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Physicians, heal thyselves: The Big Four accountancies are setting up as targets for Intellectual Property (IP) theft

  #

If the Big Four are, as I believe, headed in the direction of becoming a lost cause, what is a corporate SEC-regulated IP-dependent client to do in the age of Sarbanes Oxley? Even when clients are independently building up a credible IP protection program, where do you draw the line on Big Four access to the IP upon which future revenue depends? There may be a remarkable opportunity for second tier accountancies not yet compromised, such as an IP-focused exposure or assessment program (which implies that they will per force have to have their own means of protection in place). With all of that in place, however, they could go in and assess Big Four clients, establish IP-driven carve-outs for business critical valuations and position themselves in a new market space. Even knowing what has been compromised, although painful for boards to face, can staunch an IP hemorrhage as well as evolve into a tool for the allocation of suitably-valued IP protective measures.

RSM McGladrey, Grant Thornton, and BDO Seidman, this is your moment. Where in the market are you?

Previous: Persistent limitations and deficiencies among the 'guardian class' of business advisors charged with protecting their clients' interests in China

And he said unto them, Ye will surely say unto me this proverb, Physician, heal thyself: whatsoever we have heard done in Capernaum, do also here in thy country. Luke 4.23

What was good for a small walled village in ancient Galilee, not to mention for Euripides, Aeschylus, Homer and Ovid, is good for businesses today, especially those who aspire to shepherd businesses for clients.

We predict that the Big Four accountancies, PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG are now, and will continue to be, sustained targets for Intellectual Property (IP) harvesting by Chinese aspirants to this coveted market space - and they will be targets not just within the confines of China.

If a reader is taken aback, the questions he or she might ask are, "How can it not be?" "How could the highly profitable, strategic services sector be impervious to what is occurring in the manufacturing and R&D sectors?" By now, a client should be asking, "What happens to all the client data above and beyond the business processes of a Big Four member?" We suspect not.

The realization crystallized as three items crossed our desks, two from the FT's Barney Jopson, China to promote rivals to ‘big four’ and Big four firms plan boost to China staff, and China Business Services flagging the former FT item along with circulating an anti-monopoly draft, Draft Anti-Monopoly Law Approved. Frankly, we should have seen it sooner but coming on the heels of a renewed investigation of Intellectual Property (IP) threats, the implications leapt off the page.

Having previously discussed the difficulties that firms such as management consultancies and accountancies have in preventing IP loss under the best of circumstances, we then dug deeper into their lack of actionable processes for IP protective measures for their clients. I remembered earlier comments by partners at these firms over the near impossibility of rolling out a uniform policy to each office and partner. (The subject was not IP, just the generic process of gaining partner-wide agreement to promulgate a process, design it, approve it and test for compliance across a dispersed network.)

I realized that a historical advantage that many of these decentralized firms in what we may call the "guardian community" becomes a disadvantage in exercising a commitment to a global process rollout and, in fact, leaves them in a far worse condition than their commercial clients who have a more conventional hierarchical structure. Many accountancies, management services firms and multinational professional firms employ a Swiss Verein (or association) model of organization through which independent offices have limited liability in relation to the others. An advantage of the Verein structure is that local offices are "only bound by regulators in their country" and so have great sway over the practices that they elect to employ. Add to that the undeniable profit motive of each office to do 'what sells,' and you have a tenuous ability to roll out a globally effective IP protection plan.

I believe that the Chinese perceive finance and accounting as a strategic asset, at least on par with, say, automotive manufacturing. Just as in automotive, China is "determined also to promote the development of powerful domestic companies in strategic industries, ranging from manufacturing to finance, telling the local champions they should seek to "go global" as soon as they are strong enough."

The Big Four have commenced what amounts to unofficial, uncontrolled joint ventures with the Chinese state. The experience of US and EU automotive OEMs that pursued a far more controlled JV path is well known:

The big four have sought to curry favor with officials by providing consulting and training, and seconding people to bodies such as the finance ministry and the China Securities Regulatory Commission.

Just as in the automotive JVs, these de facto strategic advisory JVs will see virtually everything in the Big Four's inventory voluntarily surrendered without accountability. This is an Intellectual Property nightmare that will only be perceived after the damage is done. Given this state of affairs, I would as a Big Four client have to consider everything transferred to China, or made accessible in China, as compromised.

Substitute electronics, sensors, chip design, automotive and aircraft production for pharmaceuticals and accounting, then consider the following:

  • The big four "are proceeding with ambitious expansion plans in China" boosting "their staff in China by more than 20 pct this year" in the face of "official discomfort over the fact that China’s biggest companies depend on the services of foreign accountants to raise capital
  • The Chinese state is encouraging the rise of ‘national champions’ in accounting "to reduce the country’s reliance on the big four international firms that monopolise the auditing of Chinese companies listed overseas"
  • Domestic Chinese accounting firms "resent the kudos and influence" of the Big Four and service what amounts to financial table scraps of the listed Hong Kong firms
  • The Ministry of Finance has begun to "call for consolidation among China’s 5,600-odd accounting firms"
  • The Ministry of Finance has called for several national champions "able to prepare and certify accounts for such large flotations" as the IPO of Bank of China (BOC), which incidentally is now audited by PricewaterhouseCoopers

In Persistent limitations and deficiencies, I noted that "firms driven offshore in [a] "flight condition" are generally destabilized, plunged into a "catch-up mode" at any cost" and tend to be irrationally hopeful about, or at least inattentive, to their exposure to IP collection efforts. "They usually quickly become an easily harvestable asset." The "frantic China hirings" by the Big Four and the go-go atmosphere, problems with corruption notwithstanding, create just such an opened condition where the only focus is market position and profit. In such an environment, active collection efforts will not be noticed.

We depart from Jopson over comments that simply do not stand given Chinese practice and performance to date in other industries:

But the chances of a credible big-four rival emerging from present-day China look remote, as the country lacks experience of international disclosure requirements, accounting rules and audit procedures… the government would not give domestic firms "special privileges or preferential treatment" and stressed it was up to companies to decide which auditors they hired. Lack of direct government support could make it more difficult for local accounting firms to compete internationally.

Christopher Cassidy's Chinese Law: Smoke and Mirrors and Dan Harris' Chinese Law: Smoke And Mirrors And Who Really Wields The Influence. are far closer to reality on the ground. Reading them is recommended. Cassidy also noted that the "vice director of the Institute of Intellectual Property Law at China University of Politics and Law [could only point] to the pragmatism of Party leaders as the driving force behind what he hopes will be an effective system for IPR protection." That is not my definition of a transparent, legal framework for IP protection.

If the Big Four are, as I believe, headed in the direction of becoming a lost cause, what is a corporate SEC-regulated IP-dependent client to do in the age of Sarbanes Oxley? Even when clients are independently building up a credible IP protection program, where do you draw the line on Big Four access to the IP upon which future revenue depends? There may be a remarkable opportunity for second tier accountancies not yet compromised, such as an IP-focused exposure or assessment program (which implies that they will per force have to have their own means of protection in place). With all of that in place, however, they could go in and assess Big Four clients, establish IP-driven carve-outs for business critical valuations and position themselves in a new market space. (Even knowing what has been compromised, although painful, can staunch an IP hemorrhage as well as evolve into a tool for the allocation of suitably-valued IP protective measures.)

RSM McGladrey, Grant Thornton, and BDO Seidman, this is your moment. Where in the market are you?

Chinese Law: Smoke And Mirrors And Who Really Wields The Influence.
Posted by Dan Harris
China Law Blog
June 13, 2006 at 04:03 PM

China set for investment revolution
Sundeep Tucker, London
The Australian - FT Business
June 13, 2006

Chinese Law: Smoke and Mirrors
by Christopher Cassidy at 8:10 PM
Asia Business Law
June 09, 2006

The Nexus of IPR and Culture in China
posted by Christopher Cassidy at 3:07 PM
Asia Business Law
June 09, 2006

China to promote rivals to ‘big four’
By Barney Jopson in Beijing
Financial Times
Published: June 8 2006 01:25 | Last updated: June 8 2006 01:25

Draft Anti-Monopoly Law Approved
China Business Services
June 8, 2006

China approves draft anti-monopoly law
By ELAINE KURTENBACH
AP
June 7, 2006 · Last updated 10:52 p.m. PT

China's bank corruption doesn't faze investors
The multi-million-dollar scandals are a footnote in the floats
Tom Mitchell and Justine Lau
The Australian-FT Business
June 05, 2006

Accounting firms plan to boost China staff by over 20 pct - report
AFX News Limited/Forbes
06.04.2006, 08:34 PM

Big four firms plan boost to China staff
By Barney Jopson in Shanghai
Financial Times
Published: June 4 2006 22:04 | Last updated: June 5 2006 05:19
Mirrored as
Big four accountants in frantic China hirings at The Australian - FT Business, June 06, 2006
Mirrored at China Daily/Foreign Media on China

Biggest law firm in China seeks help
By Clare Cheung
Bloomberg News/IHT
MAY 31, 2006

Around Asia's Markets: Bad loans dim ardor for China banks
By Michele Batchelor
Bloomberg News
APRIL 25, 2006

China, and the Story of the Malicious Foreign Takeovers
China Business Services
March 15, 2006

Gordon Housworth



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Persistent limitations and deficiencies among the 'guardian class' of business advisors charged with protecting their clients' interests in China

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Previous: Low cost is not low risk: realities of IP Loss

Low cost is not low risk describes a global IP risk to both domestic and offshore facilities of both established industrial firms and venture capitalist (VC) startups in which:

  • Most firms do not know that they are at risk and, if they do become aware, do not know where to turn for valid assistance
  • Becoming aware of their target status but deprived of competent advice, firms employ non-solutions that lull themselves into a false sense of security
  • Firms silently surrender, fearful of negative consequences to business continuity or souring relationships with a host government (Too often a target firm mistakenly presumes that mitigation of IP loss demands a Rambo-style response.)
  • A firm's management may not confront a threat despite their awareness and even the periodic presence of internal champions for improved protection

We are now seeing firms that have prided themselves on US manufacturing being driven to China by simultaneous margin pressure and the recognition of rising Chinese reverse engineering of their products. Early indications are that these firms, not having sound guidance to the contrary, are operating under the odd assumption that it is better to "do something in China rather than to lose all" to reverse engineering.) Once in Asia, unprotected, more of the firm's assets can be at risk. (Experience has shown that firms driven offshore in such a "flight condition" are generally destabilized, plunged into a "catch-up mode" at any cost and inattentive to IP collection efforts; they usually quickly become an easily harvestable asset.)

How do firms, especially those global firms with broad skill sets, get into such a fix? Who are their advisors? Are they omissive? Answers differ between nascent Venture Capitalist (VC) funded firms and established firms. Venture Capitalist firms are usually small groups of former operators and entrepreneurs whose only external advisors are law firms and investment bankers (for the initial public offering. Established industrial firms are larger, employing tiers of professional managers that contract a broad spectrum of advisory agents, notably management consultancies, IT consultancies, banks, investment houses and law firms. We see three common characteristics among these advisory groups:

  1. Proper (actionable) IP protection guidelines are absent; in their place are ineffectual guidelines that confer a false sense of security among clients
  2. IP is frequently missing among the key characteristics that clients are urged to address when going offshore
  3. Fear of reprisal by a host government refusing them business restrains the level of advice offered to clients

The first two points are understandable as realistic IP protection practices, vulnerability assessments and mitigation practices are poorly understood by client and advisor alike. The third point is more troubling but I would prefer readers to understand it as the inevitable condition of a globally distributed services firm that has regional revenue targets independent of activities or events elsewhere in its network and is frequently beholden to one or more host governments for its ability to operate within their borders rather than a felonious act.

Proper (actionable) IP protection guidelines are absent:

While management consultancies often report what clients are doing as opposed to what the consultancy specifically recommends, their readership takes the implied leap that the related practices are recommended. As it is so infrequently reported, we should first state what does comprise competent threat analysis, what is "at the core of an interdiction process regardless of whether it is counterterrorism (CT) or Intellectual Property (IP) theft." From The danger of confusing terrorist interdiction with the consequences of terrorist action:

Defenders must be able to define a coherent view of their risk tolerance before they can craft a response strategy, a function the defense sector calls a Design Basis Threat (see simple overview.) For a more complex example, see Building Design for Homeland Security and look at the units: Asset Value Assessment, Threat/Hazard Assessment, Vulnerability Assessment, and Risk Assessment/Risk Management.

Unfortunately, the few that get this far attempt to solve the problem using scenario analysis which can never end, often results in analysis paralysis, and usually misses the scenario that delivers the payload or compromises the asset under protection:

Scenario-based responses are dangerously omissive. Witness the events now unfolding in London where the UK has had a thirty year history of dealing with a variety of terrorist attacks and bombings. The "scenario" and "lessons learned" of bombing mass transit (see Atocha’s Impact) in Madrid, Spain, was recent and well know yet it did the English little good in interdicting the London attack.

Moreover, scenario-spinning has no end since it has no scope-like business risk statement to bound it, and so efforts continue without end, usually crippling most well-intended protective efforts (paralysis by analysis)… The net is that the scenarios are very useful for estimating consequences (direct and indirect costs) should a similar event occur but that they are virtually ineffective for interdicting the adversary's preparation, surveillance and actual attack.

As noted in Acting upon knowledge is different from its gathering:

The alternative to scenario planning is to understand the key actors and processes at play, how they might interact (without locking into "the" prediction), especially in a region and culture so different from our own and one in which our own cultural assumptions could lead to under or overrating events, good and bad.

Some recommendations are astonishing. Peter Yu's From Pirates to Partners offers a good history and magnitude of the IP theft problem but then descends into a failed Twelve-Step Action Plan that is nothing short of an apologia for continuation of the current condition; Step 10, Be Patient with China During the Transitional Period, caught our eye. (We can support the first step, Abandon the Coercive Policy, only because US inaction has effectively made realistic enforcement moot. Individual firms must attend to the protection of their IP and that of critical suppliers in their development and manufacturing supply chain.)

McKinsey's Protecting intellectual property in China is slightly better than most in that it discredited reliance upon legal remedies:

Many multinational companies in China are losing the battle to protect their intellectual property, largely because they rely too heavily on legal tactics and fail to factor IP properly into their strategic and operational decisions. When we studied the Chinese operations of ten multinationals competing in IP-sensitive industries... we found that many executives think of protecting IP solely in legal termsand sometimes only after property has been stolen. The most successful companies, however, take strategic and operational action to protect their IP before that happens, thus lowering their litigation costs and improving the odds that their IP will remain safe...

In our experience, some executives are so caught up in the rush to reach the Chinese market that they share technological and business secrets too readily with partners, which subsequently use the information to become competitors.

