THE JOURNAL OF THE COMMITTEE ON MONETARY AND ECONOMIC REFORM

$3.95 Vol. 24, No. 1 • January 2012

Contents

3 Occupy Moves Us into a New Era Rare Isotope Tracks an Ancient 4 as Permafrost Thaws, Scientists Study the Risks Water Source 6 a State Weighs Restitution for People It Sterilized By Felicity Barringer, The New York Times, tope hydrology section of the International 7 reader Mail November 21, 2011 Atomic Energy Agency’s water resources 8 Hope for Post-traumatic The Nubian Aquifer, the font of fa- program, said that success in tracking older Stress Sufferers bled oases in Egypt and Libya, stretches bodies of water had long been elusive. Car- 9 Past Haunts Tally of Japan’s languidly across 770,000 square miles of bon 14 dating, so useful in archaeology, Nuke Crisis northern Africa, a pointillist collection of reaches back just 50,000 years or so. 11 uganda Losing Grip on AIDS Crisis underground pools of water migrating, ever It is now clear that the Nubian Aquifer 13 COMER’s Court Case Proceeds so slowly, through rock and sand toward the has been a million years in the making. 20 a Banker Speaks, With Regret Mediterranean Sea. “For decades we have been looking at The aquifer is one of the world’s oldest. different means of fingerprinting water,” Publications Mail Agreement No. 41796016 But its workings – how it flows and how Dr. Aggarwal said. “We used a bunch of quickly surface water replenishes it – have different isotopes – stable isotopes – to trace been hard to understand, in part because the where the rain comes from. We also used the tools available to study it have provided, at radioisotopes to figure how quickly ground- best, a blurry image. water moves.” Now, to solve some of the puzzles, physi- For years, scientists had relied on carbon cists at the Department of Energy’s Argonne 14 dating indicating the aquifer was just National Laboratory in Illinois have turned 40,000 years old. They knew that krypton to one of the rarest particles on earth: an 81, an isotope present in the open air but elusive radioactive isotope usually ricochet- not underground, would be a better marker ing around in the atmosphere at hundreds for the forensic work of tracking under- of miles an hour. ground water’s movement. When water Their first success was in distilling these loses contact with air, the radioactive clock elusive isotopes, krypton 81, from the water starts; the isotope decays by a factor of two in the huge Nubian Aquifer, part of which every 230,000 years, and the decay is mea- lies two miles below the oases of western surable as far back as two million years. Egypt where temples honor Alexander the But the krypton 81 isotopes were devil- Great. Their second was in holding these ishly difficult to isolate and even more dif- isotopes still and measuring how much they ficult to catch. had decayed since they last saw sunlight. Zheng-Tian Lu, a physicist at the Ar- Knowing how long water has been un- gonne laboratory, and his colleagues have derground helps researchers understand spent 14 years mastering and extending how fast aquifers are recharged by surface techniques to slow down atoms, the same water and how fast they move, leading to laser-based techniques that were pioneered more accurate geological models. Ground- by the current energy secretary, Steven Chu, water is becoming an increasingly crucial in the 1980s, and for which he won a Nobel component of the world’s available fresh prize. water, and the findings could significantly When Dr. Lu realized the potential ben- increase understanding of how it behaves. efit of isolating krypton 81 isotopes, “I got Pradeep Aggarwal, who runs the iso- Continued on page 2 Isotope from page 1 national Atomic Energy Agency pointed hooked on the problem,” he said. “I tried to out: “As a result of the drawdown we have use the trapping method I’d already learned dried up the oases in a couple of places. In to try and solve the radio-krypton dating Libya they have dried up Kufra Lake.” In problem. 1920, he said, National Geographic pub- FOUNDING EDITOR “We are combining the ability to control lished a picture of the lake at high water. John Hotson 1930–1996 and manipulate atoms to select krypton 81 “Right now it is a dry bed, because they are PUBLISHER–EDITOR out of a million kinds of krypton isotopes,” pumping so heavily,” he said. William Krehm he added. There is one krypton atom in And even though the aquifer is huge, its ([email protected]) every million molecules of water; one in a recharge rate, at best, “is measured in mil- INFORMATION SECRETARY trillion of these krypton atoms is the kryp- limeters per year,” Dr. Aggarwal said – tiny Herb Wiseman ([email protected]) ton 81 isotope. compared with what is being pumped out. The key, he said, is using lasers to pin- In addition, Dr. Sturchio said, there WEBMASTER point the frequency at which atoms oscillate remains the question of how best to extract Tony Koch – a loose equivalent of trying to determine water: “where you put wells, how deep, how Economic Reform (ER) the exact pitch of a musical note. Detect- close to each other.” (ISSN 1187–080X) is published monthly ing the infinitesimal differences in isotopes’ “If you design it the right way, you can by COMER Publications resonance is hard, but when done, lasers can get a lot more water without problems,” he 27 Sherbourne Street North, Suite 1 be tuned to pick up each isotope’s frequency. went on. “But if you put all the wells in one Toronto, Ontario M4W 2T3 Canada When krypton 81 atoms go through a laser spot, you could be causing yourself a lot of Tel: 416­‑924-3964, Fax: 416‑466‑5827 attuned to them, they glow brightly and trouble.” Email: [email protected] slow down, giving scientists an easier target Water managers around the world will Website: www.comer.org to isolate. find the team’s information useful, he pre- COMER Membership: Annual dues The process begins when water is ex- dicts. (includes ER on request plus 1 book or tracted from the aquifer without any con- In addition to being applied to other video of your choice): CDN$50 tact with air. Krypton is bled from the water aquifers in places like the Philippines and into a vacuum system. Once identified and Australia, the krypton 81 techniques are Economic Reform Subscription only: slowed, the krypton 81 isotopes are trapped being explored as a way of tracking under- One year, 12 monthly issues, in Canada by six laser beams focusing on them from ground brine in places like southeastern CDN$30, Foreign CDN$40 the four cardinal points of the compass and New Mexico, where radioactive waste from Send request and payment to: from above and below. Then their decay can ships, submarines and aircraft carriers is COMER Publications be measured. stored underground. 27 Sherbourne Street North, Suite 1 “From this aging information, you are In the end, management of nuclear waste, Toronto, ON M4W 2T3 looking at how the water flowed in the long like management of water, is a political mat- ER Back Issues: CDN/US$4, includes past,” Dr. Lu said. “But it does have impli- ter. “There are a lot of different calculations postage; additional copies same cations about how to manage waters today.” that go into exploiting a resource,” Dr. issue, $2; additional issue same order, He added, “To manage a water resource you Aggarwal said. “In most cases, decisions of $3. Send requests for back issues to need to build a realistic hydrology model.” whether to use or not to use, or how much Herb Wiseman, 69 Village Crescent, That is where Neil C. Sturchio, a geolo- to use, are social, political and economic Peterborough ON K9J 0A9. gist at the University of Illinois at Chicago, decisions.” comes in. He works with the most accepted Still, he said, “the more reliable info we Copyright © 2012 model of how water flows through the can provide for making those decisions, the COMER Publications Nubian Aquifer. “The reason this model better off we are – what we want to do is get All rights reserved was done,” he said, “is that there is an in- the most accurate information possible.” Permission to reproduce is granted ternational agreement among the countries ❧ ❧ ❧ if accompanied by: that share this water” – Egypt, Libya, Chad “Copyright © 2012 COMER Publications. and Sudan. Editor: Wasting human capital, while Reproduced by permission of “The issue is if Libya is starting to pump disastrously running out of water. Have you COMER Publications” on their water seriously and Egypt is doing noticed how snowless the skies have been Postmaster, please send address the same thing in their oasis areas,” what to the pointed that poor Santa Claus has corrections to: happens to the rest of the aquifer? If heavy to pull his sled on broken wheels may be, COMER Publications pumping comes too close to a coastline, under what threatens to be clear dry skies? 27 Sherbourne Street North, Suite 1 saltwater may be drawn into the hydrologic That will not only require the rewriting of Toronto, Ontario M4W 2T3 depression created by the pumping. our Xmas carols, but interfere with how we The Nubian Aquifer is not exactly run- do our “washing up.” PRINTING AND DISTRIBUTION ning dry; it is filled with the equivalent of That again it is only another instance on Watt Solutions Inc., London more than 500 years of Nile River flow; the how society has given the back of its hand Printed in Canada on recycled paper. groundwater in the Egyptian portion alone to the preservation and full use we must is estimated to exceed 10,000 cubic miles. make of our human capital. which has taken Nonetheless, Dr. Aggarwal of the Inter- Continued on page 10

