Things Have to Change in Order to Remain the Same
American Hypocrisy in the Middle East
By PAUL CRAIG ROBERTS
The hypocrisy of the US government is yet again demonstrated in full bore force. The US government invaded Iraq and Afghanistan, laid waste to much of the countries including entire villages and towns, and massacred untold numbers of civilians in order "to bring democracy" to Iraq and Afghanistan. Now after days of Egyptians in the streets demanding "Mubarak must go," the US government remains aligned with its puppet Egyptian ruler, even suggesting that Mubarak, after running a police state for three decades, is the appropriate person to implement democracy in Egypt.
On January 30, US Secretary of State Hillary Clinton declared that "freedom and democracy" America neither seeks nor supports the ouster of the Egyptian dictator. Israeli prime minister Netanyahu told the US and Europe that criticism of Mubarak must be curbed in order "to preserve stability in the region."
By "stability" Netanyahu means the unimpeded ability of Israel to continue oppressing the Palestinians and stealing their country. Mubarak has been for three decades the well-paid enforcer for the US and Israel, sealing off Gaza from the outside world and preventing aid flows across the Egyptian border. Mubarak and his family have become multi-billionaires, thanks to the American taxpayer, and the US government, both Republicans and Democrats, do not want to lose their heavy investment in Mubarak.
The US government has long corrupted Arab governments by paying rulers installed by the US to represent US/Israeli interests rather than the interest of Arab peoples. Arabs put up with American-financed oppression for many years, but now are showing signs of rebellion.
The murderous American-installed dictator in Tunis was overthrown by people taking to the streets. Rebellion has spread to Egypt and there are also street protests against the US-supported rulers in Yemen and Jordan.
These uprisings might succeed in ousting puppet rulers, but will the result be anything more than the exchange of a new American puppet ruler for the old? Mubarak might go, but whoever takes his place is likely to find himself wearing the same American harness.
What dictators do is to eliminate alternative leadership. Potential leaders are either assassinated, exiled, or imprisoned. Moreover, anything short of a full-fledge revolution, such as the Iranian one, leaves in place a bureaucracy accustomed to business as usual. In addition, Egypt and the country's military have grown accustomed to American support and will want the money to keep flowing. It is the flow of this money that ensures the purchase of the replacement government.
Because the US dollar is the world reserve currency, the US government has financial dominance and the ability to financially isolate other countries, such as Iran. To break free of America's grip, one of two things would have to happen. Revolution would have to sweep the Arab world and result in an economic unity that could foster indigenous economic development, or the US dollar has to fail as world currency.
Arab disunity has long been the means by which the Western countries have dominated the Middle East. Without this disunity, Israel and the US could not abuse the Palestinians in the manner in which they have for decades, and without this disunity the US could not have invaded Iraq. It is unlikely that the Arabs will suddenly unite themselves.
The collapse of the dollar is more likely. Indeed, the policy of the US government to maximize both budget and trade deficits, and the policy of the Federal Reserve to monetize the budget deficit and the fraudulent paper assets of the large banks, have the dollar heading for demise.
As the supply of dollars grows, the value diminishes. Perhaps the time is not far off when rulers cease to sell out their peoples for American money.
Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury. His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com
Understanding Social Unrest in Egypt and Tunisia
Democracy, Capitalism and Technology
By DAVID CORREIRA
Among the many amazing images of social unrest that have come out of Egypt over the course of the past week includes a nighttime photo that depicted a group of young protestors huddled in the middle of Tahrir Square huddled around a small fire kindled from scrounged scraps of wood. The photo was used widely by dozens of media outlets including The Washington Post, The Daily Kos and The Huffington Post. What was most remarkable about the photos was how it was displayed in the New York Times. Throughout the past week, the Times has offered an incredible slideshow of photos taken by photojournalists from the AP, Reuters and the European Pressphoto Agency. The Times prominently displayed the campfire photo as a remarkable depiction of disparate protestors making common cause over the shared intimacy of a simple campfire. It is a nearly universal image. We have all circled around campfires, brought together by the warmth and light of the fire, and in doing so have shared intimacies and forged social bonds.
What was most interesting about the photo, however, was the way in which the Times chose to display it. The campfire photo was immediately followed in the slideshow by another nighttime photograph of Tahrir Square. Another shot of protestors huddled in a circle together. Another photo of protestors sharing a brief intimacy amid enormous chaos. But in this photo the light they shared wasn't the light of a small kindling fire, but rather light emitted from a pile of blinking cell phones recharging on a communal extension cord.
The uncanny familiarity between the two photos illustrates a central theme of so much of the coverage of the unrest in Tunisia and Egypt over the past month: the central role of technology and its role in producing democratic transformations via free markets. According to the photo, the cell phone has replaced the campfire as the hearth around which we build our most intimate social relations. And the cell phone photograph, juxtaposed as it is against the campfire photo, suggests that while the source of social relations and intimacy (from stone age campfires to 21st century technology) may have changed the way in which we express those social relations has not. Cell phones are the new campfires and we owe our social bonds and most intimate relations to them.
This photo was the compelling visual representation of an ongoing trope among many commentators, journalists, and political activists. According to the Times and the Guardian, and debated on Democracy Now and in endless blog entries and twitter feeds, the unrest we have been witnessing in Tunis and Egypt is the "facebook" or "twitter" revolution.
But this obsession with the technological essence of the unrest in the Arab world—is it, or isn't it the techno-revolution?—has unfortunately been marked by a profoundly uncritical debate over the role of technology in the political and economic convulsions we have been witnessing. Deeper investigations into the role of technology have been ignored in favor of the fetish of the facebook. And this is nothing new. The fetish of facebook and twitter echoes the fascination with the technological innovations understood as inherent and progressive in capitalism. And because of it we have cell phone revolutions.
While some commentators have been quick to dismiss the absurd idea of a facebook revolution, these interventions they have largely ignored the central way in which technology is understood: technology as an autonomous, independent agent of change—THE causative agent driving human progress. The ubiquitous objects of technology have finally become so much a part of everyday life that they have become invisible to critical scrutiny.
As a result many critics have responded to the banality of claims of technological progress at the heart of the Egyptian unrest with equally banal claims about the limits of technology. We are subjected to discussions of the political implications of technology that often slide into "he said, she said" absurdities.
While much of the punditry on the role of technology in the events unfolding in Egypt reveal the depth of truly shallow views of technology, the political and economic context of the uprising in Cairo offers, if anything, an antidote to claims of technological determinism and an opportunity to develop a critical view of technology that examines the political economy of technology.
First, (and perhaps the most obvious and most noted) Facebook and Twitter aren't "technology." They are commercial firms with services developed and deployed as commodities that circulate solely as a means to capture surplus value and thus provide a return on investment for shareholders.
Celebrations of technology, or out-of-hand rejection of technology, that rely on the simplified view of technology (facebook = technology) not only ignore the political economy of technological development in capitalist society, not only valorize and reinforce the dangerous notion of an independent techno-authority, but by doing so foreclose the close scrutiny of technology and democracy in capitalist society. We ignore the cultural, political and economic complexity of technological artifacts and let off the hook the people, institution and worldviews that rely on these tools to reproduce inequality and injustice.
While many critics of the idea of a "facebook revolution" have pointed out that the protests in Egypt have developed largely without the aid of facebook or twitter, this phenomenon has not been fully explored and does not go far enough.
A consideration of the role of technology in the unrest engulfing the Arab world should consider how particular political structures and economic arrangements have produced and relied on particular tools of oppression expressed through control of everyday objects of technology. Starting at this critical vantage point, instead of around the virtual campfire, takes us somewhere else entirely.
The events in the Arab world over the past two weeks have starkly revealed the authoritarian structures and reactionary politics embedded in nearly all of the objects and artifacts upon which we have come to rely on and refer to so innocuously as "technology."
First, the same US corporations heralded as the source of technology-driven revolution (facebook and twitter) are hardly the most important US technology corporations implicated in the unrest in Egypt. Narus, a California-based company founded in 1997 and owned by Boeing, developed and now sells what they call "real-time traffic intelligence" equipment to countries and corporate clients. Among their many clients are Egypt Telecom and the U.S. super-spies at the National Security Agency. Narus provides equipment that provides the capacity for on-the-spot surveillance of internet communications. NSA conducts these procedures on a daily basis in ongoing violation of the Foreign Intelligence Surveillance Act but at the continued pleasure of the White House. Mubarak, his hand ever on the handle of authoritarian tools delivered to him by his corporate friends, has used this capacity with a vengeance over the past week, targeting activists and interrupting communications. This hasn't been the "facebook revolution." If anything it is the "Narus Revolution" brought to you by the friendly international team of trainers in the National Security Agency.
