22 Jul 2009

Austrian Economics in Iraq, Part II

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In a previous guest post, Edward Gonzales explained his experiences with government spending on an Iraqi community. In the present essay, Gonzales caters to our requests for more talk of blowing stuff up. –RPM

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Fighting an Insurgency
by Edward Gonzales

While serving in Iraq I came to the conclusion that a thriving economy did more to fight the insurgency than all the weapons in my arsenal. To fully explain this I will describe the conditions in the village in which I served, the type of enemy I encountered, the change in tactics we employed, and the results I witnessed.

The Village

When I first arrived in Iraq I had a very simple view of what fighting an insurgency was going to entail. I would organize combat and reconnaissance patrols, find the insurgents, and kill them. The reality I experienced was not so simple. I very rarely saw the bad guys. Most attacks took the form of Improvised Explosive Devices (IEDs), booby traps, snipers, and mortars. The only time the insurgents openly exposed themselves to us was during suicide attacks. It was physically and emotionally draining. Nothing would happen for weeks and then three days of attacks would come with two or three IEDs and booby traps per day and then nothing again. The anticipation of when the next attack might occur was the most draining. When the attacks came from snipers, the insurgents placed themselves in populated areas, so if the patrol returned fire and killed the sniper, the chance of killing one or more innocent villagers was highly likely. After the attacks the insurgents would disappear by blending into the local populace. The insurgents had this ability because the villagers either supported them or they were too afraid to speak out against them. I became convinced within a month that “winning” in the traditional sense against an insurgency was impossible.

The Enemy

Insurgents fell into one of two categories. In the first category were the die-hard extremists committed to jihad. There is no negotiation with this type of insurgent. They must be fought with weapons and brute force. We hear a great deal about this type of insurgent from our politicians and the media. What is not said is that they represent a very small minority of insurgents in Iraq. In my time in Iraq I captured and questioned dozens of insurgents. Only one insurgent fell into this category. The great majority of insurgents I encountered fell into a second category. They were young men who had been recruited by the extremists. They certainly had been ingrained with the usual pro jihad, anti American propaganda that I expected, but upon further questioning the reoccurring theme was no money, no hope for the future, and a promised better quality of life once the Americans were thrown out. I realized that had I gotten to these young men first, I could just have easily recruited them into the Iraqi Army or local police force. These insurgents did not care about American democracy or Al Qaeda ideals. They wanted someone to show them a way towards a better life, a life that included a job and a family they had the ability to support. Al Qaeda in Iraq had convinced these young men that America was the source of all trouble and once the Americans were destroyed Iraq would be a prosperous nation again. The realization I came to was that as long as there was no hope for a better future, I and any Marine who might replace me would be fighting insurgents forever.

A Change in Tactics

My focus therefore became about providing enough security to let the village be relatively safe but not so much that it stifled trade. Myself and the Iraqi officers and soldiers patrolled daily and on every patrol we would stop in to see as many shop owners and village elders as we had time for. I would take ten minutes to have tea with each one and ask if their neighborhood was safe and if business was growing. I repeatedly told them that our only intentions were to keep them and their families safe. The security measures that we did put in place were meant to protect and improve trade, not hinder it. After a few weeks I was on a first name basis with most of them and knew their children. Within six weeks of this type of patrolling the difference within the village was noticeable. The people would greet us and let us know if any outsiders had come to the village. They pointed out the areas and trails they thought might be unsafe and we began to find many more IEDs, booby traps, and weapons caches. The number of attacks began to drop.

The Effect

I noticed a direct and snowballing correlation between safety and economic conditions. In a dangerous area the people produced just enough for their survival. When security was provided against murder and robbery, people began to produce more for trade. As trade started the area became more safe and production and trade increased again which lead to greater safety. As production and trade increased and more people came into the village my job became easier, not harder. The local businessmen gave us all the information we needed to keep insurgents from launching heavy attacks. There were still dangers and attacks still did happen, but in a village with active trade the locals turned those who did launch attacks into the Iraqi Army or local police force, usually within hours. Many locals risked their lives on numerous occasions to stop an American or Iraqi patrol from walking into an IED or booby trap in the road. On another occasion, two men trying to emplace an IED were chased away by the local men all armed with AK-47 assault rifles. (In the Al Anbar province men were allowed one assault rifle in their homes for protection. As a Marine tasked with providing security I was much safer and my job easier with armed locals, but that is another article altogether.)