2 | Economic Reform January 2012 www.comer.org all, they’ve managed to change the public discourse, putting inequality front and cen- Occupy Moves Us into a New Era tre – something activists and writers, myself included, have failed to accomplish despite By Linda McQuaig, Toronto Star, November necessary to grab attention through extraor- decades of trying. 25, 2011 dinary measures like occupying more than An article last week in the mainstream When thousands of Egyptian protesters 1,000 parks across North America. magazine New York notes that we’re now took over Tahrir Square in events widely After all, they’re drawing attention to moving “from the terror era to the income- celebrated as the Arab Spring, I don’t recall nothing less than the fundamental dys- inequality era.” anyone being concerned that they were vio- function of our economic system, which Wow. After only two months, the Oc- lating local bylaws. massively favours a privileged elite at the cupy movement – without backing from Of course, Egypt was a dictatorship and expense of the rest and which led to the billionaires or governments – seems to have the only way to protest the lack of democ- disastrous 2008 financial collapse, from moved us into a new era. Not bad for a lead- racy was by breaking laws. which millions still suffer around the world erless group that sleeps in tents and doesn’t Canada isn’t a dictatorship, and so pro- (including in Canada). even use microphones. testers – like the group now ordered evicted Despite its radical message, the Occupy Linda McQuaig is an award winning from St. James Park – don’t have the same movement has attracted some surprising journalist and author. Her latest book, The clear moral licence to ignore bylaws that supporters, including a retired Philadelphia Trouble With Billionaires, written with Neil their Egyptian counterparts had. police chief who was arrested last week at Brooks, is now available in paperback. Her Critics argue that the Toronto Occupiers a New York protest where he told the cops column appears monthly in the Toronto Star. have made their point; if they want to take they were just “workers for the 1 per cent.” ❧ ❧ ❧ it further, they should join a political party – Another unexpected supporter is former attend all-candidates meetings, put up lawn Canadian prime minister Paul Martin, who Editor: The McQuaig article is good, signs, eat hot dogs at summer barbecues, as finance minister in the 1990s slashed courageous, and well intentioned, but it become backroom operatives. social spending in the name of deficit re- leaves the really powerful technology of Of course, Occupiers should join politi- duction. Martin, former CEO of Canadian ever-more voracious investments unmen- cal parties and try to change them. But part Steamship Lines, is also very much part of tioned. of the Occupiers’ point is that democracy the top 1 per cent. The speculative banks have transformed has become a hollow shell. Yet, in a telephone interview on Monday the greatest achievement to come out of In theory, democracy is one of human- from Montreal, Martin told me that he sees World War II – the recognition of the cru- kind’s noblest creations – a system in which “considerable value” in the Occupy move- cial importance of human capital – health, people govern themselves. In practice, the ment. “Everybody I’ve talked to feels the education, the ability to endow every gen- results have been, well, disappointing. same way. The question of inequality and eration with an ever more invaluable heri- In particular, as the Occupiers note, the the top 1 per cent. That’s not what built tage. Treat that as debt rather than as the concentration of wealth in the hands of North America. ever more valuable capital asset it is, and you the top 1 per cent undermines meaningful “The fact is (the Occupiers) have touched have recognized the key tool the speculative democracy, blocking the will of the bottom a chord with Canadians and, I’m sure, with bankers have devised to ensure that not only 99 per cent. Americans,” said Martin. “Look, there’s future profits but past social achievements Or as the late 19th century Republican something fundamentally wrong here…. are reversed into a ever more voracious trap strategist Mark Hanna put it during another For the last hundred years, certainly in for society’s capital improvements. era of extreme inequality: “There are two North America, every generation has felt it’s This reflects the role of the male rake things that are important in politics. The going to have a better life than their parents. who makes a passing pleasure of having first is money and I can’t remember what the For the first time, that’s not there.” making love with no sense of responsibil- second one is.” Rather than hanging out at malls or zon- ity, even curiosity, of the possible fetus and This is more obviously true in the US, ing out on Facebook, these young people even the child that may result from a one- but it’s also true here. have endured real hardship in the Canadian time encounter. Very different is the role The financial elite manages to exert its near-winter to fight for a more inclusive of the impregnated female not only during dominance, not just at elections but at society. Any inconvenience they’ve caused pregnancy but even if there should result a every stage of the political process – from through their peaceful occupation seems formal marriage. the drafting of party platforms, the financ- minor in comparison to their contribution Finance capital in its intrusive very ing and organizing of political advocacy to the public good. temporary involvement with loans or in- campaigns, the writing and amending of As lawyers from the Law Union of On- vestments has its counterpart in the high legislation, to the shaping of public opin- tario point out: “Some inconveniences to finance investment that takes its maximum ion through the media (which they largely local park users is a small price to pay for profits and the sooner the better and on to own). The wealthy are adept at influencing the larger price being paid by the 99 per cent other overnight adventures. It reflects the every stage of the broader political process. worldwide in the face of an economic sys- self-centred, clipped interest of an aggres- Given the lopsided influence of the tem that privileges the few over the many.” sive irresponsible male, whereas our society wealthy, those seeking to restore meaningful Are occupations really necessary to draw needs more of the responsible concerns of democracy and a more inclusive economic attention to their cause? Perhaps not. But ever-ravaged motherhood. system can be forgiven for thinking it’s I’d trust their judgment over mine. After W.K. www.comer.org January 2012 Economic Reform | 3 As Permafrost Thaws, Scientists Study the Risks By Justin Gillis, The New York Times, ide, the gas that usually forms when organic gases. “It will be a chronic source of emis- December 16, 2011 material breaks down, but as methane, pro- sions that will last hundreds of years.” Fairbanks, Alaska – A bubble rose duced when the breakdown occurs in lakes A troubling trend has emerged recently: through a hole in the surface of a frozen or wetlands. Methane is especially potent at wildfires are increasing across much of the lake. It popped, followed by another, and trapping the sun’s heat, and the potential for north, and early research suggests that ex- another, as if a pot were somehow boiling in large new methane emissions in the Arctic tensive burning could lead to a more rapid the icy depths. is one of the biggest wild cards in climate thaw of permafrost. Every bursting bubble sent up a puff science. of methane, a powerful greenhouse gas Scientists have declared that understand- Rise and Fall of Permafrost generated beneath the lake from the decay ing the problem is a major priority. The Standing on a bluff the other day, over- of plant debris. These plants last saw the United States Department of Energy and looking an immense river valley, A. David light of day 30,000 years ago and have been the European Union recently committed to McGuire, a scientist from the University locked in a deep freeze – until now. new projects aimed at doing so, and NASA of Alaska, Fairbanks, sketched out two mil- “That’s a hot spot,” declared Katey M. is considering a similar plan. But research- lion years of the region’s history. It was the Walter Anthony, a leading scientist in study- ers say the money and people devoted to peculiar geology of western North America ing the escape of methane. A few minutes the issue are still minimal compared with and eastern Siberia, he said, that caused so later, she leaned perilously over the edge of the risk. much plant debris to get locked in an ice the ice, plunging a bottle into the water to For now, scientists have many more box there. grab a gas sample. questions than answers. Preliminary com- These areas were not covered in glaciers It was another small clue for scientists puter analyses, made only recently, suggest during the last ice age, but the climate was struggling to understand one of the biggest that the Arctic and sub-Arctic regions could frigid, with powerful winds. The winds and looming mysteries about the future of the eventually become an annual source of rivers carried immense volumes of silt and earth. carbon equal to 15 percent or so of today’s dust that settled in the lowlands of Alaska Experts have long known that northern yearly emissions from human activities. and Siberia. lands were a storehouse of frozen carbon, But those calculations were deliberately A thin layer of this soil thawed on top locked up in the form of leaves, roots and cautious. A recent survey drew on the exper- during the summers and grasses grew, cap- other organic matter trapped in icy soil – a tise of 41 permafrost scientists to offer more turing carbon dioxide. In the bitter winters, mix that, when thawed, can produce meth- informal projections. They estimated that grass roots, leaves and even animal parts ane and carbon dioxide, gases that trap heat if human fossil-fuel burning remained high froze before they could decompose. Layer and warm the planet. But they have been and the planet warmed sharply, the gases after layer of permafrost built up. stunned in recent years to realize just how from permafrost could eventually equal 35 At the peak of the ice age, 20,000 years much organic debris is there. percent of today’s annual human emissions. ago, the frozen ground was more extensive A recent estimate suggests that the peren- The experts also said that if humanity be- than today, stretching deep into parts of the nially frozen ground known as permafrost, gan getting its own emissions under control lower 48 states that were not covered by ice which underlies nearly a quarter of the soon, the greenhouse gases emerging from sheets. Climate-change contrarians like to Northern Hemisphere, contains twice as permafrost could be kept to a much lower point to that history, contending that any much carbon as the entire atmosphere. level, perhaps equivalent to 10 percent of melting of permafrost and ice sheets today Temperatures are warming across much today’s human emissions. is simply the tail end of the ice age. of that region, primarily, scientists believe, Even at the low end, these numbers Citing permafrost temperatures for because of the rapid human release of green- mean that the long-running international northern Alaska – which, though rising house gases. Permafrost is warming, too. negotiations over greenhouse gases are likely rapidly, remain well below freezing – an Some has already thawed, and other signs to become more difficult, with less room organization called the Center for the Study are emerging that the frozen carbon may be for countries to continue burning large of Carbon Dioxide and Global Change becoming unstable. amounts of fossil fuels. claimed that permafrost is in “no more dan- “It’s like broccoli in your freezer,” said In the minds of most experts, the chief ger of being wiped out any time soon than it Kevin Schaefer, a scientist at the National worry is not that the carbon in the per- was in the days of our great-grandparents.” Snow and Ice Data Center in Boulder, Colo. mafrost will break down quickly – typical But mainstream scientists, while hoping “As long as the broccoli stays in the freezer, estimates say that will take more than a the breakdown of permafrost will indeed it’s going to be OK. But once you take it out century, perhaps several – but that once the be slow, reject that argument. They say the of the freezer and put it in the fridge, it will decomposition starts, it will be impossible climate was reasonably stable for the past thaw out and eventually decay.” to stop. 10,000 years or so, during the period when If a substantial amount of the carbon “Even if it’s 5 or 10 percent of today’s human civilization arose. Now, as people should enter the atmosphere, it would in- emissions, it’s exceptionally worrying, and burn immense amounts of carbon in the tensify the planetary warming. An especially 30 percent is humongous,” said Joseph G. form of fossil fuels, the planet’s temperature worrisome possibility is that a significant Canadell, a scientist in Australia who runs is rising, and the Arctic is warming twice as proportion will emerge not as carbon diox- a global program to monitor greenhouse fast. That, scientists say, puts the remaining

4 | Economic Reform January 2012 www.comer.org permafrost deposits at risk. bubble clusters everywhere. I realized – freezing. Dr. Walter Anthony, six months For several decades, researchers have ‘aha!’ – this is where all the methane is.” pregnant, bent over one plume to retrieve been monitoring permafrost temperatures When organic material comes out of the samples. in hundreds of boreholes across the north. deep freeze, it is consumed by bacteria. If “This is thinner ice than we like,” she The temperatures have occasionally de- the material is well-aerated, bacteria that said. “Don’t tell my mother-in-law! My own creased in some regions for periods as long breathe oxygen will perform the breakdown, mother doesn’t know.” as a decade, but the overall trend has been and the carbon will enter the air as carbon Dr. Walter Anthony had already run a relentless rise, with temperatures now in- dioxide, the primary greenhouse gas. But in chemical tests on the methane from one creasing fastest in the most northerly areas. areas where oxygen is limited, like the bot- of the lakes, dating the carbon molecules Thawing has been most notable at the tom of a lake or wetland, a group of bacteria within the gas to 30,000 years ago. She has southern margins. Across huge areas, in- called methanogens will break down the or- found carbon that old emerging at numer- cluding much of central Alaska, permafrost ganic material, and the carbon will emerge ous spots around Fairbanks, and carbon as is hovering just below the freezing point, as methane. old as 43,000 years emerging from lakes in and is expected to start thawing in earnest Scientists are worried about both gases. Siberia. as soon as the 2020s. In northern Alaska They believe that most of the carbon will “These grasses were food for mammoths and northern Siberia, where permafrost is at emerge as carbon dioxide, with only a few during the end of the last ice age,” Dr. Wal- least 12 degrees Fahrenheit below freezing, percent of it being converted to methane. ter Anthony said. “It was in the freezer for experts say it should take longer. But because methane is such a potent green- 30,000 to 40,000 years, and now the freezer “Even in a greenhouse-warmed world, it house gas, the 41 experts in the recent door is open.” will still get cold and dark in the Arctic in survey predicted that it would trap about as Scientists are not sure yet whether the winter,” said Mark Serreze, director of much heat as the carbon dioxide would. thermokarst lakes will become more com- the snow and ice data center in Boulder. Dr. Walter Anthony’s seminal discovery mon throughout the Arctic in a warming Scientists need better inventories of the was that methane rose from lake bottoms climate, a development that could greatly ancient carbon. The best estimate so far was not as diffuse leaks, as many scientists had accelerate permafrost thaw and methane published in 2009 by a Canadian scientist, long assumed, but in a handful of scattered, production. But they have already started Charles Tarnocai, and some colleagues. vigorous plumes, some of them capable of to see increases in some regions, including They calculated that there was about 1.7 putting out many quarts of gas per day. In northernmost Alaska. trillion tons of carbon in soils of the north- certain lakes they accounted for most of the “We expect increased thermokarst activ- ern regions, about 88 percent of it locked emerging methane, but previous research ity could be a very strong effect, but we don’t in permafrost. That is about two and a half had not taken them into consideration. really know,” said Guido Grosse, another times the amount of carbon in the atmo- That meant big upward revisions were prob- scientist at the University of Alaska, Fair- sphere. ably needed in estimates of the amount of banks. He is working with Dr. Walter An- Philippe Ciais, a leading French scientist, methane lakes might emit as permafrost thony on precision mapping of thermokarst wrote at the time that he was “stunned” by thawed. lakes and methane seeps, in the hope that the estimate, a large upward revision from Most of the lakes Dr. Walter Anthony the team can ultimately use satellites and previous calculations. studies were formed by a peculiar mecha- aerial photography to detect trends. “If, in a warmer world, bacteria decom- nism. Permafrost that is frozen hard sup- With this kind of work still in the ear- pose organic soil matter faster, releasing ports the ground surface, almost the way ly stages, researchers are worried that the carbon dioxide,” Dr. Ciais wrote, “this will a concrete pillar supports a building. But changes in the region may already be out- set up a positive feedback loop, speeding up when thaw begins, the ground sometimes running their ability to understand them, or global warming.” turns to mush and the entire land surface to predict what will happen. collapses into a low-lying area, known as Plumes of Methane a thermokarst. A lake or wetland can form When the Tundra Burns Katey Walter Anthony had been told to there, with the dark surface of the water cap- One day in 2007, on the plain in north- hunt for methane, and she could not find turing the sun’s heat and causing still more ern Alaska, a lightning strike set the tundra it. permafrost to thaw nearby. on fire. As a young researcher at the University Near thermokarst locations, trees often Historically, tundra, a landscape of li- of Alaska, Fairbanks, she wanted to figure lean crazily because their roots are disturbed chens, mosses and delicate plants, was too out how much of that gas was escaping from by the rapid changes in the underlying land- damp to burn. But the climate in the area lakes in areas of permafrost thaw. She was scape, creating “drunken forests.” And the is warming and drying, and fires in both doing field work in Siberia in 2000, scatter- thawing, as it feeds on itself, frees up more the tundra and forest regions of Alaska are ing bubble traps around various lakes in the and more ancient plant debris. increasing. summer, but she got almost nothing. One recent day, in 11-degree weather, The Anaktuvuk River fire burned about Then, that October, the lakes froze over. Dr. Walter Anthony and an assistant, Amy 400 square miles of tundra, and work on Plumes of methane that had been hard to Strohm, dragged equipment onto two fro- lake sediments showed that no fire of that spot on a choppy lake surface in summer zen thermokarst lakes near Fairbanks. The scale had occurred in the region in at least suddenly became more visible. fall had been unusually warm and the ice 5,000 years. “I went out on the ice, this black ice, was thin, emitting thunderous cracks – Scientists have calculated that the fire and it looked like the starry night sky,” Dr. but it held. In spots, methane bubbled so and its aftermath sent a huge pulse of carbon Walter Anthony said. “You could see these vigorously it had prevented the water from into the air – as much as would be emitted www.comer.org January 2012 Economic Reform | 5 in two years by a city the size of Miami. Sci- entists say the fire thawed the upper layer of permafrost and set off what they fear will be A State Weighs Restitution permanent shifts in the landscape. Up to now, the Arctic has been absorbing for People It Sterilized carbon, on balance, and was once expected to keep doing so throughout this century. By Kim Severson The New York Times, tests at the time were not necessarily accu- But recent analyses suggest that the perma- December 10, 2011 rate predictors of capability. For example, as frost thaw could turn the Arctic into a net Linwood, NC – Charles Holt, 62, an adult Mr. Holt held down three jobs at source of carbon, possibly within a decade spreads a cache of vintage government re- once, delivering newspapers, working at a or two, and those studies did not account cords across his trailer floor. They are the grocery store and doing maintenance for a for fire. stark facts of his state-ordered sterilization. small city. “I maintain that the fastest way you’re The reports begin when he was barely a Wealthy businessmen, among them going to lose permafrost and release per- teenager, fighting at school and masturbat- James Hanes, the hosiery magnate, and Dr. mafrost carbon to the atmosphere is in- ing openly. A social worker wrote that he Clarence Gamble, heir to the Procter & creasing fire frequency,” said Michelle C. and his parents were of “rather low mental- Gamble fortune, drove the eugenics move- Mack, a University of Florida scientist who ity.” Mr. Holt was sent to a state home for ment. They helped form the Human Bet- is studying the Anaktuvuk fire. “It’s a rapid people with mental and emotional prob- terment League of North Carolina in 1947, and catastrophic way you could completely lems. In 1968, when he was ready to get out and found a sympathetic bureaucrat in change everything.” and start life as an adult, the Eugenics Board Wallace Kuralt, the father of the television The essential question scientists need to of North Carolina ruled that he should first journalist Charles Kuralt. answer is whether the many factors they do have a vasectomy. A proponent of birth control in all forms, not yet understand could speed the release A social worker convinced his mother it Mr. Kuralt used the program extensively of carbon from permafrost – or, possibly, was for the best. when he was director of the Mecklenburg slow it more than they expect. “We especially emphasized that it was a County welfare department from 1945 to For instance, nutrients released from way of protecting Charles in case he were 1972. That county had more sterilizations thawing permafrost could spur denser plant falsely accused of having fathered a child,” than any other in the state. growth in the Arctic, and the plants would the social worker wrote to the board. Over all, about 70 percent of the North take up some carbon dioxide. Conversely, Now, along with scores of others selected Carolina operations took place after 1945, should fires like the one at Anaktuvuk River for state sterilization – among them un- and many of them were on poor young race across warming northern landscapes, educated young girls who had been raped women and racial minorities. Nonwhite immense amounts of organic material in by older men, poor teenagers from large minorities made up about 40 percent of vegetation, soils, peat deposits and thawed families, people with epilepsy and those those sterilized, and girls and women about permafrost could burn. deemed to be too “feeble-minded” to raise 85 percent. Edward A.G. Schuur, a University of children – Mr. Holt is waiting to see what The program, while not specifically de- Florida researcher who has done exten- a state that had one of the country’s most vised to target racial minorities, affected sive field work in Alaska, is worried by the aggressive eugenics programs will decide his black Americans disproportionately because changes he already sees, including the dis- fertility was worth. they were more often poor and uneducated covery that carbon buried since before the Although North Carolina officially apol- and from large rural families. dawn of civilization is now escaping. ogized in 2002 and legislators have pressed “The state owes something to the vic- “To me, it’s a spine-tingling feeling, if it’s to compensate victims before, a task force tims,” said Governor Perdue, who cam- really old carbon that hasn’t been in the air appointed by Gov. Bev Perdue is again paigned on the issue. for a long time, and now it’s entering the wrestling with the state’s obligation to the But what? Her five-member task force air,” Dr. Schuur said. “That’s the fingerprint estimated 7,600 victims of its eugenics has been meeting since May to try to deter- of a major disruption, and we aren’t going to program. mine what that might be. A final report is be able to turn it off someday.” The board operated from 1933 to 1977 due in February. ❧ ❧ ❧ as an experiment in genetic engineering This week, the task force set some priori- once considered a legitimate way to keep ties. Money was the most important thing Editor: Contrast this with the way that welfare rolls small, stop poverty and im- to offer victims, followed by mental health the current rules of our economies are as- prove the gene pool. services. suming every rise in the price level to be Thirty-one other states had eugenics How much to pay is a vexing ques- due to an excess of market demand, when programs. Virginia and California each tion, and what North Carolina does will be decades ago I and others had identified sterilized more people than North Carolina. closely watched by officials in other states. factors such as government investments in But no program was more aggressive. In a period of severe budget cuts and layoffs, human capital that simply are not marketed, Only North Carolina gave social workers money for eugenics victims can be a hard but directly acquired by governments, that the power to designate people for steriliza- sell to legislators. is notably prepaid human capital that had tion. They often relied on IQ tests like those States began practicing eugenics in ear- been recognized as the most profitable in- done on Mr. Holt, whose scores reached 73. nest in the United States in the 1920s and vestment a country and humanity could But for some victims who often spent more ‘30s, driven by a philosophy of social en- make. W.K. time picking cotton than in school, the IQ gineering once so popular that President