Complete agreement on these comments but then the advisory dissolves into ineffectual remedies. Consider the implications of In a Scientist's Fall, China Feels Robbed of Glory, Atomised and Chip fraud in China becomes embarrassing setback, then review McKinsey's recommendations for "use of surveillance equipment or firewalls, to prevent large file transfers," "screen all job candidates for high ethical standards," "prefers employees with international work and educational experience, which it hopes will foster a healthy respect for IP," and "requiring non-compete clauses… in employment contracts for all positions." The article concludes with a "Pyramid of IP Protection" from "Must have" to "Nice to have" that is not in the correct order, and although desirable is not achievable with the tools on offer.

IP is missing key characteristic among client offshore guidelines:

No one firm was singled out for the following samples of IP omission; they were close to hand and our experience has shown them to be typical. It becomes easy to understand how otherwise competent suppliers can reach a vulnerable IP posture.

Booz Allen's The China Syndrome (and an earlier China's Gold Rush: Should You Make the Journey East?) cites "Five Factors to Examine": manufacturing cost, transportation efficiency, lead time and scheduling stability, product design and technical capabilities, concluding that:

By analyzing these five critical dimensions for each unique procurement initiative, companies can better understand their geographic sourcing options - which products are candidates to be sourced from low-cost countries and which need to be purchased from more developed markets.

IP is conspicuously absent.

Accenture's The Secrets of Successful Low-Cost-Country Sourcing states that "It’s absolutely essential that LCCS [low-cost-country sourcing] be made a core part of the overall corporate strategy" [but] successful LCCS is not a straightforward proposition [as it] involves a careful balancing of often competing interests within a company and demands great flexibility."

IP is apparently not part of this equation. It is certainly not sufficient to laud a client's "40-strong, largely Chinese procurement team in China. What’s more, the sourcing manager is a strong believer in working with local staff. It’s not just a question of culture and language, he explains: "These are people with a strong local network who are in tune with local market conditions.""

Ariba's Supply Base Localization: A Different Look at Low-cost Country Sourcing states that "Capturing the sourcing savings in a low-cost manufacturing strategy means weighing the risks and understanding total cost" but fails to mention IP. It's section When China Is Not the Answer is devoted solely to total cost piece part analysis: "As sourcing teams [are] getting a better handle on true total cost of ownership, a number of commodities are revealing themselves to be more costly when sourced from Asia versus from supply bases closer to home."

The Supply Chain Resource Consortium's Do Organizations Consider Strategic Cost Management When They Outsource To China? does not cite IP in its value equation nor does it mention IP in its 6-part China Series save for a brief mention of "laws to protect intellectual property."

I was surprised closer to home by an otherwise fine regional accounting and management firm, Plante & Moran, and its partner in the Strategic Planning and Global Services practice, Craig Fitzgerald. Having systematically tracked Fitzgerald's public materials since 2004, especially those having to do with China-related investments, I approached him in March 2006 about the seeming omission of Intellectual Property (IP) protection: "In comparison to your analyses of supplier tiers and recommendations for action, IP gets only a mention. A mantra around our shop for both outsourcing and offshoring is "Low cost is not low risk.""

I was saddened by his voicemail of 23 March, 2006:

I did get your voicemail and email messages, thank you very much. The nature of my consultation doesn't deal with IP protection whatsoever, so I really think us having a conversation would not be productive for you or for my clients as this is an area that I do not get into. I deal specifically with Customer relationship management and Enterprise strategy for auto suppliers. I do not go far afield or get into the tactics… [transcription of retained voicemail]

While Fitzgerald was very polite, all those who listened to his message agreed with my opinion that he closed with a second kind, but firm, attempt to convince me to not call again, all this from a fellow that states that he deals specifically with "Customer relationship management" and "Enterprise strategy for auto suppliers."

Fitzgerald is not alone. In dealings with a US tier one with Chinese operations, their headquarters staff were surprised to hear a key "advisor from Japan" shy away from any discussion of IP protection. I asked if the advisor was Japanese (yes) and if the individual was a long term contractor to this firm and other clients (yes). I noted that Chinese are not fond of Japanese on the best of days (decades ago my Chinese clients wanted, and paid for, tech support out of the US rather than rely on our Japanese distributor) and that the advisor could not raise sensitive issues lest it prejudice his ongoing consulting. Such an individual was not going to offer the US supplier any guidance beyond the mechanics of production and logistics.

Fear of reprisal by a host government:

While I've previously noted that the "established guardian community - major management consultancies, banks, investment houses and law firms - is restrained by fear of reprisal by a host government refusing them business in a designated country," few examples outshine the recent hasty scramble by a Big Four accounting firm, Ernst & Young, to grovelingly withdraw a and refreshingly frank May 3, 2006, assessment of Chinese bank non-performing loan (NPL) exposure. E&Y estimated total Chinese bank NPL at USD $911 billion with the NPL for the four major state-owned banks (the Big Four) spun off from the People's Bank of China (PBOC) in 1983-84 (Bank of China (BOC), Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), and Agricultural Bank of China (ABC)) at USD$358 billion - a figure three times greater than China's official estimate of USD$133 billion. More interestingly, E&Y audits ICBC, which is shortly to list).

China Business Services noted that E&Y's retraction "stated that the report "contained errors" requiring retraction of the study in toto. In doing so, E&Y has bowed lower than any western firm one can remember in recent times, offering in addition to the public shame of retraction, its profuse apology as well as sincere regrets.

Definitely read McGregor's China's banks still bedevilled by bad debts in which McGregor shows that E&Y's reporting was similar to that of PwC and McKinsey, and cited the frank comments of a managing director at E&Y, Jack Rodman:

AT first glance, Beijing would appear to have tackled head-on the mountain of bad debt in its state banking system - debt which has built up in the years since China began opening the economy in the late 1970s. In 1999, the Government established bad-debt disposal companies to sell off sour loans, used bank profits to wipe out more, and also pumped in cash from its foreign exchange reserves to recapitalise the institutions.

 In other words, US balance of payment debt paid, and continues to pay, down Chinese bad loans.

In all, China cleared about $US560 billion ($730 billion) of bad debts in a flurry, an amount equal to about half the country's gross domestic product at the time the funds were deployed. So after a period during which China enjoyed boisterous economic growth rates, it is surprising that a series of new reports say non-performing loans (NPLs) remain stubbornly high and may be getting worse.

A report issued on Wednesday by Ernst & Young, the accountancy firm, puts China's total liabilities for NPLs at just over $US900 billion, even higher than its $US875 billion stack of foreign reserves, the largest in the world. E&Y's findings are broadly in line with a report by professional services firm PwC issued last week, and similar in tone to another lengthy report released this week from McKinsey, the consultancy, on China's financial system.

"I think the numbers will be a big surprise because China has been giving the impression (with its banks listing overseas) that the problem is behind us," said Jack Rodman, a managing director with E&Y. "China has not really resolved the issue - they have just moved it from one state enterprise to another."

The three reports say the original stock of bad loans has not been dealt with and that a huge stack of new NPLs has been created. "While there have been improvements in the banking sectors, and the Government has sought to address NPLs, the core causes for the build-up have not been fully dealt with," said the McKinsey report.

"Until these problems are addressed, the problem is likely to persist, and the banking system will remain vulnerable to potential liquidity shocks." The "problems" are familiar - a lack of commercial mindset among banks and skills to assess credit risk, and a sprawling nationwide branch system over which the head office in Beijing has little control.

In other words, the Chinese banking system is insolvent, and investors may never see their money back, much less a profit.

Three of the big four state banks, which have either listed overseas or are preparing to, have an even better record, with their NPL ratio by December last year under 5 per cent, according to PwC. The fall was not due to NPL resolutions, but transfers to the bad debt disposal agencies, and a surge in new lending which made existing bad loans a smaller part of the expanding pie of banking assets.

"So while NPL ratios appear to be decreasing, in number NPLs are probably increasing," says Mike Harris, the PwC report's author. The bad debt disposal agencies, known as asset management companies (AMCs), have taken on $US330 billion in sour loans since 1999, but have only resolved about $US100 billion.

In other words, no substantive change has occurred in Chinese lending and banking practice.

Read Luo Jun's Bank of China's $9.9 Billion IPO Plan Vexed by Bad Loan Legacy for more on the mechanics. I recommend readers to Richard Kuslan's Asia Business Intelligence, Dan Harris' posts at China Law Blog, and byzantine_ruins' The Epic of the Fall:

Readers are referred to the many additional links on Chinese banking revelation are in the bibliography below. In lieu of the E&Y withdrawal, I recommend two reports by the IMF's Richard Podpiera. Read Does Compliance with Basel Core Principles Bring Any Measurable Benefits?, November 2004, for general banking sector performance and Progress in China’s Banking Sector Reform: Has Bank Behavior Changed?, March 2006, for analysis of Chinese lending growth, credit pricing, and regional lending patterns in search of "evidence of changing behavior of the large state-owned commercial banks (SCBs)." All the items by Minxin Pei offer readers a sound view of the structural issues contributing to China's economic and societal pressure.

This reprisal segment closes with the conflicts of interest facing investment bankers Lehman Brothers, Morgan Stanley and Goldman Sachs during the 2005 attempt of China's CNOOC to acquire Unocal:

Lehman Brothers, which has been aggressively wooing Chinese clients, also happens to be the banker for Chevron in the battle for control of Unocal, the American oil company. Chevron's strategy in seeking public support for a deal with Unocal has included denouncing Cnooc's offer not just on its economic merits, but also as a Chinese government-sponsored bid that threatens America's national security. Chevron's lobbying campaign in Washington all but compares China to Russia during the cold war. This has made for some awkward moments for Lehman Brothers in China. "Pitching business there at the moment is not the easiest thing to do," lamented a Lehman banker who just completed a trip to Hong Kong that he called "unsuccessful."...  

Morgan Stanley, which is also trying to create a franchise in China, is representing Unocal. Relying in part on Morgan Stanley's advice, Unocal's board has rejected Cnooc's bid - which is actually higher than Chrevron's offer - as too low, considering the political risks… "Conflict resolution is tremendously complex to start with for most big firms," said Steven Koch, co-chairman of global mergers and acquisitions at Credit Suisse First Boston. "It gets even more complicated when the client is associated with a country's national interests."…

Goldman Sachs… has spent the last several years zealously courting Chinese government officials… Goldman's decision to pursue working for Cnooc was a calculated one. It knew full well that Cnooc had a long shot of winning. As adviser to the losing side in the takeover fight, Goldman would make virtually no money for its months of strategizing...  

But for Goldman, it may have looked like a no-lose situation. If Cnooc won, it would be a watershed deal that would reap millions of dollars in fees for Goldman. But being on the losing side would offer rewards, too. The experience itself has already helped Goldman build deep relationships inside the Chinese government that may give it a leg up in the coming years... [S]ome people close to Cnooc have suggested that Goldman could be blamed if the Chinese company ends up losing the current takeover battle. Critics are already saying that Goldman has miscalculated the level of protectionist sentiment in Washington as well as Chevron's ability to stir up a firestorm of protest against the Chinese company.

The moral that I take from this section in particular and the full note in general is that if you are an investor in China in any fashion and are not performing your own independent, rigorous analysis from multiple sources, but rather relying on the advisory of your accountant, that you are in for a tenure marked by surprise and cost.

Next: Physicians, heal thyselves: The Big Four accountancies are setting up as targets for Intellectual Property (IP) theft

Chinese banks reap rewards of reform
(Asia Pulse/XIC)
Asia Times
Jun 7, 2006

Atomised
Beijing no longer commands instant obedience from China's local authorities
The Economist
Jun 1, 2006

China finance: Investors bet on BOC
ViewsWire
ECONOMIST INTELLIGENCE UNIT
May 26th 2006
Also here

Banking on Reform
Recent reforms have helped China avoid a banking collapse. But how will its banks hold up when the sector fully opens to foreign competition?
by Stephen Thomas and Chen Ji
China Business Review
CBR May-June 2006

Bank of China's $9.9 Billion IPO Plan Vexed by Bad Loan Legacy
Luo Jun
Bloomberg
May 16, 2006

In a Scientist's Fall, China Feels Robbed of Glory
By DAVID BARBOZA
New York Times
May 15, 2006

Chip fraud in China becomes embarrassing setback
Faked development of digital signal processors unravled
By Sumner Lemon, IDG News Service
May 15, 2006

Ernst & Young And China Banks -- Better Wrong Than Right?
Posted by Dan Harris
China Law Blog
May 15, 2006 at 09:35 AM

Non-Performing Accountants (and Loans)
China Business Services
May 15, 2006

Ernst and Young Retracts China Bad Loans Report
Posted by Richard Kuslan
Asia Business Intelligence
May 15, 2006 01:21 PM

China's Banks May Be Troubled, But Nobody Knows The Trouble Ernst & Young Has Seen
Posted by Dan Harris
China Law Blog
May 15, 2006 at 12:41 AM

Ernst & Young Bullied To Withdraw NPL Report By Chinese Authorities
By byzantine_ruins
The Epic of the Fall
May. 15th, 2006 @ 09:35 am

Ernst & Young withdraws NPL Report
E&Y Global headquarters
12 May, 2006

China central bank says report on extent of bank NPLs 'seriously distorted'
AFX/Forbes
05.11.2006, 08:00 AM

China's banks still bedevilled by bad debts
They've just passed the buck, writes Richard McGregor
Richard McGregor
The Australian-FT Business
May 05, 2006

China on Borrowed Time?
David Bosco
Foreign Policy
Wed, 05/03/2006 - 1:22pm.

Troubled Loan Trail Leads To China -- Do Not Try This At Home
Posted by Dan Harris
China Law Blog
May 3, 2006 at 11:16 PM

China bad loans may reach total of $900bn
By Richard McGregor in Beijing
Financial Times
Published: May 3 2006 07:46 | Last updated: May 3 2006 07:46

China Bad Loans May Reach Total of $900bn
China Business 2.0
May 3, 2006
MIRROR of much of the McGregor/FT article

Around Asia's Markets: Bad loans dim ardor for China banks
By Michele Batchelor
Bloomberg News
APRIL 25, 2006

The Chinese Conundrum: External financial strength, Domestic financial weakness
Brad Setser
Director of Research, Roubini Global Economics
Research Associate, Global Economic Governance
Produced for CESifo Conference: "Understanding the Chinese Economy"
Programme, University College, Oxford
This draft April 15, 2006

The Dark Side of China’s Rise
By Minxin Pei
Foreign Policy
March/April 2006
Scrolled to paid archive
Mirror here:
The Dark Side of China's Rise
By 
Minxin Pei Foreign Policy, March/April 2006
Carnegie Endowment for International Peace

Progress in China’s Banking Sector Reform: Has Bank Behavior Changed?
Richard Podpiera
International Monetary Fund Working Paper WP/06/71
Monetary and Financial Systems Department
Authorized for distribution by Abdessatar Ouanes
March 2006

Supply Base Localization: A Different Look at Low-cost Country Sourcing
By David Morgenstern
Supply & Demand Chain Executive
February/March 2006

China Is Stagnating in Its "Trapped Transition"
By Minxin Pei
Financial Times, February 24, 2006
Mirror at CEIP

Competition and trade in the U.S. auto parts sector
by Thomas H. Klier and James M. Rubenstein
Chicago Fed Letter
Research Department of the Federal Reserve Bank of Chicago
NUMBER 222
January 2006

China Is Paying the Price of Rising Social Unrest
By Minxin Pei
Financial Times, November 7, 2005
Mirror at CEIP

A Fresh Approach on China
By Minxin Pei
International Herald Tribune, September 9, 2005
Mirror at CEIP

Protecting intellectual property in China
Litigation is no substitute for strategy.
Meagan C. Dietz, Sarena Shao-Tin Lin, and Lei Yang
The McKinsey Quarterly, 2005 Number 3

There's a New China Syndrome on Wall Street
By ANDREW ROSS SORKIN
New York Times
July 24, 2005

The Secrets of Successful Low-Cost-Country Sourcing
By Kris Timmermans
Accenture
Outlook Journal, June 2005
PDF

The Economic Basis for Social Unrest in China
Albert Keidel
Carnegie Endowment for International Peace
for The Third European-American Dialogue on China
The George Washington University
May 26-27, 2005

OE Auto Parts Supplier Strategy for the Next Ten Years
Marc Santucci
eAutoPortal.com
2 May, 2005

Banking reform to continue despite scandals: official
Xinhua English
March 10, 2005 00:57:36

Sourcing in China not a sure bet
By strategy+business
Special to CNET News.com
February 7, 2005, 10:00 AM PST
[Recycling of content from 
China's Gold Rush: Should You Make the Journey East?]

