty, the quality of light on a winter afternoon, even life itself. American culture is alive.

This vividness, this vitality, is reflected in our military; we do not expect to achieve ultimate solutions, only constant improvement. All previous cultures, general and military, have sought to achieve an ideal form of life and then fix it in cement. Americans, in and out of uniform, have always embraced change (though many individuals have not, and their conservatism has acted as a healthy brake on our national excesses). American culture is the culture of the unafraid.

Ours is also the first culture that aims to include rather than exclude. The films most despised by the intellectual elite--those that feature extreme violence and to-the-victors-the-spoils sex--are our most popular cultural weapon, bought or bootlegged nearly everywhere. American action films, often in dreadful copies, are available from the Upper Amazon to Mandalay. They are even more popular than our music, because they are easier to understand. The action films of a Stallone or Schwarzenegger or Chuck Norris rely on visual narratives that do not require dialog for a basic understanding. They deal at the level of universal myth, of pre-text, celebrating the most fundamental impulses (although we have yet to produce a film as violent and cruel as the Iliad). They feature a hero, a villain, a woman to be defended or won--and violence and sex. Complain until doomsday; it sells. The enduring popularity abroad of the shopworn Rambo series tells us far more about humanity than does a library full of scholarly analysis.

When we speak of a global information revolution, the effect of video images is more immediate and intense than that of computers. Image trumps text in the mass psyche, and computers remain a textual outgrowth, demanding high-order skills: computers demarcate the domain of the privileged. We use technology to expand our wealth, power, and opportunities. The rest get high on pop culture. If religion is the opium of the people, video is their crack cocaine. When we and they collide, they shock us with violence, but, statistically, we win.

As more and more human beings are overwhelmed by information, or dispossessed by the effects of information-based technologies, there will be more violence. Information victims will often see no other resort. As work becomes more cerebral, those who fail to find a place will respond by rejecting reason. We will see countries and continents divide between rich and poor in a reversal of 20th-century economic trends. Developing countries will not be able to depend on physical production industries, because there will always be another country willing to work cheaper. The have-nots will hate and strive to attack the haves. And we in the United States will continue to be perceived as the ultimate haves. States will struggle for advantage or revenge as their societies boil. Beyond traditional crime, terrorism will be the most common form of violence, but transnational criminality, civil strife, secessions, border conflicts, and conventional wars will continue to plague the world, albeit with the "lesser" conflicts statistically dominant. In defense of its interests, its citizens, its allies, or its clients, the United States will be required to intervene in some of these contests. We will win militarily whenever we have the guts for it.

There will be no peace. At any given moment for the rest of our lifetimes, there will be multiple conflicts in mutating forms around the globe. Violent conflict will dominate the headlines, but cultural and economic struggles will be steadier and ultimately more decisive. The de facto role of the US armed forces will be to keep the world safe for our economy and open to our cultural assault. To those ends, we will do a fair amount of killing.

We are building an information-based military to do that killing. There will still be plenty of muscle power required, but much of our military art will consist in knowing more about the enemy than he knows about himself, manipulating data for effectiveness and efficiency, and denying similar advantages to our opponents. This will involve a good bit of technology, but the relevant systems will not be the budget vampires, such as manned bombers and attack submarines, that we continue to buy through inertia, emotional attachment, and the lobbying power of the defense industry. Our most important technologies will be those that support soldiers and Marines on the ground, that facilitate command decisions, and that enable us to kill accurately and survive amid clutter (such as multidimensional urban battlefields). The only imaginable use for most of our submarine fleet will be to strip out the weapons, dock them tight, and turn the boats into low-income housing. There will be no justification for billion-dollar bombers at all.

For a generation, and probably much longer, we will face no military peer competitor. Our enemies will challenge us by other means. The violent actors we encounter often will be small, hostile parties possessed of unexpected, incisive capabilities or simply of a stunning will to violence (or both). Renegade elites, not foreign fleets, should worry us. The urbanization of the global landscape is a greater threat to our operations than any extant or foreseeable military system. We will not deal with wars of Realpolitik, but with conflicts spawned of collective emotions, sub-state interests, and systemic collapse. Hatred, jealousy, and greed--emotions rather than strategy--will set the terms of the struggles.