6 | Economic Reform January 2012 www.comer.org Woodrow Wilson, Justice Oliver Wendell to be found among eugenics board records was going to tell her before she got married. Holmes Jr. of the Supreme Court and Mar- stored in dozens of cardboard boxes in the Welfare would have ended if she had not garet Sanger, the founder of Planned Parent- basement of the state archives. People have consented, her mother said. hood, were ardent supporters. died or moved or use different names. It is She did marry, and her husband, who Before most of the programs were closed needle-in-a-haystack work. has since died, accepted the fact that they down, more than 60,000 people nationwide Some critics of the effort say the state is could not have children. Still, she was for- had been sterilized by state order. not working hard enough. Victims and oth- ever changed. The reasons were chilling, reports from ers argue that names in the archives could be “I see people with babies and I think state records and interviews with survivors matched to drivers’ records. how much I would have loved to have a and researchers show. But the state cannot just send letters to young one,” she said. “It should have been There was a 14-year-old girl deemed people’s houses suggesting they might have my choice whether I wanted to have a baby low-performing and “oversexed” who came been sterilized against their will, Ms. Fuller or not. You just feel like you were held back, from a home with poor housekeeping stan- Cooper said. Medical records are private. like you never had any say in your life.” dards. A man who raped his daughter at 12 Husbands or adopted children could find She figures what she went through is signed her sterilization consent when she out a long-buried secret. Old wounds could worth at least $50,000 or $100,000. “May- was 16 and pregnant. A mother of five was be laid open again. be I could retire,” she said. deemed to have a low IQ. Even people who call her office some- Mr. Holt still remembers that October Victims began filing a handful of lawsuits times hang up abruptly when a spouse day. He thought he was getting an examina- in the 1970s, but outrage has been slow to approaches, wanting to keep their terrible tion so he could leave the state home. He build. In 2002, The Winston-Salem Journal secret unless money is on the table. said he did not know he was giving up his ran a series of articles on eugenics, prompt- “Until folks know what the state’s going chance to be a parent. ing official apologies and initial legislative to do, people aren’t going to take the risk “The doctor told me I couldn’t go home efforts aimed at compensating victims. and come forward,” she said. unless I had an operation done,” said Mr. But nothing came of it until Governor One woman who submitted her name Holt, who was 19 at the time. “When I Perdue, a Democrat, took up the cause. She fears it will become public. In a recent inter- woke up I tried to walk, and I said: ‘This has vowed to put money in the 2012 budget. view in her small home in Lexington, NC, ain’t right. I don’t even remember them The House speaker, Thom Tillis, a Repub- she said she would be embarrassed if her co- shaving me down there.’” lican, said in October that he, too, would workers at a local hospital knew her story. He went on to marry and divorce. Now work on a bill to compensate victims. Now 62, she was adopted but sent to a recovering from a stroke and surviving on But how much to include? Is $20,000 state school at 7 because her parents thought disability payments, he lives with relatives per victim, a figure suggested by some, she was mentally deficient. She remembers in a tidy trailer park in the middle of the enough? being told as a teenager that she was getting state. “How can you quantify how much a an appendectomy. When she was 27 and He thinks maybe $30,000 would be baby is worth to people?” asked Charmaine started having uterine trouble, a doctor re- enough. Others want more. Elaine Riddick, Fuller Cooper, executive director of the quested her records and discovered that she 57, who also lives in Atlanta, was sterilized North Carolina Justice for Sterilization Vic- had been sterilized in an operation that had in 1967. She was 14 and had gotten preg- tims Foundation, which is financed by the been botched, her medical records show. nant from a rape. Social workers persuaded state. “It’s not about quantifying the unborn “I tell you what,” she said. “I about hit her illiterate grandmother to sign the con- child, it’s about the choices that were taken the floor.” sent form with an X. away.” She went to her mother, who said she She has become the most vocal propo- The issues go deeper than just a dollar amount. The task force has to decide wheth- er money should go only to those living or to the estates of the dead, whether a tubal Reader Mail ligation is worth more than a vasectomy. One variable is how many people will Dear William, ion awakenings around the world. actually sign up to get the money. The state Greetings from me and many of your UK In the inevitable confusion within each estimates that about 3,000 victims of state- Bromsgrove friends who look in when they expression of this amazing example of sub- mandated sterilizations may still be alive. Of can on the weekly London Global Table. sidiary, the inclusiveness, the toleration of those, 68 have been verified in state records. I always have pleasure there in sharing difference and the growing understanding But not all sterilizations were done through the wisdom of COMER’s journal. of “human capital” and “accrual account- the state board. Counties had programs, as Your current editorial is a particular joy, ing” is astonishing. did private doctors who were part of the and I thought you might yourself enjoy the Our own complicity in the state of eco- eugenics movement. Those people will not five minutes of this remarkable YouTube nomic misdirection is growing on many qualify for state compensation, Ms. Fuller video. participants and so an emerging commit- Cooper said. Alive to deepest being www.youtube. ment towards formal reconciliation fora is Still, her office in Raleigh receives about com/watch?v=EXBSF98nREk. particularly encouraging. 200 calls a month. People who suspect they The associates the Table are intensely Yours along the pilgrims’ challenging were part of the state program must send her involved in the new networks of creativity way, a notarized letter. Then, their names have aroused by OCCUPYLSX and its compan- Peter Challen www.comer.org January 2012 Economic Reform | 7 nent of payment, suing the state for $1 mil- sisters were going to be in the streets all be- “What would an apology do for me?” she lion. Her case was appealed to the United cause of you,” she said. “It’s either sign the said. “You don’t know what my kids were States Supreme Court, which refused to paper or mama’s checks get cut off.” going to be. You don’t know what kids God hear it. In 1973, with the help of the American was going to give me. Twenty thousand dol- For Nial Ramirez, 65, who was sterilized Civil Liberties Union, she became the first lars ain’t gonna do it, honey.” at 18 after she gave birth to her daughter, no person to file a lawsuit against the state eu- ❧ ❧ ❧ amount could make it right. genics board. It ended with a $7,000 settle- A social worker from the Washington ment from the doctor, she said. Editor: It is no great chore moving from County Department of Public Welfare sug- Now in a small apartment surrounded by this shocking report of the destruction of gested that she get sterilized. Mrs. Ramirez the sound of the television and some of the Nature’s wisdom in endowing humans – said she did not understand that the proce- 200 dolls she has collected through her life- and other species – with a deep desire to dure was permanent and thought she had time, Ms. Ramirez remains angry. She does have, protect and nurture their progeny. But no choice. not want an apology, and she will not settle the financial clique that has taken over is “They told me that my brothers and for the amounts being discussed. imposing the exact parallel of the de-sexing

Hope for Post-traumatic Stress Sufferers

By Anne Mcilroy, The Globe and Mail, ered some relief. Designed to help people through an amplifier to a computer that October 1, 2011 influence the activity of their brain waves, analyzes electrical activity as it occurs. Infor- It is difficult for navy veteran Aubrey it offers a new approach to a disorder that mation is sent back to the patient through Francis to talk about the faces that have affects one in 10 Canadians. audio and visual feedback. Patients wear haunted him for years in flashbacks and “I’m not back to normal, but I am earphones and listen to music. They also in nightmares, but this week, he sat for an functional. I wasn’t functional before. The watch constantly moving colourful patterns interview and compelled himself to recall dreams aren’t so intense, the flashbacks on a screen. When their brain-wave activity one of the worst days of his life. His goal: aren’t so hellish. The terror is not there,” Mr. becomes too intense they hear static in the to make others aware of an experimental Francis, 42, said. music and see a slight jump or hesitation in treatment for post-traumatic stress disorder Neurofeedback is still experimental and the movement on the screen. that has blunted the destructive power of costs up to $150 a week. But the idea of “It acts like a rumble strip on a high- his memories. using it for PTSD is gaining steam among way,” Dr. McCullough said. “The brain “I was in Syria, in 1999, I was with the veterans in Kingston, who are encouraged self-corrects.” UN. I was having a stroll through Damas- that Veterans Affairs Canada agreed to cover It is unclear exactly how it helps reduce cus,” Mr. Francis began, sitting in a quiet the cost for many of them. the symptoms. Mr. Francis said he had more room in his psychiatrist’s house in Kings- Mr. Francis first tried the therapy two energy almost immediately. He is off antide- ton, Ont. “It was my weekend off. There years ago at the suggestion of his psychia- pressants and other medication. was a square, with a statue of the president, trist, Janet McCullough. Veterans Affairs recently authorized pay- covered in flowers, with a nice floral scent. I Dr. McCullough is a clinician, not a ment for Mr. Francis to have the system sat there and had a sandwich and a drink of researcher, but she and two colleagues did at home. It costs about $5,000, Dr. Mc- water. Just outside the courtyard there was a small pilot study that showed the therapy Cullough said. a marketplace. A young boy runs past. He significantly reduced the severity of PTSD Mr. Francis was a cook in the navy, and might have been no more than 8. symptoms in 12 veterans. So far, Dr. Mc- now has a chip wagon near his home in the “Two security guards ran in behind, and Cullough has treated more than 40 men. Kingston area. His wife, Tracy, said they had they grabbed him. He had an orange. He Many relive traumatic events in dreams put off having children, but last year de- was a little street urchin. One held his arms, or flashbacks that can be triggered by sounds cided he was well enough. Their son, Perry, the other took out a club and beat his brains and smells. Some withdraw from family and is now three months old. out. Before they hit him, he looked at me friends, and many have difficulty sleeping. “Three years ago, would I have been and I just froze. And the guards looked at It is an anxiety disorder, but is linked to de- able to have a baby? No. Neurofeedback has me and said, ‘What are you going to do, pression and addictions to alcohol or drugs, given me hope,” Mr. Francis said. UN?’ They beat him and the blood went all as well as an increased risk of suicide. Treat- ❧ ❧ ❧ over my beret. I walked away. But my life ments include medication and talk therapy. changed that day.” Neurofeedback was once seen as alterna- Editor: Ours is a deeply traumatized That was one of many horrifying inci- tive medicine, but a growing number of pre- world, and the lack of anything that would dents during 20 years in some of the world’s liminary studies suggest it could help with be mistaken for the recognition of prepaid most troubled places. Mr. Francis was diag- several brain disorders. US researchers are human capital leaves our government liter- nosed with PTSD in 2003 after returning planning trials to see if it can help veterans ally without anything that might be mis- from a tour in Afghanistan. In 2008, he had with PTSD. taken for accountancy. to leave the service, suffering from flash- During each session, Dr. McCullough Obviously we must bring in a system of backs, nightmares and other symptoms, places electrodes on the patient’s scalp accountancy that will deal with rather than until a therapy called neurofeedback deliv- that record brain waves. The pattern goes diddle with such issues. W.K.

