Ethanol in 2008: Tom Vilsack

Tom Vilsack, the soon-to-be-former governor of Iowa, was the first Democrat to formally jump into the 2008 presidential campaign.

Considering he’s a two term Democratic Governor in a Republican state, he should do well in the Iowa Caucus before the New Hampshire primary. I’m sure pundits will say he will need a win in his home state to be taken seriously in New Hampshire. If he can nail down a top three finish in both New Hampshire and South Carolina he will stick around for important primary’s in the month of February, including Missouri and Wisconsin. Here is the early line up (full slate is at the end of this post):

January 14, 2008 - Iowa
January 22, 2008 - New Hampshire
January 29, 2008 - South Carolina
February 5, 2008 - Delaware, Missouri
February 12, 2008 - District of Columbia, Tennessee, Virginia
February 19, 2008 - Wisconsin

It’s a long way away until we get to Wisconsin. If he makes it that far be sure that you will hear more of this line: “In the past eight years, Iowa successfully changed farm fields into energy fields. We changed the traditional idea of agriculture and became the national leader in renewable fuel and energy production. As a state, we became more economically, environmentally and energy secure. If you drive around Iowa today, you will see a changing landscape marked by new ethanol and bio-fuel production plants and wind farms.”

My sister lives in Rochester Minnesota and did some work on the 2006 campaign for the Democratic nominee who ran for the House. She hears a big buzz in her area for Ethanol. I’ve read an article recently about farmers in Missouri who did not want to sell their Ethanol assets to New York investors because they saw Ethanol as their investment in their family’s future. Sure, Ethanol’s efficiency as a fuel may draw its skeptics, however with the rural population giving many of their sons to Iraq, energy independence will be an issue with traction in the red states. Ethanol will be one political answer with this message: “Revitalize Rural America.”

Al Gore already has developed the policy to reach out to this voting bloc. Vilsack being a governor from the heart of the corn belt will authenticly resonate and has already spun this message:

”Together, with the courage to create change, let us build a 21st Century economy of cutting-edge companies and technologies that lead us to energy security. Energy security will revitalize rural America, re-establish our moral leadership on global warming and climate security and eliminate our addiction to foreign oil.”

New York Times
His candidacy is designed to have a home-spun, out-of-Washington feel, which explains the potluck supper that his wife presided over on the eve of his announcement.

Mr. Vilsack’s challenges? Name recognition, the ability to raise money, foreign policy experience.

Mr. Vilasck’s strengths? He’s a governor – who voluntarily stepped down after two terms – who can run for president full-time, absent the ball-and-chain of the Senate voting schedule. And the voting record that comes in tow.

Here’s his full announcement speech:

“Christie, thank you. It sure feels good to be home. I want to thank Christie, Jess, and Doug for their love, support, and inspiration. Without them I would not be here today. As a family we are committed to this campaign and this effort – you can be sure of that. And I want to thank all of you for being here and for your friendship and support for so many years. My life was profoundly changed and made better when you welcomed me into your community 30 years ago.

Three weeks ago, Americans courageously voted to create change. We sent a clear message that we wanted our country led in a new and better direction. But our job is not done. We have more work to do.

Today in the White House, we have a president whose first reflex is to divide and conquer…who preys on insecurities and fears for partisan gain…who has tried to rob us of the very asset that has made the United States the greatest country on earth: Our sense of community, optimism and can-do spirit.

In the last election, Americans were not fooled by political tricks or gimmicks. We said in one voice, from all regions of the country, for our children and grandchildren: Tomorrow does matter.

That is why I am here today — to bring even bolder change and build an even stronger future for our great nation.
Let us face facts.

The world today is filled with real threats and real problems. Our way of life is at risk from terrorism throughout the world. Here at home, families struggle with skyrocketing healthcare costs and rising college tuition. For too many, home ownership is a fading dream. For others, a secure retirement is an unfulfilled promise. And for many neighborhoods and cities, crime is a daily threat and danger.

Let us also speak truth.

Our way of life and national security have been put at risk by fiscal irresponsibility and by our dependence upon foreign oil and the countries that provide it. In some cases, the governments of these countries take our money — and yet despise us and harbor terrorists.

By any measure or standard we are less safe and less secure than we were 6 years ago. Our country needs bold leadership guided by the right values and the right experience.

That is why I am here today.

For those of you meeting me for the first time, let me say a few words of introduction.

I have always been the underdog and long shot. And I have always been inspired by stories of ordinary people who struggled, but ultimately succeeded.

I began life in an orphanage in the arms of a stranger. I was adopted into a loving but troubled home. During my early years, my mother battled alcohol and prescription drug addiction. My parents separated. I watched as my father balanced being a single parent while trying to keep his business alive. We struggled and adapted to a declining standard of living. I know what it is to feel alone and forgotten…as if you do not belong.

The deepest hole anyone can dig is addiction and dependency. My mother dug that hole, but she dug herself out. She relied on her faith, family and friends. In doing so she taught me a valuable lesson – that the courage to create change can overcome anything, and that community can give you the support and confidence to succeed.

My parents got back together. And when they did, they taught me never to give up on people, family or community. Their values live here inside me and will always guide me in everything I do.

I have served as a mayor, state senator and two-term governor. I have worked every day in public life to bring people together to create change.

In the past eight years, Iowa successfully changed farm fields into energy fields. We changed the traditional idea of agriculture and became the national leader in renewable fuel and energy production. As a state, we became more economically, environmentally and energy secure. If you drive around Iowa today, you will see a changing landscape marked by new ethanol and bio-fuel production plants and wind farms.

We had the courage to create change in education, health care and government itself. And by having the courage to create change, we provided greater security and opportunity to our people.

That is why I am here today – to continue our work, and to bring the courage to create change to America. It will take leadership to create this change. But it also will take an active sense of community.

You do not have to be raised behind a white picket fence to understand the power of community. Some of America’s strongest communities do not have any white picket fences or even yards for that matter.

In these communities, there are countless American success stories - immigrants from every continent who traveled here to farm fields, work in factories and pursue the American Dream. Many of these new Americans faced and overcame discrimination. Our country must always remain a destination for those in pursuit of that dream, for a better life for their family and to live in freedom.

That too is why I am here.

America needs a president who builds and creates…who makes our country more secure… who is bold and has the courage to create change.

I will be that president.

So today, in front of the family and friends I love and here in the community I call home, I announce my candidacy to be the next President of the United States.

Let us have the courage to create the bold change we need. Let us stop the endless debates and empty talk.

Together, with the courage to create change, let us develop a healthcare system that prevents illness, cures diseases and helps people live longer healthier lives — without taking away every penny in their bank accounts after a lifetime of sacrifice and hard work.

Together, with the courage to create change, let us fight for an education system that helps every child become as inquisitive and creative as God intended them to be. If we are to compete in a tough, global economy, Americans must remain the most innovative people on earth.

Together, with the courage to create change, let us build a 21st Century economy of cutting-edge companies and technologies that lead us to energy security. Energy security will revitalize rural America, re-establish our moral leadership on global warming and climate security and eliminate our addiction to foreign oil.

Together, with the courage to create change let us embrace a new foreign policy that renews friendships, develops alliances and isolates enemies. In Iraq, we must act, take our troops out of harm’s way and allow Iraqis to begin providing their own security.
I am running for President because every America has the right to pursue the American Dream.

I am running for President because every community should contribute to our success. Americans who live in cities, barrios, suburbs and small towns all deserve a president who works for and remembers them.

Most of all, I am running for President to replace the anxiety of today with the hope of tomorrow and to guarantee every American their birthright: Opportunity.

It will take courage to create this change. But by restoring America’s community, optimism and can-do spirit, we will succeed. I ask for your support and your vote. Together let us have the courage to create change in America.

May God Bless our work and the United States of America.”

Democratic primaries and caucuses
January 14, 2008 - Iowa

January 19, 2008 - Nevada

January 22, 2008 - New Hampshire

January 29, 2008 - South Carolina

February 5, 2008 - Delaware, Missouri

February 12, 2008 - District of Columbia, Tennessee, Virginia

February 19, 2008 - Wisconsin

February 26, 2008 - Arizona, Hawaii, Idaho

March 2008 (date to be determined) - American Samoa, Democrats Abroad, Guam, Michigan, Minnesota, North Dakota, Virgin Islands, Wyoming

March 4, 2008 - Connecticut, Georgia, Maine, Maryland, Massachusetts, New York, Ohio, Rhode Island, Vermont

March 7, 2008 - Colorado, Utah

March 8, 2008 - Kansas

March 11, 2008 - Florida, Louisiana, Mississippi, Oklahoma, Texas

March 18, 2008 - Illinois, Oregon

April 2008 (date to be determined) - Alaska

April 1, 2008 - Pennsylvania

May 6, 2008 - Indiana, North Carolina

May 13, 2008 - Nebraska, West Virginia

May 20, 2008 - Arkansas, Kentucky

May 27, 2008 - Washington

June 3, 2008 - Alabama, Montana, New Jersey, New Mexico, South Dakota

June 10, 2008 - California

Ethanol in 2008: Al Gore

Policy for 2006:
“We could further increase the value and efficiency of a distributed energy network by retooling our failing auto giants - GM and Ford - to require and assist them in switching to the manufacture of flex-fuel, plug-in, hybrid vehicles.”

This post is a companion to Ethanol 2008 : Tom Vilsack . Al Gore’s policy below was delivered at NYU in September 2006. Al Gore's policy is much more sophisticated than Vilsack at this time. Hopefully Gore will run or someone like Vilsack will take his policy and adopt it.

