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Posted by: Doug Henwood | December 11, 2017

Is Bitcoin the future of money?

This originally appeared in The Nation, April 30, 2014, issue. With Bitcoin now having migrated from obscurity to headlines (though I said “all over the headlines” then, it’s really broken into the bigtime now), I thought I’d repost it here, since it’s behind a paywall. My BTC 0.05 would be worth $862.50 as I’m posting this, but I sold it, alas.

Is Bitcoin the future of money

Doug Henwood

What’s being touted in some circles as the future of money looks hardly more peaceful than its past. Bitcoin, a formerly obscure cyber-currency, is now all over the headlines with reports of bankruptcies, thefts and FBI lockdowns. If our fate is to buy and sell in bitcoins, this instability is troubling. But despite the headlines, the triumph of Bitcoin and related cyber-currencies is a lot less likely than recent commentary would suggest. One cause of all this hype? The number of people who understand what Bitcoin is seems almost immeasurably small—and that probably includes some of its users.

Money, it should be conceded, is not a simple topic. Most people understand how gold, which is something of a primal money, is mined, refined and shaped into coins. It is rare, pure, easily divisible and has been cherished over the centuries. Paper money is more complex. From 1900 through 1971 (with the exception of during World War I), the US dollar was backed by gold, meaning its value was legally defined by a certain weight of the metal. That ended in 1971, when Richard Nixon shocked the world by breaking the link to gold and allowing the dollar’s value to be determined by trading in the foreign exchange markets. The dollar is valuable not because it’s as good as gold, but because you can buy goods and services produced in the United States with it—and, crucially, it’s the only form the US government will accept for tax payments. Among the Federal Reserve’s many functions is allowing the issuance of just the right quantity of dollars—enough to keep the wheels of commerce well greased without slipping into a hyperinflationary crisis.

But Bitcoin (capitalized as a concept, lowercased when referring to units of the currency, according to American Banker) is another animal entirely. It is the first and most famous of a large and growing family of so-called “cryptocurrencies.” Others include Litecoin, Feathercoin, Songcoin (“designed for The Music Industry”), Auroracoin (Iceland only) and Dogecoin (“the fun cryptocurrency”)—but Bitcoin is by far the largest. Its origin is traced to a 2008 paper written by the pseudonymous Satoshi Nakamoto. Newsweek recently claimed to have located the real one, but he promptly denied all, so the whole thing remains quite mysterious.

According to its semi-official definition, a crypto-currency is “a peer-to-peer, decentralized, digital currency whose implementation relies on the principles of cryptography to validate the transactions and generation of the currency itself.” (While that is one dense slab of prose, to be fair to the cryptoids, it wouldn’t be easy to define the dollar succinctly either.) What this means is that Bitcoin and the rest are electronic currencies created and transferred by networked computers with no one in charge. The role of cryptography is not merely to guarantee the security of the transaction, but also to generate new units of the currency, which are “mined” by having computers solve complicated mathematical problems. Once solved, new coins are created and their birth—with digital signatures guaranteeing authenticity and uniqueness—announced to the rest of the system. The creator earns the value of the new coins when they enter the system.

Trading is done via exchanges, which communicate with other exchanges, but there is no central authority. Some trading is done online, but you can also buy bitcoins for cash in person.

The mining requires enormous amounts of computing power, though specialized processors have been developed to reduce power consumption, which in turn produce many tons of carbon. Even the most ephemeral coin has material roots.

That’s the technology of bitcoin; but is it money? The classic economist’s definition holds that money is a store of value, a unit of account and a medium of exchange. You go to the store and find that a can of tomatoes is priced at $3—a unit of account, which the store will book as revenue once it’s sold. You take $3 out of your pocket or via your debit card—you draw down the store of value (cash on hand or in the bank) and use it as a medium of exchange. The value of the US dollar is that everyone in the United States, and beyond, recognizes the currency as fulfilling these tests of money. The dollar is valorized by the goods and services that it can buy.