8 | Economic Reform January 2012 www.comer.org of the under-privileged. For in the society human pattern of allowing even the humble deeper encroachment of humanity’s powers that has emerged after two world wars, the to provide for their offspring has been blot- of doing so, thus strikes at the very survival restructuring of national incomes has been ted out. And yet that instinctive trait is of the human race. This mad racial suicide so distorted by sheer ravaging financial what made possible humanity’s develop- is equally underwritten by the ever more greed that even the mention of the ancestral ment from single-cell creatures. The ever refined technology of atomic warfare.W.K.

Past Haunts Tally of Japan’s Nuke Crisis

By Yuka Hayashi, The Wall Street Journal, internal exposure,” he said, referring to the whether for bomb survivors or for people December 23, 2011 ingesting of radioactive material. near power plants. Kashiwa, Japan – The struggle to under- There are some emerging indications “The government has always underes- stand the health consequences of the Fu- that the impact of the Fukushima disaster timated the impact of radiation exposure,” kushima Daiichi nuclear meltdown carries on public health may not be as severe as says Shoji Sawada, a Hiroshima survivor an eerie echo of Japan’s past: the nation is some have feared. Researchers at Hirosaki and retired nuclear physicist who advocates still debating who is a victim of the atomic University, north of Fukushima City, sur- for greater attention to the bombs’ health bombs that destroyed Hiroshima and Naga- veyed 5,000 affected residents at shelters in effects. saki in World War II. the area between March 15 and June 20 and There are big differences, of course, be- On Wednesday, in the latest in a series found only 10 people with relatively high tween the bombs and Fukushima. Estimates of high-profile lawsuits, four of five people exposure levels; they weren’t high enough to vary, but 150,000 to nearly 250,000 people who were exposed to radiation from the need decontamination. died in the blasts. People within 2.5 kilo- bombings – but weren’t present at the actual Still, there is little science on long-term meters (1.5 miles) received an average 200 blasts – won official recognition as victims. health consequences of low-level radiation. millisieverts of radiation, according to the Until recent years, Japan held that only In fact, Fukushima provides the world one Radiation Effects Research Foundation in people who experienced the actual blasts at of the few opportunities to start filling the Hiroshima. close range were victims, because secondary scientific gap. By contrast, exposure for three of the radiation posed negligible danger. For years after the World War II bomb- most affected towns in Fukushima were less This debate resonates today because ings, Japan kept its criteria for victim status than 5 millisieverts for 97% of the popula- many potential victims of the Fukushima vague, never stating one way or the other tion, according to Fukushima Prefecture. A disaster will have received only secondary whether internal exposure (or other condi- spokesman for Fukushima Daiichi’s owner, radiation, for instance from eating tainted tions) qualified. But before 2008, virtually Tokyo Electric Power Co., says the com- food or inhaling dust. all “early entrants” to the bombed areas were pany isn’t aware of any local residents or Which is one reason why Takashi Asa- denied benefits, according to a health-min- plant workers sickened from exposure. The hina, 79 years old, says he recently brought a istry official. spokesman says Tepco believes government megaphone to the train station in Kashiwa – Vast studies of Japan’s hibakusha, “the officials have taken the appropriate steps to a town on high alert because radiation “hot people exposed to bombs,” provide a foun- protect citizens. spots” from Fukushima have been found dation of the scientific understanding of The power plant, however, released more here, 120 miles away. radiation’s human effects. These studies radiation than either bomb because it con- As commuters hustled by in a winter today are the basis for global nuclear-safety tained much more radioactive material. shower, Mr. Asahina warned passing moth- standards. Tatsuhiko Kodama, a physician and head ers to keep children sheltered from the rain But hibakusha studies focused on people of the Radioisotope Center at Tokyo Uni- and advised anyone who would listen to exposed most intensively to the blasts. They versity, has criticized Japan for not providing track their radiation exposure. “Radiation gave minimal attention to people a few children in Fukushima enough protection effects won’t show up immediately,” he said. miles from the blast or who visited the hy- from internal exposure. “We must strategize “Don’t take down your guard.” pocenters later, and to people exposed over on the assumption that the Fukushima Dai- As a boy, Takashi Asahina went to Hiro- time from tainted food, rain or snow. ichi disaster, like Chernobyl, released radia- shima just days after the attack. The 1986 nuclear accident at Chernobyl tion equal to several dozen nuclear bombs It’s a lesson Mr. Asahina says he learned in Ukraine deepened the understanding and created far larger amounts of fallout,” from his own years-long court battle to of internal exposure. When thyroid cancer he said at a July parliamentary session. gain recognition as a Hiroshima victim. He surged among children there, it was traced Key studies of Hiroshima paid less atten- wasn’t near the hypocenter, or ground zero, to contaminated cows’ milk they had con- tion to victims not near the blast, complicat- for the blast in August 1945, but went there sumed. Still, Chernobyl data covers only a ing modern policy making. two days later, putting him in a category quarter-century – not enough time to study The government has said Fukushima re- known as “early entrants.” A cancer survivor, radiation’s full effects – and the information leased cesium-137 in an amount 168 times he was recognized as a victim only in 2008. isn’t extensive or consistent enough, Japa- larger than that of the Hiroshima bomb. “I think the court cases will serve as a nese and US experts say. It released about half the amount of Cher- great textbook for people in Fukushima,” Critics argue that the lack of research on nobyl, experts said. The cesium, with a half- Mr. Asahina said in an interview. “For so low-level or internal exposure means today’s life of 30 years, is likely the main long-term long, the government rejected the notion of policies may downplay the health risks, health threat from Fukushima, although www.comer.org January 2012 Economic Reform | 9 prevailing winds during the March accident or those who, like the megaphone-wielding exposed to doses defined as 100 millisieverts blew most of it out to sea. Mr. Asahina, were “early entrants.” or more in a short period. The commission Japanese officials admit that missteps When hibakusha claiming just low-level suggests a policy of limiting people’s exposure may have exposed people to radiation. “We exposure started seeking compensation in after a nuclear accident to the “lower part of apologize deeply for the residents in the the 1960s, they faced a kind of Catch-22: the 1-20 millisievert-per-year band.” As the nearby areas who have been exposed,” Yukio They were told there was no conclusive evi- Fukushima disaster unfolded, these guide- Edano, a minister overseeing the nuclear dence to prove health effects, because low- lines shaped Tokyo’s decision to evacuate industry, said at a parliamentary committee level exposure hadn’t been studied. Many areas with estimated annual exposure above meeting last month. He said the government claimed ailments similar to people who 20 millisieverts, the government has said. will provide health checkups “continuously had been hit directly by the blast: hair loss, The ICRP guidelines don’t come from for the affected residents.” bleeding and, years later, cancer, cataracts firsthand studies of exposure at those levels, The government defends its standards, and heart problems. but are extrapolated from the much higher suggesting that people may have overreacted They took to the courts, launching a exposure levels from the bombs. In Japan, to the risk of low-level exposure. “We need to remarkable decades-long debate – part sci- 300 out of 1,000 deaths annually are cancer- look at what exactly the impact on people’s entific, part legal – over low-level radiation caused. If the population is exposed to 100 day-to-day life will be from an additional risks. The cases offer some of the most com- millisieverts of radiation, it would rise to an exposure of one or two millisieverts,” says prehensive records assembled on a question estimated 305, according to the National Goshi Hosono, state minister in charge of today at the heart of assessing Fukushima’s Institute of Radiological Sciences of Japan, the Fukushima accident. “We may still need potential danger. partly as victims tend to develop cancer ear- to ask people to continue with their lives The movement built slowly. But in 2000, lier than the general public. after taking into account such impact.” the Supreme Court sided with a Nagasaki But some medical experts argue that’s Two years after the US bombed Hiroshi- woman who linked her partial paralysis to just guesswork. One theory: Extended low- ma and Nagasaki, the American occupation exposure and proximity to the blast, some level exposure might actually be more haz- in 1947 launched studies of survivors. The 2.5 kilometers away. The court also ruled ardous than a one-time blast if a brief, high studies continue today under the Radiation the government should consider compen- dose just kills cells, whereas internal expo- Effects Research Foundation, or RERF, sating hibakusha who received low-level sure could damage them even at low levels, funded by the US and Japan. radiation at greater distances. ultimately causing cancer. Other experts say Over decades, some 120,000 survivors That ruling opened the gates. Since it’s simply prudent to use extra caution on were tracked. Exposure was based on peo- 2006, about 300 hibakusha have won in 30 low-level exposure, since little data exists. ple’s distance from the blasts, adjusted for class-action suits nationwide. The ICRP guidelines reflect the “general whether they were shielded by a building, In many, judges ruled “early entrants” consensus of scientific experts,” says Mi- for instance. should also get benefits. In effect, this was chiaki Kai, a professor at Oita University The research didn’t take into account the first official acknowledgment that inter- of Nursing and Health Sciences and ICRP the effects of fallout over time, and “didn’t nal exposure could cause health problems, committee member. “It is true the risk is encompass the impact of internal exposure,” given that these people weren’t exposed to uncertain for very low-level radiation. The for the most part, says Takanobu Teramoto, the blasts, but to later fallout. question is how to respond to that uncer- RERF’s permanent director. “We didn’t In 2008 Japan eased its criteria for survi- tainty. It’s an ethical question, not a scien- have data on people’s detailed behaviors that vor benefits, granting them to people with tific one.” Should people stay away “until would have allowed us to estimate that.” certain health problems who were within radiation levels return to zero?” he asks. “Or For decades, Japan’s official conclusion 3.5 kilometers of the epicenters, compared shall we allow them to go home before that from the study was that about 1% of the to 1-to-2 kilometers previously. In addition, so they can resume their lives?” 400,000 hibakusha had radiation-induced “early entrants” who went near hypocenters Dale Preston, an American researcher of problems, and the government compen- within 100 hours of the bombings are now hibakusha at RERF for more than two de- sated them. Among the 99% of hibakusha included. cades, says the studies demonstrated radia- deemed unaffected were tens of thousands Now, just as the court cases are winding tion exposure did increase cancer risk even who lived a few miles from the hypocenters, down, debate over Fukushima is building. at low doses, but in proportion to the dose Discovery of radiation in autumn rice crops size. “In no analyses was there any evidence Isotope from page 2 from Fukushima has put people on alert. of larger-than-expected risks at low doses,” much good water to the point where we The government is expected soon to unveil he says. have been induced to consider its existence a timeline for the return of residents evacu- Several experts and advocates from the a sheer waste, rather than a crucial capital ated from the 20-kilometer zone around the fight over Hiroshima and Nagasaki are now asset in our drying-up world. We are already nuclear plant. joining the Fukushima debate. groping in the very bowels of mother earth In making key decisions, Tokyo has re- Shuntaro Hida, a doctor at a Hiroshima for both our fuel and our water. A lot of lied on guidelines from a Canada-based hospital at the time of the bombing who water and fuel are at stake when we leave hu- scientific body, the International Com- has treated more than 6,000 survivors, was man capital to rot into uselessness, because mission on Radiological Protection, that the key expert witness in a class-action suit those in power have taken humans to be a used the Hiroshima-Nagasaki studies as a in Osaka that concluded in 2006. There he useless asset to be exploited and even slaugh- cornerstone. described in detail the symptoms of “early tered to make the world safer for speculative Many radiation experts say a population entrants” and told the story of a young banking. W.K. will face a measurable cancer increase only if woman who entered Hiroshima a week after

10 | Economic Reform January 2012 www.comer.org the bombing, searching for her husband, he did as a young man and simply avoid the ing megabanks is leading us to the certainty who quickly died from hemorrhaging. issue of radiation exposure. As a 13-year- of another atomic war, that would make Now 94 years old, Mr. Hida is again in old middle-school student, he approached the atomic bombs dropped on Japan mere the spotlight. He says he received calls from the hypocenter two days after the blast, he child’s play. It was, of course, the result of more than 50 readers of his recent book on says, to look for bodies of his classmates. He the most direct application of the relativity internal radiation exposure – mostly from found only buttons and belts. theory of Albert Einstein, a man of peace if anxious mothers – after Fukushima. One Soon Mr. Asahina showed symptoms of ever there was one. woman was frantic that cesium was detected acute radiation sickness, including hair loss Since then atomic weaponry has taken in her breast milk, he says. Others worried and bleeding gums. But once the moment great steps as a mass-killer when everything that their children’s nosebleeds or canker passed, he says, he tried to forget those days, that had been learned about economic mat- sores were tied to radiation. despite years of health problems, until his ters that would allow nations to live in “I say to them, once radiation enters cancer finally struck. peace and plenty has been rubbed – along your body, there is no reversing it, and that “We Japanese tend to look the other way with their great promoters – notably Presi- there is no medicine,” Mr. Hida says. “I tell when something really awful happens,” Mr. dent Kennedy, and later his junior brother. them, now it’s up to them to have a positive Asahina says. “We need to learn to face it.” These, be it noted, were not killed by a Rus- attitude.” ❧ ❧ ❧ sian or Persian, but by Americans. Mr. Asahina, the Hiroshima survivor, That makes the present developments says he brought his megaphone to the train Editor: The overpowering truth today is in atomic weaponry serious threats to the station because he fears people will do what that our public policy to suit our speculat- survival of humanity. W.K.