The China Syndrome
A five-dimension analytical model for deciding when (and when not) to purchase from the East
By Michell Quint & Dermot Shorten

strategy + business
01/18/05

Does Compliance with Basel Core Principles Bring Any Measurable Benefits?
Richard Podpiera
International Monetary Fund Working Paper WP/04/204
Monetary and Financial Systems Department
Authorized for distribution by Abdessatar Ouanes
November 2004

China's Gold Rush: Should You Make the Journey East?
Michell Quint & Dermot Shorten
Booz Allen
November 2004

Rural Financial Sector Reform in China
Thorsten Giehler
Asia Forum on Financial Sector Reforms in China, Frankfurt
26 Oct, 2004

Do Organizations Consider Strategic Cost Management When They Outsource To China?
by Rob Handfield, SCRC
Supply Chain Resource Consortium (SCRC)
4/8/04

China Series by Rob Handfield, SCRC:
Global Sourcing from China: Insights from a Recent Visit - China Series #1
5/3/05
Planning and Controld Systems in China (PLAN) - China Series #2
6/10/05
Identifying and Negotiation with Chinese Suppliers (SOURCE) - China Series #3
6/23/05
Manufacturing in China (MAKE) - China Series # 4
7/6/05
Logistics in China (DELIVER) - China Series # 5
7/20/05
Environmental Risks in China's Supply Chain - China Series # 6
8/22/05

Ch 3-Finance-Sec 2: Commercial banks: The big four state-owned banks
China Hand March 2004 Main Report
Economic Intelligence Unit
March 2004

China -Threat or Opportunity? You Decide
Craig Fitzgerald
Manufacturing Consulting Services, Plante & Moran
March 2003

Strategies for entering the Chinese Market
Craig Fitzgerald
OESA China Business Report
SAE 2003 World Congress
March 3, 2003

From Pirates to Partners: Protecting Intellectual Property in China in the Twenty-First Century
Peter K. Yu
American University Law Review, Vol. 50
Date Posted: December 7, 2000
Last Revised: April 21, 2003
Abstract

Gordon Housworth



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Low cost is not low risk: realities of IP Loss

  #

Previous: Trends in Intellectual Property IP transfer to China

This note builds upon the Intellectual Property (IP) protection series. Readers are encouraged to review:

The US supply base is undeniably concerned about IP loss in China; trade issues, protection of intellectual property and the opening of China's market to foreign products were high on the US agenda during Chinese president Hu Jintao's recent visit to North America. While certain assets are likely targets inside China, the key is to think "asset" instead of "country". Risk cannot be based on countries or "risky areas" but rather wherever a sufficiently valuable asset is accessible at any tier in any country - as the collector will move to the least defended point that contains the IP. We currently see, for example, collection efforts on the US west coast against electronics assets long before they are transferred to a presumably risky country in Asia. Commercial and dual-use technologies are high on the collection list.

The idea of trying to isolate "risky countries" with respect to IP migration remains unworkable due to the revenue loss and market share erosion that occurs when IP is withheld plus the fact that nations such as China demand that you be there in order with competent products in order to do business.

The three key areas of vulnerabilities remain the same: Pricing model compromise (supplier outsourcing, subcontracting, etc.), Data citadel attack (R&D hives and data warehouses), and Human resources (HR) churn. All three are critical, yet we find that HR too often gets scant attention even though collection effectiveness is high while risk and cost are low.

Yes, all technology migrates over time but most firms assume risk by default in (a) not identifying what is already compromised, (b) identifying what assets need to be protected and (c) the amount of dollars and effort needed to realistically protect those assets - wherever they occur in the supply chain. If a collector obtains a critical IP asset, the owner's entire ROI justification collapses along with the expected revenue stream. And when the IP asset is the core of a system or subsystem that often contains more mature, less competitive technology, the entire system revenue stream truncates.

Many of the risks to suppliers as well as OEMs were inadvertently demonstrated in a recent 2006 SAE World seminar, Lessons Learned in China: The Automotive Supplier Perspective distilled from "more than 50 interviews and surveys with executives of global automotive suppliers located in the U.S."

A firm expert in supply chain analysis and logistics, PRTM, had surveyed these global suppliers, distilling the collective supplier wisdom on attempts at IP protection as "To protect critical IP, choose components wisely, break up assemblies, select partners carefully and exploit all legal options." Unfortunately, all are ineffective in protecting IP as none of the four offer protection against even modest collection efforts. They are even less effective against an Asian style method of collection.

It validated our assessment that commercial supply bases have no effective protection whatsoever and whatever attempts that are being made at a 'solution' to IP risk are only lulling the targets into a false sense of security. Following is the text of the original PRTM IP protection slide from their survey followed by our commentary pointing out the weaknesses of each approach. (I hasten to note that PRTM was only presenting a collated supplier response, but I fear that the longer those efforts are allowed to stand without challenge, the more likely it is that PRTM will be associated with these de facto "best practices.") PRTM text is in italics and was transcribed from PRTM handouts:

Choose components wisely

  • Only source components which have reached maturity in marketplace
  • Only source basic components with little "design know-how"
  • Make IP protection a priority of your make/buy strategy
  • Or build your own plant in China

COMMENT: The market value of an asset trends downward from high value design to low value commodity. Such progressive value loss can often be mitigated if mature IP is integrated into systems led by a high value asset. It is difficult if not impossible to isolate the newer asset(s) from the older in the production of integrated systems. (In the case of electronics, for example, the asset will appear in three overlapping tiers: logic design, embedment in firmware and test.)

The damage from IP loss moves progressively up the value chain, to newer and more vital IP, in terms of future growth, because collectors are re-tasked to target and acquire more valuable IP.

Compromise of the high value asset compromises both the value of the lead asset as well as the maturing and mature technology components in the system. When there is an IP loss, it is most likely that the discovery will show that the damage to the business is not isolated and broader than anticipated.

There is no "build your own plant" option. Regardless of whether your firm moves into an existing structure or contracts its own, someone else will erect the building, install HVAC, electricals, electronics and contract the security function, guards included.

A local option that delivers protective control is feasible only with a complete IP asset protection program (including asset vulnerability assessments), and significant preparation in selecting and developing local supply chain relationships.

Break up the puzzle

  • Do not source too many components from one supplier
  • Piece out assembly to multiple suppliers in different regions - protect integration IP
  • Avoid giving unnecessary specification & drawing details

COMMENT: Location-specific IP protection is a partial approach - and too often a red herring - that rarely if ever adds much protective value for a global asset. Conversely, location-specific approaches often creates a false sense of comfort on the protective side. The accessibility of the asset to hostile IP collectors at any tier, at any location, is the key question.

Asset-specific protection, by contrast, is global, or requires a comprehensive view of asset accessibility in the supply chain. It almost always becomes optimally effective on the basis of a complete asset (value chain) exposure assessment to be effective.

Choose integrity tested partners

  • Check integrity history with current customers
  • Choose strategic partner with a vested interest in protecting your IP - heavily dependent upon both yours and his business success

COMMENT: Even under ideal conditions, partnering merely shares the risk of IP loss but does not control it. Under typical conditions, partnering is not controlled and generates additional risk. (Note the levels of IP transfer that already occur in any joint venture.)

Education and a clear delineation of joint interests is usually required, but frequently hard to affect and enforce.

Customers may not pre-disposed to cooperate with supplier IP protection efforts.

Invest in legal protection of IP

  • Ensure strong legal contract and non-disclosure agreement… but still proceed with extreme caution
  • Use Chinese lawyers to write detailed "contracts" - jointly signed in person
  • Prosecute offenders relentlessly

COMMENT: Unfortunately, legal remedies come after the economic damage is done or is underway, i.e., the ROI and revenue loss are unrecoverable.

Legal remedies are ineffective outside the US, parts of the EU and Australia, and may in fact be damaging to the litigating party.

A legal strategy may be useful for asset sales or portfolio management (disposition), and will likely be a necessary part of US-based due-diligence for Sarbanes Oxley compliance. It will have limited deterrent value at best for clandestine IP asset collectors.

Above these risks to IP, PRTM found that "the majority of North American automotive suppliers sourcing from China are not realizing great savings," that "over half the participants in [the PRTM] study achieved less than 40% of their savings goals" for their Chinese operations:

PRTM concluded that China sourcing requires a minimum savings of 20% to outweigh such negatives as costs associated with logistics, quality and intellectual property (IP) risks… [PRTM cautioned] suppliers not to get too excited about the low price of a Chinese-made component. "Premium freight is the most basic risk" [of] the hidden costs of doing business in China… [Suppliers] wishing to save money by producing in China need to factor in the cost of insurance [and] the cost of lawyers and investigative teams to enforce IP rights and allocate funds to cover quality-related risks associated with doing business with one of the country’s relatively new suppliers… Suppliers should carefully select their business partner in China by doing local research and networking, not flipping open the Yellow Pages

Given the substantive IP transfers inherent in joint ventures, it was interesting to note the ebbing of JVs:

As far as suppliers wanting to establish a China strategy, PRTM finds joint ventures are becoming a thing of the past, with 21% of respondents in a JV with a Chinese company in 2005 but just 14% expected to be in one by 2010. The growth in China sourcing will come in the form of greenfield plants [with] 28% of respondents taking this approach last year and 44% expected to in 2010. "Joint ventures are out"

Even these brief comments does not do the problem justice. We see otherwise skilled firms adopting an IP protection posture involving amateurish methods and unimplementable good intentions, often buttressed by the erroneous belief that US legal remedies are applicable on a global basis. Other firms violate the rule of "Absence of evidence is not evidence of absence." When no legitimate Vulnerability Assessment has been carried out, it is tenuous at best to claim that no penetrations have been made, or that no threats of collection exist.

Leave it to the English to be candid:

There is an almost suicidal rush now to transfer research and development operations to China lock, stock and barrel. Financial consultants have advised firms about the tax advantages of relocating R&D to China; you can hire researchers with PhDs very cheaply compared to the more advanced countries. All this raises the risk of loss and abuse of intellectual assets in a country where copycatting and intellectual property piracy have long been a national sport.

US and EU IP is being harvested at an intense rate by a hierarchy of collectors. In the case of China, Chinese firms are being pressured for increased margins while Chinese scientists and researchers are being pressured for national breakthroughs that create native Chinese advances not subject to foreign control and/or royalty payments.

Edward Tse's China's Five Surprises offers a fine structural analysis of points that most, if not a wide majority, of US and EU firms are not taking into account in planning their response to China. Even this aggressive posture as outlined by Tse is not enough to satisfy CCP goals for growth, thus the pressure on Chinese scientists to acquire foreign technology as part of their research.

In heated competitive atmospheres such as this, it is all too easy to view foreign IP as harvestable assets. Changes in Chinese law are reducing even the modest IP protection for foreign firms save for the efforts offered up to redress audio and film piracy. We have reason to believe that there is also an assumed feeling of impunity on the part of collectors in the face of feeble or ineffectual responses from targets.

We expect visibility of offshoring, outsourcing and IP theft to rise in the US 2006 and 2008 elections. It is a basic tenet of attack strategy that the attacker (collector) will step up activities in progress if they feel that a heightened security posture is imminent. What is belated good practice and awareness on the target side will be met with accelerated collection on the adversary side.

We recommend early adoption of prudent, non-adversarial business practices now to identify current exposure and to combat the forthcoming surge in collection efforts. Beware ineffectual IP protection tools and processes such as the mechanisms flagged above or IP protection pyramids that, while desirable, are fuzzy and leave the client without the tools to achieve its IP goals. We have achieved success with strategies drawn from proven Counterterrorism (CT) practices applied to Intellectual Property risk evaluation and remediation. We know from experience that these processes can be taught and that they are easy to embed as company best practices performed by its employees instead of an outside consultant. Properly done, IP protection becomes a crucial business attribute, like quality, lean manufacturing or robustness.