Bitcoin has serious problems in all three respects. From the beginning of 2013 through early February 2014, the price of a bitcoin has varied from $13.40 to $1,203.42—a ratio of 90 to 1. Its average one-day change (ignoring whether it was up or down) was 4.3 percent. In just one day last April, Bitcoin lost 48 percent of its value relative to the US dollar—and that came the day after it lost 33 percent. But by November 2013, Bitcoin had shaken off this case of nerves and risen 1,405 percent off that crash low. By contrast, the ratio of high to low in the Federal Reserve’s broad index of the US dollar’s international value was just 1.07 to 1. Its biggest one-day move was under 2 percent; its average one-day change was 0.3 percent. (The dollar’s biggest daily change was less than half of Bitcoin’s average daily change.) Yes, inflation has steadily eaten away at the dollar’s value, but in relatively steady and predictable ways over the decades. It does not gyrate by almost 50 percent in a day. So much for a store of value.

Almost no one accepts payment in Bitcoin, nor do any businesses of note keep their books in Bitcoin; it fails both as a unit of account and a medium of exchange. And its short history—the first bitcoins were minted in 2009—has been turbulent. The US government seized funds from Mt. Gox, then the largest Bitcoin exchange, in May 2013, and just this past February, Mt. Gox collapsed from an undetermined mix of theft, fraud and mismanagement, leaving hundreds of millions of dollars in losses in its wake. There have been many other reports of thefts, frauds and hackings, which Bitcoin partisans dismiss as mere growing pains. But with no regulator, no deposit insurance and no central bank, this sort of thing is inevitable—it’s just tough luck. Introduce regulators and insurance schemes, though, and Bitcoin will lose all its anarcho-charm.

Keynes once called gold “part of the apparatus of conservatism” for its appeal to rentiers who loved austerity because it preserved the value of their assets. Bitcoin serves a similarly totemic purpose for today’s cyber-libertarians, who love not only the statelessness of it as money, but also its power to subject the institutional banking system to “disruption” (one of the favorite words of that set). And like gold, Bitcoin is deflationary. There’s a limit on how many bitcoins can be produced, and it gets more difficult to produce them over time until that limit is reached. Of course, new cryptocurrencies could arise. But the existence of the limit reflects the deflationary sympathies of the libertarian mind—in a Bitcoin economy, creating money to ease an economic depression would be impossible. Which is not to say that only libertarians love Bitcoin.

* * *

To catch a glimpse of cyber-libertarianism in its natural habitat, I ventured to a December 19 holiday party organized by Cryptos.com, a business incubator for Bitcoin startups; BitcoinNYC, a meetup group; and Halfmoon Labs, which builds trading platforms. I was hoping to find some wildly anti-statist libertarians, and my hopes were further stoked by the first person I saw upon entering—a tall, skinny man with a red bow tie, the very picture of an Ayn Rand adept.

But it was not to be. Though the air wasn’t free of libertarianism, most of the partiers I talked with were interested in running Bitcoin-related businesses or speculating in the currency. Many had day jobs in tech or finance. It was mostly male (but not overwhelmingly so) and mostly white. Only one person was wearing Google Glass. From national surveys of unproved rigor, your typical Bitcoin enthusiast is a 30-ish libertarian white male—though the same survey finds 39 percent of the fan base leftish in some sense. The group at the holiday party, probably because of its business-y skew, was somewhat more diverse.

Cryptos.com founder Nick Spanos worked two cellphones. When I introduced myself and turned on my iPhone voice recorder, Spanos was not cooperative: “I don’t talk to reporters I don’t know. Turn the thing off.” After I did, he told me the place was filled with Bitcoin millionaires—ten of them under 21. When I asked what kinds of businesses they were in, he replied: “All kinds.” That was the end of the interview—a cryptopromoter for a cryptocurrency.

Another partier, Marshall Swatt, the chief technology officer at Coinsetter, a Bitcoin trading platform for institutional investors, was more helpful. Swatt told me that, after building trading platforms for established Wall Street institutions, he was looking for something more entrepreneurial. When I asked him whether Bitcoin was money or a trading asset, he said it was an open question. (In late March, the IRS ruled that Bitcoin is an asset, not a form of money, and that mining and trading gains are subject to income tax.) Bitcoin would need to develop a large consumer market to be taken seriously as currency. Swatt thinks it will: Virgin Galactic, Richard Branson’s scheme to take tycoons into space, accepts Bitcoin. But that’s by nature a small market. To get taken seriously, Swatt would love to see Bitcoin adopted by Google, Amazon, Facebook and Apple. Asked to explain its appeal, Swatt replied that it’s an “extremely well-crafted device,” secure and mobile. Unlike many Bitcoin enthusiasts, Swatt doesn’t talk trash about gold or fiat currencies—he sees it as a complement to state money. It’s deflationary like gold, but like money (and unlike gold), it’s easy to use. He predicts a trillion-dollar volume in Bitcoin someday, though with the supply so tightly limited, that would send the value of a single coin through the roof.