Uganda Losing Grip on AIDS Crisis

By Geoffrey York, The Globe and Mail, it reduced its national HIV rate to 6 per cent Ugandan President Yoweri Museveni, December 10, 2011 of adults, compared with 18 per cent at the who played a key role in fighting AIDS in Kampala – Motorcycle taxi driver Rich- peak of the pandemic in the early 1990s. the 1990s, has been noticeably less outspo- ard Okiror has seen the devastating cost of But now its HIV rate is creeping back up ken on the AIDS issue in recent years. He AIDS firsthand. He has watched people again. New infections are increasing, and has even publicly questioned the value of wasting away and dying from a virus that the sense of urgency has vanished. Uganda male circumcision – one of the most impor- infected nearly one-fifth of all adults in his is one of the few countries in the world tant tools in reducing HIV transmission, ac- country. His own parents died of AIDS in where the decline in HIV infections has cording to all the latest scientific evidence. the 1990s when he was a teenager, leaving stopped and even reversed. It has become His government has failed to make prog- him an orphan. an early warning signal to the rest of the ress toward universal HIV testing, another Yet today, in an era of life-saving medi- world: If the fight against AIDS fades into key weapon against the virus. Only about cine, he notices that his friends are less wor- complacency and neglect, the disease can 40 per cent of Ugandans have been tested ried by the virus. Some of them, he says, are roar back again. for the virus, so most never receive the coun- even paying extra money to prostitutes for “It’s very worrying,” says Denis Kibira, selling sessions that help galvanize them into sex without a condom. a health researcher in Uganda. “In the next behavioural changes. “People don’t take it as seriously as be- five or 10 years, we’re going to face a real Perhaps the biggest factor, however, is fore,” he said. “It’s a disease that doesn’t kill crisis.” the increasing emphasis on abstinence and you very fast.” Over the past decade, the national HIV faithfulness as the official response to the Others put it even more bluntly. “People rate has edged back up to 6.7 per cent. An AIDS pandemic. look at HIV as a cough,” said Joseph Ma- estimated 129,000 Ugandans became in- In the early days of the crisis, Uganda tovu, a Ugandan health analyst. “You get it fected with the virus last year – a rise of 11 adopted an “ABC” policy: Abstinence, Be and then you are cured.” per cent in the past four years – and experts faithful, and wear a Condom. But today the With the growing availability of antiret- predict the number of new infections will policy seems to be “AB” without the “C.” roviral drugs, people can live with the virus rise to 140,000 this year. The Ugandan government, which heav- for decades. And because they see fewer “Every year it rises by 10,000 or 15,000 ily promoted condoms in the 1990s in a people dying from AIDS, they are less likely and soon it will be 20,000 or 30,000,” successful strategy to reduce the HIV rate, to take precautions. says Raymond Byaruhanga, director of the rarely talks about condoms any more. Many “We have stagnated, and there’s evidence AIDS Information Centre, a Uganda non- religious groups, hugely influential in this of increasing infections,” said Asuman Luk- governmental group. predominantly Christian country, oppose wago, the permanent secretary in Uganda’s But while the complacency of ordinary the promotion of condoms. So, too, is the health department. “There’s a new genera- people might be one reason for the rise, president’s powerful wife, Janet Museveni, tion of young people who are unaware of the government policies are equally important a born-again Christian who gives praise to dangers of not using condoms.” factors. And two key governments – those God on nearly every page of her autobiog- In the early days of the AIDS crisis, of Uganda and the United States – have raphy. And so the government has backed Uganda was hailed as one of the greatest suc- contributed to the rise in HIV infections away from condom advertising. cess stories. With a massive education effort, here, analysts say. Official aid agencies in the United States, www.comer.org January 2012 Economic Reform | 11 one of the biggest donors in the campaign scratch compared to the full damage in- cost to society in a tangle of ways. Thus it against AIDS, took a similar stance against flicted on society by still denying the many deprives society of its invaluable strategy of condoms during the George Bush admin- – storyed moral and financial the full costs utilizing its key advantage of being able to istration from 2001 to 2009. It was only in short the importance of human capital. respond to advance knowledge it has. If the recently that the United States dropped its Compensation to the bilked house-buy- government makes its advance information restrictions on financial support for condom ers though important, shrinks to unshelled of its own plans it will be able to profit in promotion. peanut size in comparison with the emascu- the public interest in putting that informa- As a result of religious lobbying and gov- lation of the powers of essential reforms in tion to highly profitable use. It could just ernment reluctance, condoms are effectively modern states. By denying the greatest social buy strategic sites near the stations as soon banned from Ugandan billboards these revolution to have come out of the slaughter as the earlier plans for a subway are decided days. And condoms cannot be advertised on of World War II – associated with the names on. For example the moment the very plans Uganda’s television channels, except after of Theodore Schultz, Gerald McGeer and for a subway recommended, it could option 9 p.m. François Peroux. Until we fully reclaim the sites close to the future subway stations, “Everyone in the industry knows that it’s heritages of this great cohort, we shall con- and lease them at a profit to others when a ‘no-go’ area,” says Daudi Ocheing, head tinue heading blindly towards our society’s the plans become public. Today the public of communications at the Uganda Health extinction to recapture their full legacy – the interest lies in such timely responses. Marketing Group, a non-profit company importance of the timely full inheritance of Even where the government has con- that distributes condoms as part of its health the grasp in all its implications. trol of such capital programs, the niggling activities. We must recount the full record of their resources accorded it, limits its powers of “Everyone’s hands are tied,” he says. “We achievements – for that is what has been profiting by advance knowledge of the gov- should have billboards to promote con- suppressed and thus has condemned our ernment’s own plans. Special private finan- doms, but we don’t have them. If you don’t society to its ultimate self-destruction. At cial corporations based largely in Spain and put condoms in the mix, you’re wasting a the end of WWII, Washington sent to Japan Australia profit from long term leases on a lot of time.” and Germany many hundreds of econo- highway north of Toronto and international The idea of promoting abstinence and mists to assess the damage and predict how bridges and other facilities. faithfulness as the sole solution for all Ugan- long it would be before those former great I spent ten years researching every con- dans will never work, Mr. Ocheing said. “It’s trading nations could assume such roles ceivable aspect of the advantages that would a lie. Are you going to tell an 18-year-old to again. Some 15 years later, one of these, ensue if the government were free to rec- be abstinent? It’s never going to happen, not Theodore Schultz of the University of Chi- ognize that public investment in human in a thousand years.” cago wrote a memo on how wrong he and capital is the most profitable investment He also criticized the government’s refus- his colleagues had been in their forecast: a government could make, and sent my al to allow condom advertising on television they had concentrated on the physical de- essay to publications on economic theory before 9 p.m. Teens as young as 14 years old struction, but ignored the fact that invest- throughout the world. It was purchased via are already sexually active, he noted. ment in human capital had come out of the return mail by the outstanding publication Young people are not the only source of war almost intact. From that he concluded Revue économique in France, and carried as HIV transmission. More than 40 per cent that human capital is the most productive a 41-page publication in its issue of May, of new transmissions are occurring within investment a government can make. For 1970. Only later did I understand why. On couples, where one partner has HIV and a few years Schultz was celebrated for his its editorial board there was not only the the other does not. Because of this, condom great discovery and then completely forgot- leading French sociologist of that day, but use should be promoted within couples too. ten. More significantly, that suppression left two statistical specialists, who had relat- But the Ugandan government is extremely governments free to respond to the upward ing supply-and-demand figures with price reluctant to do so, since it would imply climb of prices as though it was to mere in- movements with no success. My analysis that one partner might be unfaithful – an creased interest rates. That, of course put the was picked up by publications on economic implication the government doesn’t want speculative banks in the drivers’ seat more theory, and I spent much of the following to accept. securely than ever before. two years attending meetings on economic Stephen Lewis, the former United Na- A decade earlier I had attacked the same theory on just about every continent. This tions ambassador on AIDS in Africa, says problem from a different angle – recogniz- brought me into very kindred contact with he is deeply concerned by the rise in HIV ing human capital as the most important François Perroux, the leading spirit, the infections in Uganda. The “crazy obsession” investment a government can make. I noted group in charge of the publication to ad- with abstinence in US aid to Uganda may that an increasing portion of government dress a near-capacity audience in French at have led to a rise in infections, he said. investment now comes in human capital. the University of Waterloo, where I did the “There has to be much more emphasis This must be treated not as an expen- translation. on prevention,” Mr. Lewis said. “They have diture gotten out of hand but as a crucial The collaboration with Perroux con- to beat the drums again.” investment. I worked for a decade analyzing tinued on a very intimate basis until his the significance of this from every conceiv- death. There I had been invited to Waterloo Our Comment able angle, centering on the fact, that mistak- University by John Hotson, a well respected They must get out of cold storage their ing this crucial social investment for a debt leading member of the economic faculty, shovels and their consciences and start dig- has endless consequences. For this is social and COMER was founded. Some eight ging deeper, so much more deeply that it capital that comes prepaid, and treating it as organizations dedicated to rethinking eco- will make the proposed adjustment, a mere a debt rather than an asset compounds the Continued on page 19