Next: Persistent limitations and deficiencies among the 'guardian class' of business advisors charged with protecting their clients' interests in China

Piracy in China Remains Concern For U.S. Firms
Cui Rong
Wall Street Journal
May 16, 2006

Bank of China's $9.9 Billion IPO Plan Vexed by Bad Loan Legacy
Luo Jun
Bloomberg
May 16, 2006

In a Scientist's Fall, China Feels Robbed of Glory
By DAVID BARBOZA
New York Times
May 15, 2006

Chip fraud in China becomes embarrassing setback
Faked development of digital signal processors unravled
By Sumner Lemon
IDG News Service
May 15, 2006

Automotive Sourcing in China & Cost Savings [Title from weblog - may not be the paid subscriber title]
From wardsauto.com
By Christie Schweinsberg
April 6, 2006
Mirror from
Manufacturing Forum, Practical Machinist

Study Reveals: Auto Suppliers Find No Cost Guarantee in China Sourcing
MEMA
April 3, 2006
Mirror at China Supply Chain Council

Study Reveals: Auto Suppliers Find No Cost Guarantee in China Sourcing; OESA and PRTM Management Consultants' Survey: More Than Half of Companies Studied Achieved Less Than 40 Percent of China Sourcing Targets
Business Wire
April 3, 2006

Enter the Dragon? - Lessons Learned in China Sourcing
Executive summary [Handout obtained at SAE session presentation]
Andreas Mai and Stephen Pillsbury, PRTM Management Consultants
Findings from a study based on more than 50 automotive supplier executive team interviews and surveys of supplier experiences and best practices in China
Lessons Learned in China: The Automotive Supplier Perspective
SAE 2006 World Congress, Detroit, MI
April 3, 2006
NOTE: Best online summaries immediately above

Competition and trade in the U.S. auto parts sector
by Thomas H. Klier, senior economist, and James M. Rubenstein, Miami University of Ohio
Chicago Fed Letter
Research Department of the Federal Reserve Bank of Chicago
NUMBER 222
January 2006

Don't jump in without testing the water
Peter Humphrey, ChinaWhys
China-Britain Business Council (CBBC)
2005

China’s Five Surprises
by Edward Tse
Strategy + Business
Winter 2005
PDF

GM Eyes Asia for Cost Cuts
Asian suppliers could help automaker trim costs
by Joseph Szczesny
Car Connection
Sept 12, 2005

INTELLECTUAL PROPERTY THEFT IN CHINA AND RUSSIA
HEARING BEFORE THE SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY OF THE COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES, ONE HUNDRED NINTH CONGRESS, FIRST SESSION
Serial No. 109–34
MAY 17, 2005
PDF
Mildly indexable HTLM version

OE Auto Parts Supplier Strategy for the Next Ten Years
Marc Santucci
eAutoPortal.com
May 2, 2005

A "China Price" For Toyota
The auto giant is taking its cost-slashing drive to a new level. Can its suppliers match China's cheaper parts?
By Chester Dawson in Toyota City, with Karen Nickel Anhalt in Berlin
Business Week Online
FEBRUARY 21, 2005

Sourcing in China not a sure bet
By strategy + business
Special to CNET News.com
February 7, 2005, 10:00 AM PST

Gordon Housworth



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Trends in Intellectual Property (IP) transfer to China

  #

Trends outlined in the 1999 Bureau of Industry and Security's U.S. Commercial Technology Transfers to the People’s Republic of China have accelerated to the present day:

China’s laws, regulations, and policies with regard to foreign investment and trade include numerous provisions and mandates for foreign technology transfer. These policies are clearly intended to support domestic reform and modernization efforts toward self-sufficiency in high-tech sectors. Furthermore, many of the provisions included in China's existing industrial policies appear to raise questions as to their consistency with international trade practices and bilateral agreements... Despite these policies, however, many foreign corporations continue to invest in China, including US high-tech companies. In doing so, these companies often must transfer commercial technology in various forms in order to accommodate Chinese foreign investment and import regulations, which have become increasingly selective in terms of the level and type of technologies allowed. Thus, it is clear that foreign firms are being coerced into transferring technology (which they probably would not otherwise do) as the price to be paid for access to China's market.

The more difficult question to answer, however, is the degree to which these transfers are "forced" [as the] degree to which US technology is being transferred to China is a combination of Chinese law and strategic decision-making on the part of US corporations. That is, technology transfer is both mandated in Chinese regulations or industrial policies (with which US companies wishing to invest in China must comply) and used as a deal-maker by US firms seeking joint venture contracts in China…

[F]oreign investors face a difficult dilemma: to invest early and accept the risks involved in doing so in hopes of minimizing potential losses while creating a market presence and goodwill in China, or to wait and see how China's market and policies develop, investing when the time is ripe and investment policies less discriminatory. The leading high-tech companies — American, European, and increasingly also the Japanese — seem to have decided on the former strategy…

[Part 1 shows that] China’s foreign investment policies have followed a clear pattern characterized by an increasingly targeted focus on hightechnology investment and imports. These policies are intended to bolster China’s modernization efforts in both the civilian and military sectors. The most significant finding of this study, however, is the degree to which US high-tech firms are collaborating on R&D with leading Chinese universities and research institutions in China, an offset agreement frequently accompanying joint venture contracts. Although there is as yet no clear cause and effect as much of the evidence is circumstantial, Part 2 of the study demonstrates that trends in Sino-US trade are worrisome in that hightechnology sector exports (such as electronics) are increasing from China to the United States and elsewhere while at the same time the US trade deficit with China is climbing.

Long past the period of sending "outdated factory equipment to China to produce older models no longer salable in the West, the 2006 landscape shows a continuing foreign competition in China:

so fierce [that] Honda is about to introduce its latest version of the Civic only several months after it went on sale in Europe, Japan and the United States. Toyota, meanwhile, is assembling its Prius gasoline-electric sedan only in Japan and China. [In 2005-6] Ford opened a second production line next door that is practically identical to one of its most advanced factories, the Saarlouis operation in southwestern Germany. The new line produces the Focus, the same small car it builds in Germany (but different from the Focus sold in the United States). And with continuing improvements to the first line, it will bring total capacity here to 200,000 cars a year by June [2006]…

American and European carmakers, including Ford, General Motors, DaimlerChrysler and Volkswagen, as well as Toyota, Honda and Nissan of Japan are introducing their best technology to their plants in China, and not only to compete against one another. They also face rapidly growing competition in the Chinese market from purely local companies like Geely, Chery and Lifan.

That technology infusion is now reversing the acquisition direction. Shanghai Automotive Industry Corporation (SAIC) "acquired a controlling stake in Korean car maker Ssangyong Motor Co." in 2004. Nanjing Automobile Corporation bested SAIC to acquire the UK's MG Rover Group in 2005, dismantling its factories for shipment to China (although SAIC gained rights to two Rover designs). Chinese suppliers such as Wanxiang continue to acquire automotive suppliers, many of whom "needed cash because Chinese manufacturers like Wanxiang were eroding their business." To solve its shortfall in efficient engine manufacture, the Lifan Group in partnership with the CCP is attempting to purchase the highly advanced Chrysler-BMW joint venture Campo Largo engine plant, which if successful, would see the plant dismantled and moved to China to seed indigenous engine manufacture. [Russian AvtoVAZ and GAZ has also evinced interest.]

SAIC is now using expertise gained from its joint ventures with GM and Volkswagen to produce its own upscale luxury sedans in 2006, occupying both partner and competitor roles to its foreign partners. Foreign OEMs have no avenue of redress:

Under Chinese regulations, to make cars in China, foreign companies must form joint ventures in which their Chinese partners own no less than 50%. The major multinationals have already teamed up with the biggest and most promising local firms. [They] have little choice but to keep making their cars and encourage their partners not to compete too directly with them.

GM and Volkswagen have no choice but to acquiesce even though they know that all the IP they contributed, and will contribute, to their joint ventures will increasingly be used against them:

In a prepared statement, GM said it "understands" Shanghai Automotive's "desire for further growth" and that it is confident "SAIC recognizes that the success of both companies in the China market is closely linked to the success of our joint ventures."

In a prepared statement, Volkswagen said, "Volkswagen and SAIC keep a close and long-lasting partnership. We understand SAIC's wish to build up an own Chinese car brand. We offered our support in the past and still do at present."

While foreign OEMs have enjoyed rapidly rising production of "family vehicles" (cars, SUVs and minivans) in China in the 2000-2005 period, indigenous Chinese manufacture has grown at much higher rate. (It is an axiom of technology maturation that each generation takes half the time of its predecessor; Japanese car manufacturers took 20 years to establish themselves in the US market, the Koreans 10 years, and short of import limitations, I expect the Chinese to half that, all at lower cost.)

SAIC's vertical integration will drive other Chinese auto firms to follow suit, thereby increasing the pressure and demands on foreign OEMs for more and better technology even as it narrows their options. Foreign OEMs will become collateral damage in the competition between Chinese OEMs and Tier One suppliers.

I predict that Chinese firms will move instead to replace foreign firms or absorb their Chinese operations when the foreign OEMs have nothing else to offer, ultimately buying into increasingly ailing foreign OEMs so as to create sales channels for Chinese vehicles.

What happens when even the current level of JV supplied technology is no longer sufficient, when the desired technology is not within the hands of foreign OEMs?

Next: Low cost is not low risk: realities of IP Loss

China's Car Sector Gears Up for Big Change
At Shanghai Auto, Foreign Partners Now Find A Rival
By GORDON FAIRCLOUGH
Wall Street Journal
April 5, 2006

AvtoVAZ Goes Brazilian To Secure New Engine Supplies
By Anna Smolchenko
The St. Petersburg Times
Issue #1154(20), March 21, 2006

Thanks to Detroit, China Is Poised to Lead
By KEITH BRADSHER
New York Times
March 12, 2006

Cutting U.S. jobs while prospering in China
A struggling U.S. auto parts maker faces a dilemma that's increasingly common as more products are made in China
By Craig Simons
Austin Statesman
March 05, 2006

China Seeking Auto Industry, Piece by Piece
By KEITH BRADSHER
New York Times
February 17, 2006

China takes aim at U.S. auto industry
By Michael Oneal
Chicago Tribune
Published January 29, 2006

GM Eyes Asia for Cost Cuts
Asian suppliers could help automaker trim costs
by Joseph Szczesny
Car Connection
Sept 12, 2005

China Investing in Rust-Belt Companies
Auto-Parts Maker Wanxiang Invests in U.S. Partners As Its Ambitions Expand
By PETER WONACOTT
Wall Street Journal
November 26, 2004
Fee archive
Mirror

U.S. Commercial Technology Transfers to the People’s Republic of China
Bureau of Industry and Security
US Department of Commerce
1999
Key findings:

Full text by section: Part 1, Part 2, Part 3, Appendix A, Appendix B, Appendix C, Appendix D, Appendix E

Gordon Housworth



InfoT Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  

discussion

  discuss this article

GeoCell: a map, a narrative and a stopwatch for acts of war, acts of god and acts of commerce

  #

Gen. Michael Hayden's GeoCell concept is what I call a map, a narrative and a stopwatch that can be applied equally to acts of war, acts of god and acts of commerce. His "breathtaking" advance strikes me less as the promulgation of the GeoCell than his having made the bureaucratic leap of integrating not only the output but the working relationship between classified imagery and analysis assets:

  • Maps have long been one of the best means to present a large volume of data to a person
  • An appropriate narrative containing contextually relevant actionable info is always useful
  • Perishability of the event and the data pertinent to the event is an important part of relevance and info upon which to act

Richard Saul Wurman beat him to it in 1981. Wurman, architect, graphic designer and cartographer, arguably created the GeoCell concept with his ACCESS travel guides and for which he received the Kevin Lynch Award from MIT. This note will weave Wurman and Hayden.

Generically, a geocell is a 1 degree x 1 degree box, very close to a rectangle at the equator. To any Air Force officer like Hayden, the concept would be well-known from targeting analysis. While not clear from the unclass press when Hayden promoted GeoCell in earnest, a pilot was working as early as 2002. Hayden integrated satellite imagery at National Geospatial-Imagery Agency (NGA) with collection and analysis at National Security Agency (NSA). GEOINT 2004 noted:

An extremely important concept that NGA and NSA has developed is the GEOCELL: the integration of collection and analysis at the most tactical level. The objective was to get the best situational understanding to the most appropriate level, whether it was at the Division, the Regiment, the Brigade, the Company, etc., all in real-time or worst case, near real-time. A big part of enabling the GEOCELL was providing INTELLINK network access to those who needed it and moving the concept of intelligence from "The Need to Know, to The Need to Share". The GEOCELL includes personnel from NGA, NSA, other agencies and the relative vendors.

Where Multi-INT "is the collaboration of two or more intelligence disciplines," the SIGINT-GEOINT (signals and geospatial intelligence) collaboration is intended to produce Multi-INT products "directly to customers – shortening and streamlining a process that has traditionally been linear while providing more complete and accurate information. Multi-INT is all about speed, accuracy and depth of content. Information can be discerned faster through virtual collaboration, thereby shortening timelines for decision-makers. Multi-INT products are more accurate because they correlate multiple data points, and they provide important context through the integration of multiple data sources." By January 2005, GeoCell was said to have "rushed real-time tips and warnings to field operatives as well as White House officials."

Hayden's GeoCell for military and humanitarian means meets Wurman's ACCESS Guides for tourism and commerce. Wurman was "enchanted with "the simplification of things."" Creating a geographically contextual 'GeoCell' view to tourism, Wurman's Access series "was the first guidebook to adopt the neighborhood-by-neighborhood format":

Wurman devoted himself to fighting what he calls "the disease of familiarity." Trying to find a good guidebook to help him get around Los Angeles [where he moved in 1978], he realized that they were all written by people who clearly knew too much and thus could not effectively create a guide for visitors who knew nothing. From this experience came the inspiration for Access, a series of guidebooks that are organized, not categorically, but geographically, so that a person can easily find all the restaurants, cultural attractions, and landmarks within a given area...

It's important to note that the format of each Access guide presupposes that the visitor is on a walking (or perhaps bicycling) tour of the area. The guides are organized by neighborhoods and broken into five color-coded subject headings... Each neighborhood is further organized as if one were strolling the streets. In some of the books, there are descriptions of places that could only be found by walking down the avenues and lanes identified in the guides...

A page chosen at random from the Tokyo Access guide, for example, presents both practical information and cultural observations about a tiny area of the Ginza. The items flow smoothly from one to the next, as one would walk the streets of the area: first, how to get to what the author considers the best private art museum in Japan (the Bridgestone); then, a rush-hour glimpse of the waves of commuters in silent procession from the Tokyo Station nearby (with a note that the bus to Disneyland is at the Yaesu exit). Next, upstairs, is the Daimaru department store, ''the ideal store for those things you forgot to pack for the trip,'' and a suggestion that the store's ''fifth-floor putting green is a good place to kill time while waiting for a train (no charge).'' Another short walk leads to the Library of Tourism and Culture and then to the Fukuoka Mutual Finance Bank where one can see ''a door based on a design by Marcel Duchamp.'' A sobering aside: ''According to popular belief that Tokyo's earthquakes run on a 69-year cycle, the next massive tremor is due to occur in 1991.'' (This cycle formula failed to predict the earthquake of Oct. 4, 1985.) Each brief item is color coded for quick identification. Gardens and parks are described in green type. Items on museums, theaters and architecture are printed in blue; restaurants and nightlife in pink; shops in red; hotels and narrative items in black...

The updates have been written for the most part by local travel writers, giving much of the information a "locals" feel. This bias has the side effect that some of the well-known restaurants catering to tourists found in other guidebooks do not appear in these guides. Common to all guidebooks is the problem of businesses that have closed or relocated since the publication date. For that reason, anyone purchasing a guidebook of any type should always verify that the venue is still there prior to driving there the first time.

It should be noted that Wurman created TED (technology, entertainment, and design) and the TED Conferences in the mid 1980s as he saw his three areas of interest converging. His Information Anxiety and Information Architects are still benchmarks. Wurman operates in Five Rings of Information Immediacy:

  • Cultural Information: outermost ring containing "our history, philosophy, and arts… our attempts to understand our culture"
  • News Information: current events having "only a relatively minor impact on our daily lives"
  • Reference Information: information "sources including textbooks, directories, encyclopedias, maps, dictionaries, and telephone books"
  • Conversational Information: "verbal and written exchanges of information that we have with people around us," a level Wurman identifies "as a main source and the one we most easily ignore [but one] that we should focus most intensely on if we are to gain greater control over our own information spaces.
  • Internal Information: innermost ring of "cerebral messages that enables our bodies to function, e.g., pain and hunger, "information over which we have the least control but that affects us the most"

Creating a geographically contextual 'GeoCell' view of tourism, Wurman's Access series "was the first guidebook to adopt the neighborhood-by-neighborhood format." Having long since sold the venture to Harper Collins, its series editor "maintains that Access remains "the only guide that takes you street-by-street into the heart of the city neighborhood." ACCESS "is a particular boon for business travelers who tend to find themselves stuck in a neighborhood. [The] success of this format is so effective that 60 to 80 percent of first-time users of Access will buy another guide in the series, and 30 to 40 percent will purchase the volume for the city in which they live."