We will survive and win any conflict short of a cataclysmic use of weapons of mass destruction. But the constant conflicts in which we selectively intervene will be as miserable as any other form of warfare for the soldiers and Marines engaged. The bayonet will still be relevant; however, informational superiority incisively employed should both sharpen that bayonet and permit us to defeat some--but never all--of our enemies outside of bayonet range. Our informational advantage over every other country and culture will be so enormous that our greatest battlefield challenge will be harnessing its power. Our potential national weakness will be the failure to maintain the moral and raw physical strength to thrust that bayonet into an enemy's heart.

Pilots and skippers, as well as defense executives, demand threat models that portray country X or Y as overtaking the military capability of the United States in 10 to 20 years. Forget it. Our military power is culturally based. They cannot rival us without becoming us. Wise competitors will not even attempt to defeat us on our terms; rather, they will seek to shift the playing field away from military confrontations or turn to terrorism and nontraditional forms of assault on our national integrity. Only the foolish will fight fair.

The threat models stitched together from dead parts to convince Congress that the Russians are only taking a deep breath or that the Chinese are only a few miles off the coast of California uniformly assume that while foreign powers make all the right decisions, analyze every trend correctly, and continue to achieve higher and higher economic growth rates, the United States will take a nap. On the contrary. Beyond the Beltway, the United States is wide awake and leading a second "industrial" revolution that will make the original industrial revolution that climaxed the great age of imperialism look like a rehearsal by amateurs. Only the United States has the synthetic ability, the supportive laws, and the cultural agility to remain at the cutting edge of wealth creation.

Not long ago, the Russians were going to overtake us. Then it was oil-wealthy Arabs, then the Japanese. One prize-winning economist even calculated that fuddy-duddy Europe would dominate the next century (a sure prescription for boredom, were it true). Now the Chinese are our nemesis. No doubt our industrial-strength Cassandras will soon find a reason to fear the Galapagos. In the meantime, the average American can look forward to a longer life-span, a secure retirement, and free membership in the most triumphant culture in history. For the majority of our citizens, our vulgar, near-chaotic, marvelous culture is the greatest engine of positive change in history.

Freedom works.

In the military sphere, it will be impossible to rival or even approach the capabilities of our information-based force because it is so profoundly an outgrowth of our culture. Our information-based Army will employ many marvelous tools, but the core of the force will still be the soldier, not the machine, and our soldiers will have skills other cultures will be unable to replicate. Intelligence analysts, fleeing human complexity, like to project enemy capabilities based upon the systems a potential opponent might acquire. But buying or building stuff is not enough. It didn't work for Saddam Hussein, and it won't work for Beijing.

The complex human-machine interface developing in the US military will be impossible to duplicate abroad because no other state will be able to come from behind to equal the informational dexterity of our officers and soldiers. For all the complaints--in many respects justified--about our public school systems, the holistic and synergistic nature of education in our society and culture is imparting to tomorrow's soldiers and Marines a second-nature grasp of technology and the ability to sort and assimilate vast amounts of competitive data that no other population will achieve. The informational dexterity of our average middle-class kid is terrifying to anyone born before 1970. Our computer kids function at a level foreign elites barely manage, and this has as much to do with television commercials, CD-ROMs, and grotesque video games as it does with the classroom. We are outgrowing our 19th-century model education system as surely as we have outgrown the manned bomber. In the meantime, our children are undergoing a process of Darwinian selection in coping with the information deluge that is drowning many of their parents. These kids are going to make mean techno-warriors. We just have to make sure they can do push-ups, too.

There is a useful German expression, "Die Lage war immer so ernst," that translates very freely as "The sky has always been falling." Despite our relish of fears and complaints, we live in the most powerful, robust culture on earth. Its discontinuities and contradictions are often its strengths. We are incapable of five-year plans, and it is a saving grace. Our fluidity, in consumption, technology, and on the battlefield, is a strength our nearest competitors cannot approach. We move very fast. At our military best, we become Nathan Bedford Forrest riding a microchip. But when we insist on buying into extended procurement contracts for unaffordable, neo-traditional weapon systems, we squander our brilliant flexibility. Today, we are locking-in already obsolescent defense purchases that will not begin to rise to the human capabilities of tomorrow's service members. In 2015 and beyond, we will be receiving systems into our inventory that will be no more relevant than Sherman tanks and prop-driven bombers would be today. We are not providing for tomorrow's military, we are paralyzing it. We will have the most humanly agile force on earth, and we are doing our best to shut it inside a technological straight-jacket.

