Recently I saw Ian Read, the CEO of Pfizer, on CNBC explaining that the Pfizer/Allergan merger would enable the combined companies to spend more on research and development of new drugs. He also confirmed that Pfizer raised prices on at least 105 drugs for no apparent reason. You can watch a small part of the interview here.
Read tries to pass the price hikes off as some kind of market-driven thing, which is stupid because price hikes are mostly either for drugs protected by patents or for generics which have no competition. The increases averaged 9.4%, far in excess of inflation, and faster than the expected increase of 5.4% in total health care spending. It’s a money grab pure and simple. The CEO then explained that these prices are a drop in the bucket, since drugs account for only about 10% of total health care spending, which comes to a total of about $310 billion, or roughly $1000 per person in the US. Drug prices rose by an average of 10.4% in 2014, so a drop in the bucket is roughly $100 per US person. And anyway, Read says, they do negotiate prices with some providers and cut prices for some poor people; meaning that the rest is paid by drug insurance policy holders. All this public talk is just politics, says Read, who in 2014 received total compensation of $23.3 million. Surely for that kind of money he could do a better job of defending his company’s rapacious behavior.
Pfizer is planning to merge with Allergan and move to Ireland to cut taxes. Read claims he needs the money for research and development of wonderful new drugs. That suggests that Read thinks he doesn’t have enough money for R&D right now. Let’s see what the 2014 financial statements say about that. In 2014, Pfizer reported net income of $9.1 billion. P. 58. It paid dividends of $6.6 billion, and repurchased stock for $5.0 billion, a total return to shareholders of $11.1 billion. With that kind of management, no wonder there is no money for an increase in R&D.
Remember that R&D expenses are deductible in full in the year incurred, a temporary tax law now permanent thanks to Congress. So let’s see what we get for that tax cut. Pfizer reports that in 2012, it had an R&D expense of $250 million to “obtain the exclusive, global, OTC rights to Nexium”. P. 28. Pfizer get Uncle Sam to pay about $80 million of that price. In 2014, Pfizer counted as part of its increase in R&D this gem: “$309 million, reflecting the estimated fair value of certain co-promotion rights for Xalkori given to Merck KGaA”. That’s a non-cash transaction that cut Pfizer’s taxes.
And here’s a description of the R&D program at Pfizer:
We take a holistic approach to our R&D operations and manage the operations on a total-company basis through our matrix organizations described above. Specifically, a single committee, co-chaired by members of our R&D and commercial organizations, is accountable for aligning resources among all of our R&D projects and for seeking to ensure that our company is focusing its R&D resources in the areas where we believe that we can be most successful and maximize our return on investment. We believe that this approach also serves to maximize accountability and flexibility.
That’s management speak for “we make drugs that will maximize our income.”
Turning to the Allergan deal, CEO Read assures us that Pfizer will use the tax savings for R&D. Let’s first see what the savings might be. According to Americans for Tax Freedom, Pfizer paid effective world-wide tax rate of 7.5%. That compares with the 25.5% reported on its 10-K. P. 28. ATF offers a detailed explanation of the accounting, and explains that most US multinationals don’t use the same accounting treatment. ATF adds that Pfizer had as much as $148 billion parked overseas and untaxed in the US. At least that explains where they get the money to pay off their shareholders and keep Wall Street happy.
Let’s just ignore the claim of Frank D’Amelio, Pfizer’s CFO, that half the tax savings will go to shareholders as dividends. Pfizer has shut down a bunch of R&D facilities after each of its recent mergers.
Writing in Nature, former Pfizer R&D executive John LaMattina noted that the company’s three largest buyouts–Warner-Lambert, Pharmacia and Wyeth–resulted in sweeping research cuts and site closures, leaving more than 20,000 scientists out of work. And those who stick around were saddled with major R&D delays, LaMattina wrote, as integrating two large companies involves a painstaking review of assets that can slow development down to a crawl. Even more difficult to quantify is the effect on productivity, he wrote, as word of potential layoffs spreads fast throughout a large company and distracts workers from their projects.
After the merger the number two man, Brent Saunders of Allergan will oversee operations, including R&D. Here’s Saunders in August, 2015, discussing his vision of R&D with Randall Pierson of Reuters.
Saunders said discovery research, where researchers test ideas and compounds in test tubes and animals, typically eats up about 30 percent of pharmaceutical company research budgets, although only about one of every 20 such products that enters human trials succeeds and is approved.
“Discovery is where the industry has its lowest return on investment,” he said, “and not a good (use) of Allergan’s research dollars.”
Instead, he said Allergan will acquire products from companies that have already done the research spadework, and then itself develop the medicines and submit them for regulatory approvals.
In other words, Saunders and Read like the business of buying other people’s research and then doing some tests and filling out the paperwork for drug approvals. This gets them a patent/monopoly, and a fat tax deduction for all the paperwork. Then they can sell the drugs for a profit that is taxed (if at all) at capital gain rates, and if a US company buys it, the US company gets to treat the price it paid as a fully deductible R&D expense. Sweet.