The attraction of the ACCESS guides was such that in 2001 Philip Agre wished for a "personal access guide," a "fantasy" personal information device patterned after Wurman's guides employing "Accessware" for various interests. A "basic Personal Access Guide platform" is loaded with open source Accessware assignable to various levels or groups for business or recreation:

When you display all this stuff, it looks exactly like an Access Guide… Newspapers will provide geographic annotations for every place they mention, including not just restaurant reviews but the places where events happen in their stories. That way, you can point someplace (or just go there) and ask the LA Times, "what has happened here?". Or the LA Times could repurpose years of its reporting into neat packages of Accessware, all quality-controlled for its continuing interest…

The Personal Access Guide that you can assemble from other people's content will be limited [so you can] market an Accessware module based on your own explorations of the city. Just capture a geocode for each place… write up a paragraph on it, answer the half-dozen questions that the Accessware framework defines… and drop it into the right folder. When it's time to issue a new release, you just write yourself a little blurb, select the right menu entry, and your guide hits the market within fifty milliseconds…

What would happen if everyone used such systems? Bad places would be driven out of business more quickly, and secrets would not remain secret as long. Good places would prosper instantly whether they could advertise or not. The general idea is that people would be matched with places more effectively… Perhaps big signs would be less important for attracting people to places, and streets might become more presentable as a result. Wireless "signs" might interact with people through their devices rather than directly.

What was posited as a "fantasy" in 2001 is now commercially viable. Imagine what Google WiFi has in mind for you PDA and cell phone. Military versions are already in hand. But attention to perfect graphics, text and timing must be constant; while the ACCESS guides are still good, they suffered after Wurman sold the business and lesser hands with sharper budgets lessened the product.

Contrast Wurman with the NSA-NGA Multi-INT:

In the area of data collection, Mutli-INT optimizes the use of sensors through coordinated tasking, tipping and cueing. Through Multi-INT collaboration, analysts from different tradecrafts gain perspective through the additional insight provided by other intelligence disciplines. Sometimes data collectors and analysts are able to tip each other to information that would have otherwise gone unnoticed. For example, communications intelligence (COMINT) might learn that an event is about to occur and automatically tip GEOINT capabilities to obtain relevant imagery.

I think that General Paul Van Riper would second Wurman's enchantment with "the simplification of things." (In the 2002 Millennium Challenge war game presaging OIF, Van Riper's Red Team adversary routed the US Blue Team "equipped with an elaborate computerized decision-making tool" called Operational Net Assessment. Malcolm Gladwell observed that at the moment of Van Riper's attack on US forces, "they were so caught up in their computers and charts and systems analysis and complex matrixes that they had lost the ability to engage in the flexible, free-wheeling, instinctive thinking that is essential in the midst of battle.")

A colleague with a gift for creating seductive Graphical User Interfaces (GUIs) noted that:

[Mapping] is very important to bringing it all together but is extraordinarily limited without data. Google local is a great example of the power when you tie a simple database of services to good mapping application. I picked up a Verizon Aircard and can surf 500kb to 1MB while driving around in the car. I’ve taken to bringing the laptop along on family trips and surfing just ahead of the car looking for alternate routes that circumvent traffic or offer more scenic passage. Last week [we] were able to identify [a restaurant] within 5 minutes of our chosen route... I think the challenge is figuring out what data represents actual actionable stuff. (Insert your lecture on Signals, Sprignals and Noise here) [Private correspondence] 

For the Signal and Sprignal (spurious signal) discussion, see The value of counter-deception and early sprignal detection in political elections and the two parts that follow. Our discussion proceeded to the difference between a "good enough" military and commercial offering. My position:

[Despite] the cubic acres of money the feds spend, both the military and commercial spheres talk in terms of "good enough," only their good enough is more than enough for we commercial plodders. I split that hair only to point out the feds are trying to be more cost effective in certain areas, if for nothing else, the number of places that they have to be to deal with today's threats are rising. As noted in one of the first items, the feds are harnessing commercial feeds for both lower cost and to insert an air gap of sorts to isolate their classified systems - which can give away info just by the multi-INT streams converging on a shooter's console. [Private correspondence]

I remember thinking at the time that a fruitful jump off point was combining commercial feeds and commercial tools to build a "good enough" implementation of some of the federal logic, e.g., using that advanced logic as a template to edge closer with short cycle time development.

The feds have spent enormous effort on locating things and integrating that knowledge into a 'supply chain' that delivers the appropriate item onto the appropriate location at the proper time. The AF targeting guide talks in terms of CEP or Circular Error Probability (CEP) in which 0.5 of the ordnance fall within a targeted radius; Total Overall Error as a combination of target location error, navigational error (GPS & Inertial), aircraft, weapon and operator; Casualty Radius (CR) and the Cumulative Collateral Damage Probability (CCDP). A good civilian application would be the location of a WiFi hotpoint where the 'casualty radius' is the connection radius or pattern formed by masking or distortion that extends beyond the locus of points describing the physical location.

I do not see commercial providers addressing location beyond mastering "driving direction" algorithms and putting geographers into the field to pick up road "geometry," verifying existing "named features" and looking for new ones. (Goggle algorithms appear to favor right turns, for example, which creates circuitous routes.) They do not do well in assessing vague locations, what I liken to locating the electron in the potential well, i.e., there is difficulty in saying precisely where the electron is at a point in time but great accuracy over a range of locations/energy states.

Increase the scale of the map or the duration of the time line sufficiently and the probability equation will collapse to a point or cluster sufficient to work for a particular location or period of time. Conversely, as one zooms in, location or time will have greater uncertainty and will require other tools/inputs for a "nav update." In dealing with textual and spatial data in a GeoCell, I think of a clustering algorithm for 1+ points that is sensitive to the range of time or position under consideration as well as to the task, e.g., striking a reinforced VC company on the move or an SS-18 silo (I date myself in both cases) requires a different sensitivity in time, location and response. I think that much advantage is to be had from applying targeting algorithms to the nascent commercial mapping field.

One can also suffer from too little pertinent data integration. Applicable to this note, Mossad's Efraim Halevy and Uzi Arad offered the CIA useful ideas, and some painful prediction. One was in terms of data integration, DoD has taken more of RMA (revolution in military affairs) to heart than had CIA. While my personal information is dated, recent unclass descriptions show little had changed such that the average DI analyst had a clumsy hodgepodge of terminals and feeds on their desk hampered by an excessive air gap to reach open source feeds. Automated Multi-INT was largely nonexistent. A recent two-hour demo of Bloomberg technology by one of their journalists showed far more on their desks in terms of integration than at Langley.

[Aside: Interestingly Bloomberg was not taking advantage of the work by their journalists, opinion makers and editors beyond delivery of the primary product, e.g., there was no tracking and analysis of what these people did, and what they looked at, in the production of their primary product. There is much secondary knowledge extraction to be had that is not being exploited. In that respect, an entertainment industry database firm, All Media Group is a step ahead; AMG's machine analysis of a historical trove of music previously rated and described by human listeners allows it use machine analysis to rate an exponentially rising volume of unrated music, yet achieve human-scale scoring. Even something as good as Bloomberg has much to gain from secondary analysis.]

How much is enough? How much distracts and dilutes focus? I think that Wurman did a superb job of implementing Van Riper's admonition to stick to the essence of task with the appropriate (minimum) level of technology needed to speed without encumbering:

We hear many terms, whether it's "transformation," "military technical revolution," "revolution of military affairs," all indicating something revolutionary has happened that's going to change warfare. Nothing has happened that's going to change the fundamental elements of war. The nature of war is immutable, though the character and form will change. The difficulty is that those who put forth this argument believe that something fundamentally has changed, and you can change very quickly without thinking your way through it. They want to apply the technology without the brainpower.

My experience has been that those who focus on the technology, the science, tend towards sloganeering. There's very little intellectual content to what they say, and they use slogans in place of this intellectual content. It does a great disservice to the American military, the American defense establishment. "Information dominance," "network-centric warfare," "focused logistics"—you could fill a book with all of these slogans. What I see are slogans masquerading as ideas. In a sense, they make war more antiseptic. They make it more like a machine. They don't understand it's a terrible, uncertain, chaotic, bloody business. So they can lead us the wrong way. They can cause people not to understand this terrible, terrible phenomenon.

Kosher Cures for the CIA
By BRET STEPHENS
Wall Street Journal
May 9, 2006

Dodging Perils on Way to Top of Spy Game
By SCOTT SHANE
New York Times
May 8, 2006

GETTING THERE
The science of driving directions.
by NICK PAUMGARTEN
New Yorker
Issue of 2006-04-24
Posted 2006-04-17

Blink Reading Guide
Malcolm Gladwell
2005
Reading Guide Chapter 4. PAUL VAN RIPER'S BIG VICTORY

GEOINT 2005: Shattering Stovepipes, Creating Community
GeoIntelligence
Nov 1, 2005

A melding of the minds increases collaboration at two spy agencies
By Bob Drogin
Los Angeles Times
January 2, 2005

Wurman Uncut
A Conversation with Richard Saul Wurman
GK VanPatter
NextD Journal
Issue SIX, Conversation 6.1
2005

GEOINT 2004: Leveraging Technology in a new Era of Cooperation within the Intelligence Community
By Hal Reid
Directions
Oct 26, 2004

NGA Turns to Commercial Imagery To Fill Demand for Unclassified GEOINT
By Jessica Warner
PATHFINDER
SEPTEMBER - OCTOBER 2004

The Next Big Ideas: Multi-INT and Horizontal Integration
By Michele Weslander
PATHFINDER
MAY - JUNE 2004

Horizontal Integration: Why Is It Different?
By Lon Hamann
PATHFINDER
MAY - JUNE 2004

The Immutable Nature of War
Battle Plan Under Fire
NOVA
2004

Brands That Go Places
By Patricia Tan
Brandhome
12-May-2003

OGC Demonstrates Major Advances in Interoperable Geoprocessing for Military
PRESS ANNOUNCEMENT
Open GIS Consortium, Inc
March 7, 2002
PDF

The Access Guides and the Contradictions of Design
Philip E. Agre
Department of Information Studies, UCLA
16 December 2001

Wish List: Ten Inventions, Some More Serious Than Others
Philip E. Agre
Department of Information Studies, UCLA
20 October 2001

The Wurmanizer
By Gary Wolf
Wired
Issue 8.02 - Feb 2000

Information dis-ease
By Michael Fraase
Information Eclipse
Section: 01 Information 101
02 September 1999 08:16PM CST

THE TARGET LOCATION
Chapter 13
USAF INTELLIGENCE TARGETING GUIDE
AIR FORCE PAMPHLET 14- 210 Intelligence
1 FEBRUARY 1998

The Commissioner of Curiosity
David Kushner
The Pennsylvania Gazette
Last modified 12/15/97

A HANDSOME LOOK IN FUNCTIONAL GUIDEBOOKS
By PETER LEWIS
New York Times
Published: October 20, 1985

Gordon Housworth



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Confluence of anti-Semitic, pro-Fascist sentiments of the "Radio Priest" and Nazi-tolerant sentiments of US business

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Preceding: Jewish American and Israeli perspectives on AIPAC and its marriage of convenience with Evangelicals

Today's marriage of convenience between American Jews and Evangelicals is a welcome relief for Jews accustomed to attack by most Christian sects here, in Europe and wherever a Christian sect held sway. (Jews historically fared better under Muslim suzerain than Christian.) One cannot blame Jews for wishing to continue the current arms length relationship as the alternative is lessened security and perhaps renewed persecution of varying degree. The epicenter of 20th Century American religious attack upon Jews is actually close by as I write - the Shrine of the Little Flower church in Royal Oak, Michigan, the pulpit of the "Radio Priest," Father Charles E. Coughlin, whose anti-Semitic and pro-Fascist sentiments outraged Jews. It is sad to say that Coughlin was ultimately removed not for his assault upon Jews but his support for Nazi Germany and encouragement of a far right Catholic front group that was seen as an increasingly destabilizing element in the US political landscape, i.e., Jews remember that Coughlin's religious sentiments were not overturned or repudiated, only his support of a foreign power with whom the US ultimately went to war.

I think it useful to explore Coughlin and the period in which he prospered, as well as the enchantment between US business interests and Nazi Germany in the prewar years. (Remember that Roosevelt had to nanny the US out of isolationism and into war.) I believe that there are parallels of that period to the enchantment that occurs today between US business and China.

Shrine of the Little Flower is a remarkably beautiful church and bell tower, Beaux-Arts and Art Deco rather than Gothic or Romanesque. Henry McGill was the architect. Rene Chambellan executed the sculptural facade of its Charity Crucifixion Tower. It's singular beauty (photos here and here) belies the venom that Coughlin spewed from its pulpit and from the radio broadcast center in its Charity Crucifixion Tower. Older Jewish friends here virtually spit Coughlin's name. Few recordings of his sermons in full flight are available free (but are available for fee, see below) but all are chilling. Many in the Detroit area, Jew and Gentile alike, still connect the church to Coughlin and the stain in the minds of those of a certain age still hangs over it to this day.

In May 1925, Bishop Michael Gallagher named his new church for St Teresa of the Little Flower, locating it in a then distant suburb of Detroit, Michigan, even though "only 28 Catholic families resided there at the time because he foresaw that the booming auto industry would attract many Catholics to the area." In parallel, Gallagher had selected a Canadian priest for his already demonstrated ability to generate Mass attendance, Father Charles E. Coughlin:

One of the first public figures to make effective use of the airwaves, Charles E. Coughlin, was for a time one of the most influential personalities on American radio. At the height of his popularity in the early 1930s, some 30 million listeners tuned in to hear his emotional messages. Many of his speeches were rambling, disorganized, repetitious, and as time went by, they became increasingly full of bigoted rhetoric. But as a champion of the poor, a foe of big business, and a critic of federal indifference in the face of widespread economic distress, he spoke to the hopes and fears of lower-middle class Americans throughout the country. Years later, a supporter remembered the excitement of attending one of his rallies: "When he spoke it was a thrill like Hitler. And the magnetism was uncanny. It was so intoxicating, there's no use saying what he talked about..."

