Early in December, the press reported from the Barack Obama transition team that the president-elect has signed onto a foreign policy program continuing the “war against terror” on new, expanded and fundamentally changed terms. The United States will attack the sources of the problem of terrorism. It will start from scratch in “rogue,” “failed” and other distressed Middle Eastern, South Asian and African states, to build them up into modern democracies.

The Washington foreign policy community has been working on this idea. Condoleezza Rice announced last summer that new, multi-agency teams were being formed to move into countries to build democratic institutions and practices there, in addition to providing traditional aid. “Democratic state-building,” she said, was the “new American wisdom.” Robert Gates, who will continue as defense secretary in the Obama administration, has already endorsed the substance of this program. Washington will — in Secretary Rice’s words — “change the world in America’s image.”

Let me change the subject for a moment. Recent days have brought information on a 513-page federal report on the American-led reconstruction of American-destroyed Iraq, which has proved to be a $100-billion disaster, incorporating ignorant assumptions, waste, organizational chaos, bureaucratic and personal rivalries, lies and incompetence.

According to the document, during the past five years little more has been accomplished than restoration of the basic services and productive capacity that was destroyed by the American invasion and the looting that followed.

This is after killing or wounding — how many, a half million? — Iraqi civilians in order to liberate them. No wonder the Iraqi journalist threw his shoes at George W. Bush at the president’s farewell Baghdad news conference, and shouted “you dog!” — the worst insults possible in Arabic culture. This happened because no one in responsibility knew what they were doing, beyond the military objectives. The neoconservatives assured the president that America built democracies in Germany and Japan after the war. Surely Iraq would be easier yet. No one in power asked anyone who was there in Germany or Japan, or bothered to consult the records, which are ample.

Japan was “democratized” because the emperor, having been informed that such was the wish of Gen. Douglas MacArthur, ordered his people to become democrats. Japan had a parliament and constitutional monarchy before the war, then became a military dictatorship, and by fiat became a constitutional democracy again after the war.

The British and American occupation authorities in Germany in 1945 began “denazification” but soon found that, as most official positions in the country had required Nazi Party membership, if they denazified Germany there would be no one to run it. They settled for prosecuting actual war criminals. As the Cold War then began, they let the Germans get on with installing a democratic system as ordered (Germany had been a parliamentary democracy before Hitler and his party were democratically elected). The first thing the Bush administration did in its crusade to democratize Iraq was to fire all the people who knew how to run it.

Something else has happened recently that bears on the issue of American official competence. This was the confession by one of the most respected men on Wall Street, former chairman of the NASDAQ exchange, that he had for years been running a simple Ponzi pyramid swindle (paying high returns to established customers out of the funds newcomers invest). With this, on his own account, he stole $50 billion from individuals, including sophisticated investors, as well as banks in the United States and abroad.

Bernard Madoff seems to have done this over a 40-year period (he started his investment firm in 1960), despite three Securities and Exchange Commission investigations, formal complaints to the SEC from competitors, conspicuous secrecy about his clients and methods, published accounts going unquestioned despite being prepared by an obscure two-man auditing firm, and persistent Wall Street rumors and suspicions. It may be the biggest financial swindle ever committed.

It comes at an unfortunate moment for American-style capitalism, which it has been the U.S. aim to install worldwide. The capitalist world suffers a liquidity crisis and impending catastrophe that may prove worse than the Great Depression of the 1930s. It has been caused by American financial fraud and incompetence. Following this evidence of American fiasco in running its own affairs, let me return to the subject of a foreign policy devoted to remaking other countries “in the American image.”

The conclusions of the report on American reconstruction of Iraq included the following statement: “Five years after embarking on its largest foreign reconstruction project since the Marshall Plan in Europe after World War II, the U.S. government has in place neither the policies and technical capacity nor the organizational structure that would be needed to undertake such a program.” I would think this should be written in fiery letters over the portal of the future president Barack Obama’s National Security Council.

Visit William Pfaff’s Web site at www.williampfaff.com.

© 2008 Tribune Media Services, Inc.

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