Second, Egypt not only conducts surveillance, but also literally controls access to digital information, demonstrated by their rapid digital response to social unrest. They shut down all internet traffic in Egypt because all internet traffic runs through one of four commercial ISPs. They were ordered to shut down and they complied. The internet is not the virtual commons, it operates as a virtual marketplace in the same way that the mall does—it is private property. It's infrastructure owned and controlled by corporations and governments on stand-by to protect their interests. As long as all you do is shop, you're fine.
Mubarak ordered UK-based Vodaphone to shut down mobile phone texting. This was easy, of course, because in order for Vodaphone to acquire a license to operate in Egypt it had to agree to conditions and government control and oversight. They did so happily. Such is the logic of capitalism. So much for "technology" as an autonomous, independent agent of social change and democracy.
Senators Susan Collins of Maine and Joseph Lieberman of Connecticut have long been working on legislation to make Mubarak's malevolent tactics our federal law. Their bill would give to the President the authority to "declare a cybersecurity emergency," and "order the disconnection" of certain networks or Web sites. This authority would "not be subject to judicial review."
So much for "technology" serving the interests of democratic movements. In the end, the particular objects and artifacts of everyday "technology" are the tools of corporations and authoritarian governments. And by now it should be clear that democracy and capitalism do not cohere and the revolution cannot be carried out via "technology." Rather the struggle must become a struggle over the social, political and economic conditions that have made the everyday objects of technology—our digital campfires—nothing more than the tools of authoritarian despotism and capital accumulation.
And over the past few days, this is precisely what has happened in Egypt. The trite talk of techno-progressivism and techno-democracy has been silenced by scenes of bloody confrontation between Mubarak's reactionary goons and protestors no longer huddling around cell phone campfires. They are fighting in the streets as anti-Mubarak protestors are breaking up bricks ("the broken-brick revolution!?") to heave at knife-wielding pro-Mubarak attackers as they fight against a regime long propped up by its technological authoritarianism.
David Correia is a Visiting Professor of American Studies at the University of New Mexico. He can be reached at dcorreia(at)unm(dot)edu
From Brunei to Washington
Kleptocrats at Work
By PAUL CRAIG ROBERTS
Kleptocracy is as old as government. Exotic car broker Michael Sheehan discovered an amazing case nine years ago when he was invited to purchase rare Ferraris and McLaren F1s from a Brunei collection. He writes about it in the current issue of Sports Car Market.
Brunei is a family-owned oil Sultanate of 400,000 people located on the island of Borneo in southeast Asia. A brother of the sultan was finance minister until 1997, when the Asian financial crisis hit Brunei. The Arthur Anderson accounting firm was called in to audit the books. The accountants found that between 1983 and 1998 $40 billion had disappeared and that the finance minister himself had personally spent $14.8 billion.
The finance minister had a collection of 2,500 exotic cars, 500 properties, five yachts, and nine world-class aircraft. He had managed to spend $900,000,000 in the London jeweler Asprey, apparently guaranteeing the old age retirements of a number of attractive women who consort with kleptocrats.
The finance minister was allowed to keep 500 of the cars, but he had to turn in the rest of his loot--to no avail as we shall see.
Sheehan went to Brunei to view the cars. From his general description of the collection, I estimate that the finance minister had paid six figures for the least expensive car in the collection. Many cost much more. McLaren F1s cost $1,000,000 new. They are more valuable now. In October 2008 one sold at a London auction for $4,100,000. Many of the cars were custom built. Some of the high speed Ferraris “were coated in radar-absorbent matt-black coatings and fitted with infrared cameras for night driving.” Easily more than one billion dollars of Brunei’s oil revenues had found their way into the finance minister’s car collection.
Sheehan reports that the cars were stored in about 12 buildings “surrounded by a high wall topped with razor wire and with a bomb-proof front gate” and patrolled by “armed Gurkhas with very serious German shepherds.” The security was for naught, because “the air conditioning was off, but the tropical sun was not.” Years of heat and humidity had destroyed the cars. The storage facilities had become a car tomb.
Sheehan concluded that most of the cars were in such a state of ruin that only a few of the cars had sufficiently high inherent values to support commercially viable restorations. The best use of the rest, Sheehan decided, would be to turn them into an artificial ocean reef.
The careless waste is shocking and even more so to car buffs who consider many of the ruined cars to be artistic masterpieces. This is the kind of opulent waste that we associate with family-owned countries. But before we Americans start feeling superior, consider that the U.S. government puts the Brunei finance minister to shame.
On January 29, 2002, CBS Evening News reported that the Pentagon had lost track of $2.3 trillion, yes, $2,300 billion. Defense Secretary Rumsfeld admitted, “According to some estimates we cannot track $2.3 trillion in transactions.” “We know it is gone,” said Jim Minnery of the Defense Finance and Accounting Service, “but we don’t know what they spent it on.”
Reported thefts from Iraq and Afghanistan reconstruction aid rival Brunei’s missing billions. Pallets of cash stacked high have been flown out of Afghanistan in plain view. The stories of corruption and missing funds are so numerous that they are no longer reported.
The U.S. Congress, at President Obama’s request, recently passed the largest military spending bill of all time in behalf of the share prices of the military/security complex, while many of the 50 states teeter on bankruptcy and default on pensions and municipal bonds and slash education, medical, and other services. For “our” government in Washington, it is a no-brainer that the profits of the military-security complex take every precedence over every need of the American people.
If the Brunei finance minister’s billion dollar car collection becomes an artificial reef, it will foster marine life. In contrast, Dick Cheney seriously damaged, perhaps for many years to come, the Gulf of Mexico, because Cheney believed a few extra bucks for the oil companies were more important than safety standards. The missing safety standards have cost British Petroleum $20 billion in clean up and restitution costs.
U.S. taxpayers are paying the Department of Homeland Security
$56,336,000,000 this year to porno-scan and grope them and otherwise invade their privacy, while millions of Americans are foreclosed out of their homes.
How are the priorities of the US. government superior to those of the Brunei finance minister? When it comes to waste and corruption, lies and deception, the U.S. government has no equal.
Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury. His latest book, HOW THE ECONOMY WAS LOST is published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com
BP in Russia
BP’s Russian venture is already proving trickier than expected
TONY HAYWARD, BP’s ex-boss, once moaned that he wanted his life back. That was after an oil spill in the Gulf of Mexico last year, which the British oil giant expects will end up costing it more than $40 billion. BP, too, is struggling to get its old life back, even after apologising, helping with the clean-up, dumping Mr Hayward and taking a huge write-off.
On February 1st it announced its final, awful, results for 2010: a loss of $4.9 billion. That was BP’s first loss since 1992, but the company fondly hopes that it will now have an opportunity to move on. It would like to direct the world’s attention to its efforts to improve safety, its plan to start paying dividends once again this year and its ideas for the future.
Alas, some of those plans are already hitting obstacles. Two weeks ago BP announced a new partnership with Rosneft, Russia’s state-controlled oil giant, that will see the companies exploring a large and promising part of Russia’s Arctic region for oil. The deal gives BP access to Russian reserves which are normally kept out of foreign reach. In return Rosneft will get 5% of BP’s shares, making it one of the largest shareholders. It will also share BP’s expertise and technology. The deal sparked a furious row between BP and its partners in TNK-BP, a Russian oil company run as a joint venture between BP and a few Russian oligarchs.
On the same day that BP’s results were announced, a judge in London granted a request by Alfa-Access-Renova (AAR), the vehicle through which Russian partners hold their stake in TNK-BP, that the Rosneft deal be put on ice until at least February 25th. AAR argues that TNK-BP is meant to enjoy an exclusive right to develop any further deals in Russia to which BP might be a party. It complains that BP has stiffed it. “BP is acting more Russian than a Russian firm,” says one of AAR’s largest shareholders. AAR has also moved to block a dividend from TNK-BP that would have yielded BP $900m.
At a press conference Bob Dudley, BP’s new boss, said that it had been impossible for BP to talk to AAR in advance of the Rosneft deal because of the market sensitivity of the share swap involved, and that BP and its partners would be headed for arbitration on the matter regardless of the court verdict. He says he expects to come to a settlement quite easily, and that one of BP’s strengths is its long history of involvement with Russia, which contributes about 10% of BP’s profits. At least some of this history, however, consists of misjudging Russian politics and quarrelling with its partners.
When BP formed its joint venture with TNK in 2003, oligarchs seemed the partners of choice for getting things done in Russia. But in 2008, having judged that the ultimate power in Russia lay with state energy companies, BP went behind the backs of its private Russian partners to negotiate a deal with Gazprom, the state-controlled gas behemoth.
This did not go down well. BP underestimated the power of Mikhail Fridman, one of its oligarch partners. A self-made entrepreneur, Mr Fridman got rich in the 1990s and then consolidated his business under Vladimir Putin while remaining his own man—a trick few have managed. BP’s attempt to outplay Russian oligarchs at their own game of power politics failed.
