What is it with Barack Obama? He can give a great speech, but either he or his speechwriter have a streak of willful arrogance that is totally discordant with reality. Consider these lines from his UN speech:
"This is what we have already done, but this is just a beginning. Some of our actions have yielded progress. Some have laid the groundwork for progress in the future. But make no mistake: This cannot solely be America's endeavor.
Those who used to chastise America for acting alone in the world cannot now stand by and wait for America to solve the world's problems alone. We have sought in word and deed a new era of engagement with the world, and now is the time for all of us to take our share of responsibility for a global response to global challenges."
As I asked before in my blog post about Susan Rice’s comments, WHAT is he talking about? What problems has America solved alone?
Global warming? The US refused to ratify Kyoto under Clinton and Bush. Today, it is the largest emitter of CO2 in the world, and has no real plan for long-term environmental efficiency or CO2 abatement.
Terrorism? The US invasion of Iraq has led to hundreds of thousands of dead and trillions of dollars in damage, with no perceivable benefit in stopping terrorism or the proliferation of weapons of mass destruction. In Afghanistan, politicians dither while the troops make endless sacrifices and thousands of people are killed.
The global economy? US banks and investment firms are at the heart of the current economic collapse. After trillions of Federal dollars pumped into the system, the US financial industry now continues to lobby against any kind of meaningful regulation of the sector.
Mr. President, an objective observer of current events would conclude that rather than solving the world's problems, America has played a leading role in creating many of them. Let's keep this in mind when we lecture the world at the United Nations.
Thursday, 24 September 2009
Thursday, 17 September 2009
I am a tax evader
I hate to announce this news in public, but … I am a tax evader.
I evade paying both VAT and social security taxes when I hire a cleaning lady to clean up my mess one day per week for my house in Athens. She is legal-I tried-but she doesn’t know how the system works and doesn’t have a book of receipts.
I evade paying VAT and real estate taxes by under-declaring the number of usable square meters and actual loan volume in my house in Athens. In fact, the bank that’s given me the loan helps me in this, as does the Hellenic Tax Authority (the Eforia) through its advice. Honestly, I tried to do it, but if I had declared the true number of square meters (developed by the previous owner), the house would probably have to be torn down and re-built.
My complicity in not demanding receipts from the laiki (farmers’ market) seller when I buy my tomatoes, or from the taxi driver when I take a taxi into Athens, makes me an active participant in VAT and income tax avoidance (of the vendors).
I’m a little bit behind in my TEBE payments…actually some months behind. But I never use the service, don’t understand its benefits, and whenever I have a question I don’t get any answers. Nevertheless, I’m going to catch up this week…or next.
On the other hand, I pay my income tax assessments, declare my income, and when VAT needs to be collected from third-party suppliers in Greece, I collect it and pay it.
Which lead me to my ultimate conclusions: the tax system simply doesn’t work. It’s irrational, and creates too many incentives for tax evasion or avoidance.
Let’s take the real estate tax as an example: in Greece, a real estate object is taxed on the basis of (a) the number of usable square meters, and (b) an “objective value” (minimum value) per square meter.
When you go to buy a house, you immediately determine three things:
(a) the previous owner has made changes to the approved building plan, such as by enclosing balconies, but not declared this to either the Town Planning Authority (Poleodomia) or to the Tax Authority (Eforia), and
(b) The actual value is far above the “objective value”, and everyone knows this, but everyone lists the “objective value” anyway, and
(c) Sellers, buyers and banks are all implicated in this cheerful deceit, even to the point of the banks making off-the-books mortgage transfers to sellers on behalf of buyers.
When government-owned banks start setting up secret accounts to cheat the government from tax revenue, you know there’s a problem.
The whole tax system is a classic case of treating a symptom rather than a root cause. The symptom is tax evasion: in order to combat this, the government has passed hundreds of laws and amendments trying to “fine tune” the system. The result is continuing, rampant tax evasion. I doubt any politician in Greece, or any citizen, can boast that he or she is in 100% compliance of the law. Even the ones that want to.
So the question is, why continue this system? What’s the point of spending hundreds of millions of Euro on antiquated compliance systems which create bureaucracy and paperwork, slow down productivity, and result in a culture of petty corruption and tax avoidance?
I suggest we start to think of basic ways to fundamentally reform the system. I’d start with the following:
(a) Eliminate VAT on any transaction where the main input involves labour. Thus, any professional activities which depend on manual, hourly labour, such as cleaning, construction, market vendors, taxi drivers, waiters, cooks, etc. should not be taxed with VAT. This does not cover professions with a high degree of specialization, such as architects, accountants, lawyers, etc., who should pay taxes under the Personal & Corporate Income Tax Bands (see below).
(b) Levy a flat tax of EUR 750-1,000 per year on all manual trades. No other taxes on personal income, earned by own personal work, should be required. However, if a manual worker has income from other sources (e.g. rental of an inherited apartment), this should be taxed under the standard Personal and Corporate Income Tax bands (seen below).
(c) Equalise corporate and personal income taxes using a “2.5%” flat rate, using tax bands as follows:
The highest corporate or personal income tax band ends at 25% of income. At the personal level, this applies to any individual. Eliminate deductions for children or other claims (replace this with direct subsidy from the state if necessary). The personal income tax applies to independent professionals or salaried employees.