As these conditions developed young men who had been “away” began returning to their family homes. Some Americans pointed out the danger that many of these young men had probably been insurgents in the past and they were biding their time in order to attack us again at a later date. I and many of the Iraqi and American officers I worked with disagreed strongly with this assessment. These were young men who had given up fighting and were moving back in with their families and now were making a go at a peaceful life in their hometowns. A discussion that I had with an Iraqi Army officer put the situation into perspective for me. He had fought against the Americans when we first invaded Iraq. When the Iraqi Army was stood up again he decided that the best way for Iraq to be peaceful and prosperous once again was not to fight the Americans but join the Iraqi Army. As time passed he believed that more and more young men who were working with Al Qaeda would realize that the insurgent groups were not the way for a better future in Iraq and would quit those groups and return home.

I knew that the insurgency in the village that I was in was defeated when more and more people moved back into the village to go to work on the family farm or work as a fisherman on the river. There was still an occasional attack, but locals were as committed to stopping the attacks as we were. The insurgents had lost the support of the locals

Sound economics is so vitally important because young men who have jobs and hope for the future do not join insurgent groups and launch attacks against police and army units. The dangerous extremists do still exist, but without the support of the local populace these extremists have no young men to recruit and are much easier to hunt down. A thriving and growing economy does more to combat insurgents than all the weaponry in existence.

22 Jul 2009

Evony’s Double Dip Marketing Strategy

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Folks, I do not have anything to do with the content of the Google Ads. I certainly don’t sign up for the “Play now, my lord!” ads that seem to feature women with increasingly large busts as the weeks pass.

It’s true, there’s a way I can go into Google Ads and tinker with it, but it’s comparable to my policy with hecklers: Once I start banning posters (or ads), the stuff that remains is prima facie approved.

Plausible deniability is the name of the game. Huh? What’s Area 51?

22 Jul 2009

Two Ironic CNBC Headlines

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In case you’re wondering, the only reason I torture myself by going to CNBC.com 5x a day is that I check the price of gold, and I continue to wait for the dollar to crash. But then when I’m there, I can’t help but look at the headlines.

For example, right now I read that Bernanke says there should be no audit of the Fed, lest the venerable institution’s independence is compromised by political factors.

Another headline reads: “Only Fed Fit to Do Systemic Exams.”

If I were running the PR on a big investment bank, I’d take out full-page ads in the Wall Street Journal saying, “Mr. Bernanke, don’t want your mission to be compromised by interference from Congress? Our shareholders know how you feel.”

It wouldn’t do any good, of course, since government officials are the most transparent hypocrites around (with the possible exception of televangelists). But it would be funny.

21 Jul 2009

Potpourri Por Favor

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* A bunch of Ron Paul fans have been griping about this WSJ article on the Fed, and I assumed they were just being touchy. But seriously just read the first three paragraphs. That might as well have titled it, “Give me a B! Give me an E! Give me an N!…”

In case you don’t see the big deal, consider this excerpt:

“Rallying one charge is Ron Paul, an iconoclastic Texas Republican who wants to abolish the central bank entirely. Mr. Paul’s economic ideas sometimes make him the target of ridicule — in the new film “Bruno,” shock comedian Sacha Baron Cohen tries to seduce the startled congressman in a hidden-camera scene while discussing economic theory.

Still, Mr. Paul has persuaded nearly two-thirds of the House to co-sponsor a bill requiring far-reaching congressional audits of the Fed.”

So my question is, what the heck is that “Still” doing? Are these clowns really suggesting that other Congressmen shouldn’t have supported Ron Paul’s bill, since he suffered ridicule at the hands of a comedian? How about this, “President Barack Obama is meeting with fierce criticism, with some commentators–such as Ann Coulter–suggesting he remove his temple from his anus. Still, Obama enjoys strong support from the Congressional Black Caucus.”

* Von Pepe sends me this link of Bernanke explaining that he has no idea where the Fed’s $500,000,000,000 went, after he gave it to some other central bankers. And this is the guy who says he needs more oversight over the financial sector, to prevent systemic risks and such.

* At MasterResource I have another summary of the economics of climate change, and the relation to policy activism. Most of it is recycled (ha ha) but I dwell a bit more on how economic models deal with uncertainty, if you care.

21 Jul 2009

Mo’ Potpourri

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* Hayek [sorry!!] Henry Hazlitt reviews Rothbard’s Man, Economy, and State.

* Ben Bernanke’s ghost writer(s) have an op ed in the Wall Street Journal today. (HT2EPJ) Pinky, are you thinking what I’m thinking?

* Bob Roddis has a Rothbard speech (in three parts) at his blog.