* * *

Bitcoin’s limitations as a currency may be why most of the world’s central banks have tolerated it. States are fond of their monopoly over money. Federal Reserve chair Janet Yellen said in late Feburary, right after the Mt. Gox collapse, that the Fed lacked the authority to regulate Bitcoin because it’s outside the banking system. The Danish central bank stated in a press release: “Bitcoins are not money in a proper sense as there is no issuer behind them. Instead, bitcoins display the characteristics of a commodity to which users attach value. Unlike precious metals such as gold and silver, bitcoins have no actual utility value, bearing closer resemblance to glass beads.” The bank found the market too small to worry about; all the risks are on a small number of participants. And the market is very small: the value of all bitcoins outstanding is $5.9 billion—0.05 percent the size of the US money supply (by the Fed’s M2 definition).

Two Goldman Sachs economists, Dominic Wilson and José Ursua, largely concurred with the Danish evaluation. “We would argue that Bitcoin and other digital currencies lie somewhere on the boundary between currency, commodity and financial asset. Our best definition would be that it is currently a speculative financial asset that can be used as a medium of exchange.” But they also make an important point: the peer-to-peer technology behind Bitcoin could become a model for moving money around without third-party verifiers, like banks.

Bitcoin is not without friends on Wall Street. Gil Luria of Wedbush Securities is following it; he describes the recent volatility as “extended price discovery,” which is a way of saying that no one knows what it is, what it will be or what it’s worth. His firm is selling his Bitcoin research for payment in bitcoins.

* * *

The political cast of the Bitcoin universe is mostly libertarian, but it does have a left wing. These users celebrate Bitcoin’s evasion of state surveillance and policing—which, in the post-Snowden era, is nothing to sneeze at.

Take sex workers, often subjected to outrageous degrees of scrutiny. A Marxist-feminist professional dominatrix who practices in Britain under the name Mistress Magpie is an enthusiastic Bitcoin proponent. She explains her enthusiasm as beginning with her deep techno-geekiness, and adds that Bitcoin is also practical for someone in her line of work—anonymity is important, whether operating in real life or online. Unlike libertarians, who see cryptocurrencies as a possible gateway to a new society, the socialist in Mistress Magpie sees them as a way to operate furtively under capitalism, in a way that might not be needed in a more open socialist society. Even for her, though, Bitcoin doesn’t go far—the majority of her clients are not well versed in digital currencies. Furtive payment is also good, of course, for drugs and other illegal procurements—a sort of anarchic market operating beyond regulation. Though the FBI shut down Silk Road, the online mall of illicit goods, its offspring live on. A friend whose politics are well left of center—and not unusually anti-statist either—loves that he can pay for DMT (a short-acting hallucinogen) using bitcoins in an encrypted transaction.

Apart from anonymity, though, it remains difficult to see what problem Bitcoin solves for people with left-wing politics. The switch to paper money was a response to the crisis of the old gold-centered system, and Bitcoin has managed to replicate many of gold’s bugs with few of its features. Leaving aside the entrepreneurs and speculators, who are simply looking to get rich quick, the political vision of Bitcoin is of a decentralized, stateless world with competing money systems.

Competitive currencies that would end the state’s monopoly over money have long been a dream of the right. In a 1976 paper, Friedrich Hayek argued for allowing multiple currencies to circulate within individual countries; competition would lead to the use of the soundest—meaning most austerity-friendly—currency and put a check on the attempts by governments to inflate their way out of trouble. That would mean no fiscal or monetary stimulus in an economic crisis—just let things run their purgative course. In this view, the New Deal lengthened the Great Depression; had the bloodletting continued after Roosevelt’s inauguration, things would have righted themselves sooner or later. And we should have done the same in 2008 and 2009. Cryptocurrencies would be an advance over the idea of competitive currencies—improvised money systems that could challenge the state monopoly itself.