I think Coughlin is a forgotten orator worthy of being ranked along with Roosevelt, Churchill, Hitler and Goebbels. The New York Times noted:

Coughlin became a leading spokesman of the ''America for Americans'' movement of the 1930's. Along with such ''lunatic fringe'' figures as Gerald L. K. Smith and Francis E. Townsend, he formed the National Union for Social Justice, its primary purpose being the dumping of President Franklin D. Roosevelt. These were the years of the Great Depression. Institutions were being threatened. People were looking for demons and evildoers. Demagogues were popping up all over the landscape to provide them. Father Coughlin, giving his followers a little bit of everything, made impassioned speeches against both Communism and capitalism, the latter scorned for its concentration of wealth and profit-taking.

Coughlin began broadcasting in 1926 over WJR in Detroit; his "Hour of Power" on Sunday afternoon became a national pulpit:

[With] a nationwide listenership of 40 million in the 1930's, [Coughlin] raised huge amounts of money on the radio. And while at the beginning of the Depression Coughlin sounded like a Populist in the tradition of Huey Long, he became more and more extreme. Jewish bankers caused the Depression… Hitler and Mussolini, while stern authoritarians, should be supported, because that's what it takes to get rid of Communists. "Coughlin berated Jews, he berated Blacks, he was just hateful… "

Donations of ordinary folks in response to Coughlin's radio callings provided virtually all of the money to build the church and tower, and after being thrown off the air by CBS, underwrote his purchase of radio airtime for Coughlin and his National Union for Social Justice (NUSJ). At his zenith in the 1930s, Coughlin was commanding 30 million plus listeners. No wonder he was called the Radio Priest. Without the donations of so many ordinary people, Coughlin's brand of evil would never have taken wing:

Although anti-Semitic themes appeared in some of Coughlin's speeches fairly early in his career, it wasn't until the late 1930s that the priest's rhetoric became increasingly filled with attacks on Jews. By 1938, the pages of "Social Justice" were frequently filled with accusations about Jewish control of America's financial institutions. In the summer of that year, Coughlin published a version of "The Protocols of the Elders of Zion." A virulently anti-Semitic piece of propaganda that had originated in Russia at the turn of the century, the "Protocols" accused Jews of planning to seize control of the world. Jewish leaders were shocked by Coughlin's actions.

Later that year, the radio priest delivered perhaps his most startling and hateful speech to date. In response to the November 10, 1938, "Kristallnacht" attack on Jews in German-controlled territory, Coughlin began by asking, "Why is there persecution in Germany today?" He went on to explain that "Jewish persecution only followed after Christians first were persecuted."

The owner of WMCA, the New York station that carried Coughlin's show, refused to broadcast Coughlin's next radio message. The Nazi press reacted to the news with fury: "America is Not Allowed to Hear the Truth" declared one headline. "Jewish organizations camouflaged as American...have conducted such a campaign...that the radio station company has proceeded to muzzle the well-loved Father Coughlin." A "New York Times" correspondent in Germany noted that Coughlin had become for the moment "the hero of Nazi Germany."

While I admit to being inexpert on leftist/labor activities of the 1930s, it appears that a journalist for the Daily Worker, Abe Magil, was responsible for first outing Coughlin's extremist views:

Speaking to millions of radio listeners every Sunday morning from his church just outside Detroit, at first Coughlin hid his extremism and anti-Semitism in his broadcasts, but not in his church sermons. With some trepidation, Magil began attending Coughlin’s sermons, and wrote the first exposé of Father Coughlin’s neo-fascist, vitriolic anti-Semitism for the Daily Worker.

Coughlin reflected what a Jewish colleague described as the monotonously precise Nazi delivery of the idea that Germany would be returned:

to its "rightful" place in the world and correct the wrongs perpetrated on them by the world community and the 5th column of traitors within Germany that had subverted the nation and signed an capitulation in the form of the Armistice because of the evil of the Jews, liberals, trade unionists and other progressives. Of course dis-employing all the Jews would (and did) open up jobs and advancement to the non-Jews would be one more 'rational' motivation… And of course the Nazis hid (barely) the truth of the exterminating death camps so that the rest of Germany could feel moral and civilized…

Some historians say that the only force Hitler worried about opposing him within Germany was the Lutheran Church. Outside of Germany, the key issue of the day was not death camps, world domination of Hitler but "non-interventionism"… The greatest evils have been described by as arriving with a banal face… From my vantage organized evil creeps slowly on its hands and knees and eschews all shouting and other recognizable drama.

Many in business were not so observant. We forget that Hitler and his National Socialist movement retained an aura of social acceptability among too large a segment of US culture and business well after Kristallnacht, not the least of which were Henry Ford, Father Coughlin, Charles Lindberg, even the architect Philip Johnson. From Profits über Alles! American Corporations and Hitler:

[Hitler] sent mixed signals [to] American businessmen [who] Like their German counterparts… long worried about the intentions and the methods of this plebeian upstart, whose ideology was called National Socialism, whose party identified itself as a workers' party, and who spoke ominously of bringing about revolutionary change. Some high-profile leaders of corporate America, however, such as Henry Ford liked and admired the Führer at an early stage. Other precocious Hitler-admirers were press lord Randolph Hearst and Irénée Du Pont, head of the Du Pont trust, who… had already "keenly followed the career of the future Führer in the 1920s" and supported him financially. Eventually, most American captains of industry learned to love the Führer…

In the 1920s many big American corporations enjoyed sizeable investments in Germany. IBM established a German subsidiary, Dehomag, before World War I; in the 1920s General Motors took over Germany's largest car manufacturer, Adam Opel AG; and Ford founded a branch plant, later known as the Ford-Werke, in Cologne. Other US firms contracted strategic partnerships with German companies. Standard Oil of New Jersey — today's Exxon — developed intimate links with the German trust IG Farben. By the early 1930s, an élite of about twenty of the largest American corporations had a German connection including Du Pont, Union Carbide, Westinghouse, General Electric, Gilette, Goodrich, Singer, Eastman Kodak, Coca-Cola, IBM, and ITT. Finally, many American law firms, investment companies, and banks were deeply involved in America's investment offensive in Germany, among them the renowned Wall Street law firm Sullivan & Cromwell, and the banks J. P. Morgan and Dillon, Read and Company, as well as the Union Bank of New York, owned by Brown Brothers & Harriman. The Union Bank was intimately linked with the financial and industrial empire of German steel magnate Thyssen, whose financial support enabled Hitler to come to power. This bank was managed by Prescott Bush, grandfather of George W. Bush. Prescott Bush was allegedly also an eager supporter of Hitler, funnelled money to him via Thyssen, and in return made considerable profits by doing business with Nazi Germany; with the profits he launched his son, the later president, in the oil business.

American overseas ventures fared poorly in the early 1930s, as the Great Depression hit Germany particularly hard. Production and profits dropped precipitously, the political situation was extremely unstable, there were constant strikes and street battles between Nazis and Communists, and many feared that the country was ripe for a "red" revolution like the one that had brought the Bolsheviks to power in Russia in 1917. However, backed by the power and money of German industrialists… Hitler came to power in January 1933…

American business leaders with assets in Germany found to their immense satisfaction that his so-called revolution respected the socio-economic status quo. The Führer's Teutonic brand of fascism, like every other variety of fascism, was reactionary in nature, and extremely useful for capitalists' purposes. Brought to power by Germany's leading businessmen and bankers, Hitler served the interests of his "enablers." His first major initiative was to dissolve the labour unions and to throw the Communists, and many militant Socialists, into prisons and the first concentration camps, which were specifically set up to accommodate the overabundance of left-wing political prisoners. This ruthless measure not only removed the threat of revolutionary change — embodied by Germany's Communists — but also emasculated the German working class and transformed it into a powerless "mass of followers" (Gefolgschaft), to use Nazi terminology, which was unconditionally put at the disposal of their employers, the Thyssens and Krupps.

Most, if not all firms in Germany, including American branch plants, eagerly took advantage of this situation and cut labour costs drastically. The Ford-Werke, for example, reduced labour costs from fifteen per cent of business volume in 1933 to only eleven per cent in 1938… Coca-Cola's bottling plant in Essen increased its profitability considerably because, in Hitler's state, workers "were little more than serfs forbidden not only to strike, but to change jobs," driven "to work harder [and] faster" while their wages "were deliberately set quite low." In Nazi Germany, real wages indeed declined rapidly, while profits increased correspondingly, but there were no labour problems worth mentioning, for any attempt to organize a strike immediately triggered an armed response by the Gestapo, resulting in arrests and dismissals. This was the case in GM's Opel factory in Rüsselsheim in June 1936… As the Thuringian teacher and anti-fascist resistance member Otto Jenssen wrote after the war, Germany's corporate leaders were happy "that fear for the concentration camp made the German workers as meek as lapdogs." The owners and managers of American corporations with investments in Germany were no less enchanted, and if they openly expressed their admiration or Hitler — as did the chairman of General Motors, William Knudsen, and ITT-boss Sosthenes Behn — it was undoubtedly because he had resolved Germany's social problems in a manner that benefited their interests.

Jews within my circle of friends forget none of the above. Were I them I would take the supplications of deluded Evangelicals. I like to think this a version of Sun-Tzu's "Keep your friends close, and your enemies closer."

I submit that Profits über Alles! American Corporations and Hitler has relevance to China where business, be it from the US, Taiwan, Japan or Europe, is by and large anxious to expand its business there and is willing to put aside issues of censorship, labor relations, forced relocation of peasantry, pollution and other elements beyond the profit motive. And before anyone thinks that I am rushing to a moral judgment or that 'business is evil, think of all the many shareholders that are most pleased with the quarter to quarter profits that those investments produce in distant lands - just like the 1930s in Germany. One has to wonder how similar the outcomes will be.

This Catholic church is born again
Evangelical approach helps attendance soar
By Margaret Ramirez
Chicago Tribune
Published April 15, 2006

Profits über Alles! American Corporations and Hitler
Jacques R. Pauwels
History Cooperative
Spring 2003

Abe Magil: A tribute to a working class, Marxist journalist
People's Week World
Mar 22, 2003

Reverend Charles E. Coughlin (1891-1979)
American and the Holocaust
American Experience
1999

Review/Television; Father Coughlin, 'The Radio Priest'
By JOHN J. O'CONNOR
New York Times
December 13, 1988

Father Couglin, the "radio priest"
Bobby's Digital Old Time Radio Page
BROADCAST HISTORY:
1926, WJR, Detroit.
1926-30, WMAQ, Chicago; WLW, Cincinnati. Oct. 5, 1930-Apri15, 1931, CBS. 6Om, Sundays at 7.
1931-42, private network; heard Sundays throughout the land on many independent stations.

FATHER COUGHLIN
Radio Memories
Radio Memories Program index
Father Coughlin, Vol. 1 - BS 068
Father Coughlin, Vol. 4 - BS 338
Father Coughlin, Vol. 5 - BS 339
Father Coughlin, Vol. 6 - BS 340
Father Coughlin, Vol. 7 - BS 341
Father Coughlin, Vol. 8 - BS 342
Father Coughlin, Vol. 9 - BS 343
Father Coughlin, Vol. 10 - BS 344
Father Coughlin, Vol. 11 - BS 345
Father Coughlin, Vol. 12 - BS 346

Gordon Housworth



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Jewish American and Israeli perspectives on AIPAC and its marriage of convenience with Evangelicals

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In response to the AIPAC trilogy (parts 1, 2 and 3), a very dear friend attempted to put things into a Jewish American perspective:

Yes we Jews have become very effective in "persuading Congress et al" [sender's quotation marks]. Most who are my age remember all too well the boats being turned away, the interception of boats on the way to the Palestine Mandate, the refusal to at least bomb the railways to the death camps, the caveats in the property deeds, the fighting our way into and out of school. Shall I make the list longer?

Our efforts to control power given our absolute small percentage of the total population have been quite successful and long shall it be so. To not do so would condemn us to the rampant anti semitism one sees in France. It is only under the surface here in the good old U S of A… I felt it every day in commerce whether it was the guy off the street who said I was trying to jew him down to the owner of a stamping plant who referred to us as "sheenies".

Gordon, my contribution to AIPAC is on the way.

[Sheeny; sheenies: a derogatory term for a Jew or Jews. Origin is generally listed as unknown but it may be based on the German "schon" or beautiful, an adjective used by Yiddish merchants in advertising their wares]

I can sympathize with the "only under the surface" comment as I had an older relative, a courtly southern gentleman until circumstances drove him to drink, that began to ascribe anything amiss or bad as the fault of "dirty niggers and sheeny Jews," over and over. It was nothing short of stunning as I'd previously never heard those words from him.

In the late 70s or early 80s, I was sitting in the living room of my Israeli distributor, he from Prague, his wife from Munich, and both very elegant and artistically sensitive. Their son was about 6 or 7 if memory serves. My distributor had often expressed the sadness that he and his wife felt over the lack of a cultured environment in Tel Aviv or Israel for the matter. I asked why that did not return to Europe. The reply: "Gordon, this is the one place my son will never be called a Jew." I remember thinking how academic my education had been. Using a phrase that first rose in a talk with Black colleagues, I shall never be able to understand what I call the accumulated injury of a life of slights.

My American friend continued:

The only place a Jew really feels safe is Israel. There are 300 million Arabs surrounding 5 million Jews. There is a layer of anti semitism in Europe and the US. The muslim world is in the main anti semitic. There is no doubt that the Israeli Jew and the American Jew will do whatever is necessary to involve anyone that will come to their aid and will do so by any means possible.

It is my hope that we (the Jews) are not being naive. The reason the US is involved with Israel is that Israel is the eyes and ears where the oil is. I hope you do not believe the US would not walk away no matter what AIPAC et al would do if there was no oil in the Mideast. It suited the US's purpose to have Israel knock out the reactor in Iraq; it may serve again to have Israel go after the reactors in Iran. It may serve the US's purposes to feed Israel to the wolves. It is imperative that Israel do everything in its power to make sure that does not happen.

Gordon, Never Again!

My reply:

The US is certainly in the Middle East due to oil and its geopolitics drive us until such time as we slake our dependence on it or someone with a bigger stick shoos us away from it. [The US] was already in the Middle East before its relationship rose with Israel. Too few US nationals remember that although the US urged the partition of the East Bank of Mandate, declining Jewish wishes to partition the West Bank of the Mandate (Jordan) as well, the original military benefactor to Israel were the French [who were] instrumental in the construction of the Negev reactor and the Jericho I IRBM... It was Truman, feeling a need to annex Jewish voters in a close presidential election, that begun the political landscape that we have in the US today. One wonders what would happened without that event, or when the next time of need would have occurred. I do not for a moment think that Israel would look for another benefactor if US permissiveness waned. Mark me zany, but I think that Israel would strike a very interesting deal with China although the Chinese are so much more smooth a political operator that the fumblers in the administration, that they are doing very well painting us into the corner as the bull in the global China Shop...

I was privy to a number of Israeli state actions some of which were in our interests while many were not. I do not begrudge a nation state from acting in its own interests; I do not like it trying to pass its actions off as something good for us when it is something good for them. The US is the primary intel target for the State of Israel, dwarfing the assets directed at any other state. It is allowed access that no other state is permitted and it uses that access to our ill - significantly so.