There is no "big threat" out there. There's none on the horizon, either. Instead of preparing for the Battle of Midway, we need to focus on the constant conflicts of richly varying description that will challenge us--and kill us--at home and abroad. There are plenty of threats, but the beloved dinosaurs are dead.

We will outcreate, outproduce and, when need be, outfight the rest of the world. We can out-think them, too. But our military must not embark upon the 21st century clinging to 20th-century models. Our national appetite for information and our sophistication in handling it will enable us to outlast and outperform all hierarchical cultures, information-controlling societies, and rejectionist states. The skills necessary to this newest information age can be acquired only beginning in childhood and in complete immersion. Societies that fear or otherwise cannot manage the free flow of information simply will not be competitive. They might master the technological wherewithal to watch the videos, but we will be writing the scripts, producing them, and collecting the royalties. Our creativity is devastating. If we insist on a "proven" approach to military affairs, we will be throwing away our greatest national advantage.

We need to make sure our information-based military is based on the right information.

Facing this environment of constant conflict amid information proliferation, the military response has been to coin a new catchphrase--information warfare--and then duck. Although there has been plenty of chatter about information warfare, most of it has been as helpful and incisive as a discussion of sex among junior high school boys; everybody wants to pose, but nobody has a clue. We have hemorrhaged defense dollars to contractors perfectly willing to tell us what we already knew. Studies study other studies. For now, we have decided that information warfare is a matter of technology, which is akin to believing that your stereo system is more important to music than the musicians.

Fear not. We are already masters of information warfare, and we shall get around to defining it eventually. Let the scholars fuss. When it comes to our technology (and all technology is military technology) the Russians can't produce it, the Arabs can't afford it, and no one can steal it fast enough to make a difference. Our great bogeyman, China, is achieving remarkable growth rates because the Chinese belatedly entered the industrial revolution with a billion-plus population. Without a culture-shattering reappreciation of the role of free information in a society, China will peak well below our level of achievement.

Yes, foreign cultures are reasserting their threatened identities--usually with marginal, if any, success--and yes, they are attempting to escape our influence. But American culture is infectious, a plague of pleasure, and you don't have to die of it to be hindered or crippled in your integrity or competitiveness. The very struggle of other cultures to resist American cultural intrusion fatefully diverts their energies from the pursuit of the future. We should not fear the advent of fundamentalist or rejectionist regimes. They are simply guaranteeing their peoples' failure, while further increasing our relative strength.

It remains difficult, of course, for military leaders to conceive of warfare, informational or otherwise, in such broad terms. But Hollywood is "preparing the battlefield," and burgers precede bullets. The flag follows trade. Despite our declaration of defeat in the face of battlefield victory in Mogadishu, the image of US power and the US military around the world is not only a deterrent, but a psychological warfare tool that is constantly at work in the minds of real or potential opponents. Saddam swaggered, but the image of the US military crippled the Iraqi army in the field, doing more to soften them up for our ground assault than did tossing bombs into the sand. Everybody is afraid of us. They really believe we can do all the stuff in the movies. If the Trojans "saw" Athena guiding the Greeks in battle, then the Iraqis saw Luke Skywalker precede McCaffrey's tanks. Our unconscious alliance of culture with killing power is a combat multiplier no government, including our own, could design or afford. We are magic. And we're going to keep it that way.

Within our formal military, we have been moving into information warfare for decades. Our attitude toward data acquisition and, especially, data dissemination within the force has broken with global military tradition, in which empowering information was reserved for the upper echelons. While our military is vertically responsible, as it must be, it is informationally democratic. Our ability to decentralize information and appropriate decisionmaking authority is a revolutionary breakthrough (the over-praised pre-1945 Germans decentralized some tactical decisionmaking, but only within carefully regulated guidelines--and they could not enable the process with sufficient information dissemination).