Mr Fridman pulled strings, Gazprom disengaged and Mr Dudley, then the chief executive of TNK-BP, had to flee Russia. Purported diplomatic cables published by WikiLeaks suggest that Igor Sechin, the deputy prime minister and chairman of Rosneft, BP’s new partner, was co-operating with Alfa (Mr Fridman’s firm) and played a part in Mr Dudley’s ouster.
Now BP is in bed with Rosneft and has shaken hands with Mr Sechin, who is widely seen as the architect of the attack on Yukos, an oil firm that was dismantled with scant regard to the law in 2004. Yukos’s main shareholder, Mikhail Khodorkovsky, is now in jail. He was ostentatiously given a second prison sentence just as the BP-Rosneft deal was announced.
BP may become embroiled in the legal battle over Yukos’s assets, which were swallowed by Rosneft. But first the British firm faces a fight with Mr Fridman. If BP assumed that its partnership with Rosneft meant that Mr Fridman would not dare to protest, and that Mr Sechin would always take BP’s side, it may have miscalculated. The legal challenge from AAR is said to come with the full knowledge and approval of the Kremlin. “BP has a very simplistic view of the power structure in Russia,” says Mr Fridman.
AAR does not have any interest in destroying Rosneft’s $16 billion deal with BP. But equally Mr Sechin is unlikely to stand in Mr Fridman’s way when he demands that BP compensate AAR handsomely. Rather than wanting to chase Mr Dudley away again, the Kremlin (and AAR) are keen to draw BP deeper into Russian business and gain more influence over it. Rosneft wants to transform itself into a respectable global oil firm, using its relationship with BP as a stepping-stone.
BP must surely have its qualms about this; but all the parties’ interests are at least aligned on one thing. They want those Arctic oilfields to make money. As Mr Dudley affirmed this week, BP’s long-term strategy is to keep searching for oil, which is more lucrative than gas. And with more and more of the world’s oil being produced by state-owned oil firms, private ones need to go to greater extremes, both technologically and politically, to stay in the game.
The West should celebrate, not fear, the upheaval in Egypt
Democracy in the Arab world
FROM fear of autocracy through euphoria to fear of chaos: over the past ten days, Egypt has been through an intense emotional arc. The protests that started with a few thousand people on January 25th escalated to a thrilling climax on February 1st, when hundreds of thousands assembled in Cairo’s Tahrir Square to demand the removal of Hosni Mubarak, and then deteriorated into violence as the president’s supporters attacked demonstrators.
But despite the ugly scenes mid-week, the developments in Egypt should be welcomed. A downtrodden region is getting a taste of freedom. In the space of a few miraculous weeks, one Middle Eastern autocrat has fallen, and another, who has kept the Arabs’ mightiest country under his thumb for 30 years, is tottering. The 350m-strong Arab world is abuzz with expectation; its ageing autocrats are suddenly looking shaky. These inspiring events recall the universal truth that no people can be held in bondage for ever.
For some in the West, which has tended to put stability above democracy in its dealings with the Middle East, these developments are disturbing. Now that the protests have sucked the life out of Mr Mubarak’s regime, they argue, the vacuum will be filled not by democrats but by chaos and strife or by the Muslim Brothers, the anti-Western, anti-Israeli opposition. They conclude that America should redouble its efforts to secure a lengthy “managed transition” by shoring up either Mr Mubarak or someone like him.
That would be wrong. The popular rejection of Mr Mubarak offers the Middle East’s best chance for reform in decades. If the West cannot back Egypt’s people in their quest to determine their own destiny, then its arguments for democracy and human rights elsewhere in the world stand for nothing. Change brings risks—how could it not after so long?—but fewer than the grim stagnation that is the alternative.
Revolutions do not have to be like those in France in 1789, Russia in 1917 or Iran in 1979. The protests sweeping the Middle East have more in common with the popular colour revolutions that changed the world map in the late 20th century: peaceful (until the government’s thugs turned up), popular (no Robespierre or Trotsky running things behind the scenes), and secular (Islam has hardly reared its head). Driven by the power of its citizens, Egypt’s upheaval could lead to a transformation as benign as those in eastern Europe.
Pessimists point out that Egypt has neither the institutions nor the political leadership to ensure a smooth transition. But if it did, the people would not have taken to the streets. No perfectly formed democracy is about to emerge from the detritus of Mr Mubarak’s regime. Disorder seems likely to reign for some time. But Egypt, though poor, has a sophisticated elite, a well-educated middle class and strong sense of national pride. These are good grounds for believing that Egyptians can pull order out of this chaos.
Fear of the Muslim Brotherhood is anyway overdone. It is true that the Brothers produced Ayman al-Zawahiri, now Osama bin Laden’s number two and chief ideologue; the writings of Sayyid Qutb, the Brothers’ leading thinker in the 1950s and 1960s, are certainly intolerant and hostile to the West. Any new Egyptian government, especially if it included the Brothers, would probably be harder on Israel and easier on Hamas, the Islamist offshoot that runs the Gaza Strip between Egypt and Israel, the very existence of which it in theory rejects.
Yet the Brothers are a varied bunch, and more flexible than they were. Though some argue for rescinding Egypt’s peace treaty of 1979 with Israel, they probably would not risk another war. Nor would they obviously win elections. They are respected for their piety, discipline and resilience, but estimates of their popularity hover around 20% and have been falling. If they did better than that, perhaps even winning power at the ballot box, some fear they might never let go. But Islamists participate in elections in countries such as Turkey, Malaysia and Indonesia where democracy has taken hold.
If democracy is to flourish in Egypt, the Brothers must be allowed to compete for power; and the lesson of the past few weeks is that the alternative to democracy is a dead end. For several years now, unable to renew its institutions or find jobs for its youth, Egypt has been becoming more repressive. To leave 85m people to live under dictatorship—burdened by a corrupt and brutal police force, the suppression of the opposition, and the torture of political prisoners—would not just be morally wrong; it would also light the fuse for the next uprising. Some would wish to install a new strongman and wait for him to create the conditions for a secular democracy. But autocrats rarely plan for their own removal, as the sad state of the Middle East shows.
Despite the undoubted difficulties in the short run, even a messy democracy could eventually be a rich prize—and not just for Egyptians. A democratic Egypt could once again be a beacon to the region. It could help answer the conundrum of how to incorporate Islam in Arab democracies. And, though Israel is understandably fearful of the threats on its borders, an Egyptian government that speaks for the people might one day contribute more to a settlement with the Palestinians than an authoritarian’s “cold peace” ever could.
The West can help win this prize. Its pursuit of stability above democracy has damaged its image, but it can make amends now. America in particular still has influence with Egypt’s political, business and military elite. If it uses that, it could help speed the transition from autocracy through chaos to a new order and improve its standing in the region.Egypt’s upheaval may make Westerners nervous, but when Egyptians demand freedom and self-determination, they are affirming values that the West lives by. There is no guarantee that Egypt’s revolution will turn out for the best. The only certainty is that autocracy leads to upheaval, and the best guarantor of stability is democracy.
How much longer can corporate America keep on delivering bumper increases in profits?
NEW YORK | from PRINT EDITION
THE first time the Dow Jones Industrial Average hit 12,000, in October 2006, presenters on CNBC, a business channel, almost caught fire with excitement. When it reached that milestone again on February 1st the reaction was more muted, though the recovery from a low of 6,547 less than two years ago is remarkable, and soaring share prices reflect a corporate America that is leaner and stronger than it was back in 2006.
The current profit-reporting season is shaping up to be one of the best ever. For non-financial firms in the S&P 500, earnings per share are now higher than they have been for at least a decade. With over half of the companies in the S&P 500 having reported, profits in 2010 were up by 17% compared with 2009. (The year-on-year increase is far greater if financial firms are included, since they plunged in 2009 and then rebounded spectacularly.)
The Dow was helped on its way by strong quarterly profits from Alcoa, an aluminium producer, which generated more than $1 billion of cash from its operations in the fourth quarter, and Exxon Mobil, which reported a 53% increase in fourth-quarter profits thanks to high oil and gas prices. Its full-year profit was $30.5 billion, up from $19.4 billion in 2009.
How much longer will the party last for corporate America? The investors who took the Dow past 12,000 are less giddy than their predecessors were in 2006. The average price-earnings ratio then was 22.7—indicating that investors expected rapid future growth. Now it is a more sober 14.7.
Some fear that the productivity improvements that have driven profit growth since the financial crisis will soon tail off. “Around 90% of the productivity growth in corporate America has come from cost-cutting, and that is now reaching its limit,” says Carsten Stendevad of Citigroup’s corporate-advisory arm. Scared for their jobs during the crisis, employees toiled more for no more money; but they cannot be whipped much harder. To increase profits still further, firms need to increase sales far more than most analysts think they will, reckons Mr Stendevad.