12 | Economic Reform January 2012 www.comer.org COMER’s Court Case Proceeds Our court case against our government’s trifling with the very serious Claim matters of its once-recognized investment in human capital – as a pre- 1. The Plaintiffs claim: paid asset a government can make – has come to life again. Threats from (a) declarations that: southern Italian gangsters against the lives of our solicitor’s new-born i) the Minister of Finance, and Government of Canada is babes have been handled and Rocco Galati has been able to proceed with required to request, and that the Bank of Canada is statu- our suit with his legendary insights. torily required, when necessary, to make interest-free loans, Court File No.: T-2010-11 on the terms set out under s.18 (i) and (j) of the Bank of Canada Act, RSC, 1985, c. B-2 (the “Act”) for the pur- “Proposed Class Action Proceeding” poses of “human capital” expenditures and/or municipal/ FEDERAL COURT provincial/federal “human capital” and/or infrastructure Between: expenditures; Committee for Monetary and Economic Reform (“COMER”), Wil- ii) that the “Government of Canada,” the Minister of Finance, liam Krehm and Ann Emmett (Plaintiffs) and Her Majesty the Queen in Right of Canada, with the Bank of Canada, – and – A/ have abdicated their statutory and constitutional duties Her Majesty the Queen, the Minister of Finance, the Minister of with respect to ss. 18(i) and (j) of the Bank of Canada National Revenue, the Bank of Canada, the Attorney General of Act which subsections read: Canada (Defendants) 18. The Bank may … Statement of Claim (i) make loans or advances for periods not exceeding six (Pursuant to s.17 (1) and (5)(b) Federal Courts Act, and s.24(1) months to the Government of Canada or the govern- and 52 of the Constitution Act, 1982) ment of a province on taking security in readily mar- (Filed this 12th day of December, 2011) ketable securities issued or guaranteed by Canada or TO THE DEFENDANT: any province; A LEGAL PROCEEDING HAS BEEN COMMENCED (j) make loans to the Government of Canada or the AGAINST YOU by the Applicant. The claim made against you is government of any province, but such loans out- set out in the following pages. standing at any one time shall not, in the case of IF YOU WISH TO DEFEND THIS PROCEEDING, you or a the Government of Canada, exceed one-third of the solicitor acting for you are required to prepare a statement of defence estimated revenue of the Government of Canada for in Form 171B prescribed by the Federal Courts Rules, serve it on the its fiscal year, and shall not, in the case of a provincial applicant’s solicitor or, where the applicant does not have a solicitor, government, exceed one-fourth of that government’s serve it on the applicant, and file it, with proof of service, at a local estimated revenue for its fiscal year, and such loans office of this Court, WITHIN 30 DAYS after this statement of claim shall be repaid before the end of the first quarter after is served on you, if you are served within Canada. the end of the fiscal year of the government that has Copies of the Federal Courts Rules, information concerning the contracted the loan; local offices of the Court and other necessary information may be B/ and further that the refusal to request and make (interest obtained on request to the Administrator of this Court at Ottawa free) loans under s. 18(i) and (j) of the Bank of Canada (telephone 613-992-4238) or at any local office. Act has resulted in negative and destructive impact on IF YOU FAIL TO DEFEND THIS PROCEEDING, judgment Canadians by the disintegration of Canada’s economy, may be given against you in your absence and without further notice its financial institutions, increase in public debt, de- to you. crease in social services, as well as a widening gap be- Date: December 12th, 2011 tween rich and poor with an continuing disappearance Address of local office: of the middle class; Federal Court of Canada iii) that s. 18(m) of the Bank of Canada Act, and its adminis- 180 Queen Street West, Suite 200 tration and operation, is unconstitutional and of no force Toronto, Ontario M5V 3L6 and effect, in Parliament and the government, including the Defendant Minister of Finance, abdicating their duty TO: to govern, and insofar, as monetary, currency and financial Department of Justice,Ontario Regional Office policies, per se, are concerned, and in turn as they effect First Canadian Place, The Exchange Tower socio-economic governance, have abdicated their consti- 130 King Street West, Suite 3400, Box 36 tutional duty(ies)and handed them over to those interna- Toronto, Ontario M5X 1K6 tional, private entities, whose interests, and directives, are AND TO: placed above the interests of Canadians, and the primacy Bank of Canada of the Constitution of Canada, not only with respect to its 234 Wellington Street specific provisions, but also with respect to the underlying Ottawa, Ontario K1A 0G9 constitutional imperatives, and which provision reads: www.comer.org January 2012 Economic Reform | 13 (m) open accounts in a central bank in any other country nadians, is to cause injury to the Plaintiffs and all other or in the Bank for International Settlements, accept Canadians, or the Defendants’ officials should know, in deposits from central banks in other countries, the Bank the circumstances, that injury to the Plaintiffs, and all for International Settlements, the International Mon- other Canadians, is likely to, and does result; etary Fund, the International Bank for Reconstruction ix) that the privative clause in s. 30.1 of the Bank of Canada and Development and any other official international Act, financial organization, act as agent or mandatary, or de- A/ does not apply to the seeking of “judicial review,” by pository or correspondent for any of those banks or or- way of action or otherwise, of declaratory relief with re- ganizations, and pay interest on any of those deposits; spect to any statutory or constitutional ultra vires action iv) that the maintaining of minutes of meetings by the Gover- and/or section of the Act, by way of declaratory relief, nor of the Bank of Canada, with other central bank “gov- or any other prerogative remedy, available to hear and ernors” from other states and federation(s), as secret and determine the statutory and/or constitutional limits or not open to parliamentary and public view and scrutiny, actions under the Act, in accordance with, inter alia, in constitutes: Supreme Court of Canada’s pronouncement in Dun- A/ ultra vires action by the Governor of the Bank of Canada smuir v. New Brunswick [2008] 1 SCR 190, nor does it contrary to inter alia, s. 24 of the Act; apply to seeking damages for ultra vires or unconstitu- B/ unconstitutional conduct by the Governor of the Bank tional damages:and of Canada; B/ if s.30.1 of the Bank of Canada Act is interpreted to so v) that the Parliament of Canada, in: apply as a privative clause, then it is unconstitutional A/ allowing the Governor of the Bank of Canada to hold and of no force and effect for breaching the Plaintiffs’ secret the nature and content of his meetings with other constitutional right to judicial review, as well as breach- central bank(ers); and ing the underlying constitutional imperatives of Rule of B/ in not exercising the authority and duty contained in Law, Constitutionalism, and Federalism; 18(i) and (j) of the Act; and (b) damages in the amount of: C/ enacting s. 18(m) of the Bank of Canada Act; i) $10, 000.00 per plaintiff; and has unconstitutionally abdicated its duty and function as ii) should the within action be certified as a class action pro- mandated by ss. 91 (1a), (3), (14), (15), (16), (18), (19) ceeding, $1.00 (one dollar) for every Canadian citizen/resi- and (20) of the Constitution Act, 1867, as well as s. 36 of dent, to be calculated based on the last population figure the Constitution Act, 1982; published in the last census, in accordance with s. 91(5) of vi) that the Minister of Finance is required to list expenditures(s) the Constitution Act, 1867; on “human capital,” including infrastructural capital ex- which damages are on account of: penditures relating to “human capital,” as an “asset” and iii) the constitutional breaches pleaded in the statement of not a “liability” with respect to budgetary accounting; claim herein; and vii) that the Minister of Finance is required to list, in his iv) the conspiracy pleaded in the statement of claim herein; budgetary accounting, all revenues collected prior to the (c) such further declaratory and/or consequential injunctive and/ return of “tax credits” to individuals, and moreover, cor- or prerogative order and/or relief as counsel may advise and porate taxpayers, with tax credits subtracted from the total this Honourable Court grant; revenue due, before subtracting total expenditures from (d) costs of this action and such further or other relief this Court total revenue, and arriving at either a budgetary “surplus” deems just. or “deficit” as required,inter alia, by s. 91(5) of the Consti- tution Act, 1867; The Parties viii) that the defendants’ (officials) are wittingly and/or unwit- 2 (a) the Plaintiff, Committee for Monetary and Economic Reform tingly, in varying degrees, knowledge, and intent, engaged (hereinafter “COMER”) historically to date is an international in a conspiracy, along with the BIS, FSB, an IMF, to render economic “think-tank,” based in Toronto, and was established in impotent the Bank of Canada Act, as well as Canadian 1970, dedicating itself to the monetary and economic reform poli- sovereignty over financial, monetary, and socio-economic cies of Canada and conducts research, analysis, and publication(s) policy, and in fact by-pass the sovereign rule of Canada, on these issues. For the past 23 years it has published a monthly through its Parliament, by means of banking and financial publication entitled COMER with articles and analysis from systems, which conspiracy and elements of such tortious various authors including some of its own committee members. conduct are set out, in inter alia, Hunt v. Carey Canada Inc. Its committee members have consisted of economists, academics, [1990] 2 S.C.R. 959 namely: and published authors expert in their respective fields; A/ that the Defendants’ (officials), including and together (b) the Plaintiff, William Krehm, is and has been a member of with the BIS, engage(d) in an agreement for the use of COMER, since its inception, and has devoted much of his life to lawful and unlawful means, and conduct, the predomi- the study, research, analysis and writing on economic, monetary, nant purpose of which is to cause injury to the Plaintiffs, and social reform, and is a published author on economic and and all other Canadians; monetary reform, included various articles, papers, as well as B/ that the Defendants’ (officials), including and together books as recent as 2010; with the BIS, engage(d), in an agreement, to use unlaw- (c) the Plaintiff, Ann Emmett, is a member of COMER, and has ful means and conduct, whose predominant purpose devoted much of her life to the study, research, analysis and writ- and conduct directed at the Plaintiffs, and all other Ca- ing on economic, monetary, and social reform, and is a published

14 | Economic Reform January 2012 www.comer.org author on economic and monetary reform, included various WHEREAS it is desirable to establish a central bank in articles, and papers, as recent as 2010; Canada to regulate credit and currency in the best interests (d) the Defendant, Her Majesty the Queen, is statutorily and consti- of the economic life of the nation, to control and protect the tutionally liable for the acts and omissions of her officials pursu- external value of the national monetary unit and to mitigate ant to s. 17 of the Federal Courts Act as well as s. 24(1) and 52 of by its influence fluctuations in the general level of production, the Constitution Act, 1982; trade, prices and employment, so far as may be possible within (e) the Defendant, the Minister of Finance, is statutorily and ulti- the scope of monetary action, and generally to promote the mately, with the consent of Governor-in-Council, responsible for economic and financial welfare of the Dominion: Therefore, overseeing both the Bank of Canada, as well as the Governor of His Majesty, by and with the advice and consent of the Senate the Bank of Canada, pursuant s.14 of the Bank of Canada Act, and House of Commons of Canada, enacts as follows: and the Minister of Finance is also, constitutionally, responsible 5. The Plaintiffs state, and the fact is, that the current Bank of for setting out the budgetary process, and expenditures for each Canada Act, continues to reflect a public statutory duty and session of Parliament, upon the appropriation request, through responsibility, as borne out by the preamble to the Act, which the taxing power, of Her Majesty the Queen, as set out in Her reads: Parliamentary throne speech delivered by the Governor General WHEREAS it is desirable to establish a central bank in for that purpose; Canada to regulate credit and currency in the best interests (f) the Defendant, the Minister of National Revenue, is statutorily of the economic life of the nation, to control and protect the responsible for administering the Income Tax Act, and other Fed- external value of the national monetary unit and to mitigate eral taxing statutes related to the collection of revenue through, by its influence fluctuations in the general level of production, inter alia, the taxing power, under s. 91(3) of the Constitution Act, trade, prices and employment, so far as may be possible within 1867; the scope of monetary action, and generally to promote the (g) the Defendant, the Attorney General of Canada, is, constitution- economic and financial welfare of Canada ally, the Chief Legal Officer, responsible for and defending the 6. The Plaintiffs state, and the fact is, that the Bank of Canada is the integrity of all legislation, as well as responding to declaratory only “public” central bank created by statute, and accountable to relief with respect to legislation, including with respect to its the legislative and executive branches, to be found in any of the constitutionality and required to be named as a Defendant in any G-8 nations. All other central banks are “private” banks and are action for declaratory relief. not directly created nor governed by legislation nor directly ac- countable nor reportable to the legislative or executive branches The Facts of the governments in the nations in which they operate. 3. The Plaintiffs state, and the fact is, that the Bank of Canada was 7. The Plaintiffs state, and the fact is, that Policies such as inter- established as Canada’s central bank, in 1934, and nationalized in est rates, and other policies set by the Bank of Canada are set 1938, with the intended purpose of: in consultation, and at times, but mostly at the direction of the (a) Asserting domestic and public control of monetary and eco- “Financial Stability Board” (“FSB”), established after the 2009 nomic control and public policy pursuant to its constitutional “G-20” London Summit in April, 2009. The FSB is a successor sources of jurisdiction contained in s. 91 and 91 A of the of the “Financial Stability Forum” (“FSF”). The current FSB, like Constitution Act, 1867, namely: its predecessor, is an international body of central bankers that i) 1A. The Public Debt and Property; monitors and makes recommendations about the global financial … system. The Board includes all major G-20 major economies, FSF ii) 3. The raising of Money by any Mode or System of Taxa- members, and the European Commission. The FSB is based in tion; Basel, Switzerland. iii) 4. The borrowing of Money on the Public Credit; 8. The Plaintiffs state, and the fact is, that the current FSB, like its … predecessor FSF, continues to serve the same function. It consists iv) 14. Currency and Coinage; of the major national financial authorities such as Finance Minis- … ters, central bankers, and international financial bodies. v) 16. Savings Banks; 9. The Plaintiffs state, and the fact is, that the FSF was and is man- … aged by a small secretariat, which secretariat was housed at the vi) 18. Bills of Exchange and Promissory Notes; “Bank of International Settlements” (“BIS”) in Basel, Switzer- vii) 19. Interest; land. It was established by the Hague Agreements, in 1930, prior viii) 20. Legal Tender. to the creation of the Bank of Canada. and as set out in s. 18 of the Act and its predecessor provisions; 10. The Plaintiffs state, and the fact is, that the BIS is a so-called (b) to be a vehicle to provide the Federal and Provincial govern- inter-governmental organization of central banks which purports ments interest-free loans for physical infrastructure as well as to execute financial co-operation and purports to serve as a “bank “human capital” expenditures (education, health, other social for central banks.” The Plaintiffs state, and the fact is, that the BIS services); and in fact formulates policies and dictates to central banks, including (c) maintain sovereign control over credit and currency with the the Bank of Canada. aim to promote the economic interests of Canada in all its 11. The Plaintiffs state, and the fact is, that Canada, through its Bank aspects. of Canada, became a member of an expanded BIS in 1974. The 4. The preamble to the Bank of Canada Act, upon its enactment Plaintiffs further state, and the fact is, that between 1934 to 1974 in 1934, as a private corporation, and as re-enacted as a Crown the Bank of Canada, and Canada, was completely independent, corporation in 1938, read as follows: from international private interests, with respect to its statutory www.comer.org January 2012 Economic Reform | 15 duties under the Bank of Canada Act, as well as its monetary and 16. The Plaintiffs state, and the fact is, that this loss of control coin- financial policies reflected in the preamble to the Act, and as it cides with the Bank of Canada being a member of the BIS, FSF flowed through to its economic and social policies. The Plain- and FSB, without public scrutiny nor accountability with respect tiffs further state, and fact is, that since 1974, there has been a to the actions of the Bank of Canada, at the direction and deci- gradual, but sure, slide into the reality that the Bank of Canada sions of foreign, private bodies and interests. and Canada’s monetary and financial policy are in fact, by and 17. The Plaintiffs state, and the fact is, that in or about 1974, after large, dictated by private foreign bank and financial interests, Canada’s entry into the expanded BIS, an agreement or direc- contrary to the Act. tive was reached, at which BIS, where Canada’s (central) Bank 12. The Plaintiffs state, and the fact is, that the BIS is not accountable of Canada was the only publicly-created and accountable to its to any government. It holds annual meetings, which are secret, Parliament or Legislative body, that the central banks would not and provides banking services to central banks, including the be used to create or lend-interest free money, contrary to ss. 18(i) Bank of Canada. and (j) of the Act, and its original purpose for its creation, but that 13. The Plaintiffs state, and the fact is, that the BIS is effectively in governments obtain borrowed money from and through the BIS control of the FSB when it comes to credit, currency, monetary (FSF, FSB, and International Monetary Fund (“IMF”)). and financial policies for G-20 countries, including Canada, with 18. The Plaintiffs state, and the fact is, that no sovereign government far-reaching economic and social impact not in the interests of such as Canada, under any circumstances, should borrow money either the Bank, government, nor people of Canada. from commercial banks, at interest, when it can, instead, borrow 14. The Plaintiffs state, and the fact is, that the meetings of the BIS from its own central bank interest-free, particularly when that and FSB, their minutes, their discussions, and deliberations are central bank, unlike any other G-8 nation, is publicly established, secret and not available to Parliament, the executive, nor the Ca- mandated, owned, and accountable to Parliament, and the Min- nadian public, notwithstanding that the Bank of Canada policies ister of Finance, and was created with that purpose as one of its directly emanate, and are directed by these meetings. main functions. 15. The Plaintiffs state, and the fact is, that in its early and middle 19. The Plaintiffs state, and the fact is, that over the years, Ministers existence the Bank of Canada issued (interest-free) loans, pursu- of Finance have had requests to have the Minister make interest ant to s. 18 (i) and (j) of the Act, and predecessor statutes, not free loan requests from the Bank of Canada, which have been only to the federal and provincial governments, but also directly refused, examples of which are: to municipal councils. (It also printed money and bought gov- (a) on June 11th, 2004 the Town of Lakeshore, Ontario wrote the ernment debt in financing the war efforts in World War II). It Minister of Finance, the Right Honourable Ralph Goodale, stopped doing so in the early 1974 in favour of loans from foreign on Municipal Council Resolution, requesting such loans be private banks with interest, with the resulting and detrimental made, which request is a document referred to in the plead- negative effects: ings herein; (a) loss of the control of domestic monetary policy, including (b) the Minister of Finance on August 18th, 2004 refused the re- interest rate policy; quest and in doing so did not have regard to either the nature (b) loss of control of domestic economic policy insofar as bond of the request, nor the pertinent provisions of the Bank of raters, from foreign private banks lending to Canada, would Canada Act, which response is a document referred to in the insist on the direction of Canada’s domestic economic policy pleadings herein. under threat of downgrading Canada’s borrowing/lending 20. In his response, the Minister of Finance gave the following rea- worthiness; sons for refusing to do so: (c) loss of control over social policies, from foreign private banks (a) that “…relying on the printing press to finance government lending to Canada would insist on the direction of Canada’s expenditures results in inflation…”; domestic social policies, under threat of downgrading Cana- (b) “….If the Bank had to borrow the funds that it loaned to da’s borrowing/lending worthiness; the government it would have to pay whatever interest rate (d) loss of investment in human capital and infrastructure expen- prevailed in the market…” ditures, from foreign private banks lending to Canada who (c) “Other nations that have relied extensively on, low-interest would insist on direction of Canada’s domestic human capital credit extended by central banks….have experienced very and infrastructure expenditures under threat of downgrading high inflation…” Canada’s borrowing/lending worthiness; (d) “It is also inadvisable for the Bank of Canada to issue low- (e) a corresponding loss of sovereignty over decision related to interest loans to provincial or municipal governments. To banking, monetary policy, economic policy, as well as social understand why, let us consider the two approaches that the policy; Bank of Canada could follow if it chose to issue such loans. (f) as a result, spiralling schism between the rich and the poor in Suppose that the Bank of Canada did not want to change Canada with a continuing removal of the middle class and a the total amount of loans it had outstanding. In this case, corresponding rise in socio-economic crime related to pov- the Bank of Canada could rearrange its portfolio of assets to erty; provide some loans to provinces at relatively low interest rates. (g) the bizarre, and absurd result that, while private banks can However, this would reduce the Bank of Canada’s profits. borrow money from the Bank of Canada, currently, next- Since the Bank is owned by the Government of Canada, this to-zero interest (0.25%), Canadian citizens, through the policy would result in federal taxpayers subsidizing provincial government’s debt to private banks, and foreign private banks governments.” holding Canadian bonds and currency, relend at a higher This has been a consistent response from the government of interest rate than they borrow. Canada.