(d) Social taxes on employment and earned income (e.g. professional services) should be levied according to a 1% band, starting at 1%, and rising as follows:
(e) Levy real estate construction or sales taxes on a 1% tax band . These taxes apply either to construction of a new property, or sale of a property, but are only levied once. The maximum tax rate is 10%. This same tax applies to commercial or residential projects. There is no VAT on construction activity, although a form of VAT on construction materials will be set. (This rate does not apply to annual municipal taxes on property).
All taxes are based on a professional valuation conducted by a qualified surveyor who is employed by a bank or, in the cases where a bank is not involved in financing, by the tax authority. The valuations of each surveyor will be evaluated separately by a separate branch of the tax authority. Banks cannot provide mortgages unless the buyer or seller provide evidence that the real estate tax has been paid.
(f) Remove complicated taxes for real estate. The only restrictions on real estate in the future will be (a) the building coefficient in terms of total area built, (b) the height of the building and its relationship to the buildings on either side, and (c) energy efficiency, seismic safety, etc. If an owner wants a building with no balconies and 100% internal floor space, it’s up to him. The process of evaluating the “usable” living area and assessing a value on this should be eliminated.
Adopting these bands will create an immediate loss of apparent tax revenue in the short-term, as well as a long-term revenue loss over time. Such a loss must be alleviated in two ways:
(g) Increasing “sin” taxes on alcohol, nightclubs, cigarettes and certain other categories of products and establishments. For instance, cigarette prices are clearly far lower than European norms, and cigarettes are a direct contributor to cancer and adverse health effects. A special health tax on cigarettes of EUR 1 / year should be added until the average price per pack reaches EUR 7.00/pack in 2014. (See table below).
(h) Enforcing the existing tax law on certain categories of establishments and professions, where tax evasion is standard operating procedure. More on this in a future post.
An example of re-calibrating the “sin tax” on tobacco and cigarettes is seen below. In 2009, assuming an average price for a pack of cigarettes of EUR 2, and an average tax rate of 74% of that tax, means that the tax per pack is EUR 1.48, and the total tax which should be attributed to government revenue is EUR 2.48 billion.
Cigarette "Sin" Taxes and Public Revenue
Under my proposal, the price per pack would rise by EUR 1 per year until 2014. The large majority of this price rise would comprise tax. I’ve assumed a 4% increase in the product price; by 2014, a pack of 20 cigarettes would cost EUR 7.00 to buy (which is similar to high street prices in France and Germany today). I estimate that consumption would fall by about 500 million pcs per year. Tax revenue to the government would rise to EUR 9.87 billion. This is nearly 10% of the regular 2008 central government budget.
A "sin" tax of this sort has several collateral benefits: According to the European Commission, Greece has the highest smoking rate in the European Union. Approximately 600 deaths are caused per year from passive smoking; approximately 20,000 per year from active smoking. Reducing the number of smokers would have a positive impact on national public health, while remaining an individual decision as to whether (and how much) someone should smoke.
This tax should be earmarked for shoring up the public health system and pension funds, replacing in part the funds currently collected through high IKA and other payroll taxes. Lowering the payroll taxes should in turn have a positive impact on employment, as people understand that they can keep a higher share of earnings, and employers do not have to count on high payroll taxes in employment.
This proposal does not answer several key questions in Greek tax policy today:
• How to enforce the true recording of income (receipts)?
• Whether the amount earned through indirect taxes will replace the taxes currently payed by a limited number of taxpayers (usually salaries employees)?
• Whether the Greek people will finally respond to positive incentives and assume their legal responsibilities?
• Can these ideas be implemented under EU VAT and tax law?
However, I firmly believe that we need to simplify the tax system and remove as many taxes on labour as we can, particularly for the low-paid, manual trades which are necessary in the Greek economy, and have made Greece a labour magnet since the Soviet Union fell.
Additional posts will be dedicated towards answering some of these questions. But the system needs fundamental renewal, not on-margin tinkering. It is doubtful whether any current political party is prepared to address this issue.
I evade paying both VAT and social security taxes when I hire a cleaning lady to clean up my mess one day per week for my house in Athens. She is legal-I tried-but she doesn’t know how the system works and doesn’t have a book of receipts.
I evade paying VAT and real estate taxes by under-declaring the number of usable square meters and actual loan volume in my house in Athens. In fact, the bank that’s given me the loan helps me in this, as does the Hellenic Tax Authority (the Eforia) through its advice. Honestly, I tried to do it, but if I had declared the true number of square meters (developed by the previous owner), the house would probably have to be torn down and re-built.
My complicity in not demanding receipts from the laiki (farmers’ market) seller when I buy my tomatoes, or from the taxi driver when I take a taxi into Athens, makes me an active participant in VAT and income tax avoidance (of the vendors).
I’m a little bit behind in my TEBE payments…actually some months behind. But I never use the service, don’t understand its benefits, and whenever I have a question I don’t get any answers. Nevertheless, I’m going to catch up this week…or next.
On the other hand, I pay my income tax assessments, declare my income, and when VAT needs to be collected from third-party suppliers in Greece, I collect it and pay it.
Which lead me to my ultimate conclusions: the tax system simply doesn’t work. It’s irrational, and creates too many incentives for tax evasion or avoidance.
Let’s take the real estate tax as an example: in Greece, a real estate object is taxed on the basis of (a) the number of usable square meters, and (b) an “objective value” (minimum value) per square meter.