First, dramatic improvements in the efficiency with which we generate, transport and use energy will almost certainly prove to be the single biggest source of sharp reductions in global warming pollution. Because pollution has been systematically ignored in the old rules of America’s marketplace, there are lots of relatively easy ways to use new and more efficient options to cheaply eliminate it. Since pollution is, after all, waste, business and industry usually become more productive and efficient when they systematically go about reducing pollution. After all, many of the technologies on which we depend are actually so old that they are inherently far less efficient than newer technologies that we haven’t started using. One of the best examples is the internal combustion engine. When scientists calculate the energy content in BTUs of each gallon of gasoline used in a typical car, and then measure the amounts wasted in the car’s routine operation, they find that an incredible 90% of that energy is completely wasted. One engineer, Amory Lovins, has gone farther and calculated the amount of energy that is actually used to move the passenger (excluding the amount of energy used to move the several tons of metal surrounding the passenger) and has found that only 1% of the energy is actually used to move the person. This is more than an arcane calculation, or a parlor trick with arithmetic. These numbers actually illuminate the single biggest opportunity to make our economy more efficient and competitive while sharply reducing global warming pollution.

A second group of building blocks to solve the climate crisis involves America’s transportation infrastructure. We could further increase the value and efficiency of a distributed energy network by retooling our failing auto giants - GM and Ford - to require and assist them in switching to the manufacture of flex-fuel, plug-in, hybrid vehicles. The owners of such vehicles would have the ability to use electricity as a principle source of power and to supplement it by switching from gasoline to ethanol or biodiesel. This flexibility would give them incredible power in the marketplace for energy to push the entire system to much higher levels of efficiency and in the process sharply reduce global warming pollution.

This shift would also offer the hope of saving tens of thousands of good jobs in American companies that are presently fighting a losing battle selling cars and trucks that are less efficient than the ones made by their competitors in countries where they were forced to reduce their pollution and thus become more efficient.

It is, in other words, time for a national oil change. That is apparent to anyone who has looked at our national dipstick.

Our current ridiculous dependence on oil endangers not only our national security, but also our economic security. Anyone who believes that the international market for oil is a “free market” is seriously deluded. It has many characteristics of a free market, but it is also subject to periodic manipulation by the small group of nations controlling the largest recoverable reserves, sometimes in concert with companies that have great influence over the global production, refining, and distribution network.

It is extremely important for us to be clear among ourselves that these periodic efforts to manipulate price and supply have not one but two objectives. They naturally seek to maximize profits. But even more significantly, they seek to manipulate our political will. Every time we come close to recognizing the wisdom of developing our own independent sources of renewable fuels, they seek to dissipate our sense of urgency and derail our effort to become less dependent. That is what is happening at this very moment.

Shifting to a greater reliance on ethanol, cellulosic ethanol, butanol, and green diesel fuels will not only reduce global warming pollution and enhance our national and economic security, it will also reverse the steady loss of jobs and income in rural America. Several important building blocks for America’s role in solving the climate crisis can be found in new approaches to agriculture. As pointed out by the “25 by 25” movement (aimed at securing 25% of America’s power and transportation fuels from agricultural sources by the year 2025) we can revitalize the farm economy by shifting its mission from a focus on food, feed and fiber to a focus on food, feed, fiber, fuel, and ecosystem services. We can restore the health of depleted soils by encouraging and rewarding the growing of fuel source crops like switchgrass and saw-grass, using no till cultivation, and scientific crop rotation. We should also reward farmers for planting more trees and sequestering more carbon, and recognize the economic value of their stewardship of resources that are important to the health of our ecosystems.

The Great Divide in Social Responsibility

Here are a series of articles to show the divide between the United States active denial by entrenched power to the CO2/Global Warming crisis and Europe’s active transition into a Sustainable Economy.

The first article details what was at stake when the EU decided to create mandatory industry cuts on CO2 emissions. Then there is a comment that articulates the ‘Sustainability’ aspect of the issue.

The Second article details the EU plan to cut emissions and the several countries that are cutting emissions.

Third, the Financial Times writes a concise breakdown on a case that went before the Supreme court today. “Hearing a case that could have a big impact on emission politics in the US Congress and beyond, judges listened to a Bush administration official defend the notion that the Environmental Protection Agency (EPA) should stay out of greenhouse gas regulation. They also heard from the state of Massachusetts, which insists that its coastline will be threatened unless the EPA steps in.”

These first three articles set up the fourth, which shows how naive Justices Scalia, Roberts, and Alito will publicly present themselves in order to defend entrenched interests who are making massive profits form the current economic system.

Scalia sounds as if he has never seen a systemic model analysis and how it operates. He asks “When is the predicted cataclysm?’’ He was trying to shape the discussion as if the scientists needed to present an argument that was proof positive that a doom’s day was imminent. That, he knows is not possible, nor is it even the main intent of the case. The damage of global warming is ongoing.

Scalia is smart enough to know that what is being presented is nothing short of a revolution of ideas. The case that was being presented was a warning about the future and is a recommendation to follow a different path. The path is away from free-market capitalism towards a new system of a sustainable economy which includes government oversight on industry standards.

Roberts and Alito would hope that their comments were being made in a vacuum. “Chief Justice John Roberts pointed out that regulating carbon dioxide emissions from new vehicles addresses just one aspect of an issue of global dimensions. The argument by those pushing for EPA action on vehicle emissions might or might not be valid, but it ‘’assumes everything else is going to remain constant,’’ Roberts observed.” Well, Roberts observation is flat wrong because the world is not going to remain constant and he sounds silly to suggest that it will. He sounds as if he has never looked at a systemic model either. He also hopes that the rest of the people in the room can ignore that the world does actually respond to such problems, including the fact that our friends in Europe have made dramatic changes in their policy. It is beyond ironic that the very same day Roberts made his comment Europe made carbon emission cuts in line with the Kyoto Treaty; it is a sad tragedy that our high court would portray themselves as naive to the subject.

Alito was trying to make the case a non-starter since it didn’t provide a ‘silver bullet’ cure to the problem. “But Justice Samuel Alito, who with Roberts seemed most skeptical of the states’ position, said that even in the best of circumstances, the reduction in greenhouse gases would be relatively small.” Alito also knows that the problem we are trying to solve is systemic. No silver bullets. A series of changes is what we need and getting the EPA to act is one step. As predicted Roberts and Alito are in place to defend the special interests that the Bush administration represents.

We get to wait until July 2007 for the Supreme Court to make it’s final verdict. Between now and then the EPA can keep ignoring what they have known since 1970, that carbon dioxide is an air pollutant that threatens public health and the EPA must regulate it.

The best way to circumvent the Supreme Court and get the EPA to act properly? Elect Al Gore in 2008 by more than a hand full of electoral votes.

Remember the date: it’s decision day on Earth
The Times November 29, 2006
James Cameron

Today one the most important decisions about the planet’s future for years to come will be made.

José Manuel Barroso, the President of the European Commission, will announce the caps on emissions that it will impose on its member states from 2008 to 2012. Around the world, from California to Australia, from New York to Japan, politicians, businesses and opinion formers are watching to see whether we Europeans have the conviction to make the system that prices carbon and punishes polluters work properly.

Those who want to create their own carbon-pricing schemes are keen for the system to work but will lose political momentum if it doesn’t. Those who want to do nothing will celebrate its failure.

The EU member states have in several instances abdicated the responsibility of arguing for the essential deep reductions in the amount of carbon produced. Sometimes they have called duplicitously for greater action on climate change while submitting plans that would lead to no reductions and further profit their industry champions at the planet’s cost. Now we have the real data, we know who misled us last year. There is a rational case for reductions across the board of anything from 10 to 20 per cent off the plans that have been submitted. The plans of some countries are so flawed that they must be sent back and reworked. The Commission will have to be resolute.

By ensuring there are fewer permits than are needed, the EU will force companies to reduce emissions — and put a price on pollution. By creating a scarcity, through setting demanding targets, companies will have to cut their emissions or buy reductions achieved by someone else.

The carbon market aligns public and private interest powerfully: investors are rewarded if they allocate resources efficiently to reduce emissions. Sorting out climate change should not be regarded as an economic opportunity as well as a necessity.

As the Stern report tells us, there is little cost to our economies from doing what we know we have to; there is no serious effect on competitiveness from the modest price for carbon we have, or expect to have. But the costs of inaction are enormous.

There are some who think that individual countries, like ours, will make little difference, whatever we do. But we will make a difference. Taking the right decisions now and adding a long-term signal that there will be more to come will channel huge investment where it needs to be. A tonne of carbon taken out of the atmosphere is a tonne of carbon, whether in Burton-on-Trent, Bordeaux, Berlin or Beijing.

Then there was this comment made to the UK Times post Remember the date: it’s decision day on Earth:

The Carbon Pricing scheme is not just about global warming (if the worst scare stories are to be believed then we can have no effect anyway), it is also about trying to stem the accelarated use of the precious resources of the planet. We are close to nearing the threshold whereby we go into “the red” and start useing the worlds resources at a greater than sustainable level, leading to possible land and resources wars that could be the end of the civilisation. By investing in renewable and sustainable schemes like the carbon pricing system and nuclear fusion we can help to prevent our armegeddon and expand the technological and economic power of Europe in the process. Besides which, just because others do not wish to address environmental issues does not mean we should not.

Josh Vinden, Milton Keynes/Leicester, UK

EU emissions caps tighter than expected
By Andrew Bounds in Brussels
Financial Times
Published: November 29 2006 13:16

The European Commission on Wednesday called for tougher than expected cuts to Europe’s greenhouse gas emissions, slashing the caps of nine of 10 countries whose trading plans it assessed.