No military establishment has ever placed such trust in lieutenants, sergeants, and privates, nor are our touted future competitors likely to do so. In fact, there has been an even greater diffusion of power within our military (in the Army and Marines) than most of us realize. Pragmatic behavior daily subverts antiquated structures, such as divisions and traditional staffs. We keep the old names, but the behaviors are changing. What, other than its flag, does the division of 1997 have in common with the division of World War II? Even as traditionalists resist the reformation of the force, the "anarchy" of lieutenants is shaping the Army of tomorrow. Battalion commanders do not understand what their lieutenants are up to, and generals would not be able to sleep at night if they knew what the battalion commanders know. While we argue about change, the Army is changing itself. The Marines are doing a brilliant job of reinventing themselves while retaining their essence, and their achievement should be a welcome challenge to the Army. The Air Force and Navy remain rigidly hierarchical.

Culture is fate. Countries, clans, military services, and individual soldiers are products of their respective cultures, and they are either empowered or imprisoned. The majority of the world's inhabitants are prisoners of their cultures, and they will rage against inadequacies they cannot admit, cannot bear, and cannot escape. The current chest-thumping of some Asian leaders about the degeneracy, weakness, and vulnerability of American culture is reminiscent of nothing so much as of the ranting of Japanese militarists on the eve of the Pacific War. I do not suggest that any of those Asian leaders intend to attack us, only that they are wrong. Liberty always looks like weakness to those who fear it.

In the wake of the Soviet collapse, some commentators declared that freedom had won and history was at an end. But freedom will always find enemies. The problem with freedom is that it's just too damned free for tyrants, whether they be dictators, racial or religious supremacists, or abusive husbands. Freedom challenges existing orders, exposes bigotry, opens opportunity, and demands personal responsibility. What could be more threatening to traditional cultures? The advent of this new information age has opened a fresh chapter in the human struggle for, and with, freedom. It will be a bloody chapter, with plenty of computer-smashing and head-bashing. The number one priority of non-Western governments in the coming decades will be to find acceptable terms for the flow of information within their societies. They will uniformly err on the side of conservatism--informational corruption--and will cripple their competitiveness in doing so. Their failure is programmed.

The next century will indeed be American, but it will also be troubled. We will find ourselves in constant conflict, much of it violent. The United States Army is going to add a lot of battle streamers to its flag. We will wage information warfare, but we will fight with infantry. And we will always surprise those critics, domestic and foreign, who predict our decline.



Major (P) Ralph Peters is assigned to the Office of the Deputy Chief of Staff for Intelligence, where he is responsible for future warfare. Prior to becoming a Foreign Area Officer for Eurasia, he served exclusively at the tactical level. He is a graduate of the US Army Command and General Staff College and holds a master's degree in international relations. Over the past several years, his professional and personal research travels have taken Major Peters to Russia, Ukraine, Georgia, Ossetia, Abkhazia, Armenia, Azerbaijan, Uzbekistan, Kazakhstan, Latvia, Lithuania, Estonia, Croatia, Serbia, Bulgaria, Romania, Poland, Hungary, the Czech Republic, Pakistan, Turkey, Burma, Laos, Thailand, and Mexico, as well as the countries of the Andean Ridge. He has published widely on military and international concerns. His sixth novel, Twilight of Heroes, was recently released by Avon Books. This is his eighth article for Parameters. The author wishes to acknowledge the importance to this essay of discussions with Lieutenant Colonels Gordon Thompson and Lonnie Henley, both US Army officers.

where lies the blame

BLAME FOR THE credit crunch has landed squarely on the big Western
banks, with government and the monetary authorities leading the
finger-pointing.

This seems a bit rich. Government and central banks were the chief
architects of the current difficulties. And as usual, their reaction
to this crisis is just as wrong-headed as their reaction to the
last crisis.

It's also certain to make the next crisis worse still.

Unfortunately for the US and Britain, the authorities remain too
convinced of their own powers to see the truth of this. There
they sit, Canute-like before a sea of economic reality. They truly
believe they can command the tide.

After all, this was how they responded from 2001-2005, force-feeding
money to the big banks and mortgage lenders at very low rates
of interest.

Thus did Alan Greenspan and Ben Bernanke switch the Tech Stock
Bubble for today's Subprime Crisis. Thus did Gordon Brown here
in London encourage all those "unbroken years of growth" that he
still loves to brag about. To perpetuate the feel-good factor,
Brown continued pumping the UK economy with cheap money while
preaching sanctimoniously about prudence.