Remember that Read is magnificently compensated for running this business, but what does he bring to the table? It has nothing to do with drug creation and manufacture. His contribution is measured by how little Pfizer pays in taxes, and how well he engineers earnings, and certainly not by any contribution to the well-being of humans.
We don’t have to allow this business model to flourish with tax cuts and benefits. It’s corrupt to the bone.
No, there is no substantive Pro Bowl Trash Talk. Because the Pro Bowl is a complete worthless joke.
This is a let loose on idiocy in general post. Which is more than what the NFL Pro Bowl is at this point.
Have fun and let yer hair down.
Music by Jefferson Airplane. Paul Kantner was an incredibly nice, and extremely under appreciated, seminal musician. RIP Mr. Kantner, and thanks.
The press is outraged that Sean Penn gave Chapo Guzmán editorial veto over the Rolling Stone story he published about their interview.
Disclosure: Some names have had to be changed, locations not named, and an understanding was brokered with the subject that this piece would be submitted for the subject’s approval before publication. The subject did not ask for any changes.
Though the press is outraged based on the assumption that what they’re reading is journalism. Note that Penn (or whoever wrote this paragraph) didn’t name Chapo? Why should we assume “the subject” is Guzmán and not some American three letter agency that set up this meeting?
Because it sure looks like the latter provides a better explanation for this story. It reads better as retroactive cover, published to protect Penn and the woman who, he explains, set up the meeting between him and Guzmán, Kate del Castillo, than it does as any real journalism.
Consider these details. Two men whose real names Penn doesn’t provide — one of whom Penn met with amid Enrique Peña Nieto’s security forces at a hotel in New York just before they made the final decision to take this trip — set up the meeting, playing both the role of Hollywood producer and key broker. The one he met in EPN’s hotel, Espinoza (“espinosa” translates as “spiny”), wears a “surgical corset” for his back (get it? spiny?) that somehow gets through Chapo’s extensive security unchecked.
Espinoza had recently undergone back surgery. He stretched, readjusted his surgical corset, exposing it. It dawns on me that one of our greeters might mistake the corset for a device that contains a wire, a chip, a tracker. With all their eyes on him, Espinoza methodically adjusts the Velcro toward his belly, slowly looks up, sharing his trademark smile with the suspicious eyes around him. Then, “Cirugia de espalda [back surgery],” he says. Situation defused.
Right after arriving in Chapo’s presence on what would be October 2, 2015, Espinoza goes by himself to a bungalow, purportedly to take a nap. Penn and his party stay overnight with the cartel boss. Immediately upon their departure, according to Penn’s sources, who apparently have better information than all the reporters who work this beat did last October, Mexican authorities started a siege on Chapo that was publicly explained by claiming they had geolocated the cell phone of one of his men but isn’t that a remarkable coinkydink that it actually happened immediately after Espinoza and his spiny back device showed up?
Note carefully how Penn describes searching his phone immediately after being reunited with it on what would be October 4 and not yet knowing about the siege that was going on.
In the backseat, my L.A.-based assistant had left a manila envelope with my cellphone in it. I turn on the phone to the explosion of a two-day backlog of e-mails and text messages. Ignoring them, I hit my browser for updates. What I didn’t know, and what was not yet being reported, was that from the time the weather cleared, a military siege on Sinaloa was imminent.
According to media reports that didn’t come until days later [ed: here are two examples], a cellphone among his crew had been tracked. From the time the military and the DEA moved in on them, the reports of what happened are conflicted. A source familiar with the cartel informed me on October 3rd that the initial siege had begun. That source and another on the ground in Sinaloa reported that over the next several days, two military helicopters were shot down and Mexican marine ground troops laid siege to several ranch properties.
El Chapo’s own account would later be shared with me, through a BBM exchange he had with Kate. “On October 6th, there was an operation….Two helicopters and 6 BlackHawks began a confrontation upon their arrival. The marines dispersed throughout the farms. The families had to escape and abandon their homes with the fear of being killed. We still don’t know how many dead in total.” When asked about the reports of his own injuries, Chapo responded, “Not like they said. I only hurt my leg a little bit.” [my emphasis]
What curious grammar describing Penn’s source’s remarkable knowledge. “A source familiar with the cartel informed me on October 3rd that the initial siege had begun.” Did his source inform him on October 3rd, as this passage literally claims? (The second facilitator in the story, whom Penn calls El Alto, stuck around after they emerged from the jungle on October 3.) The muddled structure of this passage would certainly allow for that, or it might mean his source informed him that on October 3 the siege began.
Curiously, when Penn provided his bona fides to Chapo — which for the cartel boss, largely rested on the actor’s relationship with Hugo Chávez — he didn’t mention that he had a relationship with people who would be privy to otherwise unavailable information about what really went down in October, though he did admit he has “many relationships inside the United States government.”