Stavros Dimas, environment commissioner, wanted a further 7 per cent reduction to the caps governments planned for the 2008-12 period, which is also 7 per cent below the level of carbon produced in 2005.

“Today’s decisions send a strong signal that Europe is fully committed to achieving the Kyoto target and making the EU emissions trading scheme a success,” he said.

“The Commission has assessed the plans in a consistent way to ensure equal treatment of member states and create the necessary scarcity in the European carbon market.”

Mr Dimas said the same standards would be applied to the plans that had yet to be submitted.

The changes would put the EU on course to fulfil its pledge to reduce its emissions by 8 per cent from 1990 levels by the year 2012.

However, the cuts to plans covering 42 per cent of total EU emissions were less than the 10 per cent many green campaigners and businesses said was needed to give the scheme credibility and investors security.

Only the UK plan was approved, so long as installations in Gibraltar were included.

Germany, the EU’s biggest emitter, was told to reduce its cap by a further 6 per cent. The Commission also told it to close a 14-year exemption for new coal-fired power stations, which it considers constitutes illegal state aid.

Lithuania was asked to make the biggest cut, from a proposed 16.6m tonnes of carbon to 8.8m. In 2005 it produced 6.6m. Sweden, Greece, Slovakia, Latvia, Ireland, Malta and Luxembourg must all reduce their caps.

Ireland must limit its reliance on achieving emissions cuts from investments in projects in the developing world – cheaper than doing so at home – to 21.9 per cent.

The Commission is still assessing plans from big emitters such as Poland and France. It has started legal proceedings against Austria, the Czech Republic, Denmark, Hungary, Italy and Spain for failing to submit their plans on time.

The Greens in the European parliament welcomed the Commission’s tough stance but warned that deeper cuts were needed for the future.

“EU reliance on external credits for achieving our climate targets means these cuts will be postponed. Not only does this undermine EU credibility in international negotiations, it also delays crucial investment into clean technologies.

“It is also clear that the EU will not meet its Kyoto target without very strict measures on emissions from private households and transport, which are not included in ETS,” said Satu Hassi, a Green MEP.

Supreme Court clashes over climate change
By Patti Waldmeir in Washington
Published: November 29 2006 21:00 | Last updated: November 29 2006 21:00
emissions.

Hearing a case that could have a big impact on emission politics in the US Congress and beyond, judges listened to a Bush administration official defend the notion that the Environmental Protection Agency (EPA) should stay out of greenhouse gas regulation. They also heard from the state of Massachusetts, which insists that its coastline will be threatened unless the EPA steps in.

Environmental activists, frustrated by the failure of Congress or the Bush administration to act on global warming, brought the issue to the Supreme Court with the case Massachusetts v EPA. The court heard oral arguments in the case yesterday but will rule only sometime next year.

Massachusetts brought the suit, backed by California, New York and several other states, to try to force the EPA to regulate exhaust emissions from new cars. The EPA says it does not have the authority to regulate such emissions, under federal law. Even if it did, the EPA says, it would refuse to do so because of continuing uncertainty in the science of global warming and because unilateral US action could reduce America’s bargaining power in international negotiations on reducing emissions.

A federal appeals court issued a splintered ruling in the case, with the two judges in the majority – who upheld the EPA’s refusal to regulate – disagreeing on their reasoning. One found that Massachusetts had no right to bring the lawsuit, and the other found that the EPA had the authority to refuse to regulate.

Wednesday’s arguments focused largely on the issue of whether Massachusetts could bring the case in the first place, with several conservative justices arguing that Massachusetts had not proved the danger to its coastline was imminent enough to merit the suit, or that the reduction in greenhouse gas emissions that could be achieved by limiting exhaust emissions – some 2.5 per cent of total US greenhouse emissions – would be significant enough to give them the right to sue.

“It depends what happens across the globe,” Chief Justice John Roberts said, noting that any reduction in US emissions might be overcome by a rise in emissions caused by China’s rapid economic development. Several liberal justices supported Massachusetts but the pivotal swing justice, Anthony Kennedy, did not reveal where he stood.

The court appeared similarly divided on the issue of whether the EPA had the authority to refuse to regulate or whether its reasons for doing so were valid.

Supreme Court Takes Up Global Warming Case
November 29, 2006
By THE ASSOCIATED PRESS
Filed at 12:04 p.m. ET

WASHINGTON (AP) -- The Supreme Court stepped gingerly into the national debate over global warming on Wednesday, asking how much harm would occur if the Environmental Protection Agency continues its refusal to regulate greenhouse gases from new vehicles.

In the first case about global warming to reach the high court, a lawyer for 12 states and 13 environmental groups pressed the justices to make the government act, saying the country faces grave environmental harm.

Inaction is like lighting ‘’a fuse on a bomb,’’ said James Milkey, an assistant attorney general for the state of Massachusetts.

Opening up an hour of arguments, Justice Antonin Scalia asked, ‘’When is the predicted cataclysm?’’

It’s not cataclysmic, but rather ‘’ongoing harm,’’ Milkey replied.

Deputy Solicitor General Gregory Garre, representing the Bush administration, cautioned justices that EPA regulation could have a significant economic impact on the United States since 85 percent of the U.S. economy is tied to sources of greenhouse gas emissions.

Garre also argued that EPA was right not to act given ‘’the substantial scientific uncertainty surrounding global climate change.’’

Chief Justice John Roberts pointed out that regulating carbon dioxide emissions from new vehicles addresses just one aspect of an issue of global dimensions.

The argument by those pushing for EPA action on vehicle emissions might or might not be valid, but it ‘’assumes everything else is going to remain constant,’’ Roberts observed.

Several justices questioned whether the states and environmental groups have met their legal burden to show they will be harmed by continued EPA inaction. Petitioners to courts must meet that threshold before the merits of a case may be addressed.

‘’We own property, 200 miles of coastline, that we’re losing,’’ Milkey said, trying to allay justices’ concerns.

But Justice Samuel Alito, who with Roberts seemed most skeptical of the states’ position, said that even in the best of circumstances, the reduction in greenhouse gases would be relatively small.

Milkey replied that even small reductions would be meaningful, pointing out that very small rises in the sea level would inundate significant portions of low-lying coastal land.

The Bush administration argued in court papers that the EPA lacks the power to regulate carbon dioxide as a pollutant under the Clean Air Act. Even if it had such authority, the EPA still would not use it at this point because of uncertainty surrounding the issue of global warming, the administration said.

Global climate change is ‘’a controversial phenomenon that is far from fully understood or defined,’’ trade associations for car and truck makers and automobile dealers said in a court filing signed by former Solicitors General Theodore Olson and Kenneth Starr. They backed the administration position.

Twelve states, mainly along the nation’s Atlantic and Pacific coasts, three cities, a U.S. territory and 13 environmental groups are arguing that the EPA ignored the clear language of the Clean Air Act. Under the 1970 law, carbon dioxide is an air pollutant that threatens public health and the EPA must regulate it, they said.

Michigan, home of the U.S. auto industry, and eight other states are backing the EPA.

Carbon dioxide is produced when fossil fuels such as oil and natural gas are burned. It is the principal ‘’greenhouse’’ gas that many scientists believe is flowing into the atmosphere at an unprecedented rate, leading to a warming of the Earth and widespread ecological changes. One way to reduce those emissions is to have more fuel-efficient cars.

A federal appeals court in Washington, in a fractured decision in 2005, upheld the administration’s position. The Supreme Court is expected to rule before July 2007.

A separate case involving the EPA’s claim that the Clean Air Act similarly does not give it authority to regulate greenhouse gas emissions from power plants also is making its way through the federal courts.

Together, U.S. power plants and vehicles account for 15 percent of the world output of greenhouse gases, said David Doniger, counsel for the Natural Resources Defense Council, an environmental group involved in the Supreme Court case.

An association of electric utilities, the Utility Air Regulatory Group, opposes greenhouse gas regulation. But two individual power companies, Calpine Corp. and Entergy Corp., are on the other side.

Entergy said it has to be able to make plans 25 years in advance and that the EPA’s current rules will not ‘’stand the test of time.’’

The case is Massachusetts v. Environmental Protection Agency, 05-1120.

If anyone knows the three Supreme court justices quoted above please point them to the special section in the The Financial Times called Climate Change with its tagline "Climate change is one of the most serious issues facing the planet. Scientific evidence shows that temperature changes are likely to have profoundly negative consequences for human society, the global economy and the world’s natural systems. This poses risks and opportunities to which investors and companies must respond". They can also read this from the Former Future President of the United States.

Article: Ford Raises $18 Billion in Financing

Ford Raises $18 Billion in Financing
November 27, 2006
New York Times

By NICK BUNKLEY
DEARBORN, Mich., Nov. 27 — For the first time in its 103-year history, the Ford Motor Company is mortgaging its assets, including factories, equipment, office buildings, patents and trademarks, and stakes in subsidiaries like Volvo, in order to raise $18 billion to overhaul itself.

The amount Ford is borrowing exceeds the total market value of all its outstanding stock by more than $2 billion.

Although other auto companies have put up manufacturing equipment and other types of collateral over the years to secure loan, Ford has never done so before. For many decades, its credit was so good that it could easily borrow without pledging assets.

By doing so now, analysts said, Ford is putting its independence at risk. If management fails in its latest attempt to make the ailing company profitable again, Ford may be left with little choice but to find a buyer or merger partner or file for bankruptcy protection.

“This refinancing tells us that they see very tough times ahead,” said John Casesa, a veteran automotive analyst with Casesa Strategic Advisers in New York. “Either they’re incredibly conservative, or they’re preparing for an extremely dark outlook.”