There are big reasons to think, however, that neither Bitcoin nor any of the myriad cryptocurrencies emerging online will ever pose a serious threat to the state monopoly on money. In the nineteenth century, the United States did have competing currencies: all kinds of little banks issued banknotes that often turned out to be worthless because they were accepted only within a small radius and weren’t actually backed by anything. Some Bitcoiners drag this out as a worthy precedent anyway. But Bitcoin could never establish itself as a currency in any serious way without regulation and some sort of insurance scheme, because investors and consumers would not trust substantial savings to it. But were Bitcoin to legitimate itself through regulation and become a serious money, it’s impossible to imagine that states would tolerate it for long. It would be simple to outlaw cryptocurrencies, enforcing a ban at the point of conversion from state money to cryptomoney without attempting to crack the coin’s infinitely complicated algorithm.

Bitcoiners share with other hard-money proponents a fear of inflation and financial collapse. But there is no inflation, and government money has proved far more stable than its alternatives, either gold or Bitcoin. No bank deposits were threatened during the financial crisis of 2008, because they were FDIC insured; you can’t say that about Bitcoin in its short life. But libertarians—and there are a lot of them in tech and finance, the two parents of Bitcoin—are always worrying about inflation. They worry about it the same way that hedge fund titans see talk of eliminating their tax breaks as a rerun of Nazi Germany.

But maybe I’m just bitter. I bought 0.05 bitcoin on February 5 for $39.72. As of April 24, it was worth $24.79—down 38 percent. Some bulwark against the irresponsible state.

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Posted by: Doug Henwood | December 7, 2017

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Posted by: Doug Henwood | December 4, 2017

Liberal suffering

Dahlia Lithwick had a cri de coeur in Slate the other day, worrying that the faith she’d placed in Robert Mueller & Co. to deliver us from Trump may be misplaced. It might have been good news had this paradigmatic liberal realized that trusting prosecutors and the national security state to perform good works might not be such a great idea after all. But, no, Lithwick’s concern is that Trump and his cronies have no respect for the rule of law.

This faith in the rule of law is touching—though, as Corey Robin often points out, many of the worst things in American history, from Indian genocide and slavery through Jim Crow and the McCarthy purges and onto ICE raids on immigrants, with multiple imperial wars along the way, have all been entirely legal. But what’s most striking about Lithwick’s argument is its lack of a politics. There is a buried mention of taking to the streets, but it sits weirdly, like an undigested morsel, with the legalism–moralism of the rest of the essay, when it should be the screaming centerpiece.

Another recent cri from the liberal wing: Katha Pollitt’s reflections on her efforts at anger management in the year since Trump’s election. Actually, the piece reads more like anger nurturing, but let’s bracket that. Bracket too her thinly veiled attack on me and my wife, Liza Featherstone:

I hate everyone who thought there was no “real” difference between the candidates because Hillary was a neoliberal and a faux feminist and Trump was not so bad. I hate people who spent the whole election season bashing Hillary in books and articles and Facebook posts and tweets, and then painfully, reluctantly dragged themselves out to vote for her, as if their one little, last-minute ballot cancelled out all the discouraging and dissuading they’d spent six months inflicting on people.

Part of my argument against Hillary all along was that she was a terrible candidate and her supporters may come to regret their support for her. I was right, but having Trump as president does interfere with my self-satisfaction.

Pollitt has forgotten that, a bit over twenty years ago, she wrote a brutal review of HRC’s It Takes A Village, that includes these lines, which are a reminder of how sharp and witty a writer she once was:

The First Lady is thus a kind of center-liberal version of Arianna Huffington, who claims that “spirituality” and volunteerism can replace the welfare state. For H.R.C. the state itself becomes a kind of pilot project, full of innovation but short on cash, and ever on the lookout for spongers.

And these words, on the Bill Clinton’s signing of welfare reform:

Liberalism is the idea that the good people close to power can solve the problems of those beneath them in the social order. Its tools are studies and sermons and campaign contributions and press conferences. The trouble is, the political forces they call on are not interested anymore — and this is true not just in the United States. In country after country, social benefits are being slashed and the working class’s standard of living lowered, and the major parties, including the ones that call themselves Labor or Socialist or Democratic, accept this process as a given.