I tell him, up front, that I had a family member who worked with the Drug Enforcement Agency, that through my work in Haiti (I’m CEO of J/P HRO, a nongovernmental organization based in Port-au-Prince) I had many relationships inside the United States government. I assure him that those relationships were by no means related to my interest in him.
Elsewhere in the story Penn claims he is telling the truth, but keeping information compartmentalized.
I take no pride in keeping secrets that may be perceived as protecting criminals, nor do I have any gloating arrogance at posing for selfies with unknowing security men. But I’m in my rhythm. Everything I say to everyone must be true. As true as it is compartmentalized.
Perhaps the most interesting detail is that when Chapo asked Penn to come back in 8 days for a return visit that never took place, Penn responded by asking for a photo — for Rolling Stone. Except that he arranged it so that it would be usable for facial recognition.
I say I can. I ask to take a photograph together so that I could verify to my editors at Rolling Stone that the planned meeting had taken place.
I explain that, for authentication purposes, it would be best if we are shaking hands, looking into the camera, but not smiling. He obliges. The picture is taken on Alfredo’s cellphone. It would be sent to me at a later date.
Who knows? Maybe Rolling Stone uses sophisticated facial recognition software in the wake of their UVA rape story disaster?
What’s perhaps funniest is this passage, which has attracted the most attention (and figures prominently in the NYT’s A1 story on Penn’s tale, which actually appeared before the tale itself in Rolling Stone and isn’t behind NYT’s paywall).
My head is swimming, labeling TracPhones (burners), one per contact, one per day, destroy, burn, buy, balancing levels of encryption, mirroring through Blackphones, anonymous e-mail addresses, unsent messages accessed in draft form. It’s a clandestine horror show for the single most technologically illiterate man left standing.
While Penn describes his discussions with Kate as being encrypted, Kate is the one who conducted negotiations with Chapo’s people, using a blackberry. Moreover, what Penn describes here doesn’t seem to match what he describes of communications with the cartel. So who was he using this operational security with?
Then there are the parts of the story that don’t cohere, not because Penn is an egotistical buffoon, but because they simply don’t make sense. Remember, the story is that Chapo is so narcissistic that he compromised his considerable operational security to reach out to some film people.
Penn is a film person, but as was decided before Chapo escaped from prison, there was no way they were going to be able to make a film (though somehow Penn managed to bring a knapsack with him to meet the drug lord, but it didn’t even contain a pen or paper). So instead the idea was to write a magazine article.
When Chapo’s men don’t show up to pick up Penn after 8 days (the siege in Sinaloa was still going strong), Penn kept pushing Kate to recontact Chapo under the premise that someone in his camp would translate Penn’s English language questions (for some reason Kate, who translated for Penn when he was in Mexico, didn’t translate them…), and Chapo would film himself answering them.
Penn attributes the delay to Chapo Guzmán’s humility (!!!!!), rather than what had to have been legitimate concern that this lefty actor had visited immediately before a massive manhunt started in October.
Without being present, I could neither control the questioning nor prod for elaborations to his responses. In addition, every question sent first had to be translated into Spanish. Remarkably, while Chapo has access to hundreds of soldiers and associates at all times, apparently not one speaks English.
At the end of each day that passed without receipt of the video, Kate would reassure me that it was only one more day away. But each night, El Chapo contacted her with more delays and apparent doubts. Not about my inquiries, but seemingly about how to make a tape of himself. “Kate, let me get this straight. The guy runs a multibillion-dollar business with a network of at least 50 countries, and there’s not one fucker down there in the jungle with him who speaks a word of friggin’ English? Now tonight, you’re telling me his BBM went on the blink, that he’s got hardly any access to a goddamn computer?! Are you saying he doesn’t have the technical capability to make a self-video and smuggle it into the United States?”
I ask myself, How in the fuck does anyone run a business that way?! I go Full-Trump-Gringo on Kate, battering her daily by phone, text and encrypted email. In the end, the delay had nothing to do with technical incompetence. Big surprise. Whatever villainy is attributable to this man, and his indisputable street genius, he is also a humble, rural Mexican, whose perception of his place in the world offers a window into an extraordinary riddle of cultural disparity. It became evident that the peasant-farmer-turned-billionaire-drug-lord seemed to be overwhelmed and somewhat bewildered at the notion that he may be of interest to the world beyond the mountains. And the day-after-day delays might reveal an insecurity in him, like an awkward teenager bashful to go unguided before the camera. Or had all of this been an orchestrated performance?
Right. Chapo Guzmán is bashful, and bewildered that he might be of interest to the entire world. And as it turns out the answers to the question — which Rolling Stone published as a verbatim transcription — are less insightful than details (such as that Chapo drew fake pesos when he was a kid) Penn must have gotten during the hours he spent with the drug lord in October. Penn had his story, but insisted on this video (remember, they had decided months earlier they weren’t doing an actual film!) so someone in Chapo’s camp would once again send video to him.