Ford, in a statement, said it needs the financing “to address near- and medium-term negative operating-related cash flow, to fund its restructuring, and to provide added liquidity to protect against a recession or other unanticipated events.”

The company said it expects to complete the financing by the end of the year, giving it a total of $38 billion in liquidity to work with.

Ford stock fell 20 cents, or 2.5 percent, to $8.31 a share in morning trading on the New York Stock Exchange.

The company said last month that it might arrange secured financing for the planned overhaul because its credit rating, now well below investment grade, makes other methods for borrowing money too expensive and too limiting.

Ford’s chief financial officer, Don R. Leclair, told reporters and analysts on a conference call two weeks ago that management’s willingness to leverage the company’s assets is “a measure of the confidence we have” in the turnaround plan.

Of the $18 billion Ford is borrowing, $15 billion will be secured and $3 billion unsecured.

Moody’s Investors Service lowered its rating of Ford’s senior unsecured debt to Caa1, seven levels below investment grade, from B3, saying that the asset pledges would make it more difficult for unsecured lenders to get their money back if the company defaults. Still, Moody’s analysts saw logic in the plan from the company’s perspective.

“It was important for Ford to structure this type of financing plan in order to ensure that it had adequate liquidity as it enters a highly challenging period,” said Bruce Clark, Moody’s automotive analyst. “The company still faces daunting competitive and market challenges, but this plan would give it some breathing room over the next two years.”

Shelly Lombard, senior high-yield analyst with Gimme Credit, a corporate-bond research service in New York, said the financing “makes sense,” given that Ford is expected to burn through $5 billion of its cash reserves this year.

“At that kind of run rate,” Ms. Lombard wrote in a research note this morning, “the company would have had only a few more years of liquidity, especially since it insists that it won’t sell Ford Motor Credit.” The company’s stake in the credit arm is one of the assets pledged in the financing deal.

Today is the deadline for hourly workers in Ford’s American operations to decide whether to accept retirement and buyout packages worth as much as $140,000 apiece. Ford offered the deals to all 75,000 of its unionized workers as it prepares to close more than a dozen factories and eliminate 30,000 hourly jobs.

About 14,000 salaried positions also are being cut, but those workers have more time to decide on buyout packages.

Nearly 35,000 workers at G.M. accepted similar deals earlier this year, costing that company about $3.8 billion. Ford’s program is expected to cost somewhat less than that amount because its work force is smaller and, on average, younger and thus farther from retirement age.

Ford announced its turnaround plan, called the Way Forward, in January, and revised it in September to accelerate the job cuts and plant closings. The company, which lost about $7 billion in the first nine months of this year, says it does not expect to earn a profit in North America until 2009 at the soonest.

Multinational Corporate Reform

Joseph E. Stiglitz argues for corporate reform in his book Making Globalization Work. Two main plan objectives are changing multinational incentives by increasing their liability, thus decreasing externalities inflicted on society and the environment, and expanding the scope of the legal system to protect international society and ecological systems.

The Multinational Corporation
With corporations at the center of globalization, they can be blamed for much of its ills as well as given credit for many of its achievements. Just as the issue is not whether globalization itself is good or bad but how we can reshape it to make it work better, the question about corporations should be: what can be done to minimize their damage and maximize their net contribution to society?

Before answering that question, I want to dispose of one charge that is largely, though not totally, unfair. Corporations are often blamed for the materialism that is endemic in developed societies. For the most part, corporations simply respond to what people want—for instance, the need to get from one place to another, which cars and motorbikes make easier; if cars and motorbikes are fancier or larger than they need to be, it is mainly because consumers like ones that are fancier or large, and buy them. Still, it must be admitted that corporations have sometimes worked to shape those desires in ways that enhance their profits, and at least some materialistic excesses can be attributed to their efforts. If advertising did not enhance desire, they would not spend billions of dollars on advertising every year. Food companies teach children to want sugary cereals that are bad for their teeth; auto companies campaign against public transportation—and in some cases actively removed it—regardless of the effect on the environment. Los Angeles once had the world’s largest urban rail system (1,100 miles of track), until a group led by General Motors bought it out, dismantled it and replaced it with GM buses.

One or two instances of corporate misbehavior might be overlooked, but the problems are clearly systemic. Whenever there are systemic problems, economists look for systemic causes. The primary one is obvious: corporations are in the business of making money, not providing charity. Therein lies both their strength and their weakness. Money is a powerful incentive, and the desire to make it can bring enormous benefits to everyone. When things go well, international corporations can marshal enormous resources, spread the most advanced technology, and increase available markets exponentially. But too often they are encouraged to do the wrong thing. Corporate incentives can be reshaped. If we are to make globalization work, they will have to be.

Here again, the eminent eighteenth-century economist Adam Smith has often been misunderstood. He argued that individuals, in pursuing their self-interests, would advance the broader interests of society: that incentives to out compete rivals would lead to lower costs and to the production of goods consumers wanted, and that consumers, and society more generally, would benefit from both. In Smithian economics, morality played no role (though Smith himself was intensely concerned about moral issues, as evidenced in The Theory of Moral Sentiments, a work that preceded Wealth of Nations). Individuals did not have to think about what was right or wrong, only about what was in their own self-interest; the miracle of the market economy was that, in doing so, they promoted the general welfare. Building on this logic, many economists believe that the first—some go so far as to say the only—responsibility of corporations is to their shareholders. They should do whatever it takes to maximize stock market value or profits. In this extension of Smithian economics, if morality enters the picture at all, it does so only to enjoin firms to think about the interests of shareholders above all else—in fact, to think only of shareholders.

Sometimes, markets do work in the way that Smith argued—the large increases in living standards over the past two centuries are, in part, testimony to his insights. However, even Smith realized that in an unfettered market economy private incentives are often not aligned with social costs and benefits—and when that happens, the pursuit of self-interest will not result in the well-being of society. Modern economists call these misalignments “market failures.” Market failures arise whenever there are externalities, consequences of an individual’s or a firm’s actions for which they do not pay the cost or receive the benefit. Markets, by themselves, lead to too little of some things, like research, and too much of others, like pollution.

Much of public policy and economic theory in the last hundred years has been directed at identifying major market failures and analyzing the most efficacious and least costly ways of correcting them, for instance through regulations, taxes, and government expenditures. Modern economics has shown, similarly, that social welfare is not maximized if corporations single-mindedly maximize profits. For the economy to achieve efficiency, corporations must take into account the impact of their actions on their employees, on the environment, and on the communities in which they operate.

The environment provides one obvious instance in which private and social costs may differ, with enormous consequences. It costs more money to refine oil or generate electricity in ways that do not pollute the air. It costs more money to dispose of waste or to mine in ways that do not pollute the water supply. These are real environmental costs to society, but—at least before strong government regulations were established—they were not costs to the corporations involved. Without government regulation and pressure form civil society, corporations lack incentives to protect the environment sufficiently; they actually have an incentive to despoil it if doing so saves them money. (180-191)

Making Globalization Work
It is easy to understand why multinational corporations have played such a central role in globalization: it takes organizations of enormous scope to span the globe, to bring together the markets, technology, and capital of the developed countries with the production capacities of the developing ones. The question is how to ensure that developing countries get more benefits—and face fewer of the costs. In the following pages, I set out a five-pronged agenda that, though it will not eliminate all instances of corporate abuse, will I believe lessen them. Underlying most of these reforms is a simple objective: to align private incentives with social costs and benefits.

Corporate Social Responsibility
Though many corporations, especially in the United States, continue to argue that their sole responsibility is to shareholders, many do recognize that their responsibility goes further. There is an element of self-interest here: doing good can be good for business, and doing bad can subject companies to expensive lawsuits.

While increasingly more corporations see business (and some studies suggest that socially responsible firms have performed better in the stock market than others), for many firms, their executives and employees, social responsibility is as much a moral issue as an economic one. Companies can be thought of as communities, people working together in a common purpose­—say, to produce a product or provide a service. And as they work together, they care about each other, the communities in which they work, and the broader community, the world, in which we all live.

The BSR movement is not enough. It must be supplemented by stronger regulations. Those who are really serious about higher standards should welcome regulations that support the codes of conduct they publicly endorse, for such regulations would protect them from unfair competition from those who do not adhere to the same standards. Regulations will help prevent a race to the bottom.

Limiting the Power of Corporations
Corporations strive for profits, and one of the surest ways of garnering sustainable profits is to restrict competition—buying up competitors, squashing competitors by driving them out of business, or colluding with competitors to raise prices. When there is a lack of competition, the potential for abuses of multinationals grow much worse.

With the advent of globalization and globally traded commodities, monopolies, and cartels­—and the problems they create—often have become global in scope. While the benefits of monopolists are global, enforcement remains fragmented, with each jurisdiction looking after its own citizens—meaning in practice that no one looks after consumers in small and developing countries. Worse still, home nations frequently fight in favor of their own global monopolies. This is natural; harm done to consumers and firms abroad is not their concern. Perhaps worse are instances where governments actually help to create global cartels to advance the interests of their own national companies.

The failure to develop a global approach to global cartels and monopolies is yet another instance of economic globalization outpacing political globalization. The current piecemeal approach, with each country looking after its own citizens, is costly and inefficient, and especially ineffective in protecting those in developing countries, whose resources are no match for those of large multinationals.

Globalization of monopolies requires a global competition law and a global competition authority to enforce it, allowing both criminal prosecution and civil action in any case in which anti-competitive behavior affects more than one jurisdiction.

