The reactor building at the Bushehr nuclear power plant in southern Iran. Photograph: Getty Images
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Iran Watch: Hats off to Guido, says Mehdi Hasan

"Staines has at least bothered to put together a response".

Hats off to Paul Staines, aka Guido Fawkes. Now there's a sentence I never thought I'd write. He's used a blogpost on an obscure, neocon-wannabe website to try and defend himself over his Osiraq gaffe that I highlighted here. (The website in question, incidentally, seems obsessed with me, once even accusing me of using too many "statistics" in my arguments. Damn those pesky facts and figures!)

The reason I say "hats off", however, is Staines has at least bothered to put together a response - unlike, say, John Rentoul, who hides behind snarky putdowns on Twitter and doesn't do substance. It's 1,300-words, which makes it the longest piece I've ever read by the self-described "pyrotechnician".

The problem is that, despite the length, it's fact-free, evasive and dodges the key issues. Poor Paul put a lot of effort into his "rebuttal" so let's take the effort of going through it para by para....

Poor Mehdi Hasan. His New Statesman blog is billed as a "polemical take on politics, economics and foreign affairs." No-one likes a good polemic more than I do. It's just that to be effective, it helps if you have a consistent approach to what you're talking about.

And so to the debate about Iran's nuclear weapons programme. Hasan can't make up his mind whether his strategy is to deny its existence or to allow it to progress to completion.

Really? My "strategy" is to point to the fact that the consensus view of 16 US intelligence agencies, as well as Israel's own intelligence chief, is that Iran isn't developing nuclear weapons and hasn't even made a decision as to whether it wants to develop and build such weapons - while at the same time pointing out how a putative Iranian nuclear weapons programme wouldn't justify military action and wouldn't automatically lead to nuclear armageddon. Is that not "consistent"? Perhaps it is for people who struggle with the English language...

More of that in a moment. But first there's some fun to be had. In an article last Tuesday Hasan took me to task for tweeting him about Israel's attack on Iraq's nuclear facility at Osiraq in 1981. The reactor was destroyed and Saddam's nuclear programme was halted in its tracks.

It's an obvious historical reference point for anyone seriously contemplating military action to stop the deranged Islamist theocracy in Tehran getting nuclear weapons. For the equal and opposite reason it's also obvious why apologists for said deranged-Islamist-theocracy feel the need to completely misrepresent its significance.

Hi-larious. I cited three leading experts on nuclear weapons (Richard Betts, Malfrid Braut-Hegghammer and Dan Reiter), who pointed out how Saddam's nuclear programme wasn't "halted in its tracks". They're all "apologists" for the "deranged Islamist theocracy in Tehran"? That's your best shot? How about Charles Duelfer, darling of the neocons and appointed by George W. Bush to hunt for Iraq's (mythical) WMDs? I quoted his report, which concluded that "Israel's bombing of Iraq's Osirak nuclear reactor spurred Saddam to build up Iraq's military to confront Israel in the early 1980s". Is he an apologist for Iran? How about Bob Woodward? Staines needs to pick up his game. So far, this is childish stuff.

Enter Mehdi Hasan with his call for me to "stick to blogging about bond markets and deficits and stay away from foreign affairs and, in particular, the Middle East." Fair enough, but what's he going to tell Bill Clinton (you know, former president of the United States and all that), speaking at the World Economic Forum in Davos in 2005, who said "...everybody talks about what the Israelis did at Osiraq, in 1981, which, I think, in retrospect, was a really good thing. You know, it kept Saddam from developing nuclear power."

Shock, horror! Staines quotes a sitting US president - one who has been described as "the most pro-Israel president" of the 20th century - saying he thinks Israel's attack on Iraq thing.

What would I "tell" Clinton? 1) That he's wrong. 2) That he knows he is wrong because if the Osiraq raid "kept Saddam from developing nuclear power", as Clinton argued in 2005, then why did the UN's weapons inspectors discover a nuclear weapons programme in Iraq, in the wake of the first Gulf War, and why did Clinton himself claim Saddam had "nuclear arms" in 1998? and 3) I would ask him to have a chat with Professor Richard Betts of Columbia University, one of America's leading scholars on nuclear proliferation and a former adviser to the CIA and the State Department. I quoted Betts as saying, in 2006:

Contrary to prevalent mythology, there is no evidence that Israel's destruction of Osirak delayed Iraq's nuclear weapons program. The attack may actually have accelerated it.