In short, it’s a load of horse shit that is entirely inconsistent with Chapo’s assent to do the meeting in the first place.
But it makes a nice cover story, even if it doesn’t amount to journalism. And journalists are so obsessed with the ethics of this non-journalism they’re not noticing all the other details that don’t make sense.
Update: There’s something else stupid about assuming Rolling Stone let Chapo approve this.
He’s in prison!
So either, they had the article ready to go, but held it until such a time he got caught (as if they knew he was about to be caught). Or they went to Altiplano, where Chapo is being held, to ask for his approval.
Or, they got approval from someone else entirely.
Update: The Rolling Stone spoke with NYT (you know, the newspaper that reported on RS’ story before they did) to defend their article. They do seem to suggest Chapo is the one who got final say.
As for giving Mr. Guzmán final approval over the article, Mr. Wenner said: “I don’t think it was a meaningful thing in the first place. We have let people in the past approve their quotes in interviews.”
Mr. Guzmán, he said, did not speak English and seemed to have little interest in editing Mr. Penn’s work. “In this case, it was a small thing to do in exchange for what we got,” Mr. Wenner said.
Logistically, that would be made possibly by RS sitting on the story several weeks.
A lawyer for the magazine, and its managing editor, Jason Fine, were eventually brought in to help with the editing process. Work on the article was completed about two weeks ago, Mr. Wenner said, but because of Rolling Stone’s production cycle, those involved were subjected to an excruciating wait for the next issue, during which time Mr. Guzmán was captured.
So we’re to believe the timing here was just an unbelievable coinkydink. And that it took RS from Thanksgiving, when — according to the new details in NYT — Penn got his video, until January, so almost as long to edit as it took to convince a top drug lord to shoot a video of himself. There were 3 issues of RS released between the time Penn would have gotten that video and the release it will go in. Though of course, if they had given Chapo final say, it would mean they contacted him just before Mexico closed in. The story spins out of control every time you try to make it make sense.
But the funniest part of the story is this: RS fact-checked it by conducting interviews with eyewitnesses.
Of Mr. Penn’s article, which was subject to follow-up interviews with eyewitnesses for fact-checking, Mr. Wenner said, “It’s not a vindication but a restatement of how good we are, how strong we are.”
Unless RS was interviewing Chapo’s men, again (as they were being rounded up), then those eyewitnesses would be limited to del Castillo or … Spiny and El Alto, whose names RS hasn’t even shared.
Four games on the schedule this weekend. No time for chit chat about balls that are round, whether large, as in the NBA, or small, like MLB. This is Playoff Football baybee!
In order, we have these games:
Chefs at Texans: This looks to be a surprisingly good game. Like the Skins in the other conference, Houston is hard to read. On a late roll. But they are4 on a roll with great defense and a boring, if marginally competent offense. That has been working for the Texans down the stretch. The line seems to consistently be on the Chefs. The real hesitation seems to be KC’s quarterback, Alex Smith. So, okay, Smith is not Joe Montana, but, then again, neither is Brian Hoyer, of whoever Houston is sporting. Edge Tejanos.
Steelers at Bengals: The matchup all the howling jackals on ESPN are uniformly calling the best of the playoffs. As usual, they are a bunch of NFL league co-opted mouthpieces that make Edgar Bergen and Charlie McCarthy look like pikers. Especially twats like Chris (11 out of 12 balls) Mortensen. Welp,back to the game, Cinci is a minor favorite at home. But they are starting Mr. AJ McCarron. Is that enough to squash Big Ben and the Stillers? Yeah, not if.
Squawks at Teh Norske: Wowzah. I have no idea on this, but a shocking lot of talking heads on ESPN and whatnot are saying Minnesota has a real chance and may well win this. As Lee Corso would scream, not so fast! I will stick with Pete Carroll and the Emerald City Boys, even if Beast Mode is not in the mix. Squawks are on a roll, and my bet is only Carolina or the Cards will stop that roll. Hope I am wrong, but not betting otherwise.
Pack at Skins: Probably the best game of the weekend. Will Rahdgahs be Rodgers? Can the Pack O-Line block, or would H and R do better? Is there any secondary left for the Pack? I have no clue. It is not a pretty picture in Title Town right now. Yes, the Cheese are in the playoffs, but as our greatest President, Jed Bartlett said, “Boy, I don’t know”. On the other hand, I liked Kirk Cousins from the get go. Before the Cards collected up Carson Palmer, I actively lobbied to have them trade some bullshit to Dan Snyder to get Cousins. Ask Marcy, she will confirm. But Shanahan was right about Cousins being the man, and not RG III. You like that? I do, and right now, if I had to put money down, I would take the Skins, and that would be a fine story. But my heart will always be made of Cheese and my eyes filled with Geezers and Starrs, of the Brett and Bart variety. I will throw my sorry lot in with the Cheese, but the Washington Professional Football Franchise has been playing awfully well lately. This is a pick em.