Improving Corporate Governance
A third set of reforms focuses on the laws governing corporations themselves. How do we make corporations, and their officers, act in way that are consistent with the broader public interest? What reforms in the legal system can help align private incentives with social costs and benefits?

One step in the right direction would be to have companies take into account all stakeholders­—employees and the communities in which they operate, not just their shareholders. It should not, for instance, be a violation of their fiduciary responsibility to their shareholders for them to pursue good environmental policies, even if profits are thereby hurt.

Limited liability law was intended to limit the liability of investors, not to absolve employees, however senior, of responsibility. But, as we have seen, sometimes that is the result. Executives should be held personally responsible for more of their actions, making it more difficult for them to hide behind the veil of their corporations.

If there is a case for making corporate officers individually responsible in the area of accountability to shareholder and other stakeholder, then there is an even stronger case in other areas. It is no less a crime to ruin the environment (stealing the heritage of the entire community) than to cheat investors by manipulating the books. Environmental damage done by corporations is longer lasting, and those injured are innocent bystanders who were neither party to any agreement nor stood to gain from investment. When a company has egregiously violated a nation’s environmental laws, the CEO and others who made the decisions and took the actions should be held criminally liable.

Another important step in achieving congruence between private and social interests is to make it easier for compensation to be obtained when damage has been done. Making firms pay for the damage they inflict—injury to workers or to the environment—provides firms with greater incentives to act more responsibly and to ensure that their employees do so.

Several changes would go a long way toward repairing the system. The first is to allow those in other countries to sue in the home country of the offending corporation. A complementary reform would be to allow judgments made in foreign courts to be enforced by courts in the advanced industrial countries.

Some firms are wary about being subject to foreign courts, claiming that the courts are stacked against them. This is simply one of the prices that one has to, and should, pay if one wants to do business in a country—including, in particular, extracting that country’s natural resources.

In the lore of America’s West, bandits would cross the state line to seek a safe haven. For international environmental bandits, there should be no safe haven. Any country in which the corporation (or the substantial owners of the corporation) has assets should provide a venue in which suits can be brought or in which enforcement actions to ensure payment of liabilities can be undertaken. The corporation may incorporate where it wants, but this should not make it any less accountable for its actions in other jurisdiction.

Global Laws for a Global Economy
Eventually, we should be working toward the creation of international legal frameworks and international courts—as necessary for the smooth functioning of the global economy as federal courts and national laws are for national economies.

When consumers within the United States and certain other countries are hurt by price-fixing, they can band together, file what is called a “class action” suit, and if the succeed, they receive an amount that is triple the damages they incurred. This provides a strong incentive for firms not to engage in price fixing. When a large number of individuals have been injured in a similar way, they should be able to band together to bring a single suit. We need to make it easier to pursue global class action suits, either in newly established global courts, or in national courts. And just as we recognize that access to justice for the poor requires the government to finance legal aid, this should be the case internationally as well: advanced industrial countries should provide legal assistance to those in developing countries.

Reducing the Scope for Corruption
There is now widespread recognition of the corrosive effects of corruption and the need to attack it at both the supply and demand side. The United States’ passage of the Foreign Corrupt Practices Act in 1997 was a major step in the right direction. Every government needs to adopt a foreign corrupt practices act, and penalties should be imposed on governments that do not enact of enforce such laws.

Bank secrecy aggravates the problems of corruption, providing a safe haven for ill-gotten gains. In the aftermath of the East Asian crisis, there were calls from the IMF and the U.S. Treasury for greater transparency in the Asian financial markets. When the developing countries pointed out that one of the problems in tracing the flow of funds was bank secrecy in offshore Western banks, there was a decidedchange in tone. The money is in these so-called offshore accounts not because the climate in the Cayman Islands is more conducive to banking; money goes there precisely because of the opportunities it affords for avoiding taxes, laws, and regulations. The existence of these opportunities is not an accidental loophole. The secrecy of the offshore banking centers exists because it is in the interests of certain groups in the advanced industrial countries.

There was an accord among the advanced industrial countries to do something about bank secrecy, but in August 2001 the Bush administration vetoed it. Then, when it was discovered that bank secrecy had been used to finance the terrorists involved in the September 11 attacks, the United States changed its views­—but only where fighting terrorism was involved.

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I have argued throughout this book that politics and economics are intricately interwoven: corporations have used their financial muscle to protect themselves from bearing the full social consequences of their actions. Why should we expect them to respond any more enthusiastically to these reforms than to any of the more modest attempts to temper their abuses?

One thing that makes me hopeful is the corporate social responsibility movement. There is an increasing number of firms who do not want to see a race to the bottom. It is firms like these, in the United States and other countries, that supported the Foreign Corrupt Practices Act. Civil society too is playing a more active role, by monitoring the actions of the large mining companies and of manufacturing firms that abuse their workers. The new technologies that have helped bring about globalization have been used to bring these abuses to the attention of the world, so that even those who have little moral compunction have been forced to account for their actions.

These are the realities, and they will not be easily changed: we should neither take corporations for the villains that they have often been portrayed as, or for munificent benefactors of developing countries. Limited liability has underpinned the growth of modern capitalism; but with globalization the abuses of limited liability have become global in scale; without the reforms suggested here, they could become far worse. The lesson here, as in much of the rest of this book, is simple: incentives mater, and governments and the international community must work harder to ensure that the incentives facing corporations are better aligned with those they touch, especially the less powerful in the developing world.

Article: Oil, Cash and Corruption

Oil, Cash and Corruption
New York Times
November 5, 2006

By RON STODGHILL
ON a warm afternoon in late September, Nursultan A. Nazarbayev strode across the tarmac at Andrews Air Force Base to board his private 767. Surrounded by an entourage of security guards and political advisers, Mr. Nazarbayev, the president of Kazakhstan, was heading home after an eventful visit that included a meeting with President Bush in the White House and a boating jaunt in Maine with the president’s father, George H. W. Bush. He also attended a swank fete at the Capital Hilton Hotel where his hosts, the business mogul Ted Turner and former Senator Sam Nunn, praised him for closing a major nuclear test site.

Warm welcomes aside, human rights groups frequently characterize Mr. Nazarbayev as a dictator who, during 15 years of rule, established a hammerlock on his country’s oil riches and amassed a fortune at the expense of an impoverished citizenry. Supporters say he has wedded a draconian political order to clear-eyed economic policies, making his country hospitable to foreign investment. But his White House visit came at a tender moment. About a month earlier, the Bush administration introduced its National Strategy to Internationalize Efforts Against Kleptocracy, an initiative aimed at preventing public graft worldwide by, among other things, denying corrupt leaders access to the United States financial system.

“Kleptocracy is an obstacle to democratic progress, undermines faith in government institutions and steals prosperity from the people,” President Bush said. “Promoting transparent, accountable governance is a critical component of our freedom agenda.”

Mr. Nazarbayev’s visit, coming on the heels of those sentiments, sparked renewed criticism of his leadership and questions about the White House’s dedication to battling corruption overseas — possibly explaining why the administration decided against holding a state dinner in the Kazakh leader’s honor. But behind the scenes, a legal drama has been playing out that analysts say may more fully explain why Mr. Nazarbayev and the White House are engaged in such an elaborate form of political kabuki.

In February, the United States attorney’s office in Manhattan is scheduled to go to trial in the largest foreign bribery case brought against an American citizen. It involves a labyrinthine trail of international financial transfers, suspected money laundering and a dizzying array of domestic and overseas shell corporations. The criminal case names Mr. Nazarbayev as an unindicted co-conspirator. The defendant, James H. Giffen, a wealthy American merchant banker and a consultant to the Kazakh government, is accused of channeling more than $78 million in bribes to Mr. Nazarbayev and the head of the country’s oil ministry. The money, doled out by American companies seeking access to Kazakhstan’s vast oil reserves, went toward the Kazakh leadership’s personal use, including the purchase of expensive jewelry, speedboats, snowmobiles and fur coats, federal prosecutors say.

Beyond the large amounts of cash involved and the top-flight access such sums often secure, the case against Mr. Giffen has opened a window onto the high-stakes, transcontinental maneuvering that occurs when Big Oil and political access overlap — a juncture marked by intense and expensive lobbying, overseas deal-making and the intersection of money, business and geopolitics. It is a shadow world of nebulous boundaries that people like Mr. Giffen establish and define, often on the fly. The case also illustrates the government’s struggle to reconcile its short-term energy interests with its longer-term political goal of encouraging democracy in countries the international community has deemed corrupt.

To be sure, many an American president has entertained a foreign leader under a cloud of suspicion, but Mr. Nazarbayev’s role in a federal criminal investigation makes him an unusual entry into that company. Bush administration officials have acknowledged that the Kazakh government falls short in its democracy-building efforts. But some foreign policy specialists see Kazakhstan as an important ally in the administration’s campaign against terrorism and a bountiful alternative to oil reserves in the volatile Persian Gulf — all of which promise to make the opening of the Giffen trial more than just hit-and-run bribery fare.

“The administration is naturally reticent about Giffen’s case,” said Raymond W. Baker, an energy policy analyst on loan to the Brookings Institution, a liberal research group. “It would probably be a lot easier on everyone if he had gotten away with it.”

IN a world long accustomed to outsize public corruption, some analysts say Mr. Nazarbayev is in a class by himself. “I can’t think of a leader in the free world as notoriously corrupt as Nazarbayev,” said Jonathan Winer, a former deputy assistant secretary of state during the Clinton administration. “We’ve known about his corruption for at least 15 years because our own intelligence agencies have told us.”