Staines uses the testimony from a partisan politician to avoid having to deal with the Betts quote. How convenient - and how unlike the anti-politican "Guido Fawkes" persona he likes to hide behind. Also, while we're on the subject of Bill Clinton, does Staines agree with Clinton's critique of the coalition's austerity measures? If not, why not? Why the selective quoting of Clinton?

The point is uncontestable, as long as you are clear about what is being claimed.

Hasan obviously isn't which is why he devotes much of his article to weirdly diversionary arguments on the questions of whether the strike on Osiraq encouraged Saddam to redouble his efforts, this time taking his nuclear programme underground.

Sorry, the point is quite clear: Staines claimed on Twitter that "Israel bombed Saddam's nuclear reactor and ended his nuclear ambitions". This isn't just contestable, it's wrong. Plain and simple. I'm not sure how pointing how Saddam didn't just continue his nuclear programme, but intensified it, weaponised it and took it outside of French and IAEA controls is "weirdly diversionary". The only one guilty of diversions and evasions here is Staines himself.

But that's irrelevant to the issue at hand which is how one assesses the balance of risk and reward prior to adopting a course of action, and what can reasonably be expected to be achieved right now. You can never know in advance of any given action precisely what the consequences will be. Nor can you know what the world would have looked like had you not taken such action. (That's logic Mehdi; go take a class in it.)

"Logic"? It's been around 13 years since I attended logic classes but I can guarantee that there's no logical reasoning on display in that previous paragraph at all. None. I'm not sure which classes Staines took at the Humberside College of Higer Education but formal logic clearly wasn't one of them.

The Israelis looked at Saddam Hussein - almost as big a Jew-hating fanatic as the warmongers in Tehran - saw he was building a nuclear capability, and rightly decided it was far too risky to allow Iraq to proceed. Any threat of weaponisation arising from Osiraq was eliminated along with the facility. That's my claim, and that's hard to refute.

Well, of course, if you're specific and narrow claim is that "any threat of weaponisation from Osiraq was eliminated along with he facility", then, of course, Staines is correct. But there's some rather brazen and embarrassing goal-post-shifting going on here. Remember: Staines claimed that "Israel bombed Saddam's nuclear reactor and ended his nuclear ambitions". And, as I've shown, and as the experts agree, it didn't. Even Bill Clinton agrees.

On a side note, Staines omits to mention the fact that Israel, during the period he refers to, chose to arm "the warmongers in Tehran". According to the Jaffee Institute for Strategic Studies at Tel Aviv Arms, arms sales to Iran were worth around $500 million between 1980 to 1983. Then there's Israel's role in the Iran-Contra affair. Funny how Staines fails to mention any of this. To borrow a later line from his blogpost: "An inconvenient truth perhaps?"

Eight Israeli F-16s destroyed five years of work in less than 90 seconds. On 8 June 1981, Iraq was once again years away from obtaining a nuclear weapon.

Er, I'm sorry to have to break it to Staines but, on 6 June, Iraq was also "years away from obtaining a nuclear weapon". Here's Professor Dan Reiter, a specialist on national security policy, writing in the The Nonproliferation Review in July 2005:

. . . before the Osiraq attack, both the French and the IAEA opposed the weaponization of Iraq's nuclear research program, and had a number of instruments to constrain weaponization, including control over reactor fuel supply and multiple and continuous inspections. After the Osiraq attack, the program became secret, Saddam's personal and material commitment to the program grew, and the non-proliferation tools available to the international community became ineffective.

The facts don't fit Staines's spin on behalf of Israel.

Of course, the magnificently executed attack on Osiraq did not mean Saddam would not have another go at acquiring nuclear weapons. And when he did have another go he was obviously going to do it as covertly as possible.