When you go to buy a house, you immediately determine three things:
(a) the previous owner has made changes to the approved building plan, such as by enclosing balconies, but not declared this to either the Town Planning Authority (Poleodomia) or to the Tax Authority (Eforia), and
(b) The actual value is far above the “objective value”, and everyone knows this, but everyone lists the “objective value” anyway, and
(c) Sellers, buyers and banks are all implicated in this cheerful deceit, even to the point of the banks making off-the-books mortgage transfers to sellers on behalf of buyers.
When government-owned banks start setting up secret accounts to cheat the government from tax revenue, you know there’s a problem.
The whole tax system is a classic case of treating a symptom rather than a root cause. The symptom is tax evasion: in order to combat this, the government has passed hundreds of laws and amendments trying to “fine tune” the system. The result is continuing, rampant tax evasion. I doubt any politician in Greece, or any citizen, can boast that he or she is in 100% compliance of the law. Even the ones that want to.
So the question is, why continue this system? What’s the point of spending hundreds of millions of Euro on antiquated compliance systems which create bureaucracy and paperwork, slow down productivity, and result in a culture of petty corruption and tax avoidance?
I suggest we start to think of basic ways to fundamentally reform the system. I’d start with the following:
(a) Eliminate VAT on any transaction where the main input involves labour. Thus, any professional activities which depend on manual, hourly labour, such as cleaning, construction, market vendors, taxi drivers, waiters, cooks, etc. should not be taxed with VAT. This does not cover professions with a high degree of specialization, such as architects, accountants, lawyers, etc., who should pay taxes under the Personal & Corporate Income Tax Bands (see below).
(b) Levy a flat tax of EUR 750-1,000 per year on all manual trades. No other taxes on personal income, earned by own personal work, should be required. However, if a manual worker has income from other sources (e.g. rental of an inherited apartment), this should be taxed under the standard Personal and Corporate Income Tax bands (seen below).
(c) Equalise corporate and personal income taxes using a “2.5%” flat rate, using tax bands as follows:
The highest corporate or personal income tax band ends at 25% of income. At the personal level, this applies to any individual. Eliminate deductions for children or other claims (replace this with direct subsidy from the state if necessary). The personal income tax applies to independent professionals or salaried employees.
(d) Social taxes on employment and earned income (e.g. professional services) should be levied according to a 1% band, starting at 1%, and rising as follows:
(e) Levy real estate construction or sales taxes on a 1% tax band . These taxes apply either to construction of a new property, or sale of a property, but are only levied once. The maximum tax rate is 10%. This same tax applies to commercial or residential projects. There is no VAT on construction activity, although a form of VAT on construction materials will be set. (This rate does not apply to annual municipal taxes on property).
All taxes are based on a professional valuation conducted by a qualified surveyor who is employed by a bank or, in the cases where a bank is not involved in financing, by the tax authority. The valuations of each surveyor will be evaluated separately by a separate branch of the tax authority. Banks cannot provide mortgages unless the buyer or seller provide evidence that the real estate tax has been paid.
(f) Remove complicated taxes for real estate. The only restrictions on real estate in the future will be (a) the building coefficient in terms of total area built, (b) the height of the building and its relationship to the buildings on either side, and (c) energy efficiency, seismic safety, etc. If an owner wants a building with no balconies and 100% internal floor space, it’s up to him. The process of evaluating the “usable” living area and assessing a value on this should be eliminated.
Adopting these bands will create an immediate loss of apparent tax revenue in the short-term, as well as a long-term revenue loss over time. Such a loss must be alleviated in two ways:
(g) Increasing “sin” taxes on alcohol, nightclubs, cigarettes and certain other categories of products and establishments. For instance, cigarette prices are clearly far lower than European norms, and cigarettes are a direct contributor to cancer and adverse health effects. A special health tax on cigarettes of EUR 1 / year should be added until the average price per pack reaches EUR 7.00/pack in 2014. (See table below).
(h) Enforcing the existing tax law on certain categories of establishments and professions, where tax evasion is standard operating procedure. More on this in a future post.
An example of re-calibrating the “sin tax” on tobacco and cigarettes is seen below. In 2009, assuming an average price for a pack of cigarettes of EUR 2, and an average tax rate of 74% of that tax, means that the tax per pack is EUR 1.48, and the total tax which should be attributed to government revenue is EUR 2.48 billion.
Cigarette "Sin" Taxes and Public Revenue
Under my proposal, the price per pack would rise by EUR 1 per year until 2014. The large majority of this price rise would comprise tax. I’ve assumed a 4% increase in the product price; by 2014, a pack of 20 cigarettes would cost EUR 7.00 to buy (which is similar to high street prices in France and Germany today). I estimate that consumption would fall by about 500 million pcs per year. Tax revenue to the government would rise to EUR 9.87 billion. This is nearly 10% of the regular 2008 central government budget.
A "sin" tax of this sort has several collateral benefits: According to the European Commission, Greece has the highest smoking rate in the European Union. Approximately 600 deaths are caused per year from passive smoking; approximately 20,000 per year from active smoking. Reducing the number of smokers would have a positive impact on national public health, while remaining an individual decision as to whether (and how much) someone should smoke.