Mr. Nazarbayev is certainly a mixed bag of goods, others said, but that is the way the world works. As Jerry Taylor, a senior fellow at the Cato Institute, a libertarian research group, put it, “Kazakhstan’s human rights record may be checkered, but if the United States were to disengage from those countries with checkered human rights and other bad actors, we’d be history.”

The Clinton administration itself embraced Kazakhstan in the 1990s and praised Mr. Nazarbayev for leading his country toward economic and democratic reform. Administration officials, including the former Secretary of State Madeleine K. Albright, also met with Mr. Nazarbayev in Kazakhstan.

“The Clinton administration certainly had enough information about Nazarbayev’s corruption,” Mr. Winer said. “The information on him was open, notorious and present.”

The work of defending the curious financial and diplomatic portfolio of Mr. Giffen is the job of William J. Schwartz and Steven M. Cohen, of Cooley Godward Kronish in Manhattan. The firm’s 48th-floor conference room offers some of the standard accoutrements of the white-collar defense bar — handsome wood paneling, a flat-screen television, a skyline view facing south toward Wall Street and a long oval table surrounded by leather chairs and punctuated at its center by a bouquet of sharpened white pencils.

In the spring of 2003, federal agents arrested Mr. Giffen as he and Mr. Schwartz prepared to board a flight from New York to Paris. Prosecutors accused him of overseeing a tangled bribery network in the 1990s designed to buy access and influence in Kazakhstan for oil giants like Exxon Mobil, BP Amoco (now BP) and Phillips Petroleum (now ConocoPhillips). The payments, prosecutors said, violated the Foreign Corrupt Practices Act, which forbids American citizens or corporations from paying bribes to foreign officials to obtain business. None of the oil companies have been accused of any wrongdoing.

While Mr. Giffen’s lawyers have conceded that their client shuffled money from one secret bank account to another, they have maintained that he did not act alone. “Mr. Giffen was working with the knowledge of our government,” Mr. Schwartz said. “Jim’s access in Kazakhstan was a function of a bizarre historical time.”

At the heart of Mr. Giffen’s defense is a motion filed by his lawyers in June 2004 to Judge William H. Pauley III of Federal District Court in Manhattan, seeking access to classified government documents for his defense.

For now, each of the names, titles, and government affiliations of individuals mentioned in the document are blacked out on virtually every page. Mr. Giffen’s lawyers have argued that much of the evidence necessary to prove his innocence rests with various officials and agencies that helped him conduct business in Kazakhstan. Without such witnesses, the lawyers say, it will be difficult for them to prove their client was performing his duties as an American. Court filings by Mr. Giffen’s lawyers suggest that senior officials at the Central Intelligence Agency, State Department and White House encouraged him to use his close ties with Kazakh leaders to ferry valuable intelligence back to the United States. Judge Pauley has written an opinion supporting the motion, but the United States attorney’s office has appealed it.

“Before this is over, Giffen’s lawyers will file a variety of motions to get at the classified stuff, but the history of that isn’t terribly terrific,” said Jack Blum, a former investigator for the Senate Foreign Relations Subcommittee. “Senior officials can very conveniently avoid governmental embarrassment by keeping everything classified.” Mr. Blum added, “When you have a kind of blink-and-nod, clandestine waiver of the law with the government, once the problem blows up, you’re going to get hung out to dry.”

Spokeswomen from the C.I.A. and the White House declined to comment.

Congress passed the Foreign Corrupt Practices Act in 1977 after concluding that bribery abroad had become an important foreign policy issue that “embarrasses friendly governments, causes a decline in foreign esteem for the United States and casts suspicion on the activities of our enterprises, giving credence to our foreign opponents.”

Mr. Giffen’s lawyers say he cannot be found guilty of bribing a foreign government because his activities were part of his official duties as an adviser to the Kazakh government and they received the blessing of senior American officials who regularly debriefed him on his activities.

That contention has prompted a blizzard of motions, memorandums and filings between the federal government and Mr. Giffen’s lawyers. Federal prosecutors have sought to block Mr. Giffen’s access to documents on the grounds that disclosing them could breach national security interests.

It was not only individuals in Kazakhstan who received some of their client’s bounteous fees, former associates of Mr. Giffen said. In 1998, two years before federal investigators began looking into Mr. Giffen’s activities in Kazakhstan, he invited Mark Siegel, a Washington political consultant, to join a group of policy experts to develop a blueprint for reforming Kazakhstan’s economy and government. It was an ambitious task, Mr. Giffen conceded, but its participants would be well compensated. Mr. Siegel, a former executive director of the Democratic National Committee, agreed to a monthly retainer of $30,000 for his firm and soon found himself on a flight to Almaty, Kazakhstan’s former capital.

As it turned out, Mr. Siegel was in high-powered company. Mr. Giffen had harnessed prominent businessmen, policy experts, lobbyists and former government officials to serve on the committee. Among those included in the group were Robert Blackwill, a former ambassador during the first Bush presidency, and Philip D. Zelikow, now a counselor to Secretary of State Condoleezza Rice, Mr. Siegel recalled in an interview. Neither Mr. Blackwill nor Mr. Zelikow responded to interview requests.

“We were a kind of a Great White Hope,” Mr. Siegel said. The committee was divided into a “P Group” and an “E Group” to distinguish political and economic experts in the group. Mr. Nazarbayev “came across as a reformer open to free markets and fair elections.”

According to his lawyers, Mr. Giffen, at Mr. Nazarbayev’s direction, paid several million dollars in fees from Swiss accounts — many of the same accounts named in Mr. Giffen’s indictment — to committee members for their expertise on a range of policy issues involving Kazakhstan.

The group’s recommendations can be found in two spiral-bound documents that came to be known simply as the Red Books. Mr. Giffen’s lawyers, as well as Mr. Siegel, said the creation of the committee reflected Mr. Giffen’s interest in helping Mr. Nazarbayev move his country away from an authoritarian government to a more democratic model. While the Red Books lists an impressive array of financiers and policy makers in its membership ranks, some of those named in the document said they never worked with Mr. Giffen. One of those people, John C. Whitehead, the former chairman of the investment banking giant Goldman Sachs, acknowledged being an acquaintance of Mr. Giffen but said he was never part of the group. “I’ve never been to Kazakhstan,” Mr. Whitehead said, “and I’ve certainly not had that kind of formal relationship with Jim Giffen.”

Mr. Giffen’s lawyers declined to discuss any other aspects of his work with the committee, but said that the committee’s existence proved that the scope of his influence with policy makers far transcended energy matters.

SUPPORTED or not by the federal government, Mr. Giffen reportedly managed to orchestrate what the government describes in its indictment as an elaborate money laundering and tax fraud scheme carried out in six separate oil transactions from 1995 to 1999, all of which involved defrauding the government of Kazakhstan. Mr. Giffen is accused of hiding some of the proceeds in each of the deals through a series of wire transfers that ultimately landed in Swiss bank accounts. One deal Mr. Giffen’s indictment details involved Mobil Oil’s 1996 purchase of a 25 percent interest in Kazakhstan’s Tengiz oil field. Located in the mineral-rich Caspian region, Tengiz is the sixth-largest oil field in the world, producing 285,000 barrels a day, or about a third of the country’s daily production.

The indictment states that after Mobil paid Mr. Giffen a $51 million fee for negotiating the deal, he transferred half of the money to a Swiss account and then sent the money on a circuitous path through a number of other accounts, including one registered to a British Virgin Islands company. Exxon and Mobil merged in late 1999 to form Exxon Mobil, the world’s largest oil company. Russ Roberts, an Exxon spokesman, said Mobil was not the source of any payments to Mr. Giffen.

“Exxon Mobil has no knowledge of any illegal payments made to Kazakh officials by any current or former Mobil employees,” Mr. Roberts wrote in an e-mail response to an interview request. “We also have no knowledge of any illegal payments received by any current or former Mobil employees.” Mr. Roberts said neither Mr. Giffen nor his company, Mercator, had represented Mobil or Exxon Mobil.

In 2003, a former Mobil manager pleaded guilty to evading taxes on $7 million he received from Mr. Giffen starting in 1993. Mr. Roberts noted that Mr. Giffen’s payments to the manager had begun several years before any Mobil acquisition in Kazakhstan and that Mobil had not been the source of the payments. Although prosecutors described the payments to the manager as “kickbacks” for work done on Mobil’s behalf, the manager, Mr. Roberts said, repudiated that accusation. Mr. Roberts declined to further discuss the matter.

But according to the indictment, Mr. Giffen wired another chunk of what court papers describe as a Mobil fee, about $20 million, into another pair of Swiss accounts. Nurlan Balgimbaev, the former prime minister and oil minister of Kazakhstan, controlled one of the accounts, according to the indictment. A Liechtenstein trust, of which Mr. Nazarbayev and his family were beneficiaries, controlled the other account, the indictment asserts.

In the process, the government asserts, Mr. Giffen paid $36,000 of Mr. Balgimbaev’s personal bills for the upkeep of a house in Newtown, Mass., spent $30,000 to buy fur coats for Mr. Nazarbayev’s wife and daughter and bought a Donzi speedboat as a gift from Mr. Nazarbayev to Mr. Balgimbaev.

ConocoPhillips and BP, two of the other oil companies which the indictment says paid Mr. Giffen, declined to comment. A lawyer and former federal prosecutor who represents the Republic of Kazakhstan, Reid H. Weingarten, declined to discuss the case. But few involved on either side of Mr. Giffen’s case have denied that his ties to Mr. Nazarbayev were substantial, longstanding and gilded.