Others disagree. “There is a lot more juice to be squeezed out of the lemon,” insists Hal Sirkin of BCG, a consultancy. Firms brag about having introduced “lean systems”, but most have done only “10-25% of what they could do”, says Mr Sirkin.
Many firms are doing clever things: sending their product designers to visit factories to figure out how to make a new product as efficiently as possible, working out which customers are the most profitable and focusing on them, and so on. Even the best firms could do more of this, and laggards could copy them, says Mr Sirkin.
The stockmarket continues to reward cost-cutting, even if it pares muscle as well as fat. When Pfizer, a research-based drug firm, announced increased profits and a hefty cut in its research-and-development budget on February 1st, its shares surged.
Sales may at last be picking up. Analysts at Bank of America Merrill Lynch calculate that in the first week of this earnings season the number of American companies reporting better-than-expected sales outstripped the number reporting better-than-expected profits. In January American manufacturers saw their revenues grow faster than those of any other sector. If they maintain January’s pace, they could grow by 5% this year.
In America, rapid sales growth is still only a rumour. In emerging markets, it is a fact. So American firms will continue to expand overseas. “Whereas 2010 was a stabilisation year [for corporate America], 2011 will be a year of investing in laying the foundation for growth,” says Mark Spelman, global head of strategy at Accenture, a consultancy.
That is likely to mean tapping into some of the mountains of cash that American firms have accumulated over the past few years. The cash piles were at first supposed to provide a safety net in case of another financial disaster. Recently, they have continued to grow because firms could not think of good ideas for putting the capital to work. If that changes and businesses start to spend again, it would be excellent news for the big tech firms that supply them with office gizmos.
Thanks to recent productivity improvements, corporate America is well placed to turn higher sales directly into higher profits, says Mr Standevad. If not investing in new organic growth, many firms will look to expand their sales through mergers and acquisitions, both at home and in emerging markets.
If, for some reason, they should fail to put their cash mountains to work, investors will demand the cash back through dividends and share buybacks. Indeed, many are already demanding, and receiving, just that. In short, as American firms expand at home and abroad, profits are set to rise and cash holdings to fall. Whether this will help the more than 9% of the American workforce who are unemployed remains to be seen.
Stocks Rise on Earnings, Economy; Egyptian Bonds, Wheat Rally
Stocks climbed, driving benchmark European and U.S. indexes to 2 1/2-year highs, as takeovers, faster global growth and reduced tension in Egypt boosted investor optimism in the economy. U.S. Treasuries fell, while Egyptian bonds rallied and the nation’s currency weakened.
The Standard & Poor’s 500 Index rose 0.3 percent to 1,314.59 and the Stoxx Europe 600 Index gained 0.8 at 9:36 a.m. in New York. The 10-year Treasury yield climbed for a sixth day, gaining five basis points to 3.68 percent. The yield on Egypt’s 2020 bond sank 37 basis points to an eight-day low. Wheat rose 1 percent and copper jumped to a record in London.
Beckman Coulter Inc. and Pride International Inc. jumped at least 9.7 percent after receiving takeover bids, two of 17 U.S. deals announced today worth a total of almost $16 billion. About two-thirds of MSCI World Index companies that reported quarterly earnings have topped estimates. India predicted its economy will expand the most in three years and Indonesia grew at the fastest pace in six years. Investor sentiment also improved as Egypt’s politicians took steps to resolve the crisis.
“More and more people and companies see the economic recovery as sustainable,” said Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, which manages $2.8 billion. “It’s no surprise that there are so many M&A deals going on. Earnings have been good and that’s indication that companies will have more cash to fund those deals.”
Dow’s 6-Day Rally
The S&P 500 rose for a third day and the Dow climbed for a sixth, its longest streak since November. Consumer credit increased by $2.5 billion in December after increasing $1.35 billion in November, economists forecast the Federal Reserve will say at 3 p.m. today in Washington. Other reports this week may show consumer confidence improved this month and claims for jobless benefits fell.
More than three stocks rose for every one that fell in Europe’s Stoxx 600. Basic-resources stocks led the rally, as Rio Tinto Group gained 2 percent and Xstrata Plc added 3.5 percent. Solarworld AG jumped 9.6 percent after the German solar-cell manufacturer said earnings increased. GEA Group AG climbed 5.8 percent after saying it will boost its dividend. Julius Baer Group Ltd. gained 2.4 percent on a share buyback.
“The outlook for the equity market is good,” said Mike Lenhoff, chief strategist in London at Brewin Dolphin Securities Ltd., whose parent company oversees $33 billion. Earnings are supportive and “the momentum behind the U.S. economy is clearly improving,” he said.
The six-day decline in the 10-year Treasury note is the longest losing streak since Oct. 27. The yield on the U.K. two- year gilt jumped six basis points to 1.58 percent. The implied yield on the short sterling futures contract expiring in December was four basis points higher at 1.74 percent as investors added to bets that borrowing costs will increase.
The cost of insuring against a default on European junk bonds fell, with the Markit iTraxx Crossover Index of credit- default swaps declining 11 basis points to 393, the lowest since Jan. 11, 2010, according to JPMorgan. The Markit iTraxx Financial Index of swaps on 25 banks and insurers dropped 1.5 basis points to a two-month low of 153.5.
Egypt Debt Risk
Credit-default swaps on Egyptian debt fell 27 basis points to 339, the lowest since Jan. 25 on a closing basis. The Egyptian pound slid 1.6 percent. Orascom Construction Industries, the country’s biggest publicly traded builder, rose 5.6 percent in London, extending gains since Egypt’s equity market closed on Jan. 27 to 13 percent. Commercial International Bank Egypt SAE surged 5.9 percent.
The government sold 13 billion Egyptian pounds ($2.2 billion) of the total 15 billion pounds offered of 91-day, 182- day and 273-day bills, according to data compiled by Bloomberg.
Egypt’s stock exchange will remain closed until Feb. 13, the bourse said today. Vice President Omar Suleiman, who met with some opposition leaders yesterday, promised a draft list within a month of constitutional changes needed for free elections.
The MSCI China Index of mostly Hong Kong-traded Chinese shares dropped 1.8 percent on concern policy makers will act further to cool property prices. The market was closed for the previous two sessions for the Lunar New Year holiday.
India’s Bombay Stock Exchange Sensitive Index, or Sensex, climbed 0.2 percent. The government said its $1.3 trillion economy will probably expand 8.6 percent in the year ending March 31 from a year earlier. Indonesia’s gross domestic product increased 6.9 percent in the three months through December from a year earlier, a government report today showed. The Jakarta Composite Index fell 0.2 percent, after earlier gaining as much as 0.7 percent.
Hungary’s benchmark BUX Index rallied 0.9 percent after Prime Minister Viktor Orban indicated his government may take a more conciliatory stance in its wrangle with the central bank on monetary policy.
Wheat climbed after Egypt, the world’s largest importer of the grain, boosted its budget for purchases and bought 170,000 metric tons of U.S. exports of the grain. Copper climbed to an all-time high of $10,160 a metric ton and brent crude oil jumped 0.5 percent to $100.32 a barrel.
AOL to Buy Huffington Post for $315 Million; Founder Stays
AOL Inc. agreed to buy the Huffington Post for $315 million as the Internet company spun off from Time Warner Inc. increases its investments in online content to help revive growth in advertising revenue.
The offer includes about $300 million in cash and the deal will likely be completed late in the first quarter or early in the second, New York-based AOL said in a statement today. Co- founder Arianna Huffington, 60, will become president and editor-in-chief of the Huffington Post Media Group, which will include all Huffington Post and AOL content.
AOL, led by Chief Executive Officer Tim Armstrong, acquired the TechCrunch blog and 5Min Media last year, investing in specialized websites and production of original video content to generate Internet traffic and attract advertising revenue. The number of unique visitors at closely held Huffington Post, which aggregates articles and publishes its own content, has grown to about 25 million a month since its debut in 2005.
“With this acquisition, Tim Armstrong is well on his way to transforming AOL into an online editorial-based content company,” Shahid Khan, chairman and chief strategist at MediaMorph Inc., a New York-based digital media-tracking service, said in an interview. “HuffPost gives AOL a very compelling, affluent, educated young audience. It further strengthens AOL’s overall editorial abilities with Arianna in charge.”
AOL declined 5 cents to $21.89 at 10:52 a.m. in New York Stock Exchange composite trading, after falling as much as 4 percent. The shares had declined 7.5 percent this year before today.
Huffington + TechCrunch
AOL is struggling with declining revenue in both its advertising and Internet-access subscription businesses. The company this month reported fourth-quarter revenue fell 26 percent to $596 million, with advertising sales dropping 29 percent to $331.6 million.