This tax should be earmarked for shoring up the public health system and pension funds, replacing in part the funds currently collected through high IKA and other payroll taxes. Lowering the payroll taxes should in turn have a positive impact on employment, as people understand that they can keep a higher share of earnings, and employers do not have to count on high payroll taxes in employment.
This proposal does not answer several key questions in Greek tax policy today:
• How to enforce the true recording of income (receipts)?
• Whether the amount earned through indirect taxes will replace the taxes currently payed by a limited number of taxpayers (usually salaries employees)?
• Whether the Greek people will finally respond to positive incentives and assume their legal responsibilities?
• Can these ideas be implemented under EU VAT and tax law?
However, I firmly believe that we need to simplify the tax system and remove as many taxes on labour as we can, particularly for the low-paid, manual trades which are necessary in the Greek economy, and have made Greece a labour magnet since the Soviet Union fell.
Additional posts will be dedicated towards answering some of these questions. But the system needs fundamental renewal, not on-margin tinkering. It is doubtful whether any current political party is prepared to address this issue.
Monday, 14 September 2009
Neither PASOK nor ND have a plan to reform the public sector in Greece
ERT Building (c) ERT AENational elections have been called for October 4th in Greece. For perhaps the first time, both PASOK and ND are vying with each other over who will introduce the most austere budget. This is a welcome change, if it were believable. I believe both party leaders are sincere. But I also believe that the party barons on both sides, as well as decades of vested interest, will sabotage or slow any reform implemented.
What Greece needs is a vision of lean government. Right now, the parties are focussing on top-line, revenue and expenditure assumptions:
• We will freeze public sector salaries
• We will freeze new hiring
• We will crack down on debt avoidance.
Unfortunately, there is no unifying vision or coherence to these measures, or how these would affect the fundamental structure and operations of public administration.
Let us view a simple example. Greece has no fewer than five public broadcast channels. These are bundled under ERT A.E., a public organisation that functions according to private law. ERT A.E. includes the following channels:
• NET
• ERT 1
• ERT 3
• ERT World
• Digital Channels : Prisma, Cine, Spor
• Vouli TV
In addition to this, the government is already funding a range of local authority and municipal TV stations, which mainly transmit programmes of local interest, and occasionally meetings of municipal councils.
The main organisation, ERT, is funded by a mandatory tax on electricity bills. It has some 3,500 employees, and a range of ancillary activities, including several radio stations, a publishing company, and no less than five orchestras:
• National Symphony Orchestra
• Orchestra of Contemporary Music
• ERT Choir
• ERT-3 Orchestra
• Childrens’ Orchestra.
I am a great fan of public TV: in Greece, it is one of the few quasi-objective media organisations (although I am sure this is also open to debate). But frankly, we are in the middle not only of an economic crisis, but of a situation where public debt has reached at least 103% of GDP, and quite possibly 108-110% by the end of 2009. We simply don’t have the resources for massive public sector organisations and repetitive functions which in many cases are paid for by the taxpayer without recourse or choice.
I would expect to see an attempt to transform the Greek public sector using the tools of lean management and e-government. If we take the example of ERT and public media in Greece, I would expect to see the following strategic changes:
1. Greek public TV will comprise 3 channels:
• A national terrestrial broadcaster
• A terrestrial broadcaster oriented towards northern Greece and the Greek islands (ERT 3)
• A digital/satellite broadcaster oriented towards Greeks of the diaspora and equivalent markets
2. All ancillary functions will be divested or closed.
3. All local TV and parliament TV can continue, but will be broadcast only online, and will not be paid for by the central government as a separate item. The costs should be borne by the IT budgets of these organisations, and should be less than EUR 1,000 per organisation from the central budget, with anything remaining gained by sponsorship or advertising.
4. The Greek state will only support a limited number of orchestras, choirs, etc. In any case, the budget for these activities has nothing to do with state television: it should be transferred to the Ministry of Culture. No more than two national symphony orchestras are needed in the entire country: one in Athens; one in Thessaloniki, which are paid for by public funds.
5. The strategic role of the national broadcaster should be to conduct in-depth analyses of Greek history, culture, news, economy, and international relations. We do not need so many programmes on recipes, sports, Greek music, etc. How many separate yet similar programmes on Greek music are aired by ERT, and why are these needed?
6. The headcount of ERT will shrink to 1,250 within 4 years, from the current total of 3,500. The celebrity media culture of untrammelled spending for gossip TV, Eurovision, and other frankly ridiculous events which are currently programmed by ERT must end.
7. Should a public subsidy for ERT continue, it will be collected by the normal tax collection method, and not through DEH (public electricity authority) bills. DEH is a totally separate business, which—apart from convenience—should not function as a billing mechanism for another quasi-governmental organisation. In any case, any public subsidy should be re-channelled to debt reduction, while ERT should improve its already important advertising revenue.
8. All major public debates and decisions should be put online as a matter of course; every Greek (and other) citizen should have access to government through the internet.
Similar decisions are needed in every government or semi-governmental organisation. The time of “caviar socialism” is over: unless hard decisions are made on the basis of a real cost-benefit analysis, the country will soon reach a debt-to-GDP ratio of 140-150%, and it will then be bankrupt.
Greece is spreading its expenditure across thousands of public organisations, replicating a model of government suited to the 1800s of employment and patronage over efficiency. There needs to be a clear strategy of focussing the role of government where it is truly needed, and exiting ancillary functions. Where government is needed, for instance in education, healthcare or the military, then we should spend the correct amount of resources to make sure Greek citizens receive world-class services, not banana republic excuses.