Now that she’s embraced the politics she scorned two decades ago, she’s left with little but anger. As with Lithwick’s column, there can be no thinking about the bankruptcy of center–left politics, which is collapsing worldwide—precisely because of its embrace of the attack on the working class’s standard of living. No anger can be directed at Hillary Clinton for running a dismal campaign—no acknowledgment of the disasters reported, from rather different perspectives, by Jonathan Allen and Amie Parnes in Shattered or Donna Brazile in Hacks. Allen and Parnes describe the dilemmas of HRC’s speechwriters, unable to come up with a rationale for her candidacy or distill her agenda into anything remotely inspiring. Brazile describes a campaign driven by data, also lacking in anything like a moving agenda—and one run largely by arrogant white men, all its pretenses of diversity to the contrary.

Lithwick and Pollitt can’t think about these things, because they would undermine their entire worldview, perfectly described by the 1996 Pollitt as the use of “studies and sermons and campaign contributions” by “good people close to power.” (In her anger screed, she takes herself to task for not having contributed enough and written more.) They’re not interested in organizing popular movements, because that’s messy and involves working with people “beneath them on the social order.” For example, the reproductive rights movement has relied almost exclusively on litigation and lobbying; unlike the Christian right, it’s done little to mobilize a large and passionate constituency. Nor are our progressive neoliberals interested in stepping on the toes of the powerful, even in pursuit of a modest social democratic agenda like that of the Sanders campaign. It’s telling that most of Pollitt’s hate is directed not at elites but the masses and the left. And it’s also telling that Lithwick is looking to prosecutors and cops to deliver her from Trump (and into the hands of Mike Pence) and not anything emerging from political agitation.

It’s looking like the GOP is going to get some sort of horrid tax bill passed. (There is the hurdle of the conference committee, which will have to resolve discrepancies between the House and Senate versions, so it’s not a done deal.) So far, the passivity of the Democratic leadership in the face of this abomination has been striking—it’s as if they expect it, in combination with Mueller and the Russia obsession (which is starting to look like a psychiatric disorder), will deliver them an effortless landslide in the 2018 elections. The contrast with the right’s tireless fervor is striking, but that fervor can be explained by the fact that they believe in something more potent than mild tweaks to the status quo.

It may not be impossible to beat something with nothing, but it’s pretty damn hard.

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Posted by: Doug Henwood | October 26, 2017

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Posted by: Doug Henwood | October 21, 2017

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Posted by: Doug Henwood | October 12, 2017

Haiti, Puerto Rico, and the Clintons

Howard Dean, who for a brief period long ago wasn’t a shill for the medical-industrial complex, recommended on Twitter that Trump turn over Puerto Rican rehab operations to the Clinton Foundation. Either Dean doesn’t know the first thing about how the Foundation operated in Haiti, an excellent case study on how they do disaster relief, or he’s more depraved than we realized. Their behavior, in collaboration with Hillary’s State Department, was appalling.

Here’s the Haiti section from my widely under-bought, under-read, and under-promoted book My Turn: Hillary Clinton Targets the Presidency. Formatting the footnotes for the web requires far more ambition than I have; I’ve attached the book pages as a PDF at the bottom. And apologies for not superscripting the footnotes; similar reason.

Dean on Haiti
No review of Hillary’s diplomatic career would be complete without an examination of her work in Haiti. Bill and Hillary have a rich shared history with the country, one of the poorest in the world. (Its per capita annual income is equal to about twelve seconds of their standard speaking fee.)150 During Hillary’s Secretaryship, she and Bill were, as a Politico headline put it, “The King and Queen of Haiti.”151

Their history with Haiti began with a 1975 trip—a leg of an extended honeymoon—to Port-au-Prince that was financed by David Edwards, an old friend of Bill’s who was working for Citibank and who had some business to transact in the country. 152 In his memoir, Bill claimed that Edwards used his frequent-flyer miles to pay for the trip, but frequent-flyer programs didn’t begin until airline deregulation hit in 1979 and the junket looks like the first of many sponsored journeys to come. You have to hand it to them: their first date involved crossing a picket line, and their honeymoon was a banker-financed trip to the Caribbean.