Huffington Post had revenue of about $30 million last year and has been aiming to triple that to $100 million in 2012, a person familiar with the company’s plans said in December. The company posted its first annual profit in 2010, Huffington, a Greek-born, Cambridge-educated author and political commentator, said in a conference call to announce the deal to investors.
The combination will create a group with about 270 million unique visitors a month worldwide and 117 million in the U.S., according to the statement. Huffington Post material will be integrated with AOL content, including Engadget, TechCrunch, Moviefone and MapQuest, according to the statement.
“Huffington Post brings another level of ability for us to serve brand marketers,” said Armstrong on the conference call. He said marketers contacted in recent hours are “very interested in this combination.”
Equity in AOL
The $300 million in cash will be divided among the Huffington Post’s owners, which included Huffington and her co- founder, New York-based angel investor Ken Lerer, and venture capital investors. Employees of Huffington Post will receive $15 million in AOL stock in exchange for their unvested Huffington Post options, AOL Chief Financial Officer Arthur Minson said on the call.
Huffington Post had raised about $35 million in venture capital from firms including Greycroft Partners LLC, founded by Alan Patricof. Most of the last round of $25 million, led by Oak Investment Partners, remained in the bank in December, Huffington said in an interview at that time.
She said she and Lerer together raised an initial $2 million to start the company. The company declined to say how much of its equity is controlled by Huffington.
The purchase price is above the historical average for similar deals. Web portals, such as the Huffington Post and companies like social networking site Facebook Inc., have been valued at about 1.5 times their revenue, according to the median of a dozen deals tracked by Bloomberg in the past two years.
The Huffington Post site has benefited as newspapers and magazines lose readers and advertisers to the more interactive experience of Web services. While the site’s number of visitors trail behind those of the New York Times, it exceeds those of online-based rivals such as the Daily Beast and the Drudge Report, according to estimates at ComScore Inc.
The site has boosted traffic by encouraging readers to weigh in on stories and contribute their own views.
“People don’t want just to consume news,” Huffington said in an interview at her New York City headquarters in December. “They want to share it, they want to advance it, and add to it.”
(AOL held call today to discuss the deal. To hear replays of the call, dial 888-286-8010 in the U.S. and Canada, or 617- 801-6888 internationally, and use replay code 90388239.)
Will Cuba Be the Next Egypt? – by Mary Anastasia O’Grady
Developments in Egypt over the last two weeks brought Cuba to my mind. Why does a similar rebellion against five decades of repression there still appear to be a far-off dream? Part of the answer is in the relationship between the Castro brothers—Fidel and Raúl—and the generals. The rest is explained by the regime’s significantly more repressive model. In the art of dictatorship, Hosni Mubarak is a piker.
That so many Egyptians have raised their voices in Tahrir Square is a testament to the universal human yearning for liberty. But it is a mistake to ignore the pivotal role of the military. I’d wager that when the history of the uprising is written, we will learn that Egypt’s top brass did not approve of the old man’s succession plan to anoint his son in the next election.
Castro has bought loyalty from the secret police and military by giving them control of the three most profitable sectors of the economy—retail, travel and services. Hundreds of millions of dollars flow to them every year. If the system collapses, so does that income. Of course the Egyptian military also owns businesses. But it doesn’t depend on a purely state-owned economy. And as a recipient of significant U.S. aid and training for many years, the Egyptian military has cultivated a culture of professionalism and commitment to the nation over any single individual.
In Cuba there are no opposition political parties or nonstate media; rapid response brigades enforce the party line. Travel outside the country is not allowed without state approval. If peaceful dissidents with leadership skills can’t be broken, they are eventually exiled. Or they are murdered.
The most striking difference between Cuba and Egypt is access to the Internet. In a March 2009 Freedom House report on Internet and digital media censorship world-wide, Egypt scored a 45 (out of 100), slightly worse than Turkey but better than Russia. Cuba scored a 90, making it more Net-censored than even Iran, China and Tunisia. Cellphone service is too expensive for most Cubans.
Yet technology does somehow seep into Cuba. When Fidel took the life of prisoner of conscience Pedro Boitel in 1972 by denying him water during a hunger strike, the world hardly noticed. By contrast, news of the regime’s 2010 murder of prisoner of conscience Orlando Zapata Tamayo hit the Internet almost immediately and was met with worldwide condemnation. The military dictatorship was helpless to contain the bad publicity.
In a similar fashion, when the Ladies in White—a group of wives, sisters and mothers of political prisoners—walking peacefully in Havana were roughed up by state security last year, the images were captured on cellphones and immediately showed up on the Web. It was more bad PR for the Castro brothers and their friends like Mexican President Felipe Calderón and Spanish President José Luis Zapatero.
Technology-induced international pressure is making the regime increasingly reluctant to flatten critics the old-fashioned way. In an interview in Argentina’s Ambito Financiero on Jan. 27, internationally recognized Cuban blogger Yoani Sánchez said the “style” of state repression has shifted from aggressive arrests and long sentences to targeted attempts at defamation and isolation. Ms. Sanchez also said that uniformed police are “distancing themselves from the political theme, not by orders from above, but because they no longer want to be associated with the repression.” Now, she said, the intimidation and arbitrary arrests are largely carried out by the secret police in civilian clothes.
A little more space has emboldened the population. Ms. Sánchez also said in the interview that she is “optimistic about the slow and irreversible process of interior change in Cubans. In that the citizen critic will grow, will have less fear, and will feel that the mask is increasingly unnecessary and that it doesn’t any longer translate into privileges and subsidies.”
Last week a leaked video of a Cuban military seminar on how to combat technology hit the Internet. It demonstrates the dictatorship’s preoccupation with the Web. The lecturer warns about the dangers of young people with an appealing discourse sharing information through technology and trying to organize. Real-time chat, Twitter and the emergence of young leaders in cyberspace—aka “a permanent battlefield”—are perils outlined in the hour-long talk. The lecturer also shares his concerns about U.S. government programs that try to increase Internet access outside of officialdom on the island.
On Friday, the regime further displayed its paranoia by charging U.S. Agency for International Development contractor Alan Gross with spying. Mr. Gross has been in jail for 14 months for giving Cuban Jews computer equipment so they could connect with the diaspora.
With very limited access, Cubans are already using the Internet to share what has until now been kept in their heads: counterrevolutionary thoughts. If those go viral, even a well-fed military will not be able to save the regime. But for now, Cubans can only dream about the freedoms Egyptians enjoy as they voice their grievances.
US: Obama’s Gross Problem (and Blunder) – Capitol Hill Cubans
Taking a page from the Obama Administration’s playbook — or perhaps mocking its announcement of unilateral concessions exactly three weeks earlier – the Castro regime also chose a late Friday afternoon to announce its charges (and a potential 20-year prison sentence) against U.S. development worker, Alan Gross.
It took the Castro regime more than 14 months to file charges against Alan Gross (for helping Cuba’s Jewish community to freely connect to the Internet).
So what are these charges that took 14 months of “intrigue”?
Gross was charged with violating Castro’s arbitrary “Law Against Independence and Territorial Integrity.” In other words, for disrespecting the absolute authority of the Castro brothers.
Ironically, this is the same “crime” for which the Castro regime imprisons Cuban dissidents — except it only takes them overnight to invent charges in those cases.
So now what happens?
There will surely be a show trial and Gross will be found “guilty.”
The question then becomes — will the regime make Gross serve the 20-year sentence or release him on “humanitarian” grounds (and thereafter seek international praise for releasing a man that should have never been arrested in the first place)?
Time will tell. However, one thing is for sure — it will be a very well-orchestrated show trial.
The audience? U.S. travelers.
The message? Bring me your money and shut up (or you too can become a hostage).
And unfortunately, the Obama Administration just made that a whole lot easier three weeks ago.
US: Reagan Revealed – by Deroy Murdock
Dr. Martin Anderson works in an ivory tower — literally. From high above Stanford University’s Hoover Institution, Anderson contemplates Ronald Reagan’s legacy as his centennial arrives on February 6.
Asked if he thinks Reagan’s stature has risen since he left office in 1989, Anderson says, “I don’t just think so. I know so.”
Reagan’s reputation has grown, largely thanks to the scholarship of Anderson and his wife, Annelise, both former Reagan aides and Hoover colleagues of mine. Like prospectors panning for flakes of gold, they routinely sift through boxes and boxes of Reagan’s papers. Their findings have surprised even the most stalwart Reaganites.
America’s 40th president succeeded, in part, by not challenging the widespread belief that he was a committed conservative who mainly sold free-market reforms while others fretted over their details and implementation. Reagan’s critics considered him gregarious, perhaps, but ultimately a mere actor who read whatever lines he was handed by such advisers as former White House counselor Ed Meese and the late media man Mike Deaver. The equally late Democratic eminence Clark Clifford famously dismissed Reagan as “an amiable dunce.”