Yes, there are tactical interests between the US and Israel. Examples being the identification of certain Palestinian assets to the Israelis... I was in some briefings by Israeli officers in which they used a metaphor that I think circulates within the IDF, as others have heard it, that Israel is like the man atop a burning building that can neither put out the fire or get down off the building. All actions are conducted within that narrow range of options.

Had I endured the history that you folks have had to do, I would be looking for every advantage that I could get and I would warily form an alliance with the [Evangelicals] that think that Jews will miraculously convert on the eve of rapture. I have Israeli friends that laugh at that as much as they are bemused at what they call the guilt of American Jews who give money in lieu of moving to Israel. Everyone seems to use everyone else to some degree. I have no issue per se with lobbying, be it for pharmaceuticals or for Israel, so long as it in the clear. In the case of AIPAC, it has long since crossed the line such that it should be under FARA.

His response was intriguing:

Frankly I don't have a problem with AIPAC falling under FARA but I am in the minority. Most feel that the omnipresent divided loyalties would be too apparent. It doesn't bother me. As to the Israelis view of the American Jews I would be there in a heartbeat if the black hats didn't wield so much power.

The "omnipresent divided loyalties" is my point and, yes, it would be on display as it is with virtually every other hyphenated American group, but that equality and openness is what I am seeking.

As to the black hats, back in the late 70s, I'd forecast that Israel would move rightward as the Sephardim came to outnumber the Ashkenazim. Combine that shift with radical religious conservatives and one gets a potent voting bloc. The Knesset's proportional representational system is tailor-made for this kind of factional pressure politics. It is neigh impossible to rule without at least having Shas underfoot or the gaggle of really rightward groups from which the greatest attack threat to Sharon was expected to rise. The Israeli security services spend a fair amount of time trying to decide who will line up on which side among the personnel among the various security assets. Rabin was, after all, not shot by a Palestinian. (See Keeping Sharon alive long enough to effect withdrawal from Gaza and the West Bank.)

I'll close this note with a reply from an Israeli friend, who divides his time between the US and Israel, responding to my inquiry as to "how Israelis - not American Jews - view evangelical Christians":

I think the average Israeli has no idea what evangelicals are about. For historical reasons (see Torquemada) Israelis have deep antipathy towards missionaries operating in Israel. In fact, the LDS [Latter-day Saints or Mormon Church] school in Jerusalem got permission from the government to set up in exchange for commitment not to engage in missionary activity in Israel.

For the average Israeli, non-missionary Christians who come to Israel with adoration for Israeli might are good gentile Zionists. Since Israelis have this inferiority/persecution complex, they crave validation from outsiders and tend to overlook the outsiders' belief systems and practices. So, Idi Amin Baba and South Africa were both kosher as well as South American despots and Pat Robertson.

Most Israelis don’t really understand that converting Jews is a big part of the evangelical theology. Most Israelis, who are quite secular, don’t know that a majority of Americans are deeply religious and hold strong beliefs about Armageddon and the role of Jews in the second coming. So perhaps they view evangelicals adoring Israeli soldiers and West Bank settlement as some type of weird but nice cult, especially as they do not proselytize in Israel.

That is the average view probably. The Israeli right wing leadership, including national-religious extreme, seemed to have struck a cynical alliance with the evangelicals. I believe that Bibi [Binyamin Netanyahu] is the master of that relationship where there’s a quid pro quo. Let them hold their crazy beliefs if they will be our power brokers in DC, a good complement to AIPAC. We'll not try to change them, nor they us, as long as both sides gain benefits.

The average Israeli was only sensitized to the evangelicals after Pat Robertson made his comment on Sharon's stroke being God’s punishment for dividing Israel. Now that is something that Israeli rabbis can spout any time with no problem (including Ovadia Yosef, the spiritual leader of Shas who is a real nut). But when an American says that, and he doesn't even wear some strange garb, that's a problem. But it was quickly smoothed out and the alliance continues and there were so many other news items that it was quickly forgotten. Ask the average Israeli, ask even enlightened Israelis who Robertson is and what evangelical beliefs about Jews are, and they will have no idea.

Next: Confluence of anti-Semitic, pro-Fascist sentiments of the "Radio Priest" and Nazi-tolerance sentiments of US business. Father Charles E. Coughlin outraged Jews and helped set the stage for today's marriage of convenience between Jews and Evangelicals.

Robertson blamed Sharon stroke on policy of "dividing God's land"
Summary: Pat Robertson suggested that Ariel Sharon's stroke occurred because he was "dividing God's land."
Meida Matters for America
Jan 5, 2006 2:54pm EST

Gordon Housworth



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Federal pandemic influenza plan can only count on half the expected public health staff to show up for a pandemic

  #

[Most of the] public health workers who would serve as a backbone of locally-driven emergency response in an influenza pandemic setting [feel] they will work under significant personal risk, in a scenario they are not adequately knowledgeable about, performing a role they are not sufficiently trained for, and believing this role does not have a significant impact on the agency’s overall response.

The "perceived risk associated with the worker’s role in an influenza pandemic" is sufficiently great that without specific intervention programs tailored for these workers, nearly "half of local public health workers would be unlikely to report during an extreme crisis. Three out of four technical and support workers don’t even think they will be asked to report to work during a pandemic."

I like to say that, "Any plan conceived and approved by or under sitting politicians must, by definition, be adjudged a success or it will be rerun until it does." Having written on previous TOPOFF (Top Officials) exercises here in the US, whose tests are gerrymandered in their instructions and boundary conditions so as to insure success, I am forever credulous of the accuracy of these tests to mimic reality. Each time the real world rudely intrudes, in the likes of Hurricane Katrina, our planning and recovery process is shown to be inept. (An example is the failure to resolve unintelligible communications channels across disciplines (such as between fire and police) that was known before 11 September, 2001, but was still not redressed as of Katrina.) See:

None of the TOPOFF exercises assumed a degradation of public health workers any where near the results of a study from the Johns Hopkins Bloomberg School of Public Health, Local public health workers' perceptions toward responding to an influenza pandemic.

The HHS Pandemic Influenza Plan clearly states the impact of an Avian Flu Influenza accurately enough:

When a pandemic virus strain emerges, 25% to 35% of the population could develop clinical disease, and a substantial fraction of these individuals could die. The direct and indirect health costs alone (not including disruptions in trade and other costs to business and industry) have been estimated to approach $181 billion for a moderate pandemic (similar to those in 1957 and 1968) with no interventions. Faced with such a threat, the U.S. and its international partners will need to respond quickly and forcefully to reduce the scope and magnitude of the potentially catastrophic consequences.

The HHS plan describes a "critical role for local and state public health agencies during a pandemic, including: providing regular situational updates for providers; providing guidance on infection control measures for healthcare and non-healthcare settings; conducting or facilitating testing and investigation of pandemic influenza cases; and investigating and reporting special pandemic situations."

Among those roles are, for example, key Healthcare and Emergency Response capabilities "Needed for Implementation of an effective response":

  1. Equipment and supplies maintained in the Strategic National Stockpile and state stockpiles sufficient to enhance medical surge capacity.
  2. Federal Medical Stations and healthcare assets (people, facilities, equipment, supplies, and exercised procedures) to enhance medical surge capacity.
  3. Widely available accurate rapid diagnostic methods to detect and characterize influenza viruses.
  4. Assets (people, facilities, equipment, supplies, and exercised procedures) for the timely, safe, and respectful disposition of the deceased.
  5. Institutionalization of psychosocial support services and development of workforce resiliency programs.

The term "Assets (people, facilities, equipment, supplies, and exercised procedures)" appears in other subsections of the HHS document, but no mention is made of the option that the local healthcare backbone will not show up for work - and no federal plan can persevere without the backbone of local support.

No one had apparently thought to query the local health staff, divided between professionals (all physicians, nurses and public health professionals) and technical/support staff on the following issues:

  • Probability of reporting to work
  • Possibility of being asked by their health department to respond to an emergency
  • Degree of knowledge "about the potential public health impact of pandemic influenza"
  • Confidence of safety "in their work roles"
  • Likelihood of family preparation "to function in their absence"
  • Likelihood they would get timely updates from their health department
  • Familiarity with "their role specific response requirements"
  • Ability to "address the questions of a concerned member of the public"
  • Significance of their role "in the agency’s overall response"
  • Importance of "pre-event preparation and training"
  • Importance of having "psychological support available during the event"
  • Importance of having "psychological support available after the event"

Risk perception theory (see other links below) describes a risk horizon in which "the summation of actual risk and other peripheral influences independent of the actual risk, such as perceived authority, trust, and situational control; these peripheral influences have been termed "outrage" or "dread." It should come as no surprise that actual risk is nestled within a group of contributing factors peripheral to the actual risk that "will have a considerable practical impact on how public health employees would respond in a crisis."

Employees' "sense of dread due to a lack of personal control" were caused by such variables as "uncertainty regarding working environment safety, unclear expectations of role-specific emergency response requirements, safety and well being of family members, inadequate emphasis on the critical value of each employee to the agency response efforts, and insufficient emphasis on stress management techniques."

The results were impressive:

  • 66% of public health workers "felt they would put themselves at risk of infection if they were to report to work during a pandemic"
  • Only 40% of all respondents felt it likely "they would be asked by their health department to respond to a pandemic influenza related emergency"
  • "Half of local public health workers would be unlikely to report during an extreme crisis"
  • "Three out of four technical and support workers don’t even think they will be asked to report to work during a pandemic"

These figures do not include those who cannot show up because of a primary or secondary interruption, i.e., they are prohibited due to such impacts as a gridlocking transport system.

So much for the ability of the US to carry out the HHS Pandemic Influenza Plan. Sustained, nationwide interventions with healthcare staff will be required to improve their willingness "in non-public health department settings to report to duty in disasters include workforce preparedness education, provision of appropriate personal protective equipment, crisis counseling, family preparedness and social support."

Local public health workers' perceptions toward responding to an influenza pandemic
By Ran D. Balicer, Saad B. Omer, Daniel J. Barnett and George S. Everly Jr.
BMC Public Health 2006, 6:99 doi:10.1186/1471-2458-6-99
ISSN 1471-2458
Publication date 18 April 2006
Full text PDF
Abstract

Nearly Half of Public Health Employees Unlikely to Work During Pandemic
Public Health News Center
Johns Hopkins Bloomberg School of Public Health
April 17, 2006

HHS Pandemic Influenza Plan
U.S. Department of Health and Human Services
November 2005

Applying risk perception theory to public health workforce preparedness training
By Barnett DJ, Balicer RD, Blodgett DW, Everly GS Jr, Omer SB, Parker CL, Links JM.
Johns Hopkins Center for Public Health Preparedness, Johns Hopkins Bloomberg School of Public Health
Journal of Public Health Management & Practice, Suppl:S33-7
November 2005

Explaining risk perception. An evaluation of the psychometric paradigm in risk perception research
Lennart Sjöberg, Bjørg-Elin Moen, Torbjørn Rundmo
Editor: Torbjørn Rundmo
Norwegian University of Science and Technology, Department of Psychology
ISBN 82-7892-024-9
Trondheim, September 2004

SARS Risk Perception, Knowledge, Precautions, and Information Sources, the Netherlands
Johannes Brug, Arja R. Aro, Anke Oenema, Onno de Zwart, Jan Hendrik Richardus, and George D. Bishop
Emerging Infectious Diseases

Vol. 10, No. 8, August 2004

Explaining risk perception. An evaluation of cultural theory
Sigve Oltedal, Bjørg-Elin Moen, Hroar Klempe, Torbjørn Rundmo
Editor: Torbjørn Rundmo
Norwegian University of Science and Technology, Department of Psychology
ISBN 82-7892-025-7
Trondheim, April 20, 2004

A Social Network Contagion Theory of Risk Perception
Clifford W. Scherer and Hichang Cho
Risk Analysis
doi:10.1111/1539-6924.00306
Volume 23 Issue 2, Page 261 - April 2003

Risk perception: Theories and models
Anna-Mari Aalto, Pilvikki Absetz, Yael Benyamini, Pepijn van Empelen, David French, Peter Harris, Britta Renner, Fritz Strack
European Health Psychology Society
2003

Gordon Housworth



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A note on sources to the forthcoming "No Nation Left Behind" program, Part 4

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I like to say that "Truth, beauty and contact lenses are all in the eye of the beholder." Given the contentious nature of the subject, the American Israel Public Affairs Committee (AIPAC) and its interaction with the Christian Right and subsequent effects on US foreign policy, much effort has been spent in source selection which, of course, will mean nothing to the fringes on either side. This note is directed at the middle where discourse remains possible. There is so much bias and venom masquerading as fact. The pro-Israeli HonestReporting is often not, but it is only modestly apologetic in comparison to the Committee for Accuracy in Middle East Reporting in America (CAMERA), the velocity of whose text barely holds onto a claim of legitimacy in presenting an Israeli issue. In opposition, there is the Institute for Historical Review (IHR) and FrontPage which I place in orbit between HR and CAMERA. Moving right, Jew Watch claims it is "NOT a hate site" but while it is largely devoid of doggerel, its texts push too great a slant. Farther to the right are those who decry the Holohuggers and Holocaustomaniacs. There is much worse. That said, a bad or dubious site can post a solid item. Attention is required as one good paragraph does not guarantee that another will follow it. For this note I have tried to stay in the center of the flock.

I habitually try to run articles back to original source, or close as possible, along the way looking for what gets replicated where or in some cases distorted or oddly excerpted in some manner (which is a good indicator of the site's interests or bias). A good example was the furor made over Thomas Stauffer's estimation of the cost of conflict of US policy in the Middle East which was disputed by pro-Israeli sources. Stauffer made his initial comments under US Army War College auspices at a conference at the University of Maine but that presentation seemed to be obscure, ultimately yielding only one HTML copy on the web, with a PDF mirror at an appalling anti-Semitic site. That led to more developed items in Middle East Policy Council (MEPC) and the Middle East Economic Survey (MEES). When HonestReporting criticized Stauffer, I was on solid ground to interpret and dismiss.

A very dear Jewish friend, arguably one of the kindest people on the planet, had sent me that very 2002 HonestReporting item in rebuttal to a private list note on Stauffer, noting that, "Yes, HonestReporting is biased towards Israel but still represents very good data… I know which side of the table I support, but I have to admit I have not verified the facts." My reply at the time (2002) was:

While I cannot speak to HonestReporting, I think that the general press and government response is far more biased [in favor of Israel] than you might be comfortable in addressing -- and I certainly do not infer any infernal cabal. [AIPAC] has been, and remains, a supremely effective organization that has affected Congress and other public bodies far in relation to its size. Interestingly VOA is more balanced in its reporting as, even though it is owned by State, it has fiercely protected its independence lest it be written off by its overseas listeners as a US agitprop organ.

One's filters will obscure potentially averse data when one's chair is firmly fixed at the table. I hope that my chair, if I have one, has no fixed point save for protecting US national interests.