These are my favourite two sentences of the entire blogpost: buried in the middle of a random para. If the attack didn't prevent Saddam from having "another go at acquiring nuclear weapons", and that too as "covertly as possible", then how did it end his "nuclear ambitions" as Staines claimed in his original gaffe? And how does it serve as a template for military action against Iran? In these two sentences, Staines reinforces the argument that some of us have been making for months: attacking Iran's nuclear facilities 1) won't end their nuclear ambitions but just delay them, and 2) will lead to a covert intensification of Iran's nuclear programme. As former CIA director Michael Hayden has argued, attacking Iran:

would guarantee that which we are trying to prevent -- an Iran that will spare nothing to build a nuclear weapon and that would build it in secret.

I'm glad Staines, finally, agrees.

The best one may be able to hope for in such circumstances is that one delays a dangerous regime's acquisition of nuclear weapons until it is finally overthrown and replaced by something less unpalatable. Via a long and circuitous route at great cost in blood and treasure that is actually what happened in Iraq, and it shows why a policy of regime change is vital in and of itself but also as a complement to any military attack.

Is Staines claiming here that the Israeli attack on Osiraq in 1981 led to the fall of Saddam in 2003? Really? I mean, really?? And if that's the case, let's do the maths. There was a 22-year time gap between Osiraq and the fall of Saddam but an attack on Iranian nuclear facilities would set back Iran's nuclear programme by two or three years, according to former US defence secretary Robert Gates. So what do we do in the intervening twenty years until the mullahs fall, Paul? Keep bombing? Every two years? That's your plan? Fantastic. I bow to your Metternichian skills.

Now, I'm curious about something. I would never accuse Mehdi Hasan of being completely out of his depth, ignorant of basic facts or deliberately distorting a picture so as to produce a convenient outcome. But I do have a couple of questions for him about his article.

Great. Can't wait. Go on...

Why didn't he tell his readers that Israel was not the first country to attack Osiraq? Why didn't he say that none other than the Islamic Republic of Iran attacked Osiraq in September of the year prior to the Israeli operation, damaging the facility but failing to destroy it?

Er, because it's not relevant to our discussion about whether or not Osiraq offers a template for a future military action against Iran.

An inconvenient truth perhaps?

No, an irrelevant truth. More evasion from Staines. Stick to the subject, man!

Surely he would not have been concealing a piece of information that shows that it wasn't just the dreaded Jewish state that regarded Iraq's nuclear programme as a security risk; a devastating revelation that the very regime Hasan is desperate we do not attack today, was the one that set the precedent for using military force to destroy another country's nuclear programme in the first place. Oh, my. It's going to be a treat seeing how Mehdi gets out of this one.

How do I get out of it? By pointing out how 1) Iran was at war with Iraq, which had attacked it in 1980 with the encouragement and support of Staine's heroes, Ronald Reagan and Margaret Thatcher. Israel, on the other hand, wasn't - which is why it was condemned by the members of the UN Security Council, including the United States. 2) Whether or not it was Iran or Israel that attacked Osiraq, my overall point still stands. It intensified Saddam's pursuit of a nuclear bomb. It didn't stop him or, as Betts points out, delay him:

Obliterating the Osirak reactor did not put the brakes on Saddam's nuclear weapons program because the reactor that was destroyed could not have produced a bomb on its own and was not even necessary for producing a bomb. Nine years after Israel's attack on Osirak, Iraq was very close to producing a nuclear weapon.

By the way, Staines curiously glosses over the fact that the Iranian strike on Osiraq in 1980 was encouraged by the . From the relevant Wikipedia page:

At the onset of the war, Yehoshua Saguy, director of the Israeli Military Intelligence Directorate, publicly urged the Iranians to bomb the reactor. . . a senior Israeli official met with a representative of the Khomeini regime in France one month prior to the Israeli attack.

Hmm. How does this fit with Staines's argument that Iran is a "deranged Islamist theocracy" bent on Israel's destruction? Why were Iran and Israel working together in the 1980s then? Guess the Iranians are more rational than Staines gives them credit for, and the Israelis aren't as fearful of Iran as apologists like Staines like to claim. Otherwise, how to explain the first (Iranian) strike on Osiraq, with Israeli support, that Staines so gleefully refers to?

Oh, my. It's going to be a treat seeing how Paul gets out of this one.

But back to the issue of the day.

Finally...

What do we do about Iran? In effect, Mehdi Hasan's answer is nothing. Which may be fine if you're Mehdi Hasan. But it's not quite so fine if you care about the future of the West and the survival of the State of Israel.