And my, how he bragged! During the good times, Britain's unbroken
growth all came down to Gordon's brilliance.

Funny, isn't it, how the downturn is now somebody else's fault?

But in economics, as in life, the hangover reflects the
party. Creating artificial demand is sure to create exactly the
situation we're in today.

So let's spell it out and see if Gordon and Ben can get it, before
they and their wretched textbooks destroy the wealth of cautious
savers and their children once more.

Whenever and wherever you find a surfeit of money, bankers will
face a choice:

#1. Take the money and lend it; or
#2. Refuse the money and lose out.

The problem for banks – as for all financial companies during a
bubble in money – is keeping up with the game. If they don't take
the cheap money on offer, they will under-perform their competitors,
and that will end in a take-over.

Another bank – making bigger profits by taking the cheap money
– will buy out the laggard. That's how cautious banks caught
playing it safe, rather than joining the fun, are dragged to the
party regardless. Their kicking and screaming is drowned out by
the clamor for "total shareholder returns".

So the reason the banks you now see around you all look like
incautious buffoons is that, between 2001 and 2005, the US and
European authorities created conditions in which only the incautious
could prosper. Government killed off the cautious by pouring cheap
money down the throats of the most aggressive banks.

Socialists and central planners just don't understand that you
cannot command an economy onto such an unnatural path without
later paying the price. Cheap money destroys caution and nurtures
speculation. When the world is awash with it, banks must take ever
bigger and bigger risks, or they will wither and die – it's as
simple as that.

The irony of the Bear Stearns' rescue seems lost on the media. Yet
it was Bear Stearns that first signaled the start of today's crisis
last June, when its "enhanced leverage" funds went bust. And if
Britain's new banking bail-out works this time (and let's hope it
doesn't) then no British bank will fail either.

The message will then echo round the City of London – as on Wall
Street – that you simply must take all the cheap money on offer
and punt it straight out to consumers and business.

By 2012 if not before, we could find the Bank of England effectively
bankrupt, sitting on a pile of "quality" mortgages as collateral
as house prices tumble from even higher peaks than last summer's top.

And the big investment banks? They will be pitching for a fresh
rescue from their next over-priced speculation.

Wind-swept farmland? Ocean-floor mining? High-orbit solar
panels...? Who knows what fresh nonsense the banks will be forced
to finance in the government's scramble for un-ending growth. Who
can guess at how much the banks – and then us - will lose as a
result. Such a slow-motion disaster, however, is baked in the crust
when those in power subvert the economy to their own over-inflated
egos.

Witness Argentina, Turkey and Zimbabwe already this decade. Now
thanks to Gordon Brown's self-belief in his personal, hands-on
management of the economy, the UK is thoroughly addicted to monetary
stimulants.

The United States, of course, is strung out on Ben Bernanke's junk,
first peddled by Alan Greenspan when Bill Clinton's White House
proclaimed "It's the economy, stupid!" As in the UK, breaking this
habit will hurt; the banks themselves warn of outright depression
if taxpayers don't front up today.

But cold turkey, according to Keith Richards at least, is just
five days of climbing the walls. (And the Stones' guitarist should
know!) Whereas, if we stick with our habit, then it could soon be
our turn to queue in the streets bearing armfuls of cash, fighting
over the last loaf of bread in the shop.

The great private antidote to the Browns and Bernankes of this
world remains gold. Those people owning it over the last couple of
years now stand unaffected by the losses sweeping through financial
markets.

Yes, it's come a little off the boil since mid-March, but the
fundamentals remain stacked in gold's favor.

** Flat-to-falling production worldwide;
** Money creation still running amok;
** Growing investment demand from a very low base (particularly
in the Far East);
** Rising inflation in your cost of living;
** Control-freaks running government; yes-men in charge of
monetary policy.

It's always painful, of course, to buy something at twice the price
it was just two and a half years ago. But markets – like gold
mines – don't easily give up their riches.

What's hardest to do can often prove the best course.

This current lull in the gold price might just be your best chance.