We need to develop a public sector from the ground up, using lean thinking and the power of the internet, if we are to compete, and indeed survive, in the future.
Friday, 31 July 2009
Snatching Defeat from the Jaws of Victory
The New York Times published an internal memo by Colonel Timothy Reese yesterday. Colonel Reese is Chief of the Baghdad Operations Command Advisory Team, and as such has been heavily involved in the training and development of the Iraqi Security Forces (ISF).
His memorandum—never designed to be leaked to the general public—is remarkable for its unvarnished and objective look at the security situation in Iraq. Some of the remarkable statements in the memo:
• Prime Minister (PM) Maliki hailed June 30th as a “great victory,” implying the victory was over the US.
• Remaining in Iraq through the end of December 2011 will yield little in the way of improving the abilities of the ISF or the functioning of the GOI. Furthermore, in light of the GOI’s current interpretation of the limitations imposed by the 30 June milestones of the 2008 Security Agreement, the security of US forces are at risk.
• The ineffectiveness and corruption of GOI Ministries is the stuff of legend.
• The military culture of the Baathist-Soviet model under Saddam Hussein remains entrenched and will not change. The senior leadership of the ISF is incapable of change in the current environment.
a) Corruption among officers is widespread
b) Neglect and mistreatment of enlisted men is the norm
c) The unwillingness to accept a role for the NCO corps continues
d) Cronyism and nepotism are rampant in the assignment and promotion system
e) Laziness is endemic
f) Extreme centralization of C2 is the norm
g) Lack of initiative is legion
h) Unwillingness to change, do anything new blocks progress
i) Near total ineffectiveness of the Iraq Army and National Police institutional organizations and systems prevents the ISF from becoming self-sustaining
j) For every positive story about a good ISF junior officer with initiative, or an ISF commander who conducts a rehearsal or an after action review or some individual MOS training event, there are ten examples of the most basic lack of military understanding despite the massive partnership efforts by our combat forces and advisory efforts by MiTT and NPTT teams.
There is little reason to doubt this assessment: It corresponds to every other objective assessment of the situation that has been coming out of Iraq.
It’s a good time, therefore, to reflect on what has occurred:
• Iraq was invaded in 2003 under a falsified claim of possessing weapons of mass destruction and links to Al Qaeda by the Bush Administration. Every one of the pre-war claims have been proven false, in many cases even before the date of the invasion. Yet the story of aluminium tubes, Prague meetings or Niger yellowcake have been forgotten. George Bush builds his library and gives the occasional speech; Tony Blair’s name has obscenely been put forward as the next President of the European Council.
• The occupation of Iraq was blatantly misplanned, leading to thousands of American and Allied deaths, and hundreds of thousands of Iraqi deaths. Paul Bremmer was awarded the Medal of Freedom; Donald Rumsfeld has retired into obscurity, for which we are grateful.
• At this time, Iraq, is essentially divided into three statelets: The Shia-controlled centre, east and south; the Sunni-controlled west; and the Kurdish-controlled north.
• Iranian influence over the Shia statelet continues to grow. Reports of Iranian control over militias and government ministries alike has been corroborated from several sources.
• The Sunni détente that was achieved by creating the “Sons of Iraq” is in the process of unravelling, as the Shia-dominated government reneges on promises made and begins to slowly disarm and disenfranchise the Sunni militias, and withhold their pay.
• The US promise to withdraw from combat operations and urban areas has fundamentally weakened the deterent threat of US power. This in turns makes any pretense of political reconciliation impossible.
• Whatever benefits won by the “surge” have been effectively lost by the Obama Administration’s decision—which was fully consistent with pledges made by the Bush Administration—to withdraw from Iraq.
If we accept these conclusions, which I believe are objective and evidence for all to see, then the incoherence and failure of American policy is simply breath-taking:
• Iraq was invaded on patently false pretences;
• The occupation was mismanaged, at tremendous cost in blood and treasure;
• Once a new strategy—the “surge” was finally put into effect and worked—both the Bush and Obama administrations literally pulled the rug out from other the feet of the US military by ordering a phased withdrawal.
America is withdrawing, leaving a broken state, where external political interference from Iran, Syria and other anti-US powers is increasing. We leave behind us another foul dictatorship and the prospect of years of low-level warfare that will inevitably draw us into renewed conflict.
In fact, there has been one clear winner in Iraq. Iran has managed to tie down US forces and broken American political will for an attack on its nuclear facilities. It has consolidated control over its ancient enemy-Iraq, and particularly over Basra and the oil-rich east of the country. It has learned how to combat American ground and air forces, and has extended its sphere of influence in the Middle East.
There are also a number of collateral winners: China has been able to continue its military and economic build-up unimpeded. Together with Russia, it emerges strengthened as America weakens. Although Russia will never recover its greatness, it’s clear that it’s room for manoeuvre has increased as it consolidates control over economic assets and neighbouring countries.
In the meantime, American combat fatalities number over 4,000, while permanently disabled and injured veterans number over 25,000. The cost so far in direct military expenditure as well as the cost of replacing worn-down equipment is probably at the $ 1 trillion mark. Joseph Stiglitz and Linda Bilmes estimate that the true cost of the war is over $ 3 trillion.