16 | Economic Reform January 2012 www.comer.org 21. The Plaintiffs state, and the fact is, that the Minister’s reasons for nized that investment and expenditure in human capital is the refusing what was requested from the Town of Lakeshore’s Coun- most productive investment and expenditure a government can cil, is both financially and economically fallacious and not in ac- make. This was amplified and borne out by the phenomenal cordance with his statutory duties under the Bank of Canada Act, success and results of the reconstruction of Germany and Japan nor his constitutional duties as Finance Minister. For example: following World War II, which was realized by a subsequent study (a) any (interest-free) loans granted under s. 18 (i) and (j) would by Theodore Shultz, a Nobel Prize Winner, from the University have to be repaid within a very short period and therefore of Chicago, and other noted economists. would not be “inflationary”; 27. The Plaintiffs state, and the fact is, that the notion and reality (b) the Bank of Canada does not have to acquire its money from of “human capital” with its origins going back to Adam Smith, commercial banks to pay back any (interest-free) loans under boil down to: s. 18 (i) and (j) in that its is statutorily mandated to do so, (a) acquired competency and knowledge of individuals, through has done so in that past, and in fact lends money to the com- education and experience, which in turn leads to the ability to mercial banks currently, at almost zero percent (0.25%); perform labour producing economic output; (c) that inflation would ensue is simply negated by the fact that (b) along with this “human capital” attributable to individuals are currently, the US Federal Reserve has a 0% interest rate while the capital expenditures to make it possible such as schools, the Bank of Canada has a 0.25% rate with no inflating con- universities, and hospitals, etc; sequences, above and beyond the fact that, historically, such (c) human capital it tied to the qualitative and quantitative prog- short-term (interest-free loans) have not, in and by them- ress of any nation; selves, caused inflation because they have to be repaid the next (d) human capital is developed through health, education, and fiscal year; and quality of standard of living which in turn translates to gov- (d) on the fact the some Provinces may get more (interest-free) ernment expenditures and investments in schools, universi- loans than others, this is neither contrary to the underlying ties, hospitals, and other public infrastructures; constitutional principle of Federalism, nor the explicit terms (e) human capital is always central to any analysis about the of s. 36 of the Constitution Act, 1982. welfare, education, healthcare, and retirement of individuals, 22. The Plaintiffs state, and the fact is, that the Minister’s response is which in turn is central to a person’s life, liberty, security of the financially and economically fallacious, as witnessed by the cur- person, as well as their equality within the Canadian state. rent state of affairs, such as the US Federal Reserve Bank (a private 28. The Plaintiffs state, and the fact is, that while “human capital” central bank) printing currency and “lending” it, to the com- expenditure, on human beings, and human capital expenditures mercial banks at 0% (interest-free), while the Bank of Canada’s (such as schools, universities, hospitals), while, in Canada, may current lending rate is 0.25% (one quarter of one percent), above not have a “marketable” or “sellable” value on the “free,” “private” and beyond the “giving” or “bail-out” of hundreds of billions of market, this does not mean, as interpreted and calculated by dollars by the US and Canadian governments, as well as by the the Defendant Minister of Finance, that it has zero value when Bank of Canada, to purportedly avert a collapse of the interna- calculating assets and liabilities for deficit/debt purposes, nor in tional banking and financial systems. the manner in which these capital human expenditures assets are 23. The Plaintiffs further state, and the fact is, that this leads to the amortised for accounting purposes in that budgetary process. absurd and ultra vires result that while commercial banks obtain 29. The Plaintiffs state, and the fact is, that human capital has been their money, from the Bank of Canada, at the Bank of Canada’s viewed as a means of production through which additional in- prime leading rate, today at 0.25%, the citizens of Canada, vestment yields additional output to the economy of any nation. through the government of Canada, pay back the commercial This investment applies both to government and the private sec- banks, commercial lending rates which are higher than the Bank tor investments and expenditures. of Canada’s prime rate, on the “national debt” owed to private 30. The Plaintiffs state, and the fact is, that so long as the notion commercial banks, accumulated on the annual “deficit” as cal- of expenditures on human capital are discarded, a critical intent culated and set down by the Minister of Finance in the annual and purpose of the Bank of Canada Act is rendered impotent, and budget, and budgetary process. equally discarded, with the results of statutory and constitutional 24. The Plaintiffs state, and the fact is, that the Minister of Finance’s breach(es) by the Minister of Finance and the Bank of Canada. refusal is purportedly based on the reasoning that such loans 31. The Plaintiffs state, and the fact is, that BIS, FSF, FSB, and would increase the annual deficits and public “debt.” IMF were all created with the cognizant intent of keeping poorer 25. The Plaintiffs state, and the fact is, that the Minister’s calculation nations “in their place,” which has now expanded to all nations of the public deficit and debt, as calculated and not amortised, is in that, these financial institutions attempt, and largely succeed, based on fallacious accounting methods, namely with respect to to over-ride governments and constitutional orders in countries, how expenditures directly relating to “human capital” are set out such as Canada, over which they exert financial control. and amortised as “liabilities” as opposed to “assets.” The Plaintiffs 32. The Plaintiffs further state, and fact is, that, so long as human state, and the fact is, that expenditures and the capital obtained capital expenditures are treated strictly as “liability” and “debt,” through those expenditures and the capital obtained through with no corresponding asset value, the government will not be in- those expenditures with respect to human capital are “assets” and vesting in human capital infrastructure, or its own infrastructure not “liabilities.” The Plaintiffs further state that the Minister of for that matter, which is manifested for example, in government Finance’s budgetary accounting is also misleading and fallacious paying exorbitant rents on space for such things as Ministerial in the calculation of “revenues” as excluding tax credits given back Departments, such as the Justice Department, as well as the Court on collected/collectable taxes. themselves, where building or purchasing such assets would, in 26. The Plaintiffs state, and the fact is, that it has been long recog- the long run, reduce those costs to a negligible fraction of the www.comer.org January 2012 Economic Reform | 17 actual rental expenditures which increases the “deficit” and “debt” and actual picture of what total “revenues,” “total expenditures,” as (mis)calculated by the current budgetary process. The Plaintiffs and what the annual deficits/surplus” actually is, what the annual state, and the fact is, that such is the case with all sales, rentals, “deficit/surplus” actually is, in any given year, and what, as a result or disposition (“privatization”) of human capital infrastructure, the standing national “debt” actually is. Moreover, and more im- including government infrastructure serving Canadians. portantly, the Plaintiffs state, and fact is, that such “accounting” 33. The Plaintiffs state, and the fact is, that with respect to the pri- methods foreclose any actual or real debate, or consideration, by vate corporate context, a company’s value is routinely calculated elected MPs, in Parliament, as the actual financial picture is not as an aggregate of its capital assets and its “goodwill” for account- available nor disclosed to either Parliamentarians nor the Canadi- ing, valuation, and income tax purposes. The “goodwill” of the an public. The Plaintiffs state, and the fact is, that such account- company essentially boils down its “human capital.” ing method breaches s. 91(5) of the Constitution Act,1867 and the 34. The Plaintiffs state, and the fact is, that the Minister of Finance’s duty of the Defendant(s) to maintain accurate “statistics.” calculation of revenue, expenditures, and surplus/deficit, on an 40. The Plaintiffs further state, and the fact is, that this “accounting” annual basis, is also fallacious and inaccurate by the statutory has, in the past, been heavily criticized by the Auditor General. slight of hand and ultra vires accounting which is effected by 41. The Plaintiffs state, and the fact is, that the defendants’ (officials) means of the Income Tax Act, through “tax credits.” Thus, the an- are wittingly and/or unwittingly, in varying degrees, knowledge, nual budget is presented, in simple terms, as follows: and intent, engaged in a conspiracy, along with the BIS, FSB, an (a) total revenue collected (without setting out total tax credits IMF, to render impotent the Bank of Canada Act, as well as Ca- given back to taxpayers before final payable tax is calculated); nadian sovereignty over financial, monetary, and socio-economic (b) minus government expenditures (which includes misamorti- policy, and in fact by-pass the sovereign rule of Canada, through zation of human capital expenditures); its Parliament, by means of banking and financial systems, which (c) equals total surplus/deficit. conspiracy and elements of such tortious conduct are set out, inter 35. The Plaintiffs state, and the fact is, that on the Minister’s pre- alia, Hunt v. Carey Canada Inc. [1990] 2 S.C.R. 959 namely: sentation of a budget, the calculation is, for example, set out as A/ that the Defendants’ (officials), including and together with follows: the BIS, engage(d) in an agreement for the use of lawful and (a) total revenue equals $240 billion; unlawful means, and conduct, the predominant purpose of (b) minus total expenditure of $280 billion; which is to cause injury to the Plaintiffs, and all other Cana- (c) equals a $40 billion deficit. dians; When in fact, the real calculation and accounting should read, B/ that the Defendants’ (officials), including and together with for example as follows: the BIS, engage(d), in an agreement, to use unlawful means (a) total revenue collected/collectable: and conduct, whose predominant purpose and conduct di- i) $340 billion, rected at the Plaintiffs, and all other Canadians, is to cause ii) minus $100 billion returned to taxpayers by way of tax injury to the Plaintiffs and all other Canadians, or the Defen- credits, for a total of $240 billion in revenues; dants’ officials should know, in the circumstances, that injury (b) minus total expenditures of: to the Plaintiffs, and all other Canadians, is likely to, and does i) $280 billion, result; ii) while not counting nor properly amortizing human capital 42. The Plaintiffs state, and the fact is, that the proper accounting expenditures and assets; and setting out of the budgetary process, including the aggregate (c) equals a deficit of $40 billion. amount of taxes collected/collectable which is “given back” to 36. The Plaintiffs state, and the fact is, that the “deficit” amount of taxpayers, and notably corporate tax payers, through tax credits, $40 billion, which is added to the annual debt every year, more would result in the proper accountability and consequential often than not equals or constitutes the bulk of the “carrying political debate, through the elected MPs in Parliament, on the charges” (interest/paid on the debt, to commercial banks, at mar- actual state of Revenues, Expenditures, Surplus/Deficit account, ket rate interest rates), while the Bank of Canada gives that money announced, and tabled in Parliament by the Minister of Finance, to commercial banks at the Bank of Canada’s lower lending rate, in his constitutional duty over the budgetary process. an amount depravingly lower than what the government pays 43. The Plaintiffs state, and the fact is, that the “accounting” em- them back on its annual “debt.” ployed in the budgetary process, and an inaccurate and unavail- 37. The Plaintiffs state, and the fact is, that tax credits do not show able “statistic” of the aggregate of tax credits transferred back up as government revenue, on the one hand, but are simply off-set before calculations of net revenue, as well as the absence of the against tax revenue and then a net figure reported as tax revenue, “asset” value of human capital and expenditures and infrastruc- as out in paragraphs 34 and 35 above. ture, violates s.91(5) of the Constitution Act, 1867. 38. The Plaintiffs state, and the fact is, that on the other hand 44. The Plaintiffs state, and the fact is, that the Minister’s statutory “refundable” tax credits, which are credits whereby monies are and Parliamentary duty over the budgetary process, goes hand in remitted to the taxpayer, as opposed to non-refundable tax credits hand with his statutory duty as ultimate authority, with the con- which simply reduce the amount of a taxpayers’ taxable income, sent of Governor-in-Council, over the Bank Canada, under s.14 on the other hand, show up as “expenditures” or government of the Bank of Canada Act, and the authority and duty imposed spending in the budgetary process. by s. 18 (i) and (j), and other duties, which includes the exercise of 39. The Plaintiffs state, and the fact is, that the above “accounting the statutory duty to ensure interest-free loans to the government method” used in the budgetary process are not in accordance of Canada and the Provinces to execute and implement human with accepted accounting practices, are conceptually and logi- capital expenditures which expenditures ought to be properly am- cally wrong, and have the effect of perpetually making the real ortized and accounted, along with the proper accounting of tax