Music this fine weekend by the one and only, dearly departed, Robet Palmer. Don’t kid yourself, the dude and his band seriously rocked. I wish there were words, but there are not.
Alright all you lugnuts that frequent the Emptywheel blog, as you may know, blogging gets a bit inconsistent Christmas week. And so it is again this year. Marcy is traveling, I am in New York City with my wife and daughter, and Jim is in Hawaii (surfing the big waves I presume) with his family.
So, we are all somewhat preoccupied. Feel free to use this post or the previous Real Housewives Trash Talk post to chat on any and all topics de jour. We will be along here or there, but in the meantime, if there is something to discuss, get on with it! Hope you all are having a great holiday week.
Previous posts in this series:
The Great Transformation is an examination of the origin of the theory of self-regulating markets and its errors. Polanyi’s argument is that when a society is threatened by violent intrusions, such as the sudden introduction of markets as the dominant new organizing principle, it fights back. As discussed in Part 4, beginning in the 1840s or so there was a general feeling among the upper classes that the self-regulating markets were so destructive that social control had to be imposed to reduce the damage and prevent further harm. There was no theory, and no plan, just case-by-case legislative action. Factory and agrarian workers and other members of the lower classes could not vote, so that impetus came from other classes.
Polanyi says that for the society to survive, it was necessary for laborers and the impoverished to come into existence as a class with the right to make demands and expect to see them answered. Under the Speenhamland system and the Poor Laws in effect in the early 1800s, this was difficult, perhaps in part because of the split between those on relief and those with miserable poorly-paying work. When those laws were repealed and the poor put on the street where they served as the army of unemployed to keep wages at very low levels, it became possible for them to identify as a class. This sounds a bit like Marxian analysis. And, in fact, Marx agreed with the economic liberals of that day that the natural level of wages was the subsistence level. This is from the Paris Manuscripts:
The lowest and the only necessary wage rate is that providing for the subsistence of the worker for the duration of his work and as much more as is necessary for him to support a family and for the race of labourers not to die out. The ordinary wage, according to [Adam] Smith, is the lowest compatible with common humanity, that is, with cattle-like existence.
The reference to Smith is to Chapter VIII of The Wealth of Nations. Smith’s analysis of the wages of labor is much more complicated than this quote from Marx shows. He says that wages depend on a number of factors including whether a nation is declining or thriving. He says that in England in the 1770s wages were above mere subsistence, and the lives of workmen were improving. That helps explain the reaction to the intrusion of the free market in labor brought on in the early years of the Industrial Revolution. The sudden change from a reasonably pleasant life to a much more miserable existence contributed to the social demand for restraining the self-regulating market. Smith seems to approve of the higher wages workmen were receiving:
Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage, or as an inconveniency, to the society? The answer seems at first abundantly plain. Servants, labourers, and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part, can never be regarded as any inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.
The laissez-faire cheerleaders of the 1800s and their neoliberal counterparts don’t agree, and perhaps Marx’ pessimism is more realistic than Smith’s approbation.
In Chapter 13, Polanyi gives two reasons for his disagreement with Marxian analysis. First, Marx teaches that classes are the basic elements of society. Polanyi says that far more often classes arise to suit the form society has taken. When a society is stable, class interests can be used to understand the evolution of the society. When society undergoes structural changes, the class structure may fracture. A class that has become functionless may disintegrate and be replaced by other classes or not at all. These structural changes may be environmental, the result of war, technological advance, or the rise of a new enemy. In such cases, class theory doesn’t predict the outcome.
Secondly, there is the equally mistaken doctrine of the essentially economic nature of class interests. Though human society is naturally conditioned by economic factors, the motives of human individuals are only exceptionally determined by the needs of material want-satisfaction. That nineteenth-century society was organized on the assumption that such a motivation could be made universal was a peculiarity of the age. … Purely economic matters such as affect want-satisfaction are incomparably less relevant to class behavior than questions of social recognition. Want-satisfaction may be, of course, the result of such recognition, especially as its outward sign or prize. But the interests of a class most directly refer to standing and rank, to status and security, that is, they are primarily not economic but social. P. 160.
Of course, the assertion that human behavior is motivated solely by material want-satisfaction wasn’t just a peculiarity of the 19th Century, it’s the dominant idea of neoliberal economics. The idea that human beings are solely devoted to getting stuff at the best price is central to their models, and to their understanding of their ill-defined markets. It is just as false today as it was in Marx’ time. I googled the term “experiment pay compared to other people”, and got a bunch of papers and articles saying that pay isn’t the important thing. Other factors, including comparative pay levels, and the intrinsic rewards of the tasks are more important. Here’s one. Beyond that, we know humans have needs that go far beyond material goods. Just take a look at Maslow’s hierarchy of needs. Material goods satisfy the needs for safety and security, but stuff by itself isn’t going to get you much in the way of love and belonging, esteem or self-actualization.