The American public appears to have forgotten about Iraq. Lulled by the Obama Administration’s promise to withdraw, the war no longer dominates the headlines. The geostrategic implications of America’s defeat—for defeat is what we are talking about—are rarely to be seen in public fora. Instead, the American public sinks deeper into its hedonistic morass of the next big sensation, the next You Tube hit, and the next irrelevant public debate.
As the summer of 2009 draws to a close, we are confronted with a debilitating strategic failure in Iraq. This failure leaves the United States less secure economically and politically that it was in 2003, and has created new opportunities for strategic enemies.
Absent a radical and fundamental re-think of US foreign, military and economic policy, we appear doomed to repeat the mistakes of the past. As our national debt skyrockets and political incoherence grips Washington, you can sense the headlines of American decline being written.
Instead of thinking, and preparing for the future, we are being drawn into another pointless conflict—that of Iraq and Pakistan—which military arms alone cannot hope to win, in which we are unaware of the true cost that will be incurred, and in which we appear to refuse to deploy the socio-economic tools are necessary for victory.
I write this post with sadness. I was opposed to the Iraq war from the start, and predicted the failure of the US occupation. Yet its failure has been beyond my grimmest forecasts. The human cost has been tremendous: the sacrifices of American troops and their families perhaps not meaningless, but certainly in vain. The economic cost is still being counted. The strategic consequences are emerging, but as yet unknown.
Napoleon Bonaparte said that “In politics, stupidity is not a handicap.” I regret that it’s never the politicians who pay for their stupidity.
His memorandum—never designed to be leaked to the general public—is remarkable for its unvarnished and objective look at the security situation in Iraq. Some of the remarkable statements in the memo:
• Prime Minister (PM) Maliki hailed June 30th as a “great victory,” implying the victory was over the US.
• Remaining in Iraq through the end of December 2011 will yield little in the way of improving the abilities of the ISF or the functioning of the GOI. Furthermore, in light of the GOI’s current interpretation of the limitations imposed by the 30 June milestones of the 2008 Security Agreement, the security of US forces are at risk.
• The ineffectiveness and corruption of GOI Ministries is the stuff of legend.
• The military culture of the Baathist-Soviet model under Saddam Hussein remains entrenched and will not change. The senior leadership of the ISF is incapable of change in the current environment.
a) Corruption among officers is widespread
b) Neglect and mistreatment of enlisted men is the norm
c) The unwillingness to accept a role for the NCO corps continues
d) Cronyism and nepotism are rampant in the assignment and promotion system
e) Laziness is endemic
f) Extreme centralization of C2 is the norm
g) Lack of initiative is legion
h) Unwillingness to change, do anything new blocks progress
i) Near total ineffectiveness of the Iraq Army and National Police institutional organizations and systems prevents the ISF from becoming self-sustaining
j) For every positive story about a good ISF junior officer with initiative, or an ISF commander who conducts a rehearsal or an after action review or some individual MOS training event, there are ten examples of the most basic lack of military understanding despite the massive partnership efforts by our combat forces and advisory efforts by MiTT and NPTT teams.
There is little reason to doubt this assessment: It corresponds to every other objective assessment of the situation that has been coming out of Iraq.
It’s a good time, therefore, to reflect on what has occurred:
• Iraq was invaded in 2003 under a falsified claim of possessing weapons of mass destruction and links to Al Qaeda by the Bush Administration. Every one of the pre-war claims have been proven false, in many cases even before the date of the invasion. Yet the story of aluminium tubes, Prague meetings or Niger yellowcake have been forgotten. George Bush builds his library and gives the occasional speech; Tony Blair’s name has obscenely been put forward as the next President of the European Council.
• The occupation of Iraq was blatantly misplanned, leading to thousands of American and Allied deaths, and hundreds of thousands of Iraqi deaths. Paul Bremmer was awarded the Medal of Freedom; Donald Rumsfeld has retired into obscurity, for which we are grateful.
• At this time, Iraq, is essentially divided into three statelets: The Shia-controlled centre, east and south; the Sunni-controlled west; and the Kurdish-controlled north.
• Iranian influence over the Shia statelet continues to grow. Reports of Iranian control over militias and government ministries alike has been corroborated from several sources.
• The Sunni détente that was achieved by creating the “Sons of Iraq” is in the process of unravelling, as the Shia-dominated government reneges on promises made and begins to slowly disarm and disenfranchise the Sunni militias, and withhold their pay.
• The US promise to withdraw from combat operations and urban areas has fundamentally weakened the deterent threat of US power. This in turns makes any pretense of political reconciliation impossible.
• Whatever benefits won by the “surge” have been effectively lost by the Obama Administration’s decision—which was fully consistent with pledges made by the Bush Administration—to withdraw from Iraq.
If we accept these conclusions, which I believe are objective and evidence for all to see, then the incoherence and failure of American policy is simply breath-taking:
• Iraq was invaded on patently false pretences;
• The occupation was mismanaged, at tremendous cost in blood and treasure;
• Once a new strategy—the “surge” was finally put into effect and worked—both the Bush and Obama administrations literally pulled the rug out from other the feet of the US military by ordering a phased withdrawal.
America is withdrawing, leaving a broken state, where external political interference from Iran, Syria and other anti-US powers is increasing. We leave behind us another foul dictatorship and the prospect of years of low-level warfare that will inevitably draw us into renewed conflict.