The Andersons’ book, Reagan, In His Own Hand, detonated this myth. They discovered 670 scripts for commentaries that the former California governor aired on 236 radio stations from 1975 to 1979. Reagan offered his specific prescriptions on taxes, regulation, peace through strength, and even oceanic mineral content as it concerned the Law of the Sea Treaty. These scripts consisted of sheets of yellow legal paper brimming with Reagan’s own cursive handwriting.
Rather than a mere mouthpiece for his staff, Reagan himself researched and addressed topical issues with philosophical consistency and concrete evidence to bolster his opinions.
“In 1969 we virtually doubled the capital gains tax,” Reagan wrote in 1978. “In 1970 there were 31 mil[lion] investors putting up the capital to increase production & create jobs. Today there are fewer than 25 mil.”
The Andersons cross-tabulate, highlight, color-code, and digitize copies of Reagan’s documents, both from Hoover’s archives and the Reagan Library in Simi Valley, California. Reagan’s prolific pen still keeps them busy.
“We published about a thousand of his letters in Reagan: A Life in Letters,” Martin Anderson says. “There are about 10,000 Reagan letters. We’re still finding more.”
The Pentagon declassified additional papers that helped the Andersons explain how Reagan won the Cold War while firing barely a shot. Here again, Anderson says Reagan pursued precisely the policy that he wanted. His deputies worked hard to follow him — not the reverse.
Reagan was driven, Anderson believes, by something he learned at a Dec. 3, 1981, National Security Council meeting. “Right now in a nuclear war we’d lose 150 mil. people,” Reagan wrote in his diary. “The Soviets could hold their loss down to less than were killed in W.W. II” — some 25 million.
In short, 40 percent of America’s population would bury the other 60 percent before returning to the radioactive rubble. Reagan wanted to do better.
“He was the only person who was smart enough to know what to do,” Anderson says. “And he did it.”
Thus, Reagan launched a tax-cut-fueled economic expansion and an aggressive military buildup, including missile-defense research. After seven exhausting decades of “scientific socialism,” the USSR could not keep up.
Reagan also engaged Russia in high-stakes diplomacy, which finally succeeded after Soviet leader Mikhail Gorbachev concluded that resistance was futile and accepted deep arms reductions.
When, exactly, did Reagan win the Cold War? Anderson cites the June 1, 1988 completion of Reagan and Gorbachev’s Moscow summit. They jointly declared “their solemn conviction that a nuclear war cannot be won and must never be fought#…#and their disavowal of any intention to achieve military superiority.”
This reflected Reagan’s singular desire to end Mutual Assured Destruction. Like most of his other policies, this sprang from his well-honed intellect and his deep-seated faith in America’s abilities. He governed with focused self-confidence. As Reagan told his very first National Security Council meeting on Feb. 6, 1981: “I will make the decisions.”
“People used to say, ‘Reagan was a nice guy. But who was handling all of this stuff for him?’” Martin Anderson marvels. “We didn’t know. And now we do: He was.”
— Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.
Source: National Review
Sunday, February 6, 2011
Founded in 1928 by the Egyptian schoolteacher/activist Hasan al-Banna (a devout admirer of Adolf Hitler and the Nazis), the Muslim Brotherhood (MB) -- a Sunni entity -- is one of the oldest, largest and most influential Islamist organizations in the world. While Egypt historically has been the center of the Brotherhood’s operations, the group today is active in more than 70 countries (some estimates range as high as 100+). Islam expert Robert Spencer has called MB "the parent organization of Hamas and al Qaeda." In 2003, Richard Clarke – the chief counterterrorism advisor on the U.S. National Security Council during both the Bill Clinton and George W. Bush administrations – told a Senate committee that Hamas, al Qaeda, and Palestinian Islamic Jihad were all "descendants of the membership and ideology of the Muslim Brothers."
MB was established in accordance with al-Banna’s proclamation that Islam should be “given hegemony over all matters of life.” Toward that end, the Brotherhood seeks to establish an Islamic caliphate, or kingdom -- first spanning all of the present-day Muslim world, and eventually the entire globe. The organization further aspires to dismantle all non-Islamic governments wherever they currently exist, and to make Islamic Law (Shari’a) the sole basis of jurisprudence everywhere on earth. This purpose is encapsulated in the Brotherhood’s militant credo: “God is our objective, the Koran is our Constitution, the Prophet is our leader, struggle [jihad] is our way, and death for the sake of God is the highest of our aspirations.”
Consistent with the foregoing credo, MB since its founding has supported the use of armed struggle, or jihad, against non-Muslim “infidels.” As al-Banna himself wrote: "Jihad is an obligation from Allah on every Muslim and cannot be ignored nor evaded." Added al-Banna: "It is the nature of Islam to dominate, not to be dominated, to impose its law on all nations and to extend its power to the entire planet."
In the 1930s, the Brotherhood was largely an underground organization. Paramilitary in nature, it stockpiled weapons and operated clandestine camps that provided instruction in military and terrorist tactics. Partly due to its call for a return to traditionalist Islamic values, and partly because of the unpopularity of the Egyptian monarchy, MB's membership swelled throughout the Thirties and early Forties. By 1944, the Brotherhood in Egypt consisted of some 1,500 branches and as many as a half-million members. As of 1948, its membership may have exceeded 2 million. During the Forties, the late PLO chairman Yasser Arafat fought alongside MB.
According to scholar Martin Kramer, the Muslim Brotherhood of that period had "a double identity":
"On one level, they operated openly, as a membership organization of social and political awakening. Banna preached moral revival, and the Muslim Brethren engaged in good works. On another level, however, the Muslim Brethren created a ‘secret apparatus’ that acquired weapons and trained adepts in their use. Some of its guns were deployed against the Zionists in Palestine in 1948, but the Muslim Brethren also resorted to violence in Egypt. They began to enforce their own moral teachings by intimidation, and they initiated attacks against Egypt’s Jews."
In December 1948, a Brotherhood member assassinated Egyptian prime minister Mahmud Fahmi Nuqrashi. Egypt's government retaliated by banishing MB from the country. Then, in February 1949, Hasan al-Banna was killed by government agents in Cairo. A harsh, official crackdown was initiated against the Brotherhood; thousands of its members were imprisoned and many others were confined to detention camps.
With Gamal Abdel Nasser’s revolutionary seizure of power in Egypt in 1954, MB split into two factions. One, led by Hasan al-Hudaybi, favored working with Nasser's secular government in an effort to gradually move the country toward Islamic fundamentalism. A more radical faction, led by the writer and ideologue Sayyid Qutb (1909-1966), advocated armed revolution against corrupt (i.e., non-Islamist) regimes in the Middle East and, more broadly, against unbelievers in Western nations.
Qutb -- whose wordview distinguished sharply between “the Party of Allah and the Party of Satan,” -- declared that Egyptian society under the secular Nasser was contrary to authentic Islam. Asserting that the Prophet Mohammad himself would have rejected such a government, Qutb claimed that Muslims had both a right and an obligation to resist it. Qutb's writings -- which challenged the views of mainstream Sunni theologians, who extolled the Islamic tradition of deference to the state and ruler -- are now cited by many scholars as some of the first formulations of political Islam.
A corollary of Qutb’s fundamentalist critique of Egyptian society was his abiding contempt for the Western, especially the United States, which he regarded as spiritually vacant, decadent, idolatrous and fundamentally hostile to Islamic piety.
After MB member Abdul Munim Abdul Rauf tried to assassinate President Nasser in October 1954, the Brotherhood, which had recently received permission to resume its operations in Egypt, was outlawed again. Thus it receded as a political force.
MB re-emerged under Anwar Sadat, a sympathizer of the group, when he became Egypt's president in 1970. Taking advantage of the Brotherhood’s militant aversion to secularism, Sadat sponsored the organization against his communist and socialist political opposition. Later, however, MB joined the political Left in opposing Sadat’s peace treaty with Israel, believing the normalization of relations with the Jewish State to be a betrayal of Islam.
Sadat was assassinated in October 1981, after a fatwa (religious edict) calling for his death had been issued by Omar Abdel-Rahman, the Islamic Group leader who despised Sadat for having struck a bargain with Israel. At that point, the Brotherhood began to chart a more mainstream course, and in 1987 it won many government seats in an “Islamic Alliance” with other parties. Although it remains officially banned in Egypt to this day, MB actively participates, with success, in the country's parliamentary elections, running candidates as “independents” under the slogan “Islam is the Solution.”