Regards,
Adrian Ash
Research, BullionVault

Anglo Disease

The FT is inching ever closer to adopting my concept of the Anglo Disease, this time under the byline of John Plender, one of its regular editorialists. In a pretty long and detailed article about rising inequality, he has this to say, among other things:


Income inequality in the US is at its highest since that most doom-laden of years: 1929. Throughout the main English-speaking economies, earnings disparities have reached extremes not seen since the age of The Great Gatsby.

In the 1930s, it ended with bank failures and the Great Depression. Now, after decades of "financialisation" in the US and other Anglophone economies, whereby financial services have increased their share of gross domestic product, banks are being bailed out - using public money - in an effort to ensure the same does not happen again.

(...)

The question is what will happen to wealth creation, stock market valuations and economic growth if, as seems increasingly likely, the public's tolerance of income inequality and what is loosely called the Anglo-American model of free-market capitalism wears thin.

The name - Anglo Disease - fits like a glove to these repeated descriptions of the Anglo- American financial capitalism model.

But, more interestingly, the article provides explicitly, for the first time as far as I can ascertain, the explication that I've been using as to why this model was tolerated for so long:


Liberal economic policies looked attractive to pragmatic left-of-centre politicians because they appeared to deliver high rates of economic growth.

(...)

But what was it that made this long period of growing inequality and stagnant incomes for all but the few tolerable for the voters? The answer is that in all the big English-speaking countries, living standards became very detached from incomes. In a period of stable, low-inflationary economic growth known to economists as "the great moderation", low and middle income people readily took on more debt, while running down their savings.

Rising asset prices, especially in the housing market, created a sense of increasing wealth regardless of income.

The great swindle of the rich looting the economy by capturing real incomes while hiding it by encouraging people to take on debt is becoming understood as such. Well, it's not labelled as a swindle, but it's already described as what it is - a diversion, whereby consumption was made possible by debt instead of by income.


Suddenly all that has changed and, with it, the political calculus. The collapse of the American housing market has left negative equity in its wake. For many, the cost of living is rising faster than wages. Houses can no longer be used as cash dispensers and savings are having to be rebuilt. Financialisation is going into reverse and the financial sector is no longer able to supercharge economic growth.

This is the Anglo Disease: the moment of reckoning, the realization that the "supercharged economic growth" is no longer around. The next step will be to acknowledge that it never really existed, except for a happy few.

The Meaning of Stage II

The U.S. Credit Bubble was punctured this past summer, as the Mortgage Crisis escalated from the confines of subprime to the expansive marketplace for Wall Street “private-label” ABS and MBS. Especially with the bursting of the Florida and then California housing Bubbles, literally Trillions of mortgages, sophisticated debt structures, Credit insurance, various financial guarantees, leveraged speculative positions, and bloated Wall Street balance sheets were in almost immediate peril. Contagious deleveraging overwhelmed the system. In a brief period of only several months the U.S. Credit system went from unmatched expansion and speculative excess to the brink of implosion.

Last week, I made the case for thinking in terms of the end of the first Stage of the Financial Crisis. The epicenter of this initial upheaval was in highly leveraged positions in mortgage Credit exposure - encompassing mortgage-related securities positions (i.e. ABS and MBS); sophisticated Credit structures (i.e. CDOs, “SIVs,” REITs, etc.); various derivatives exposures (i.e. subprime ABX indices, Credit default swaps, synthetic CDOs, etc.); and a broad assortment of financial guarantees and liquidity agreements (monolines, mortgage insurance, asset-backed CP, cash-equivalent funds, etc.). I have referred to this as the breakdown in Wall Street-Backed finance.

This collapse had reached the cusp of bringing down the entire Credit system. In stark contrast to traditional Credit crises, this one engulfed the entire system before the general economy so much as succumbed to a negative quarter of GDP contraction. To stem implosion required nothing less than a Fed-orchestrated bailout of a major Wall Street firm; the opening of the discount window to the securities firms; the implementation of massive liquidity facilities at home and abroad; the promotion of mortgage securities as collateral for borrowings from the Fed; assurances of enormous market intervention (mortgage purchases and guarantees) by the troubled GSEs; the imposition of significantly negative real short-term rates; and open-ended federal government stimulus and financial guarantees.