In fact, there has been one clear winner in Iraq. Iran has managed to tie down US forces and broken American political will for an attack on its nuclear facilities. It has consolidated control over its ancient enemy-Iraq, and particularly over Basra and the oil-rich east of the country. It has learned how to combat American ground and air forces, and has extended its sphere of influence in the Middle East.
There are also a number of collateral winners: China has been able to continue its military and economic build-up unimpeded. Together with Russia, it emerges strengthened as America weakens. Although Russia will never recover its greatness, it’s clear that it’s room for manoeuvre has increased as it consolidates control over economic assets and neighbouring countries.
In the meantime, American combat fatalities number over 4,000, while permanently disabled and injured veterans number over 25,000. The cost so far in direct military expenditure as well as the cost of replacing worn-down equipment is probably at the $ 1 trillion mark. Joseph Stiglitz and Linda Bilmes estimate that the true cost of the war is over $ 3 trillion.
The American public appears to have forgotten about Iraq. Lulled by the Obama Administration’s promise to withdraw, the war no longer dominates the headlines. The geostrategic implications of America’s defeat—for defeat is what we are talking about—are rarely to be seen in public fora. Instead, the American public sinks deeper into its hedonistic morass of the next big sensation, the next You Tube hit, and the next irrelevant public debate.
As the summer of 2009 draws to a close, we are confronted with a debilitating strategic failure in Iraq. This failure leaves the United States less secure economically and politically that it was in 2003, and has created new opportunities for strategic enemies.
Absent a radical and fundamental re-think of US foreign, military and economic policy, we appear doomed to repeat the mistakes of the past. As our national debt skyrockets and political incoherence grips Washington, you can sense the headlines of American decline being written.
Instead of thinking, and preparing for the future, we are being drawn into another pointless conflict—that of Iraq and Pakistan—which military arms alone cannot hope to win, in which we are unaware of the true cost that will be incurred, and in which we appear to refuse to deploy the socio-economic tools are necessary for victory.
I write this post with sadness. I was opposed to the Iraq war from the start, and predicted the failure of the US occupation. Yet its failure has been beyond my grimmest forecasts. The human cost has been tremendous: the sacrifices of American troops and their families perhaps not meaningless, but certainly in vain. The economic cost is still being counted. The strategic consequences are emerging, but as yet unknown.
Napoleon Bonaparte said that “In politics, stupidity is not a handicap.” I regret that it’s never the politicians who pay for their stupidity.
Thursday, 30 July 2009
Dear Mr. Whitlock,
Thank you for responding to my email: I appreciate the consideration of your response.
I have re-read your article carefully in light of your comments, and you will permit me to reaffirm that the article is biased and one-sided. Taking only the final quotation of your article is a case in point:
"The Greeks are sorry that they are called Greece and not Macedonia," he said. "What else can I tell you?"
There is certainly no equivalent statement from a Greek source in the article. Given its arrogance and utter lack of relevance, it is better that there is not.
This pattern is repeated consistently in the article: inflammatory statements by FYROM officials: no rebuttal from a Greek official; no balance or disclaimer from the author of the article.
Mr. Gjorge Ivanov, is quoted as saying that "The pressure that Greece is making is destabilizing the whole region." This is not the case: the region (which I presume refers to the Balkan region) is hardly being destabilised by Greece’s stance on FYROM’s entry into NATO or the EU. In contrast, it’s support for Bulgaria’s and Romania’s entry into the EU and NATO (which have already occurred) and its support for Croatian and Turkish future entry into the EU, are matters of public record. Greece supports FYROM’s entry into NATO and EU, subject to a mutual and satisfactory resolution of the name issue. Regrettably, you do not publish a qualifier in your article, nor do you permit the Greek side to make a response which would balance this statement.
Mr Todor Petrov is quoted as accusing Greece of ‘"practicing ethnic cleansing and genocide on the Macedonian nation" for the past 100 years. "They're denying our nationality and culture and church and history and our borders," he said.’ This is certainly not the case, since there has not been a “Macedonian nation” in the past 100 years. Again, there is no response, or balance from the article.
Mr. Pavle Voskopoulos is quoted as describing Greece as a ‘“country subscribes to a myth of a "pure" Greek people who are directly descended from Alexander and others from his era. "This is all about modern Greek identity," he said. "If there is a Macedonia as an independent state, this is a great threat against Greek policy and Greek ideology.”’ This is hardly the case, but again, there is no response, or balance from the article.
I do consider these statements errata, in other words, “factual mistakes”, which contribute to a regrettably biased and unbalanced article, as I understand the meanings of these terms.
I await the day The Washington Post publishes an equivalent article expressing the Greek view of the situation.
Sincerely yours,
Philip Ammerman
Thank you for responding to my email: I appreciate the consideration of your response.
I have re-read your article carefully in light of your comments, and you will permit me to reaffirm that the article is biased and one-sided. Taking only the final quotation of your article is a case in point:
"The Greeks are sorry that they are called Greece and not Macedonia," he said. "What else can I tell you?"
There is certainly no equivalent statement from a Greek source in the article. Given its arrogance and utter lack of relevance, it is better that there is not.
This pattern is repeated consistently in the article: inflammatory statements by FYROM officials: no rebuttal from a Greek official; no balance or disclaimer from the author of the article.