One must also be extremely wary of Greeks bearing gifts in the form of foreign language translations. Speaking neither Hebrew or Arabic, like many others, I am at the mercy of those who, as I like to say, translate, transliterate or transmogrify the original according to their skill or biases. A recent example is Rima Barakat's comparison of translations by the Middle East Media Research Institute (MEMRI) which then get quoted as gospel by affiliated groups. This is not a new issue as the Guardian took up the issue of MEMRI's veracity in 2002, allowing MEMRI to rebut. Your mileage may vary, but over the years my original opinion of MEMRI has shifted much closer to that of the Guardian.

And then there are the 'battle of the quotes.' Take Sharon's purported exchange with Peres reported on Kol Yisrael (Israel radio) in Hebrew, reported by the Independent Palestinian Information Network A subsidiary of PalVision Ltd., in which an exasperated Sharon tells a concerned Peres in Cabinet session that "every time we do something you tell me Americans will do this and will do that. I want to tell you something very clear, don't worry about American pressure on Israel, we, the Jewish people control America, and the Americans know it." CAMERA presents an aggressive but unsatisfactory rebuttal. What is not on offer are pertinent cabinet transcripts.

I lean to the opinion that a refusal by Israel to produce transcripts for the cabinet session indicates something to hide and therefore the translation has currency. Had it not occurred, an official transcript would likely be presented to clear the matter. We have, I believe, a similar matter closer to home; Bush43 addressed the Council for National Policy (CNP) (also here), a group that Kevin Phillips calls "the most powerful group you've never heard of."

CNP is media-averse in the extreme down to its membership list, its selection of guests and its practices, but there is an extremely strong vein of religious and political conservatism. "Mr. Bush addressed the group in fall 1999 to solicit support for his campaign, stirring a dispute when news of his speech leaked and Democrats demanded he release a tape recording. He did not." And has not as of this writing. My suspicions are always elevated in such cases.

Next: AIPAC 1

Gordon Housworth



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"No Nation Left Behind" program, Part 2

  #

Part 1

It is one thing to confront the trajectory of Pax America but it is quite another to realize that the timeline of the trajectory is much shorter than previously thought and that the obstacles that must be remedied to reverse the decline are vastly more difficult than I'd envisioned. Kevin Phillips' American Theocracy was the instrument of foreshortening, a capstone of what Phillips describes as an "inadvertent trilogy":

Phillips states his underlying thesis in American Theocracy that there "are the three major perils of the United States in the early 21st century. First, radical religion – this encompasses everything from the Pat Robertson-Jerry Falwell types to the attacks on medicine and science and the Left Behind books with their End Times and Armageddon scenarios. Second, oil dependence – oil was essential to 20th century U.S. hegemony, and its growing scarcity and cost could play havoc. And third, debt is becoming a national weakness – indeed, the "borrowing" industry in the U.S. has grown so rapidly that finance has displaced manufacturing as the leading U.S. sector."

While I was familiar with peak oil, unsustainable debt and offshoring, I admit to having been inattentive to the magnitude of the impact of conservative religion, or as Phillips puts it: "religion’s new political prowess and its role in the projection of military power in the Middle Eastern Bible lands—that most people are just beginning to understand. The rapture, end-times, and Armageddon hucksters in the United States rank with any Shiite ayatollahs, and the last two presidential elections mark the transformation of the GOP into the first religious party in U.S."

The realization that many of Bush43's most fervent supporters and perhaps some of those close to the levers of power in the US were detached from any sense of geopolitical reality and might well be willing to employ the US arsenal in support of religious goals was very unsettling:

End-times prophecy fueled a fifth dynamic at work as the forces for the Iraqi invasion gathered, because many Christian fundamentalists dismissed worries about oil or global warming out of belief that the end times were under way. The Bible lands were what mattered. Events were in God’s hands. Even Senator James Inhofe, the Oklahoma fundamentalist chairing the Senate Environment and Public Works Committee, was reported saying, "I don’t believe there is a single issue we deal with in government that hasn’t been dealt with in the Scriptures," while declining to discuss his belief in the imminence of end times.

Partly as a result, GOP political strategists had no desire for a far-reaching debate on either global warming or peak oil. The religious right had its own rapture chronometers and apocalypse monitors reporting how many months, days and hours remained...

This true-believer endgame has been accelerating for many decades, especially since the creation of Israel satisfied the biblical prophecy of the Jewish return to Palestine. [The] growth during the 1970s, 1980s and 1990s in the numbers of Protestant fundamentalists, evangelicals, and Pentecostals was explosive. Many became Republicans and helped to give the GOP an increasingly religious coloration. Although the stunning sales of [Tim LaHaye's] Left Behind series grabbed most of the cultural attention, other books and videos during the late nineties [described] how Saddam Hussein was rebuilding Babylon, the citadel of evil. Still others pondered whether the antichrist was already alive and who he might be. (Saddam himself was a frequent choice.) Nearly one-quarter of Americans polled in 2002 even believed that the Bible had predicted the events of September 11, 2001! While these beliefs were surely a factor in Republican invasion planning, they are difficult for politicians to acknowledge—and they are especially tricky to discuss publicly, so they are instead quietly promoted in clandestine briefings or loosely signaled by phrases and citations that reassure the attentive faithful."

American Theocracy's complete chapter 4, Radicalized Religion, is compelling reading and fortunately available online. I recommend four reviews of American Theocracy: Michiko Kakutani's Tying Religion and Politics to an Impending U.S. Decline, Alan Brinkley's Clear and Present Dangers, Michelle Goldberg's Decline and fall and Stirling Newberry's Kevin Phillips' American Theocracy.

Unless you're a Left Behind reader or a troglodyte, you're likely aware that Phillips has come full circle, that he was the author of The Emerging Republican Majority (1969), that the underpinnings of that book contributed to Richard Nixon's 1968 victory and was the basis for waves of subsequent redistricting that cemented that victorious coalition. It is instructive to read Warren Weaver's 1969 review, The Emerging Republican Majority, in which he speaks of Nixon's pragmatism in evaluating a program, i.e., "Will it work?" as opposed to "Is it good or bad?" or "Is it liberal or conservative?" "[The] answer comes out not only "It did work" but "It will continue to work for some time to come."" "The Phillips doctrine thus amounts to institutionalizing Barry Goldwater's suggestion that the nation might be better off if its northeastern corner were sawed off and allowed to drift out to sea":

Because the Republicans are little dependent on the Liberal Establishment or urban Negroes--the two groups most intimately, though dissimilarly, concerned with present urban and welfare policies--they have the political freedom to disregard the multitude of vested interests which have throttled national urban policy. The GOP is particularly lucky not to be weighted down with commitment to the political blocs, power brokers and poverty concessionaires of the decaying central cities of the North, now that national growth is shifting to suburbia, the South and the West. The American future lies in a revitalized countryside, a demographically ascendant Sun Belt and suburbia, and new towns---perhaps Mountainside linear cities astride monorails 200 miles from Phoenix, Memphis or Atlanta. National policy will have to direct itself towards this future and its constituencies; and perhaps an administration so oriented can also deal realistically with the central cities where Great Society political largesse has so demonstrably failed.

I share Weaver's discomfort in the accuracy and implications of Phillip's research:

It is not a little depressing to read a serious 480-page book on politics based largely on the theory that deep divisive conflicts between black and white, Catholic and Protestant, Jew and Irishman, East and South are immutable, that such differences cannot be harmonized and that the politician should thus simply play upon them to his own advantage.

Almost equally disconcerting is the tacit assumption, in "The Emerging Republican Majority," that these divisions are all-controlling in a Presidential election, that the issues and the personalities and capabilities of the candidates count for nothing, that Americans vote only their blood line, church, neighborhood or caste.

Not much has changed, it appears, but then James Boyd's 1969 review, Nixon's Southern strategy 'It's All In the Charts', observed that, "By presenting a conservative image [the] Republicans can capture the votes of both the "projected" and "contingent bastions," and enough of the "battlegrounds," to stay in power for years, while ignoring the liberal Northeast." Phillips' political maps of 1969 are stunningly replicated in the 2004 election results.

Here are some snippets that caught my eye from the earlier parts of the trilogy:

Wealth and Democracy, itself rising from Phillips' The Politics of Rich and Poor (1990), dealt with the latest wave of corporatocracy (the phrase of currency for plutocracy), public and private corruption, wealth aggregation and tensions for democracy exemplified by the 1990s "technology mania and bubble, the money culture, belief that economic cycles were over, policies of market extremism, corruption and a politics ruled by campaign contributions." One could have been describing the run-up to the 1929 crash, the British South Sea Bubble and the Dutch Tulipmania, but that is Phillips' sidebar of cycles of excess and redress.

Phillips makes the point that "two greatest Republican presidents, [Abraham] Lincoln and Teddy Roosevelt" held much dimmer views of the excesses of business than did the Republican Party of 2002. (Lincoln supported labor as superior to capital to the point that he evinced "strong support for labor unions and strikes." Roosevelt's attacks on corporations exceeded those of Lincoln, while he "specifically repeated and endorsed Lincoln’s oft-quoted remarks about labor being superior to and more deserving of support than capital.") As president, Nixon "supported national health insurance, income-maintenance for the poor and higher taxation of unearned than earned income." Phillips' opinion was that the current Republican Party had betrayed the Party of Lincoln even as it continued to praise Lincoln. No wonder the right began to treat Phillips as a forgotten zek.

American Dynasty looked at the family-based intertwined presidencies of Bush41 and Bush43 and the "four-generation interaction" with the US financial and political establishment that made these presidencies possible. In what Phillips calls the "perilous state of the American political system," American Dynasty examines themes that form the warp and weft of the Bush family: fundamentalism, political and religious, that gained strength over the 20th century, the morphing domestic importance "of different economic sectors and elites—from investment banking and oil to the military-industrial complex," and the 20th-21st century "emergence of the Bush family [along] a trajectory of American wealth and power."

General dynastic characteristics are identified and tracked, notably "continuities of policy and interest-group bias… [revenge seeking] against old foes as well as recalling longtime loyalists and retainers" and the "effect of biological inheritance." Specific Bush family characteristics are "repeated use of family influence in arranging or smoothing over difficulties in the military service of three generations of Bushes… involvement of four Walker and Bush generations with finance—in several cases, the investment side of the petroleum business… [family] ties to oil [that] date back [to] Standard Oil a century ago… [and] relationships between the Bushes and the CIA."

The Bush family embedment in the establishment cannot be overstated. It was the Bush family connection to the establishment that "made it possible to consider Bush for vice president in 1968, almost out of the blue." The family held its place in the financial firmament as it mirrored the "migration of the U.S. population and of political power" from "Episcopal church pews" to "fundamentalist religious alliances," even as family generated controversies never "gained critical mass." These events were placed within the 1980s aristocratic pretensions of taste, celebrity culture of 'rock star' CEOs, and "kindred winner-take-all ethos" that "helped to make dynastization of wealth and politics a turn-of-the-twenty first-century reality."

Phillips begins to examine the politics and geopolitics that rose from the post-Clinton "restoration psychology and fundamentalist theology" of Bush43, themes that he will expand in American Theocracy, the Bush family's shift of "its religious intensity," "a southern-dominated electoral coalition," the "precedent-shattering circumstance [that] the de facto head of the Religious Right and the president of the United States can be the same person," and the emergence of a US "crusader state" that satisfied religious fundamentalists as it brought profit to "important economic interests."

The "cultural harshness and fiscal regressivity" of Texanomics "obliged the family’s presidential office seekers to wear "kinder and gentler" policies and "compassionate conservatism" as velvet cloaking." In response to Clinton's moral lapses, Bush43 "began to emphasize and display unusual personal religiosity [casting] himself as the prodigal son, brought back to God after waywardness and crisis," increasingly using "such biblically inflected language about good and evil" that he "had virtually replaced evangelist Pat Robertson as the leader of the U.S. Religious Right."

Phillips makes the claim that in the wake of 11 September, "Americans slid toward another historical reversal: allowing the eighteenth-century republic to be re-conceptualized as an embattled twenty-first-century imperium." Phillips closes with a recounting of the founding fathers' fears of the US following European republics slide "toward great-family and dynastic leadership."

Part 3

Apocalyptic president
Even some Republicans are now horrified by the influence Bush has given to the evangelical right
Sidney Blumenthal
The Guardian
March 23, 2006

Excerpt: American Theocracy
By Kevin Phillips
TPMCafe Book Club
Mar 23, 2006 -- 01:03:25 PM EST

Kevin Phillips' American Theocracy
By Stirling Newberry
t r u t h o u t Book Review
Wednesday 22 March 2006

Religion and Politics
By Kevin Phillips
TPMCafe Book Club
Mar 21, 2006 -- 09:46:14 AM EST

Reaching Southern evangelicals
By Kevin Phillips
TPMCafe Book Club
Mar 21, 2006 -- 08:12:36 AM EST

Writing American Theocracy
By Kevin Phillips
TPMCafe Book Club
Mar 20, 2006 -- 01:20:23 PM EST

A Political Warning Shot: 'American Theocracy'
Interview with Kevin Phillips (AUDIO)
by Terry Gross
Fresh Air
March 21, 2006
Contains Chapter 4, Radicalized Religion, from 'American Theocracy' by Kevin Phillips

Phillips, Brinkley, and "Theocracy"
PrawfsBlawg
March 20, 2006

Tying Religion and Politics to an Impending U.S. Decline
By MICHIKO KAKUTANI
New York Times
March 17, 2006

Decline and fall
Kevin Phillips, no lefty, says that America -- addicted to oil, strangled by debt and maniacally religious -- is headed for doom.
By Michelle Goldberg
Salon
March 16, 2006

American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century
My Seattle Online
Posted on March 16th, 2006 at 1:19 pm

American Dynasty: Aristocracy, Fortune, and the Politics of Deceit in the House of Bush
by Kevin Phillips
Penguin, 2004
ISBN: 0143034316

Wealth and Democracy: A Political History of the American Rich
by Kevin Phillips
Broadway, 2003
ISBN: 0767905342

The South Sea Bubble
by Caroline Thomas
Student Economic Review, University of Dublin
Trinity College, 2003, Vol 17, p. 17-37

Fundamentally unsound
By Michelle Goldberg
Salon
July 29, 2002

Financial Crashes in the Globalization Era
Evan Osborne
The Independent Review, v.VI, n.2, Fall 2001, ISSN 1086-1653, pp. 165–184

The Queen of the Night
The Economist
October 31, 1998

Lone Star lawmakers are poised to shine on the Hill - Texas delegation to Congress has power and leadership - includes profile of Texas Congressional delegates
by Sean Piccoli
Insight on the News
March 6, 1995

Nixon's Southern strategy 'It's All In the Charts'
By JAMES BOYD
New York Times
May 17, 1970

The Emerging Republican Majority
By WARREN WEAVER Jr.
New York Times
Sep 21, 1969

Gordon Housworth



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