Continuing to embrace al-Banna’s belief that Islam is destined to eventually dominate all the world, MB today is global in its reach, wielding influence in almost every country with a Muslim population. Moreover, it maintains political parties in many Middle-Eastern and African countries, including Jordan, Bahrain, Tunisia, Algeria, Jordan, Iraq, Syria, Sudan, Somalia, Yemen, and even Israel. Not only does the Brotherhood exist in Israel proper, but its Palestinian chapter created the terrorist organization Hamas, through which MB has supported terrorism against Israel ever since. Article II of the Hamas charter explicitly identifies Hamas as "one of the wings of Moslem Brotherhood in Palestine." In January 2006 Hamas defeated the rival Fatah party to win the Palestinian legislative elections, thereby becoming the first branch of MB to control an official government.
Outside of the Middle East, MB exercises a strong influence in Muslim communities throughout Europe. Among the more prominent Brotherhood organizations in the region are: the Forum of European Muslim Youth and Student Organizations, the Muslim Association of Britain, the European Council for Fatwa and Research, the Islamische Gemeinschaft Deutschland (IGD), and the Union des Organisations Islamiques de France (UOIF).
MB also has expanded its operations to the United States. The first American chapter of the Brotherhood was formed in the early 1960s after hundreds of young Muslims came to the U.S. to study, particularly at large Midwestern universities such as Illinois, Indiana, and Michigan. Some of these students had been MB members in their homelands and now wanted to spread the group's ideology in America. MB's early activities in the U.S. centered around the Muslim Students Association of the U.S. and Canada, founded in 1963.
In the 1970s, the United States experienced a new influx of Muslim Brothers from the Middle East. At that time, MB launched a five-year plan that sought to make the period of 1975-1980 "an era of dedication for general activism." This phase was characterized by a growing emphasis on secrecy, as well as the development of a long-term strategy.
The Brotherhood initiated a second five-year plan for 1981-1985, with a focus on using Da'wa (proselytization) to increase MB's influence in organizations that were evolving among young Muslim immigrants.
In 1982, MB adopted a 14-page strategic plan known as "The Global Project for Palestine," which outlined a 12-point strategy to “establish an Islamic government on earth.” Departing from standard Islamist rhetoric (i.e., “Death to America! Death to Israel!”), this Project represented a flexible, multi-phased, long-term plan for a “cultural invasion” of the West. Calling for the utilization of multiple tactics -- including immigration, infiltration, surveillance, propaganda, protest, deception, political legitimacy, and outright terrorism -- the Project has served, since its drafting, as the Muslim Brotherhood “master plan.” For details about this Project, click here, here, and here.
In May 1991, MB issued to its ideological allies an explanatory memorandum on "the General Strategic Goal for the Group in North America." Asserting that the Brotherhood's mission was to establish "an effective and ... stable Islamic Movement" on the continent, this document outlined a "Civilization-Jihadist Process" for achieving that objective. It stated that Muslims "must understand that their work in America is a kind of grand Jihad in eliminating and destroying the Western civilization from within and 'sabotaging' its miserable house by their hands ... so that ... God's religion [Islam] is made victorious over all other religions." Through stealth jihad, the Brotherhood would seek to impose Islamic values and customs on the West in piecemeal fashion -- gradually, incrementally gaining ever-greater influence over the culture. The memorandum listed some 29 likeminded "organizations of our friends" which sought to realize the same goal. These included:
- Islamic Society of North America (ISNA)
- ISNA Fiqh Committee (now known as the Fiqh Council of North America)
- ISNA Political Awareness Committee
- Muslim Youth of North America
- Muslim Students Association of the U.S. and Canada
- Association of Muslim Scientists and Engineers
- Islamic Medical Association (of North America)
- Islamic Teaching Center
- Malaysian Islamic Study Group
- Foundation for International Development
- North American Islamic Trust
- Islamic Centers Division
- American Trust Publications
- Audio-Visual Center
- Islamic Book Service
- Islamic Circle of North America
- Muslim Arab Youth Association
- Islamic Association for Palestine
- United Association for Studies and Research
- International Institute of Islamic Thought
- Muslim Communities Association
- Association of Muslim Social Scientists (of North America)
- Islamic Housing Cooperative
- Muslim Businessmen Association
- Islamic Education Department
- Occupied Land Fund (later known as the Holy Land Foundation for Relief and Development)
- Mercy International Association
- Baitul Mal Inc.
- Islamic Information Center (of America)
At a 1995 conference (hosted by the Muslim Arab Youth Association) in Toledo, Ohio, MB spiritual leader Yusuf al-Qaradawi vowed that Islam would "conquer Europe [and] America -- not through sword but through Da’wa [proselytizing]." He also urged Muslims to "continue to fight the Jews" and "kill them."
In more recent years, the Brotherhood has attempted to forge a reputation as a moderate and reformist Islamic group that has renounced its violent past, in favor of participation in local and national politics. Some Islamist groups have condemned such engagement in secular politics as a heretical abandonment of jihad's mandates. In practice, however, MB's political involvement has not replaced, but rather has supplemented, its pursuit of jihad-by-the-sword.
Indeed, numerous statements by MB leaders offer compelling evidence of the group's undiminished militancy. For example, Ali Sadreddine Bayanouni, head of the Syrian Muslim Brotherhood, has repeatedly pledged his support for the terrorism of Hamas and Hezbollah. Muhammad Mahdi Othman Akef, MB's Supreme Guide, expressed his support for suicide bombings in Israel and Iraq (during the Iraq War), "in order to expel the Zionists and the Americans."
Many other MB luminaries have likewise justified jihadist terrorism against Israel and the United States. Yusuf al-Qaradawi has written: "There is no dialogue between them [the Jews] and us, other than in one language -- the language of the sword and force." Khalid Shaikh Mohammed, the architect of 9/11, was a member of the Brotherhood. Abdullah Azzam, a Palestinian MB preacher, was a mentor to al Qaeda kingpin Osama bin Laden. And bin Laden's deputy, Ayman al-Zawahiri, was a Brotherhood member as a young man, though he later broke with the group because of its willingness to participate in political elections. In 2006, Rajab Hilal Hamida, a Muslim Brotherhood member serving in Egypt's parliament, said:
"From my point of view, bin Ladin, al-Zawahiri and [the late radical Islamist] al-Zarqawi are not terrorists in the sense accepted by some. I support all their activities, since they are a thorn in the side of the Americans and the Zionists."
In January 2011, as Egyptian President Hosni Mubarak's hold on power was threatened by massive swarms of protesters rioting in the streets to express their opposition to his government, there was much speculation that the Muslim Brotherhood -- which was still banned in Egypt -- stood a strong chance of filling the power vacuum in the event of Mubarak's downfall. In a television interview, MB deputy leader Rashad al-Bayoumi declared:
"After President Mubarak steps down and a provisional government is formed, there is a need to dissolve the  peace treaty with Israel."
In early February, Muhammad Ghannem, a leading member of the Muslim Brotherhood in Egypt, told the Iranian news network Al-Alam that “the people [of Egypt] should be prepared for war against Israel,” emphasizing that “the Egyptian people are prepared for anything to get rid of this regime.” That objective was entirely consistent with MB Supreme Guide Muhammad Mahdi Othman Akef's 2007 assertion that his organization had never recognized Israel and never would: “Our lexicon does not include anything called 'Israel.' The [only thing] we acknowledge is the existence of Zionist gangs that have occupied Arab lands and deported the residents. If they want to live among us, it will have to be as [residents of] Palestine.”
The Muslim Brotherhood’s Penetration of the Obama Administrationby Jamie Glazov
Frontpage Interview’s guest today is Pamela Geller, founder, editor and publisher of the popular and award-winning weblog AtlasShrugs.com. She has won acclaim for her interviews with internationally renowned figures, including John Bolton, Geert Wilders, Bat Ye’or, Natan Sharansky, and many others, and has broken numerous important stories — notably the questionable sources of some of the financing of the Obama campaign. Her op-eds have been published in The Washington Times, The American Thinker, Israel National News, Frontpage Magazine, World Net Daily, and New Media Journal, among other publications. She is the co-author (with Robert Spencer) of The Post-American Presidency: The Obama Administration’s War on America.
FP: Pamela Geller, welcome to Frontpage Interview.
Well, perhaps for those who are familiar with your work and with your book, it is not a big surprise for them that Obama has endorsed a role for the Muslim Brotherhood in a new, post-Mubarak government for Egypt.
I would like to narrow in with you today about the Muslim Brotherhood’s penetration of the Obama administration. What can you tell us about this Islamist penetration of the White House?
Geller: Thanks Jamie.
The first thing we need to realize is that the Muslim Brotherhood operates in the United States under a variety of names and organizational umbrellas. Technically, there is no “Muslim Brotherhood” in the United States. But the Muslim American Society (MAS), the Islamic Society of North America (ISNA), the Council on American-Islamic Relations (CAIR) and others are – according to a document captured in a raid and released by law enforcement in 2007 during the Holy Land Foundation Hamas funding trial) – Brotherhood-linked organizations.