On that first trip, the newlyweds and Edwards went to a voodoo ceremony conducted by a Sorbonne alum, during which a man walked across burning coals and a woman bit the head off a live chicken. In his strangely abrupt accounting of the sequence in his memoirs, Bill, fresh from an electoral defeat, emerged from the experience resolving to run for attorney general back in Arkansas, because of something the ceremony taught him about how “the Lord works in mysterious ways.”153

Many years later, early in his presidency, Bill engineered the return to office of Jean-Bertrand Aristide, who had been elected as president of Haiti in 1990 as a serious progressive reformer and was promptly overthrown in a coup. The army’s subsequent rule was predictably brutal, but the Bush administration was fine with the arrangement, since it saw eye-to-eye with the rapacious Haitian elite. Bill was troubled, however, and when he took office he began maneuvering for a restoration of Aristide. A UN resolution in 1994 authorized a U.S.-led military force to restore Aristide to office, earning Bill plaudits as a friend of democracy. But the restoration was conditional on the acceptance of an IMF-written austerity and privatization program, which largely eviscerated Aristide’s reformist agenda.154 You could consider this an early instance of the left wing of neoliberalism, with the Bush position representing its right. Either way you get rule by a moneyed elite, but the left variety is more attentive to optics.

On becoming Secretary of State, Hillary resolved to make Haiti a foreign policy priority. It was to be a prime example of a new development strategy that would, as Jonathan Katz put it in a detailed history of the couple’s relationship with the country, put “business at its center: Aid would be replaced by investment, the growth of which would in turn benefit the United States.”155

Promoting foreign investment often requires keeping wages low, which is precisely what Hillary’s State Department successfully helped engineer, as a series of WikiLeaks cables published by The Nation and Haïti Liberté revealed. When the Haitian parliament unanimously passed an increase in the minimum wage to $5 a day—an amount that Hillary earned in about 0.07 seconds at her standard speaking fee—U.S. business interests on the island mobilized. President René Préval, who had replaced Aristide, then engineered a two-tiered compromise minimum. The U.S. Embassy was not pleased, dismissing the president’s move as a “populist measure aimed at appealing to ‘the unemployed and underpaid masses.’”156 Rising to the defense of this brutal reasoning, Adam Davidson, host of NPR’s Planet Money—who portrayed himself in an interview with me as having grown up in a bohemian West Village culture, and who cultivates the image that he’s cooler than his econobeat would suggest—explained that to earn $5 a day, Haitians would simply have to develop the skills to perform complex tasks.157

The WikiLeaks cables also showed the U.S. State Department collaborating in 2009 with other Western Hemisphere ambassadors to push ahead with corrupt elections from which the country’s largest party, Aristide’s Fanmi Lavalas (FL), was excluded. The elections were delayed by the January 2010 earthquake. When they were eventually held, they were a disgrace, with fraud rampant, and a 23% turnout.158 Michel “Sweet Micky” Martelly, a singer and supporter of the second coup against Aristide (mounted in 2004), was proclaimed the winner by the Organization of American States, with Hillary Clinton presiding.

The cynicism around the election was perfectly captured in an email from Hillary’s longtime aide Cheryl Mills, who wrote this to the Port-au-Prince embassy staff on March 20, 2011, the night of the runoff that delivered Martelly his victory:

Nice job. Nice job all. You do great elections. And make us all look good. I am so very grateful for all you have done. Dinner on me in Haiti next trip. [And we can discuss how the counting is going! Just kidding. Kinda. :)]159

Evidently the counting was no straightforward affair; official results weren’t announced until a month later, on April 21. They were greeted with protests across the country. In an account of Hillary’s history with Haiti, New York Times reporter Yamiche Alicindor quoted Mills’ email, adding, with the paper’s characteristic patronizing tone, that “it has fed a suspicion among Haitians, if lacking in proof, that the United States rigged the election to install a puppet president.”160 Those Haitians will believe anything.