* We are now officially in Bizarro World. Conservatives are finally on the anti-Fed and anti-Wall-Street bandwagon, while Paul Krugman concludes: “[I]t’s crazy to cut off our future to spite Goldman Sachs’s face.”

20 Jul 2009

Potpourri

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* Mario Rizzo laments the failure of macroeconomics. An interesting excerpt:

As a member of NYU’s Ph.D. admissions committee for the past fifteen years, I have even seen applicants who apologize for taking “too many” philosophy courses in college. I have seen others remind us that although they have been interested in history and literature, they are fully cognizant of the need to express their ideas in precise mathematical terms.

What of a clearly brilliant student who wants to question (or at least think about) these methodological issues? I had a colleague tell me, informally, that he would probably be a disruptive influence in the first-year classes. I guess it depends on one’s definition of “disruptive.”

I was definitely an influence, and perhaps even a disruptive one (especially when it was just the TA running the class) in my first year at NYU. But was I the clearly brilliant student? We will never know.

* Bob Higgs takes the time to blow up the silly petition about “Fed independence.” Don’t get me wrong, I think this audit-the-Fed movement might end up backfiring, but even so the petition is a bit like saying, “All this public scrutiny over Guantanamo is hampering the torturers’ efforts to spread democracy.”

* David R. Henderson somehow manages to relate Frank Zappa to Friedrich Hayek. I enjoyed both in college. (And I never inhaled while reading Hayek.)

* Speaking of college, here’s an interview with Richard Ebeling, conducted one year after I graduated Hillsdale. I think during my last semester I had three Ebeling classes. The best was when the government shut down under Clinton; Ebeling literally came dancing into the classroom that day. (That wasn’t my senior year, and now that I bring it up, I can’t remember if I actually was in his class or if somebody just told me about it. Anyway, funny stuff.) Wow now the nostalgia train has fully pulled into the station. I also vividly remember how excited all the conservative Hillsdale students were when the Republicans took over Congress. Small government, here we come!

* This news story ran a while ago, but it was just brought to my attention. Here’s the photo of the talk I gave to the Houston Property Rights Association (they supplied the signs and flag):

My favorite excerpt from the news story: “The idea that Hubert Hoover was for limited government was a “complete myth,” Murphy says.” Well it was! Get off my back.

20 Jul 2009

The Best Five-Minute-And-Seven-Second Argument Against Giving the Fed More Power

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This is hilarious. (HT2LRC) The internet is awesome. I’m impressed that someone took the time to make this video without putting in an ad or something at the end. That’s just how much people can’t stand Bernanke; his public repudiation is its own reward.

20 Jul 2009

Potpourri

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* This guy emailed me to say that my Mish article went awry at the crucial point: When the creditor lends out money so that borrowers can spend more, the creditor is content to carry lower cash balances, because he’s now holding a claim on future income. I had considered this at the time I wrote the article, but now I can’t remember how I resolved it. I’m not going to lie to you, I sorta thought Mish himself would blow me up in a response, so that we could move this debate forward. Anyway I might write a future post to tie up these loose ends, but like I said I wish a big gun pro-deflationist would spell out what’s wrong in my Mish critique.

* Today at Mises I criticize CNBC for dissing savings. I shower some love on Tyler Cowen near the end.

* Speaking of Tyler, what the @$@#$( is he talking about in this post? Seriously, did he and Scott Sumner decide to pull a prank and write a crazy post each? Here’s Tyler:

I don’t know the “inside scoop” on the bank books, but in purely theoretical terms a bit of chicanery may be socially optimal now. In general, bank moral hazard-induced-risk-taking may move closer to socially optimal, the closer banks are to insolvency. Let’s say that banks are generating high profits now by, one way or the other, pursuing short run profits and “going short” on market volatility. In the long run this investment strategy will bite them, sooner or later but probably later. In the meantime they likely will become solvent. If insolvency has a high fixed cost this can be a good risk, even from the taxpayer or social point of view.

In the comments of Tyler’s post, somebody already beat me to the punch of the gambling analogy. Really, wouldn’t it make more sense to say the exact opposite? Namely, that the very worst time in the world for banks to be engaging in high-risk bets (let alone when backed up by the taxpayers), is when they are on the verge of insolvency?

Tyler seems to be saying, “It’s not a bad idea to take a gamble that pays $1 million with 99% probability, but pays negative $1 billion with 1% probability, so long as you don’t play it very often.” I don’t think that’s right, and even if it were, the time to play it (a few times) would be when you were already up several billion dollars–not when that 1% outcome could ruin you.