“Everyone agrees on one thing, which is that Nazarbayev took bribes,” said Rinat Akhmetshin, director of the International Eurasian Institute, a Washington research group that supports Mr. Nazarbayev’s political opponents. Mr. Akhmetshin said the case was being closely followed in Kazakhstan and that Mr. Nazarbayev’s political future could turn on the trial’s outcome. “The moment Giffen goes to jail, Nazarbayev is finished as a politician,” he said.

JAMES GIFFEN’S financial ascent — from a young banker on the make into a well-heeled political insider with a bodyguard, a chauffeur-driven Mercedes-Benz and a Kazakh diplomatic passport — was a serendipitous blend of lucrative financial opportunities in Eastern Europe and Central Asia and old-fashioned elbow grease.

The son of a clothier in Stockton, Calif., Mr. Giffen, who is now 65, had ties to the Soviet Union dating back to the early 1970s. After graduating from the University of California, Berkeley and the School of Law at U.C.L.A., he started his career at a minerals trading firm before joining a subsidiary of the Armco Steel Corporation (later acquired by AK Steel). Armco was led by C. William Verity Jr., a champion of increased trade with the Soviet Union who would later serve as commerce secretary in the Reagan administration. Mr. Giffen became a vice president at the Armco subsidiary, which sold drilling equipment to the Soviet Union.

Although Mr. Giffen did not speak Russian, and the Soviets showed little interest at the time in trading with the West, he persistently courted Russia’s leaders. Nattily dressed and with a cigarette constantly in hand, Mr. Giffen exuded an affecting bluster and self-assurance — many who know him call it bravado — that eventually gained him the ears of high-ranking Soviet leaders. By the mid-1980s, Mr. Giffen had left Armco and founded his own company, Mercator, a boutique merchant bank headquartered in New York. He began the company with a five-year contract from Armco and a board of directors that included Mr. Verity and two former government officials.

Over the next decade, his lawyers have said, Mr. Giffen came to count Mikhail Gorbachev in his network of powerful friends within the Soviet government, the Communist Party and the K.G.B. In the late 1980s, Mr. Giffen convinced Chevron, Eastman Kodak, Ford Motor and RJR Nabisco to form a coalition aimed at penetrating the Soviet market through joint ventures — deals that Mercator would handle.

Although that initiative collapsed with the Soviet Union in 1991, Mr. Giffen had apparently become a conduit for information involving United States-Soviet affairs. On one occasion, the White House asked him to describe a meeting he had had with Mr. Gorbachev and to suggest trade issues that the first President Bush should raise with Mr. Gorbachev, according to filings in the federal court case. A memo, which an American official apparently prepared for the first President Bush, recounts Mr. Giffen as stating the president had “hit paydirt” with Mr. Gorbachev and that “whatever President Bush wants to do, Gorbachev will try to do.”

When 15 independent states emerged from the collapse of the Soviet Union, Mr. Nazarbayev contacted Mr. Giffen, his lawyers say. Mr. Nazarbayev, head of Kazakhstan’s Communist Party, and Mr. Giffen, who was president of the U.S.-U.S.S.R. Trade and Economic Council, had become close friends by that time, said Mr. Schwartz, the lawyer.

DURING Chevron’s discussions to acquire an interest in the Tengiz oil field, the company became one of Mr. Giffen’s clients. The company says the relationship was short-lived. “In the early 1990s, Chevron obtained the services of Mr. Giffen with respect to business opportunities with Russia and the individual republics,” the company said in an e-mail response to an interview request. “Chevron terminated that relationship in 1992.”

Mr. Nazarbayev asked Mr. Giffen to play an advisory role within the newly sovereign nation of Kazakhstan, according to Mr. Giffen’s lawyers.

As the country’s first president, Mr. Nazarbayev was determined to attract the involvement of multinational oil companies in developing his country’s bountiful oil fields, according to political and economic analysts. To that end, Mr. Nazarbayev hired Mr. Giffen to serve dual roles. As a special adviser to Kazakhstan, Mr. Giffen oversaw the country’s efforts to attract investment from the United States, while his company, Mercator, advised the Kazakh government on oil and gas transactions.

“Giffen was able to cast himself as a bigger-than-life figure who really knew how to work the West,” said Martha Brill Olcott, a specialist on Central Asian and Caspian affairs with the Carnegie Endowment for International Peace. “Nazarbayev liked that and they created a relationship of great personal trust.”

Mr. Giffen’s and Mr. Nazarbayev’s close relationship sparked resentment among some senior Kazakh officials. “The biggest problem with Giffen was that he was trying to create an instrument of government that would keep himself and the president in power,” said the former prime minister of Kazakhstan, Akezhan Kazhegeldin. “He never dreamed he’d be so close to power.”

In a telephone interview, Mr. Kazhegeldin declined to discuss Mr. Giffen’s indictment but said that he and Mr. Giffen had clashed on several occasions. Within Kazakhstan’s senior ranks, Mr. Kazhegeldin had gained a reputation as a champion of free enterprise economics and someone favored among Western leaders, Ms. Olcott said. Mr. Kazhegeldin himself asserted that his penchant for economic reform and his calls to reform his country’s autocratic government ultimately alienated both Mr. Giffen and Mr. Nazarbayev.

Now living in Italy and London, Mr. Kazhegeldin said he had spent millions of dollars on lobbyists and public affairs specialists in the hope of defeating Mr. Nazarbayev in Kazakhstan’s next election, scheduled for 2011. “There is a small group of people getting rich — and I mean really rich — in Kazakhstan while the rest of society remains really poor,” Mr. Kazhegeldin said. “The leadership is not interested in pushing a market economy. They keep two sets of books, one for themselves and another for everyone else.”

Mr. Kazhegeldin, however, is a veteran of the pell-mell economic scramble of the post-Soviet years. He amassed his wealth as a rogue salesman in the waning years before the Soviet Union’s dissolution, selling scrap metal on the black market while studying international business at Moscow’s K.G.B. Academy, according to a résumé furnished by a close associate who asked not to be identified because of the nature of the work he does for Mr. Kazhegeldin. After the spy school kicked him out in 1989 for his moonlighting activities, Mr. Kazhegeldin went on to make his millions exporting chemical fertilizer, the associate said.

Mr. Nazarbayev began his own investigation of Mr. Kazhegeldin’s finances in the fall of 1998 — to score political points, Mr. Kazhegeldin’s supporters said — which snowballed into an international scandal when it led the United States government to examine Mr. Giffen’s activities more closely.

In fall 1999, the Kazakh government accused Mr. Kazhegeldin of embezzling several million dollars into an offshore account that he controlled. Mr. Kazhegeldin denied any wrongdoing and said neither he nor any family members had access to the account.

Mr. Kazhegeldin accused Mr. Nazarbayev of arranging the deposit and leaking information about it to the news media to secure victory in a 1999 presidential election. A 1999 State Department examination of the Kazakh investigation into the accounts reportedly linked to Mr. Kazhegeldin concluded that the investigation, “while possibly grounded in facts, appeared motivated politically.”

After Kazakh officials contacted Belgian and Swiss authorities to examine Mr. Kazhegeldin’s possible role in the looting of government funds, the Swiss contacted the Justice Department to discuss what appeared to be a pattern of questionable transactions between Kazakhstan and American and European oil companies.

As federal investigators reviewed the transactions in 2000, they noticed that Mr. Giffen was party to many of them, according to his lawyers. Over the next two years, investigators focused more closely on Mr. Giffen and subpoenaed records from Mercator. A treaty between the United States and Switzerland permitted investigators to obtain detailed records of Mr. Giffen’s financial activities in New York and Switzerland, according to his lawyers. In February 2003, the United States attorney’s office in Manhattan won a grand jury indictment against Mr. Giffen on fraud charge. A month later, as Mr. Giffen boarded a flight from New York to Paris with his lawyers, federal authorities arrested him.

As the Giffen trial moves forward, with the possibility that more information about Mr. Giffen’s interactions with the Kazakh government, Washington policy makers and multinational corporations may emerge, it promises to shine a spotlight on the terms of engagement when the United States courts resource-rich countries riddled with corruption.

“Corruption is at the heart of what causes poverty in third world countries,” said Mr. Blum, the former Congressional investigator. “We tell ourselves that in the short term, we can buy these guys who will serve the national interest, but in the long run it always turns into a disaster.”

The World Bank, the Washington economic development organization that focuses its efforts on needy countries, has brought much of the current debate about overseas financial corruption to the fore. In the early 1990s, the bank started measuring corruption within the governments of its member countries. The initiative was controversial because until then, economists had largely considered corruption to be an ethical or cultural issue. The bank began interviewing hundreds of private citizens, as well as employees in government and business, trying to pin down the pattern and prevalence of corruption in areas like banking, real estate, health care, media and education.

“What we realized was that corruption is not just a moral or ethical issue but an economic development issue,” said Daniel Kaufmann, an economist who began the World Bank’s corruption studies. “We estimated that with good governance, there is a threefold increase in per capita income as funds that should be allocated toward the gross domestic product are not siphoned off.”

BY 1995, Mr. Kaufmann’s team developed a rating system that measured factors like corruption control, absence of violence, government accountability and regulatory quality in various countries. The ideas became a cornerstone of the bank’s agenda. Since the mid-1990s, it has started more than 600 anticorruption programs in nearly 100 countries. Under Paul D. Wolfowitz, who became head of the World Bank last year, it has continued its anticorruption efforts. In what Mr. Wolfowitz described as efforts to stem corruption, he recently threatened to cut loans and development contracts in India and Kenya. Mr. Wolfowitz, a former deputy defense secretary in the Bush administration and an architect of its policies in the Middle East, has received the White House’s backing in prioritizing anticorruption campaigns. But some research groups, and some of the bank’s own administrators, have criticized Mr. Wolfowitz for using the World Bank to advance the White House’s foreign policy goals in countries like Iraq, where the bank recently increased its lending support.