Soon after his selection, Martelly appointed Bill Clinton to an advisory board to encourage foreign investment in the country.161 There wasn’t a single election in Haiti for four years after Martelly took office; his rule was bloody, authoritarian, and corrupt.162 When, in August 2015, a vote for parliament was finally allowed, the campaign and balloting were full of violent disruptions, including firefights, several deaths, and vandalized polling stations. The turnout was a risible 15%.163 A presidential election, held in October 2015, featured 54 candidates for president. Martelly’s chosen successor, a previously obscure banana exporter, came in first amid widespread reports of massive fraud; run-off elections were scheduled for December but were postponed until April 2016. Martelly left office in February 2016 without a successor.164

On January 12, 2010, Haiti was hammered by a massive earthquake that killed at least 100,000, rendered a quarter-million homeless, and destroyed much of the country’s feeble infrastructure. Within days, Barack Obama appointed two of his predecessors, Bill Clinton and George H.W. Bush, as co-czars of the relief effort. On the same day of the appointment, Hillary flew in to meet with President Préval. Four days after the earthquake, she expressed confidence that Haiti would “come back even stronger and better in the future.”165 She said the goal was to “build back better.”166

From the first, the United States was to be the dominant force in Haiti relief and reconstruction—a point quickly made by the arrival of the 82nd Airborne. The Clintons, one as philanthropist and one as diplomat, were the dominant forces in the U.S. effort. As Jonathan Katz put it in Politico, “The hardest thing about evaluating the Clintons’ work in Haiti is that there is so much of it.” The Foundation spent scores of millions and raised much more, and the Secretary of State, aside from strong personal involvement, had the embassy and USAID through which to channel help. (Amusingly, both Bill’s brother, Roger, and Hillary’s brother Hugh tried to work their connections into business deals in Haiti, but only Roger succeeded.)167 But the enormous effort ended largely in failure. The rubble was cleared, and most people were moved out of refugee camps, but Haiti remains one of the most deeply poor parts of the world. Though there are doubtless some decent things that the Foundation sponsors in Haiti, the overwhelming effect of its interventions lies somewhere between disappointment and disaster.

The U.S. Agency for International Development (USAID), an independent agency that operates under the strategic guidance of the State Department, supervised a lot of the reconstruction efforts.168 USAID’s relief efforts relied heavily on private contractors, who performed poorly despite their high fees. Like any major business sector, the contractors formed a trade association, which hired a PR firm co-founded by the ubiquitous John Podesta.169

The marquee project of the Clinton-led reconstruction was the Caracol Industrial Park, which, as Hillary told a roomful of investors at its October 2012 opening, was the sort of thing that would mean “more than providing aid.” Rather, it was the kind of investment that “would help the Haitian people achieve their own dreams.”170 It follows a long-standing Clinton model, the public–private partnership of the sort that allows some to do well by doing some kind of good. So far, Caracol has fallen well short of its objectives, producing a mere 6,200 jobs, a tenth of the number promised initially.

The Caracol scheme was also responsible for some dreadful housing. USAID commissioned bids on a plan to build worker housing around Caracol. The scheme was described in an architectural peer review by Greg Higgins as “substandard, inadequate.” This was putting it mildly. The houses were tiny, crowded closely together, and lacked running water. They were without flush toilets; occupants would have to make do with a hole in the floor placed right next to the kitchen, which was to be outfitted with little more than a hot plate. The metal roofing proposed for the houses was incapable of standing up to the hurricanes that frequent the region, and could get as hot as 185°F in the summer. Drainage trenches were to run just a few feet from front doors and the sole access to running water for the entire complex was just one half-inch pipe. No provision was made for drainage in an area known to flood.171 Higgins sent his review to the State Department for investigation, but received little more than a “thank you.” According to Higgins, the execution of the plan was as bad as the design—he described the construction as “horrible.”172

The Clinton Foundation also promised to build “hurricane-proof…emergency shelters that can also serve as schools”—one of which was to be located in the coastal city of Léogâne. The buildings were to have electricity and plumbing. When Nation correspondents Isabel Macdonald and Isabeau Doucet visited the Léogâne site they found the project consisted of “twenty imported prefab trailers beset by a host of problems, from mold to sweltering heat to shoddy construction.” The units were made by Clayton Homes, a company owned by the billionaire Warren Buffett, a Foundation member and contributor to Hillary’s 2008 campaign whose reputation for decency seems inexplicable. Air samples from the Haitian trailers detected “worrying levels” of the same toxin found in the trailers deployed by FEMA in the wake of Hurricane Katrina, also manufactured by Clayton Holmes. A sixth-grader in one of the trailer schools reported recurring sickening headaches and vision problems. Similar stories came out of the Katrina trailers, but apparently no one at the Clinton Foundation heard them. And Clayton apparently hadn’t learned much either: the Haitian trailers were a fresh design, not a simple rehash of the New Orleans models.