An argument could be made that, while dramatic, these measures were not world changing. I would counter that such measures gave assurances to the marketplace that the Federal Reserve (along with global central bankers) and our government policymakers were willing take any and all measures necessary to stabilize the Credit system and sustain the U.S. Bubble economy. There were no longer any bounds on government intervention.

I have referred to these policy measures as the supplanting – or underpinning - of “Wall Street-Backed finance” with “federal government-backed finance.” Or, perhaps somewhat less analytically ambiguous, to avoid implosion Washington had no alternative but to explicitly and implicitly nationalize both system Credit and liquidity risk. It was desperate policymaking in the extreme; it was bold and it was historic. It reworked the rules of our Credit apparatus, and the markets have for more than a month now grappled with the ramifications of these changes. To be sure, each week of relative Credit system stability has provided various troubled players the opportunity to raise new capital, others to pare problem positions, and many to adjust various risk exposures. Importantly, the unwinding of “bearish” speculations and hedges is now playing an instrumental role in the resurgence in marketplace liquidity.

According to Bloomberg data, this week saw an all-time record $43.3bn of U.S. corporate debt issuance (compared to a y-t-d weekly average of $18bn). Issuers included Citigroup, Merrill Lynch, Bank of America, Wachovia and Goldman Sachs – and much of their issuance was in the form of new hybrid “equity capital.” Investment grade bond spreads narrowed this week to the lowest level since mid-January; junk bond spreads to early-March levels; and leverage loan prices recovered this week all the way back to December levels.

Many – including seasoned strategists – are today arguing that the worst of the financial crisis is now behind us. I disagree, of course. Yet from an analytical perspective it is imperative to appreciate that (the bust of Wall Street-Backed finance notwithstanding) we still very much operate in a unique period of Market-Based Credit. The ebb and flow of market perceptions (of greed and fear) continue to have an outsized impact on Credit Availability and Marketplace Liquidity – hence economic performance. Not many weeks ago the system was seizing up in the face of collapsing confidence and fears of systemic failure. Today, with confidence and greed regaining some of their “flow”, Credit conditions are loosening meaningfully – which does wonders for reigniting marketplace enthusiasm (not to mention short covering). So, Stage II – the dynamics, excesses, distortions and imbalances leading to the inevitable Second Phase of Crisis - is now off and running.

Does Stage II Mean the Credit Bubble has returned? No. Does Stage II Mean Credit losses will no longer trouble the system? Definitely not. Does Stage II Mean the reemergence of Wall Street-backed finance? No. Does Stage II Mean the reigniting of U.S. asset inflation? No, at least not generally. Does Stage II Mean the leveraged speculating community has been granted a new lease on life? Don’t bet against it. Does Stage II Mean the U.S. Bubble Economy could take on some additional air? Perhaps. Does Stage II Mean the exacerbation of Global Credit Bubble Excesses? Most certainly. Do Global Credit Bubble dynamics impact our Credit and Economic systems? Of course – more than ever.

I’ve written much on the issues of Monetary Processes and Inflation Dynamics. These themes now should play crucial roles in how we analyze the many complexities of today’s financial and economic landscape. Prior to the bust, the rampant expansion of Wall Street-Backed finance was directly fueling U.S. asset inflation and Bubbles – housing in particular. Today, post-crash, no amount of policymaker intervention can repair broken confidence in all facets of Wall Street finance, including subprime and “exotic” mortgages, the “monoline” financial guarantee business, CDOs, “private label” MBS, auction-rate securities, and so forth. Indeed, their problems are poised to only worsen as the economy falters.

It is one thing to stem implosion and something altogether different when it comes to restoring the Wall Street Credit mechanism to the point of fostering new Bubbles. Wall Street “alchemy” is a spent force unless it melds in some type of government obligation. The best policymakers can do today is place a federal government guarantee on 90% of new mortgage debt and hope this somewhat stabilizes U.S. housing.

Faltering housing markets and waning consumer confidence will place increased strains on economic performance. That’s not at issue. At the same time, the finance-driven Bubble economy is unmistakably on more stable footing now compared to its perilous perch a month earlier. Recognizing the Ebb and Flow of Contemporary Market-Based Credit (and the reality that today’s “flow” could easily be augmented in the short-run by the unwind of “bearish” positions), I will remain mindful of the potential for a meaningful loosening of Credit Conditions. To be sure, outside of housing and finance, the U.S. economy is still demonstrating some powerful inflationary biases and impulses. And inflationary biases spur Credit growth that spurs heightened inflationary pressures. That's the way it works.