Mr. Gjorge Ivanov, is quoted as saying that "The pressure that Greece is making is destabilizing the whole region." This is not the case: the region (which I presume refers to the Balkan region) is hardly being destabilised by Greece’s stance on FYROM’s entry into NATO or the EU. In contrast, it’s support for Bulgaria’s and Romania’s entry into the EU and NATO (which have already occurred) and its support for Croatian and Turkish future entry into the EU, are matters of public record. Greece supports FYROM’s entry into NATO and EU, subject to a mutual and satisfactory resolution of the name issue. Regrettably, you do not publish a qualifier in your article, nor do you permit the Greek side to make a response which would balance this statement.
Mr Todor Petrov is quoted as accusing Greece of ‘"practicing ethnic cleansing and genocide on the Macedonian nation" for the past 100 years. "They're denying our nationality and culture and church and history and our borders," he said.’ This is certainly not the case, since there has not been a “Macedonian nation” in the past 100 years. Again, there is no response, or balance from the article.
Mr. Pavle Voskopoulos is quoted as describing Greece as a ‘“country subscribes to a myth of a "pure" Greek people who are directly descended from Alexander and others from his era. "This is all about modern Greek identity," he said. "If there is a Macedonia as an independent state, this is a great threat against Greek policy and Greek ideology.”’ This is hardly the case, but again, there is no response, or balance from the article.
I do consider these statements errata, in other words, “factual mistakes”, which contribute to a regrettably biased and unbalanced article, as I understand the meanings of these terms.
I await the day The Washington Post publishes an equivalent article expressing the Greek view of the situation.
Sincerely yours,
Philip Ammerman
Craig Whitlock responds
Dear Mr. Ammerman,
Thanks for the note and for taking the time to write, though of course I'm sorry you didn't like the article.
You make a good point and raise a legitimate question about why the article quoted so many people from Skopje, as opposed to sources from Greece. Please allow me to explain.
The purpose of reporting the story primarily from Skopje was to illustrate how the "name issue" is affecting politics and life in general in the Republic of Macedonia. After all, the issue in question pertains to that country's name, and their people are the ones who have been unable to join NATO and are feeling the ramifications of this. I am sure that passions regarding the "name issue" are felt just as strongly in Greece, but I sincerely doubt that the dispute has had the same effect on the Greek economy or diplomatic relations between Athens and the rest of the world.
That said, please don't misunderstand: the Post is not taking sides in the conflict. Just because I interviewed and quoted more people in Skopje than in Greece doesn't mean that I or the newspaper endorse their views.
If you or others find their comments objectionable, that's more than OK -- we like our readers to make up their own minds about an issue. For example, it's perfectly legitimate for you to question the assertions by Macedonian officials that the name issue threatens the internal stability of the country. But several people in Skopje -- on all sides of the name issue, including some who think the Alexander campaign is silly -- mentioned it as a real possibility to me. I think it would be disingenuous to ignore their viewpoints just because others might not agree.
Just because the article quoted more people from the Republic of Macedonia than from Greece does not mean that the story was unbalanced. I strongly believe that the article did present and summarize the position of the Greek government and cited its perspective on the name issue. In fact, most of the itemized points you raised in your email are, in fact, addressed in the article in some form.
In your email, you assert that the article contained "errata" and misrepresentations. It seems to me that you do not cite any specific factual mistakes, but rather just don't like how the article was written and presented. I certainly respect your opinions and understand that you may have written the article differently. But I was careful with the facts and stand behind how they were reported in my story.
With best regards,
Craig Whitlock
Berlin bureau chief
The Washington Post
Thanks for the note and for taking the time to write, though of course I'm sorry you didn't like the article.
You make a good point and raise a legitimate question about why the article quoted so many people from Skopje, as opposed to sources from Greece. Please allow me to explain.
The purpose of reporting the story primarily from Skopje was to illustrate how the "name issue" is affecting politics and life in general in the Republic of Macedonia. After all, the issue in question pertains to that country's name, and their people are the ones who have been unable to join NATO and are feeling the ramifications of this. I am sure that passions regarding the "name issue" are felt just as strongly in Greece, but I sincerely doubt that the dispute has had the same effect on the Greek economy or diplomatic relations between Athens and the rest of the world.
That said, please don't misunderstand: the Post is not taking sides in the conflict. Just because I interviewed and quoted more people in Skopje than in Greece doesn't mean that I or the newspaper endorse their views.
If you or others find their comments objectionable, that's more than OK -- we like our readers to make up their own minds about an issue. For example, it's perfectly legitimate for you to question the assertions by Macedonian officials that the name issue threatens the internal stability of the country. But several people in Skopje -- on all sides of the name issue, including some who think the Alexander campaign is silly -- mentioned it as a real possibility to me. I think it would be disingenuous to ignore their viewpoints just because others might not agree.
Just because the article quoted more people from the Republic of Macedonia than from Greece does not mean that the story was unbalanced. I strongly believe that the article did present and summarize the position of the Greek government and cited its perspective on the name issue. In fact, most of the itemized points you raised in your email are, in fact, addressed in the article in some form.
In your email, you assert that the article contained "errata" and misrepresentations. It seems to me that you do not cite any specific factual mistakes, but rather just don't like how the article was written and presented. I certainly respect your opinions and understand that you may have written the article differently. But I was careful with the facts and stand behind how they were reported in my story.
With best regards,
Craig Whitlock
Berlin bureau chief
The Washington Post
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