The Iranian regime has repeatedly threatened to destroy Israel.

No, sorry, it hasn't. I have dealt with this hoary old myth here. And here is the latest statement from the Iranian government on the subject.

It has backed up words with deeds in the form of the funding, arming and training of appalling Islamo-fascist terror groups such as Hamas and Hezbollah which are also committed to destroying Israel. It employs anti-Semitic rhetoric unheard of since the days of the Third Reich.

I don't deny that Iran has backed Hamas and Hizbollah - which, incidentally, were formed after Israel illegally invaded and occupied Palestinian and Lebanese land! - or that some Iranian leaders employ "anti-Semitic rhetoric" but how is this relevant to the debate over nukes? Pakistan and North Korea back terrorists and possess nukes - the former with the consent of the United States. And, lest we forget, Iran was backing Hamas and Hizbollah and deploying anti-Semitic rhetoric back in the eighties too, when Israel was selling it arms - why does Staines keep evading this issue? Oh, wait, because it doesn't fit his convenient and simplistic "Iran-is-a-deranged-theocracy-bent-on-destroying Israel" narrative.

Oh, and it's building a nuclear programme which every serious analyst in the world is concerned may lead Iran ultimately to acquire nuclear weapons.

Evidence, please! Staines knows full well that the consensus views of the US and Israeli intelligence agencies is that Iran is not "building a nuclear programme". The IAEA agrees. "Every serious analyst"? How about Leon Panetta, the US Defence Secretary? Here's Panetta speaking in January:

Are they trying to develop a nuclear weapon? No.

And here's Lieutenant General Ronald Burgess, director of the Defense Intelligence Agency, speaking in February:

[Iran] is unlikely to initiate or intentionally provoke a conflict or launch a preemptive attack.

Serious enough for you, Paul?

That is why the UN security council has implemented tough sanctions. That's why Israel is worried Mehdi, and since Israel is on the front line of the same civilisational battle as we are, that's why we should be worried too.


"Israel" isn't "worried". Netanyaho doesn't represent Israel as a whole. XX

In a previous article, this time for the Guardian last November, Mehdi argued that it would be "rational for Iran... to want its own arsenal of nukes" and in the same article asks us to accept that "bombastic" (his word, honestly) President Mahmoud Ahmadinejad's "goal is only to develop a civilian nuclear programme, not atomic bombs". Muddled Mehdi wants us to rely on Ahmadinejad's irrationality for our security.

1) Since that article, both Ehud Barak and General Martin Dempsey, the chairman of the joints of staff in the United States, have agreed with my assessment that Iran is a rational actor. Poor Paul. 2) Poor Paul, like so many hawks, has a very limited understanding of how the Iranian government works. Ahmadinejad has nothing to do with any decision to stop or start building nuclear weapons; the person who decides whether Iran goes nuclear is the "Supreme Leader", Ayatollah Khamenei, who has repeatedly said he considers nuclear weapons to be unIslamic and sinful. You may not believe him but his views on this issue should at least be mentioned - and Staines is the one who mentioned how Iran is a "theocracy" so why not pay attention to the words of the theocrat-in-chief?

Finally, on the specific question, would a military attack be effective? No-one knows the answer for certain. The Osiraq precedent from 1981 certainly suggests that it could be. But there are no guarantees.

No, I'll give you a guarantee: if we attack Iran, it will be a disaster - both for the west's security and Israel's. We won't be able to prevent Iran building nukes unless we invade and occupy the country, burn down all the labs and kill all the scientists. Is that what Staines is arguing? If not, he should just keep quiet and stop posturing and invoking fraudulent historical analogies.

All we can do - those, that is, who truly appreciate what is at stake - is give our full support to military action if indeed it is taken, and hope against hope that it succeeds.

At least he's honest in his final paragraph. Staines wants war, and he wants us to uncritically support such an illegal, "preventive" and self-defeating war. He makes no mention at all of civilian casualties in his 1,300-word post (innocent Iranian women and children? Who cares!), nor does he analyse the potential, catastrophic consequences - from terrorist blowback in the west, to a secret Iranian weapons programme, to attacks on Israel, to a global oil price shock. For chickenhawks like Staines, this is all about, in the words of one academic, "mainstreaming" a war against Iran.

 

 

 

 

 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?