The Global Credit Bubble must factor into our analysis. Most conspicuously, powerful price pressures throughout global energy, food, and commodities markets are stoking growth in various sectors of our economy. Our export sector continues to boom. Less obvious, I would argue that rampant global financial excess is a contributing factor in our financial institutions’ capacity to raise new “capital” from the global markets – and more generally in bolstering marketplace liquidity in the face of the collapse of Wall Street-backed finance. Foreign demand for our assets is a not insignificant issue. Moreover, the global leveraged speculating community - and international liquidity flows more generally - are a major Stage II wildcard.

Otherwise intelligent financial commentators argue that today’s rising energy and food prices are not a “monetary phenomenon.” Instead, these price pressures are said to be due to strong demand from China and India – wealthier consumers choosing to upgrade their diets. But both the Chinese and Indian economies (and many others) are now operating with virtually unlimited Credit – a unique combination of rampant domestic Credit growth coupled with massive foreign financial inflows. As I’ve explained ad nauseam, U.S. Current Account Deficits and dollar impairment are the root cause of scores of runaway domestic Credit systemic that these days comprise the Global Credit Bubble. This historic Bubble is everywhere and in every way a monetary (Credit) phenomenon.

It is my argument that Stage II Means another year of massive U.S. Current Account Deficits. This would Mean, for one, a prolonging of the massive flow of liquidity into international central bank reserves (creating domestic Credit in the process), sovereign wealth funds, and (to a lesser extent) the hedge fund community. The consequences from a further ballooning of this Unwieldy Global Pool of Speculative Finance are not at all clear. Secondly, another year of U.S. Deficits would Mean another year of excessive liquidity flows into the already overheated economies throughout Asia, the Middle East and elsewhere. These flows are hitting economies with already acute inflation pressures and related problems. Importantly, these Monetary Processes and Inflationary Dynamics are by now well entrenched and extraordinarily powerful after years of unrelenting excess. Resulting Monetary Disorder should be expected to go to increasingly destabilizing extremes (think NASDAQ 1999 and subprime 2006!) – and indeed we’re seeing evidence of as much in near $120 crude, the global food price spike and related hoarding, and wildly unstable and speculative global financial markets.

It is in this context that I believe U.S. policymakers are today unknowingly risking global financial and economic catastrophe. They are, of course, fixated on domestic concerns and are willing to do any and everything in a desperate attempt to sustain the U.S. Bubble Economy. They are oblivious to both the heightened risks associated with today’s Current Account Deficits and to the various linkages of their policies to Heightened International Monetary Disorder. Stage II is fraught with great but not easily recognizable risks.

It is my view that there are significant risks associated with postponing the inevitable adjustment to the U.S. Bubble Economy. As I’ve attempted to explain previously, the amount of Credit necessary to sustain our uniquely maladjusted Economic Structure is unmanageable. It is unmanageable for our troubled banking system, for our troubled GSEs, and for the expansive money-fund complex – for risk intermediation generally. Stage II Means great risk to the heart of contemporary “money.” The problem rests on the reality that “pre-adjustment” Credit (borrowings associated with many businesses and enterprises that will be uneconomic come the arrival of the post-Bubble backdrop) is inherently weak and vulnerable. And as discussed above, today’s U.S. Credit is extraordinarily destabilizing in its effects upon the Global Credit Bubble and Resulting Monetary Disorder.

I am at this point more convinced than ever that only a severe crisis will instigate the necessary adjustment to the distorted and imbalanced U.S. and global economies. One is then left with the disconcerting view that Stage II will lead our authorities to exhaust all policy measures in a futile attempt to sustain the unsustainable. The obvious question: how long does the lead up to Crisis Stage II last? I would today guess a number of months, although I wouldn’t at all be surprised if it was rather short. What will be the impetus for Crisis Stage II? A spike in interest rates, a run from U.S. Treasury and agency debt, a disorderly drop in the dollar, another bout of derivative and Credit market implosion, or acute global financial tumult should be considered leading candidates based upon Stage II ramifications. Or it could easily be something completely unexpected, perhaps even war.
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