One of the goals of neoliberalism is to re-imagine human beings as the utility maximizers of their theories. Here’s a paper that flatly says that money isn’t the important issue even for the most sociopathic set, CEOs. Giving them huge bonuses for increasing stock prices doesn’t produce higher stock prices. Even the John Galts of the Corporate Jungle aren’t good little neoliberals.
Back when the beltway first declared that Hillary Clinton’s emails (by which they meant, but often didn’t specify, emails received by Hillary) included two Top Secret emails, I warned about being snookered by CIA claims their drone program was secret.
This is CIA claiming secrecy for its drone operations!!! The ongoing FOIAs about CIA’s acknowledged role in the drone war are evidence that even independent appellate judges don’t buy CIA’s claims that their drone activities are secret. Just yesterday, in fact, DC Judge Amit Mehta ordered DOJ to provide Jason Leopold more information about its legal analysis on CIA drone-killing Anwar al-Awlaki, information the CIA had claimed was classified. Indeed, Martha Lutz, the woman who likely reviewed the emails turned over, is fairly notorious for claiming things are classified that pretty obviously aren’t. It’s her job!
I’m all in favor of doing something to ensure all people in power don’t hide their official business on hidden email servers — right now, almost all people in power do do that.
But those who take CIA’s claims of drone secrecy seriously should be mocked,
On Friday, Josh Gerstein confirmed I was right to warn against taking such claims seriously.
Intelligence Community Inspector General I. Charles McCullough III made the claim that two of the emails contained top-secret information; the State Department publicly stated its disagreement and asked Clapper’s office to referee the dispute. Now, that disagreement has been resolved in State’s favor, said the source, who spoke on condition of anonymity.
Intelligence officials claimed one email in Clinton’s account was classified because it contained information from a top-secret intelligence community “product” or report, but a further review determined that the report was not issued until several days after the email in question was written, the source said.
“The initial determination was based on a flawed process,” the source said. “There was an intelligence product people thought [one of the emails] was based on, but that actually postdated the email in question.”
In an Aug. 11 memo to 17 lawmakers, McCullough said the two emails “include information classified up to TOP SECRET//SI/TK/NOFORN.” The subject of the emails has never been publicly confirmed, but published reports have said one refers to North Korea’s nuclear program and another to U.S. drone operations. The acronym “SI” in the classification marking refers to “signals intelligence,” and a footnote in McCullough’s memo references the work of the National Geospatial Intelligence Agency, which oversees U.S. spy satellites. [link to memo added]
Here’s the AP’s earlier description of the two emails, which seems to indicate the drone information was commonly known, whereas the email to Hillary included information on North Korea that preceded by days the Top Secret report providing the same information.
The drone exchange, the officials said, begins with a copy of a news article about the CIA drone program that targets terrorists in Pakistan and elsewhere. While that program is technically top secret, it is well-known and often reported on. Former CIA director Leon Panetta and Sen. Dianne Feinstein of California, the top Democrat on the Senate Intelligence Committee, have openly discussed it.
The copy makes reference to classified information, and a Clinton adviser follows up by dancing around a top secret in a way that could possibly be inferred as confirmation, the officials said. Several people, however, described this claim as tenuous.
But a second email reviewed by Charles McCullough, the intelligence community inspector general, appears more problematic, officials said. Nothing in the message is “lifted” from classified documents, they said, though they differed on where the information in it was sourced. Some said it improperly points back to highly classified material, while others countered that it was a classic case of what the government calls “parallel reporting” — receiving information the government considers secret through “open source” channels.
While (as Steven Aftergood argues in Gerstein’s article), the implications of this admission for Hillary’s campaign are significant, consider what it also means about the intelligence our spooks claim to Top Secret: it’s often readily available from alternate (unclassified, at least in the case of the CIA’s drones) sources.
What then, is the value of the ~$70 billion a year we spend on intelligence if some of the purportedly most secret intelligence can be gleaned from the press? And to what degree is all this secrecy about hiding that fact?
The intelligence community does have secrets worth keeping. But all too frequently, it has secret shortcomings protected by a classification system it controls.
Yesterday, Shane Harris told the tale of a spooked up telecom providing Iran’s state-owned telecom company with Internet bandwidth.
GTT Communications Inc.—headquartered in McLean, Virginia, just a 15-minute drive from the headquarters of the CIA and hired by various unnamed U.S. intelligence agencies and satellite operators—hasn’t exactly been touting its new venture.
The company has issued no press release about its deal with an undersea cable network that sells Internet services to Iran and other Persian Gulf. (One of the cables comes ashore at the city of Bushehr, home to a nuclear plant that’s been the subject of intense debate about its role in Iran’s nuclear program.)