18 | Economic Reform January 2012 www.comer.org credits, in the budgetary process, which process is constitutionally but also the underlying constitutional right to equality, as mandated, going back to the Magna Carta in the constitutional identified in, inter alia, the Supreme Court of Canada’s deci- guarantee that the Crown can only imposes taxes, for the declared sion in Winner v. S.M.T. (Eastern) Ltd., [1951] S.C.R. 887; proposed expenditures, as set out in the throne speech, upon the (c) the underlying constitutional principle of Federalism; consent (over the taxing power) of the House of Commons. (d) the expressed provision(s) giving effect to the underlying prin- 45. The Plaintiffs state, and the fact is, that s. 18(m) of the Bank of ciples of Federalism, contained in s. 36 of the Constitution Act, Canada Act, and its administration and operation, is unconstitu- 1982. tional and of no force and effect, in Parliament and the govern- (e) the constitutional right that statutes do not be rendered im- ment, including the Defendant Minister of Finance, abdicating potent in Parliament de facto abdicating its duty to govern. their duty to govern, and insofar, as monetary, currency and 48. The Plaintiffs state, and the fact is that as a result of the Defen- financial policies, per se, are concerned, and in turn as they affect dants (’) officials tortious, ultra vires, and unconstitutional con- socio-economic governance, have abdicated their constitutional duct, they have suffered damages as set out above, and in reduced duty(ies)and handed them over to those international, private services in human capital expenditures and infrastructure, as has entities, whose interests, and directives, are placed above the every other Canadian citizen/resident. interests of Canadians, and the primacy of the Constitution of 49. The Plaintiffs state, and the fact is that as a result of the De- Canada, not only with respect to its specific provisions, but also fendants (’) officials tortious, ultra vires, and unconstitutional with respect to the underlying constitutional imperatives. conduct they have also suffered damage to their normative 46. The Plaintiffs state, and the fact is, that ultimate control and constitutional order by irreparable harm to the constitutional decision(s) under the Bank of Canada Act, are made by the Min- supremacy required and dictated not only by s.52 Constitution ister of Finance, with the approval of the Governor in Council, Act, 1982, but also by the supremacy required and dictated by its by “government directive” under s. 14 of the Act. underlying principles. 47. The Plaintiffs state, and the fact is, that the ultra vires (in)actions 50. The Plaintiffs propose that this action be tried at Toronto. of both the Minister of Finance, and the Bank of Canada, as set Dated at Toronto this 12th day of December, 2011. out in the within statement of claim, have the result of breach- ing the rights of the Plaintiffs and all other Canadians, not only ROCCO GALATI LAW FIRM statutorily, but also their constitutional rights as follows: PROFESSIONAL CORPORATION (a) their right to life, liberty, and security of the person under s. 7 Rocco Galati, B.A., LL.B., LL.M. of the Charter by a reduction, elimination, and/or fatal delay 637 College Street, Suite 203 of health care services, education and other human capital Toronto, Ontario M6G 1B5 expenditures and services; Tel: (416) 536-7811 (b) their right to equality both under ss. 7 and 15 of the Charter, Solicitor for the Plaintiffs

Uganda from page 12 opponents of the rebel groups of Guatemala. And when I received a nomic theory reprinted the Revue économique piece and invited me telephone call from one of these descendant of a revolutionary who to come to discuss it. It was reviewed not once, but as I remember, led the movement that produced independence from Spain. The twice by the economic journal of Cambridge University in Britain message was succinct. Come down here at once. that was particularly impressed by my use of the term “social lien” And come down I did. The fortress of Guatemala City was ringed to explain the growing portion of the national product that is not with pill-boxes at each corner. The revolutionaries had kidnapped marketed but covers what is directly acquired by governments from the artillery-man in what was the pill-box loyal to the dictator in its producers. This collaboration continued on a very close basis un- power and with a pistol to his head threatened to pull the trigger if til Hotson’s death. But new winds were blowing, suddenly changed he refused to bombard another pill-box loyal to the dictator. In tears its orientation and gave John Hotson early retirement on tempting the artillery officer fired. We hid in my host’s cellar until the artillery terms that broke his heart as hastened his demise. was over – in fifteen minutes. The loyalist pill-box had fallen, and I In Latin America where years of work I had helped produce was able to leave the safety of that cellar and pick my way through the democratic revolutions where Washington’s dictators reigned seem- darkness to the central square, where I found a single dead solder – ingly securely. Washington was working hard to sell Canada and the liberation plan had been a total success. I was left with a problem, Latin America the idea of a US dollar-based currency. But takers however, I had worked for Time as a stringer, but had been dropped were scarce. At the American Embassy in Mexico, the person in on the initiative of the State Department. However, I had nowhere charge of Latin America, asked me rhetorically, pointing to a picture else to send it and Time – in its glory-period – had a near monopoly of President Kennedy, still the live and breathing president of his of informing the English–speaking denizens of Latin America, with country, “Who are we to criticize Latin American dictators if we have the way the world is going the fates would have it, however, that at this man in our White House.” Nevertheless, when my Mexican visa the time Henry Luce, the man in control of Time, was getting work came up for renewal, I was picked up in the middle of the night, with the war. When my reportage arrived he had me hired full time held in confinement overnight and put on the first south-bound at once, and gave me the choice of where I would prefer to be their plane headed for Guatemala, at Tapachula the last stop before enter- burochief – Europe or the Americas. I chose the Americas and my ing Guatemala the order came that I was not allowed to step off the American immigration difficulties was resolved at once. And I was plane. It turned out, a serious flaw in the strategy of Washington’s brought to New York for a month to learn company routines from foreign policy. For I was able to contact the rebellious groups un- within. I found the staff most sympathetic. A year later, I was re- happy with the US’s favorite Guatemalan dictator and by the time I leased, a change of the winds out of Washington, on very generous was able to get back to Mexico, I was intimately connected with the financial terms and my US visa problems were cleared.W.K. www.comer.org January 2012 Economic Reform | 19 the figure is up from 23 percent a year ago. That overhang stifles the economy, for it’s A Banker Speaks, With Regret difficult to nurture a broad recovery unless real estate and construction revive. By Nicholas D. Kristof, The New York eckston. He says that some account ex- All this came into sharper focus this week Times, November 30, 2011 ecutives earned a commission seven times as Bloomberg Markets magazine published If you want to understand why the Oc- higher from subprime loans, rather than a terrific exposé based on lending records it cupy movement has found such traction, it prime mortgages. So they looked for less pried out of the Federal Reserve in a law- helps to listen to a former banker like James savvy borrowers – those with less education, suit. It turns out that the Fed provided an Theckston. He fully acknowledges that he without previous mortgage experience, or astonishing sum to keep banks afloat – $7.8 and other bankers are mostly responsible for without fluent English – and nudged them trillion, equivalent to more than $25,000 the country’s housing mess. toward subprime loans. per American. As a regional vice president for Chase These less savvy borrowers were dispro- The article estimated that banks earned Home Finance in southern Florida, Theck- portionately blacks and Latinos, he said, up to $13 billion in profits by relending ston shoveled money at home borrowers. In and they ended up paying a higher rate that money to businesses and consumers at 2007, his team wrote $2 billion in mort- so that they were more likely to lose their higher rates. gages, he says. Sometimes those were “no homes. Senior executives seemed aware of The Federal Reserve action isn’t a scan- documentation” mortgages. this racial mismatch, he recalled, and franti- dal, and arguably it’s a triumph. The Fed did “On the application, you don’t put down cally tried to cover it up. everything imaginable to avert a financial a job; you don’t show income; you don’t Theckston, who has a shelf full of awards catastrophe – and succeeded. The money show assets,” he said. “But you still got a that he won from Chase, such as “sales was repaid. nod.” manager of the year,” showed me his 2006 Yet what is scandalous is the basic unfair- “If you had some old bag lady walking performance review. It indicates that 60 ness of what has transpired. The federal gov- down the street and she had a decent credit percent of his evaluation depended on him ernment rescued highly paid bankers from score, she got a loan,” he added. increasing high-risk loans. their reckless decisions. It protected bank Theckston says that borrowers made In late 2008, when the mortgage market shareholders and creditors. But it mostly harebrained decisions and exaggerated their collapsed, Theckston and most of his col- turned a cold shoulder to some of the most resources but that bankers were far more leagues were laid off. He says he bears no vulnerable and least sophisticated people in culpable – and that all this was driven by animus toward Chase, but he does think it is America. Last year alone, banks seized more pressure from the top. profoundly unfair that troubled banks have than one million homes. “You’ve got somebody making $20,000 been rescued while troubled homeowners Sure, some programs exist to help bor- buying a $500,000 home, thinking that have been evicted. rowers in trouble, but not nearly enough. she’d flip it,” he said. “That was crazy, but When I called JPMorgan Chase for its We still haven’t taken such basic steps as the banks put programs together to make side of the story, it didn’t deny the accounts allowing bankruptcy judges to modify the those kinds of loans.” of manic mortgage-writing. Its spokesmen terms of a mortgage on a primary home. Especially when mortgages were securi- acknowledge that banks had made huge Legislation to address that has gotten no- tized and sold off to investors, he said, senior mistakes and noted that Chase no longer where. bankers turned a blind eye to shortcuts. writes subprime or no-document mortgages. My daughter and I are reading Stein- “The bigwigs of the corporations knew It also said that it has offered homeowners beck’s Grapes of Wrath aloud to each other, this, but they figured we’re going to make four times as many mortgage modifications and those Depression-era injustices seem billions out of it, so who cares? The gov- as homes it has foreclosed on. so familiar today. That’s why the Occupy ernment is going to bail us out. And the Still, 28 percent of all American mort- movement resonates so deeply: when the problem loans will be out of here, maybe gages are “underwater,” according to Zil- federal government goes all-out to rescue er- even overseas.” low, a real estate Web site. That means that rant bankers, and stiffs homeowners, that’s One memory particularly troubles Th- more is owed than the home is worth, and not just bad economics. It’s also wrong. ❧ ❧ ❧ Editor: Our governments must get out of cold storage their consciences and shovels and dig deeper to retrieve the human capital that is being destroyed on an ever mounting scale. W.K.

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20 | Economic Reform January 2012 www.comer.org