FP: Right, and crystallize for us why we need to be concerned about Brotherhood-linked organizations in the U.S.
Geller: Because, Jamie, that same captured document explains that the Muslim Brotherhood’s mission in the U.S. is “a kind of grand Jihad in eliminating and destroying the Western civilization from within and ‘sabotaging’ its miserable house by their hands and the hands of the believers so that it is eliminated and God’s religion is made victorious over all other religions.”
FP: And people with ties to these organizations are involved with the Obama Administration, right?
Geller: Yes they are, Jamie, in various ways. On the first day of his presidency, the President showed an eagerness to be friendly toward the Brotherhood: he chose Ingrid Mattson, president of ISNA to offer a prayer at the National Cathedral during inaugural festivities on January 20, 2009.
Superficially, Obama’s choice was understandable: Ingrid Mattson was a Canadian convert to Islam who carefully cultivated the image of a moderate spokesperson. But ISNA has even admitted ties to the Muslim Brotherhood and Hamas, which calls itself “one of the wings of Muslim Brotherhood in Palestine.”
Mattson has also tried to set Jews and Christians against one another. Speaking at Harvard’s Kennedy School of Government in March 2007, Mattson said: “Right-wing Christians are very risky allies for American Jews, because they [the Christians] are really anti-Semitic. They do not like Jews.”
But Obama didn’t seem to care about any of that. And so she prayed for Barack Hussein Obama on January 20, 2009. And it gets worse: after that, Valerie Jarrett, Obama’s Senior Advisor for Public Engagement and International Affairs and a longtime, close Obama aide, asked Mattson to join the White House Council on Women and Girls, which is dedicated to “advancing women’s leadership in all communities and sectors – up to the U.S. presidency – by filling the leadership pipeline with a richly diverse, critical mass of women.”
A hijab-wearing leader of a group with ties to the Muslim Brotherhood and other terrorists and Islamic supremacists – that’s diverse, all right!
FP: Yes diverse all right. I wonder why we haven’t heard Mattson coming to the defense of victims of honor killings and denouncing the Islamic theological teachings that serve as a buffer for those killings. It would be interesting to know what she would have to say about your article, Honor Killing: Islam’s Gruesome Gallery, where you humanize this tragedy by showing us the faces of dead victims and surviving victims of Islamic misogynist violence.
But I guess we shouldn’t hold our breath waiting for Mattson to comment. I encourage all of our readers to look at that Gallery to not only get an idea of the viciousness of Islamic gender apartheid, but also of what kind of people Obama is has around him — since they are the ones who are complicit in and sanction this violence.
Ok, let us move on. Tell us more about the Muslim Brotherhood presence in the Obama Administration.
Geller: In June 2009, Obama appointed a Muslim, Kareem Shora, to the Homeland Security Advisory Council. Shora had been executive director of the American-Arab Anti-Discrimination Committee, a group that had generally opposed anti-terror efforts since 9/11 – as have all the Muslim Brotherhood-linked groups in the U.S. But more worrisome was Obama’s appointment of another Muslim, Arif Alikhan, to be Assistant Secretary for Policy Development at the Department of Homeland Security. Alikhan is affiliated with the Muslim Public Affairs Council (MPAC), which is another highly deceptive Brotherhood-linked group.
FP: Why did the President make these appointments?
Geller: These appointments were obvious attempts to show the Muslims of the United States and the world that anti-terror efforts were not anti-Islam or anti-Muslim. Shora and Alikhan would stand as moderate Muslims within the DHS, living illustrations of the iron dogma that all Muslims aside from a tiny minority were loyal Americans who abhorred Osama bin Laden and everything he stood for. But when he made the appointment, Obama didn’t notice, or didn’t care, that as deputy mayor of Los Angeles, Alikhan (who has referred to the jihad terrorist group Hizballah as a “liberation movement”) had blocked an effort by the Los Angeles Police Department to gather information about the ethnic makeup of area mosques.
FP: You mean to conduct surveillance in Los Angeles-area mosques?
Geller: No, Jamie. This was not an effort to close down Los Angeles mosques, or to conduct surveillance of them. There was no wiretapping or interrogation involved. No one would be jailed or even inconvenienced. Los Angeles Deputy Chief Michael P. Downing explained in 2007: “We want to know where the Pakistanis, Iranians and Chechens are so we can reach out to those communities.” But even outreach was too much for the hypersensitive Muslim leaders of Los Angeles: they cried racism, discrimination, and “Islamophobia” until the LAPD dropped the plan. And Arif Alikhan spearheaded their drive against this initiative.
Did Obama want him to bring to the Department of Homeland Security a similar sensitivity to the quickly wounded feelings of Muslims? I expect so.
FP: Talk a bit about that.
Geller: We are all well aware of Obama’s oft-stated commitment to defending and spreading the ideology of groups like the Muslim Brotherhood. Remember: in Cairo on June 4, 2009, Obama boasted that “the U.S. government has gone to court to protect the right of women and girls to wear the hijab, and to punish those who would deny it….I reject the view of some in the West that a woman who chooses to cover her hair is somehow less equal.” Five days later, as if to show that Obama was serious about what he said in Cairo, his post-American Justice Department filed a lawsuit against Essex County, New Jersey, charging that the county had discriminated against a Muslim woman, Yvette Beshier.
Beshier was a corrections officer, and had been forbidden to wear her khimar, or headscarf, while working. When she refused to comply, the Essex County Department of Corrections (DOC) first suspended and then fired her – the khimar was not part of the uniform, and corrections officers were expected to conform to uniform policy. But such policies, of course, were drawn up before the days of politically correct multiculturalism. Instead of simply expecting employees to conform to company rules, now the company had to adapt to the religious particularities of its Muslim employees: Barack Obama’s Justice Department sued on Beshier’s behalf.
When Obama in Cairo boasted about fighting for hijab-wearing women in the United States, he promised to “punish” infidels for not submitting to the dictates and whims of Islam. The lawsuit that followed less than a week later showed that he was in earnest.
It was almost certainly the first time that the United States Justice Department had filed a lawsuit in order to enforce an element of Sharia, Islamic law.
On duty, Yvette Beshier, like all her fellow corrections officers, should have worn religiously neutral garb. Off duty, she could have dressed any way she wanted. But ultimately the Justice Department’s suit wasn’t really about the dress code at the Essex County Department of Corrections at all. It was about asserting Islamic practices in the U.S., and establishing and reinforcing the precedent that when Islamic law and American law and custom conflicted, it was American law that had to give way.
And that’s just how the Muslim Brotherhood would want it.
FP: Interesting. I wonder when Obama will make an announcement that will defend Muslim women’s right not to veil and not to fear physical violence or acid attacks on their faces when making that decision? Aqsa Parvez was killed by her father, in part, for not veiling. I wonder why Obama didn’t come to Aqsa’s defense? Thank you, Pamela, by the way, for coming to Aqsa’s defense.
So let’s talk about the upheaval in Egypt. What do you think of how Obama is handling the situation?
Geller: Obama approved of a role in the next Egyptian government for the Muslim Brotherhood just as a Brotherhood leader was calling for war several days ago with the tiny Jewish state. It was telling. What better way to unify the ummah than with tried-and-true, religiously mandated Islamic anti-semitism? For all of those quisling clowns desperately trying to scrub the Muslim Brotherhood, this declaration of war was a good hard slap in the face.
Further, it’s interesting how the Muslim Brotherhood is blaming Israel for Mubarak’s regime. They’re not blaming the $300 billion the US has pumped into Egypt. The Camp David Peace Accord (no matter how cold a peace it established) was a good thing. Now we hear that Obama’s would-be peace partners, the Muslim Brotherhood group Hamas, are going to destroy the accord. But they want peace with the Jews; get it? Me neither.
Obama has been secretly supporting this revolution for three years. Why? He ignored the people of Iran marching against the annihilationist mullahcracy of Iran. He gave his tacit support to mass slaughter where millions took to the streets.
Anyone who, like Obama, sees a Muslim Brotherhood takeover of Egypt as a good thing secretly dreams of the annihilation of Israel. Big media is not giving you the story. Instead they have the Muslim Brotherhood’s U.S. group on, CAIR, calling in from Egypt (and mis-identifying Ahmed Rehab of CAIR as a “democracy activist”). And that was FOX. It’s that bad.
I don’t believe Obama “lost Egypt”; I believe he kicked it to the curb.
FP: Pamela Geller, thank you for joining Frontpage Interview.
And we encourage all of our readers to get their hands on Ms. Geller’s book, co-written with Robert Spencer, The Post-American Presidency: The Obama Administration’s War on America.