The company began providing bandwidth to Iran’s state-owned telecom company, TIC, via one of Gulf Bridge’s submarines cables on June 10, Doug Madory, the director of analysis at Dyn, a research company that monitors Internet connectivity, told The Daily Beast. Notably, that was nearly a month before the U.S., Iran, and other world powers announced an agreement to curb Iran’s nuclear weapons program in exchange for lifting some sanctions.
Today, WSJ has a muddled story about the Fed cutting off shipments of cash to Iraq because of concerns about who was getting the dollars.
In 2014, annual U.S. dollar cash flow from the Federal Reserve Bank of New York to Iraq was $13.66 billion, more than triple the $3.85 billion in 2012, according to data compiled by Iraq’s parliament and reviewed by The Wall Street Journal.
That spike doesn’t mesh with the sluggish Iraqi economy of late, and as a result U.S. officials suspected the dollars were being hoarded rather than circulated.
U.S. officials sent a written demand around July to Iraqi officials that the Iranian banks be cut off and separately conveyed to Iraqi officials that the Fed wouldn’t approve cash requests until the overall situation improved.
In July, several U.S. officials, including Daniel Glaser, assistant secretary for terrorist financing in the Treasury’s Office of Terrorism and Financial Intelligence, flew to Baghdad to discuss potential solutions. At a meeting in the U.S. Embassy dining room, Iraqi officials including Iraqi central bank governor Ali Allaq agreed to turn over reams of data to the Fed, which also shares it with U.S. intelligence agencies. They later hired U.S. accounting firm Ernst & Young to monitor the auctions.
On Aug. 6, just days before Iraq’s central bank said it would run out of dollars, the Fed and the New York Fed sent nearly $500 million. It has sent several more in the weeks since then.
I say the story is muddled because it offers various accounts of who was getting the dollars laundered through Iraq’s central bank: corrupt officials, the Kurds, Iran, or ISIS. (ZeroHedge suggests the money was going to intentionally fund ISIS, but a lot about that claim, especially the timing of the cut-off, doesn’t make sense.)
What one comment in the story makes clear, however, is that Treasury let this money-laundering go for a time, until recent events led them to crack down.
Some Iraqi officials had similar concerns at the time, and also said corruption and graft have been a problem for years and question why U.S. officials only recently considered the currency issue an urgent one to be addressed.
This is roughly $20 billion laundered through Iraq — much of it going to the Kurdish region — that the US only acted to halt amid concerns that one of our many adversaries was tapping into the dollars.
These two data points suggest our ostensible alliances in the Middle East aren’t in fact who we’re working with (with the exception of the Kurds, who remarkably stick with us even after we sell them out serially).
The FBI just charged an Albanian hacker living in Malaysia, Ardit Ferizi, aka Th3Dir3ctorY, with stealing the Personally Identifiable Information of over 1,000 service members and subsequently posting that PII online to encourage people to target them (he provided the data to, among others, Junaid Hussain, who was subsequently killed in a drone strike).
Given Jim Comey’s repeated warnings of how the FBI is going dark on ISIS organizing, I thought I’d look at how FBI found this guy.
In other words, Ferizi apparently did nothing to hide the association between his public Twitter boasting about stealing PII and association with KHS and the hack, down to his repeated email nudges to the victim company (and his attempt to get 2 Bitcoins to stop hacking them). His Twitter account, Facebook account, and email account could all be easily correlated both through IP and name, and activity on all three inculpated him in the hack.
The only mention of any security in the complaint is that Bitcoin account.
Sure, Ferizi was not playing the role of formal recruiter here, but instead agent provocateur and hacker. Still! The FBI is billing this guy as a hacker. And he did less to protect his identity then I sometimes use.
At least in this case, FBI isn’t going dark on ISIS’ attempts to incite attacks on Americans.
The first two posts in this series are:
In Part 1 I discussed the definition of markets in The Great Transformation, and noted that Karl Polanyi gives a definition, while mainstream neoliberal economic theory doesn’t. The absence of a definition in neoliberal theory is crucial to its success. Neoliberal economists do not have to account for the vast differences among markets: they can treat all markets as identical for purposes of their mathematical edifices.
Polanyi’s simple definition enables him to discuss the differences among markets and the different purposes they serve in different societies. In the Mercantilist era, say up to about the early 1800s, Polanyi identifies three different kinds of markets: external, internal and local. Local markets serve the local community as in the case of householding societies. Polanyi says they are not intrinsically competitive, nor are they focused on gain. P. 61
External markets are for long-distance trade, what Polanyi identifies as the carrying trade. They form at natural stops along the trails of transport, at river crossings and ports. They do involve gain, and the propensity of some people for truck and barter, but they are limited to specific sites and specific goods. They are not essentially competitive, Polanyi says. Over time, long-distant market sites turn into towns, and their principle purpose is to manage external trade. They are not a function of the nation state, but of those towns, which work to keep their long-distance markets apart from the lives of those in the countryside.