The schools never got the plumbing—not even a latrine. According to a wind scientist quoted by Macdonald and Doucet, it seemed unlikely that trailers could be made hurricane-proof, an opinion seconded by a structural engineer who looked at them. When the mayor of Léogâne was told that the Clayton trailers were similar to those provided after Katrina, he said, “It would be humiliating to us, and we’ll take this as a black thing.”173

On another visit to Haiti, in September 2011, Greg Higgins tried to find the trailers, but learned that they’d been removed. The contractor who did the job showed him pictures on his cell phone, but wouldn’t say what happened to them.

Clinton interests did, however, succeed in building two new luxury hotels around Port-au-Prince. The Foundation put $2 million of its own money into the Royal Oasis hotel in a suburb of the capital; it’s today reported to be largely empty. And Bill was instrumental in getting a Marriott built in the center of the city, introducing its developer—his friend and major donor, the Irish telecoms mogul Denis O’Brien—to Marriott execs. The grand opening in February 2015 featured not only Bill, but Sean Penn as well.174 Both hotels provided some jobs, of course, but to the many Haitains without housing and short of food, the provision of luxury hotels must have seemed a secondary priority.

In another scheme to accommodate non-Haitians, Hillary’s State Department commissioned snazzy housing for the U.S. embassy staff in Port-au-Prince—LEED certified, with a pool and basketball and tennis courts. According to a write-up in the architectural trade press, “The inspiration for the design is derived from the local Haitian culture and is modeled after the Cubist forms of the ‘Bidonvilles’ (clustered houses hugging the hillside).”175 Bidon is French for “tin”; reflecting the corrugated metal from which the houses are often made. The term translates as “shanty towns.” The design is literally slumming.

The proposed budget was around $100 million for about 100 townhouse units, or about $1 million a unit. Meanwhile, as Higgins pointed out, the budget for building 900 houses for the displaced after the earthquake was around $25 million, about $28,000 a unit. Hillary said that Haiti would be a model for a new kind of economic development, but this doesn’t really look like one.176

Hillary’s people launched a big PR campaign to paint their disastrous Haitian operation as a success, and her emails show that she was very pleased with the results. “A new model of engagement with our own people,” she declared, urging her staff to press “Onward!” But as she was writing those celebratory words, daughter Chelsea, on a secret mission to the country, was blunt about the disaster: “the incompetence is mind numbing,” she reported. She noted that Haitians were doing a remarkable job of self-organization, with very limited resources—and the outsiders who were supposed to help weren’t up to the task. But instead of deferring to the locals—people about whom Bill constantly complained, according to Jonathan Katz— Chelsea urged her father to take even more direct control of the relief efforts: “The Office of Special Envoy—i.e., you Dad—needs authority over the UN and all its myriad parts…”

Of course, Bill and Hillary were already mostly in charge, and their priorities were ass-backward. Katz writes: “The new email tranche shows how quickly the construction of low-wage garment factories and prioritizing exports to the U.S. market came to the center of the U.S.-led response in Haiti.” They installed a former Liz Claiborne exec to accelerate the garment strategy.177 Haitians’ needs for food and housing would just have to wait.


For footnotes, click here

Posted by: Doug Henwood | October 12, 2017

Fresh audio product

Just added to my radio archive (click on date for link):

October 12, 2017 Yanis Varoufakis on his new book, Adults in the Room, the story of his surreal negotiations with Greece’s creditors

Posted by: Doug Henwood | September 30, 2017

Fresh audio product

Just added to my radio archive (click on date for link):

September 28, 2017 Lukas Hermsmeier on German politics after the election (and AfD’s breakthrough) • Margaret Corvid on the UK Labour Party conference

Posted by: Doug Henwood | September 25, 2017

My review of HRC’s book

My review of Hillary’s What Happened has just been posted on Washington Babylon.

Posted by: Doug Henwood | September 21, 2017

Fresh audio product

Just posted to my radio archive (click on date for link):

September 21, 2017 Michael Lighty of CNA/NNU on Republican efforts to repeal Obamacare, and on Sanders’ single-payer bill • Natasha Lennard, author of this article, on felony prosecution of Standing Rock protesters

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