The [Hanseatic League] were not German merchants; they were a corporation of trading oligarchs, hailing from a number of North Sea and Baltic towns. Far from “nationalizing” German economic life, the [Hanseatic League] deliberately cut off the hinterland from trade. The trade of Antwerp or Hamburg, Venice or Lyons, was in no way Dutch or German, Italian or French. London was no exception: it was as little “English” as Luebeck was “German.” The trade map of Europe in this period should rightly show only towns, and leave blank the countryside—it might as well have not existed as far as organized trade was concerned. P. 66.
The third kind of market, the internal market, is a deliberate creation of the nation-state. As Polanyi explains it, the towns worked to maintain the separation between long distance and local markets, as a matter of self-protection of the town and of the town officials and elites. They feared the destructive impact of mobile capital on their existing institutions, and on their prerogatives and status.
Deliberate action of the state in the fifteenth and sixteenth centuries foisted the mercantile system on the fiercely protectionist towns and principalities. Mercantilism destroyed the outworn particularism of local and intermunicipal trading by breaking down the barriers separating these two types of noncompetitive commerce and thus clearing the way for a national market which increasingly ignored the distinction between town and countryside as well as that between the various towns and provinces. P. 68-9.
This classification of markets by their reach is convenient for the story Polanyi is telling, but there are modern counterparts. In many cities around the country, but especially in Europe, say Paris, there are local market streets, where you can find your daily food and your minor needs, like a plate to replace the one that mysteriously broke. There are weekly or bi-weekly markets where you can find all sorts of things, from a sweater to a giant vat of choucroute garnie, with nearly black juniper berries punctuating the Toulouse sausages and the hunks of pork. These are just like the local markets Polany describes, and just as important to daily life in these otherwise impersonal cities.
Scattered throughout the city, there are stores focused on specific area of France, Auvergne butchers, stores selling Charolais beef, Perigord stores, with their jars and cans of confit du canard, and many others, wine shops specializing in Champagnes or wines from Burgundy. These stores connect people to their roots in the country, and might be regarded as internal markets.
In the wealthier parts of the city there are other kinds of markets. You can find African, Indian and Near Eastern textiles and jewelry, and lots of similar things. There are shops selling Italian shoes and clothes, branded and unbranded. There is fantastic jewelry and jeweled pieces from world makers, and at prices that bug out the eyes. Each of these kinds of stores are grouped together, so that a person searching for antique French furniture only has to visit a few streets to get a good sense of what is available. This view of consumer culture reinforces Polanyi’s view that a market is a place.
Of course, standard economics rejects this simple definition. Here’s a typical reaction, from Santhi Hejeebu & Deirdre McCloskey (H/T commenter Alan)
…Polanyi never got over the noneconomist’s inclination to think of markets as literal marketplaces, rather than relationships among people in many different places…
The authors are both economists, so this is not a mistake. Their definition of a market is “relationships among people in many different places. Let’s try an example. In BKB Properties, LLC v. SunTrust Bank, (MD Tenn. 2011) the owners of the plaintiff wanted a fixed rate loan from SunTrust Bank to build a new building for their car dealership. SunTrust would only agree to a floating rate loan, and offered to sell plaintiff an interest rate swap to create a synthetic fixed rate. Plaintiff agreed. Several years later, when interest rates fell in the wake of the Great Crash, BKB’s owners wanted to refinance the note, and when SunTrust refused, plaintiff exercised its right of prepayment. SunTrust refused to accept the prepayment and release the mortgage on the land unless the plaintiff paid a stiff penalty to cancel the interest rate swap, which had a 10 year term, while the note was prepayable. The Court ruled for SunTrust, saying that this is just a routine contract case, and that the parties are assumed to understand the terms of the documents they signed.
Note that SunTrust could have purchased a swap to protect its interests more intelligently than BKB Properties, Ltd., a shell corporation set up by a car dealer. SunTrust could have canvassed offers from several banks and hedge funds, which at least sounds like a market.
But on the given facts, was this a market transaction? In the world of Hejeebu and McCloskey it certainly is. After all, these are two parties with some kind of relationship who are in different places. Swap creators don’t post prices, don’t disclose transactions in any usable way, and according to the Court don’t have any duties to their customers. The relationships that Hejeebu and McCloskey talk about are limited to Buyer Beware, and that’s good enough for them.
In Polanyi’s world, maybe not. At that time, there was no physical place one could go to buy and sell swaps, at least if you were a car dealer in a suburb of Nashville, TN. Specifically, there was no analogue to the stock market, or an electronic exchange. There was no place to find data, no place to find alternative bids, no quote sheets, and there was often negotiation over the terms of a swap which affected its value to both parties, again with no transparency to outsiders who might have learned of its existence. In sum, there was no place for any activity that sounds market-like.
Definitions matter. Polanyi’s definition gives us a good idea of what he is talking about, and his three kinds of markets are useful and convenient in his analysis. How do we talk sensibly about the “swaps market”? In what way is it like the market for choucroute garnie?