A World Bank spokesman denied that Mr. Wolfowitz was serving the White House’s interests. “He doesn’t hesitate to serve as an independent voice for the poorest people — including when it goes against the grain on issues like trade, debt relief and support for official development assistance,” the spokesman wrote in an e-mail message.

Kazakhstan, and Mr. Nazarbayev’s stewardship of the country, have been fodder for World Bank scrutiny. According to the bank’s 2005 Worldwide Governance Indicators, Kazakhstan ranks with Angola, Bolivia, Kenya, Libya and Pakistan among the world’s corruption hotspots.

Other anticorruption watchdogs, like Transparency International, also rate Kazakhstan poorly for its governance practices. The State Department’s 2005 Kazakhstan Country Report on Human Rights Practices noted that the Kazakhstan government’s “human rights record remained poor” and that “corruption remained a serious problem.”

Despite such low scores and scathing critiques, the World Bank has lent Kazakhstan more than $2 billion for 28 projects since 1992. In fiscal 2006, commitments to Kazakhstan totaled $130 million, with overall commitments for active projects at $648 million.

Juan José Daboub, who oversees the World Bank’s governance program, declined to comment specifically on corruption issues in Kazakhstan or on Mr. Nazarbayev’s leadership.

“We respect what countries pick in terms of leadership,” said Mr. Daboub. “We are not judges, prosecutors or investigators.”

But Mr. Baker, the energy analyst at the Brookings Institution, saw things differently: “If you’re a country with a lot of oil, you get a lot of free passes.”

Human rights groups have spent years blasting Mr. Nazarbayev for shutting newspapers critical of his regime; passing laws that threatened to prosecute individuals whose actions were considered threats to the country’s economic development efforts; tolerating and participating in vast graft; and the like. But rarely have American policy makers openly opposed Mr. Nazarbayev’s leadership and actions, analysts said.

“He has done a pretty sophisticated job of reaching out to many sectors,” said Thomas O. Melia, deputy director of Freedom House, a liberal research group in Washington. “He is not like a lot of leaders, who put all of their eggs in the White House basket.”

Even so, the White House, through successive administrations, has been a reliable and enormously influential ally of Mr. Nazarbayev, and its continued embrace of Kazakhstan’s leader rankles some members of Congress.

“It’s just hypocritical for President Bush to issue statements on combating foreign corruption and then to embrace a dictator,” said Senator Carl Levin of Michigan, the ranking Democrat on the Senate Governmental Affairs Committee. “It sends a real negative message to countries that you’re trying to win support from.”

Senator Levin characterized Mr. Nazarbayev as “an iron-fisted dictator who imprisons his opponents, bans opposition parties and controls the press.”

But some say the White House should be worldly wise when it comes to supporting certain countries in volatile but resource-rich regions. Ariel Cohen, a senior fellow at the Heritage Foundation, a conservative research group, said the Bush administration had effectively balanced its long-term foreign policy goals involving energy issues with its human rights standards in Central Asia. Because of turmoil in other Central Asian countries, Kazakhstan has emerged as a possible military foothold for the United States there.

“When it comes to Kazakhstan, it’s all about three things; energy, democracy and security,” Mr. Cohen said. “I would argue that relative to his competition in Central Asia, Nazarbayev is the most successful in pursuing each of them. Sure, there is still corruption and insufficient rule of law, but this is a country that 15 years ago had no statehood. They have started from scratch.”

If Mr. Giffen’s trial gets under way in February, it may enrich and shed light on the debate about the United States’ engagement with Kazakhstan and other countries that have poor anticorruption records.

FOR their part, Kazakh officials worry that Mr. Giffen’s trial may set their nation on a backward course. Mr. Weingarten, the lawyer representing the Kazakh government, wrote a letter in 2002 to the Justice Department on behalf of his client. The letter was straightforward: “Even if it were possible for the prosecutors to indict President Nazarbayev, we cannot envision a scenario where the United States would deem it in its interest to indict the leader of an important strategic ally.”

Even more important, said some of Mr. Giffen’s allies, is that the whole messy affair of moving bribes and laundered money around the world has caused Mr. Giffen’s work to become unfairly mischaracterized.

“If this whole thing was just about oil, it was one of the biggest snow jobs in U.S. history,” said Mr. Siegel, the Washington lobbyist who aided Mr. Giffen’s efforts in Kazakhstan. “I believed that we were doing God’s work.”

Article: Very Rich Are Leaving the Merely Rich Behind

This article is posted for three elements. The first is its title and topic “Very Rich Are Leaving the Merely Rich Behind”, the second is its focus on the “Very Rich” who are separating themselves from the “Merely Rich” by choosing lucrative jobs on Wall Street and the third link is captured in this quote: ”a growing number of entrepreneurs have seen windfalls tied largely to expanding financial markets, which draw on capital from around the world.”

This article is being posted in conjunction with the post called Multinational Corporate Reform. That post shows how Multinational Corporations use loopholes in international trade laws to enter foreign markets, mine their natural resources while despoiling the environment, then increase their profit margin by externalizing those costs onto the developing nation whose resources they are mining. The same international trade system that is creating a new class of rich people on Wall Street is also creating more poverty and extreme-poverty in developing countries around the world.

November 27, 2006
Gilded Paychecks
Very Rich Are Leaving the Merely Rich Behind
New York Times

By LOUIS UCHITELLE
A decade into the practice of medicine, still striving to become “a well regarded physician-scientist,” Robert H. Glassman concluded that he was not making enough money. So he answered an ad in the New England Journal of Medicine from a business consulting firm hiring doctors.

And today, after moving on to Wall Street as an adviser on medical investments, he is a multimillionaire.

Such routes to great wealth were just opening up to physicians when Dr. Glassman was in school, graduating from Harvard College in 1983 and Harvard Medical School four years later. Hoping to achieve breakthroughs in curing cancer, his specialty, he plunged into research, even dreaming of a Nobel Prize, until Wall Street reordered his life.

Just how far he had come from a doctor’s traditional upper-middle-class expectations struck home at the 20th reunion of his college class. By then he was working for Merrill Lynch and soon would become a managing director of health care investment banking.

“There were doctors at the reunion — very, very smart people,” Dr. Glassman recalled in a recent interview. “They went to the top programs, they remained true to their ethics and really had very pure goals. And then they went to the 20th-year reunion and saw that somebody else who was 10 times less smart was making much more money.”

The opportunity to become abundantly rich is a recent phenomenon not only in medicine, but in a growing number of other professions and occupations. In each case, the great majority still earn fairly uniform six-figure incomes, usually less than $400,000 a year, government data show. But starting in the 1990s, a significant number began to earn much more, creating a two-tier income stratum within such occupations.

The divide has emerged as people like Dr. Glassman, who is 45, latched onto opportunities within their fields that offered significantly higher incomes. Some lawyers and bankers, for example, collect much larger fees than others in their fields for their work on business deals and cases.

Others have moved to different, higher-paying fields — from academia to Wall Street, for example — and a growing number of entrepreneurs have seen windfalls tied largely to expanding financial markets, which draw on capital from around the world. The latter phenomenon has allowed, say, the owner of a small mail-order business to sell his enterprise for tens of millions instead of the hundreds of thousands that such a sale might have brought 15 years ago.

Three decades ago, compensation among occupations differed far less than it does today. That growing difference is diverting people from some critical fields, experts say. The American Bar Foundation, a research group, has found in its surveys, for instance, that fewer law school graduates are going into public-interest law or government jobs and filling all the openings is becoming harder.

Something similar is happening in academia, where newly minted Ph.D.’s migrate from teaching or research to more lucrative fields. Similarly, many business school graduates shun careers as experts in, say, manufacturing or consumer products for much higher pay on Wall Street.

And in medicine, where some specialties now pay far more than others, young doctors often bypass the lower-paying fields. The Medical Group Management Association, for example, says the nation lacks enough doctors in family practice, where the median income last year was $161,000.

“The bigger the prize, the greater the effort that people are making to get it,” said Edward N. Wolff, a New York University economist who studies income and wealth. “That effort is draining people away from more useful work.”

What kind of work is most useful is a matter of opinion, of course, but there is no doubt that a new group of the very rich have risen today far above their merely affluent colleagues.

Turning to Philanthropy

One in every 825 households earned at least $2 million last year, nearly double the percentage in 1989, adjusted for inflation, Mr. Wolff found in an analysis of government data. When it comes to wealth, one in every 325 households had a net worth of $10 million or more in 2004, the latest year for which data is available, more than four times as many as in 1989.

As some have grown enormously rich, they are turning to philanthropy in a competition that is well beyond the means of their less wealthy peers. “The ones with $100 million are setting the standard for their own circles, but no longer for me,” said Robert Frank, a Cornell University economist who described the early stages of the phenomenon in a 1995 book, “The Winner-Take-All Society,” which he co-authored.

Fighting AIDS and poverty in Africa are favorite causes, and so is financing education, particularly at one’s alma mater.

“It is astonishing how many gifts of $100 million have been made in the last year,” said Inge Reichenbach, vice president for development at Yale University, which like other schools tracks the net worth of its alumni and assiduously pursues the richest among them.

Dr. Glassman hopes to enter this circle someday. At 35, he was making $150,000 in 1996 (about $190,000 in today’s dollars) as a hematology-oncology specialist. That’s when, recently married and with virtually no savings, he made the switch that brought him to management consulting.

He won’t say just how much he earns now on Wall Street or his current net worth. But compensation experts, among them Johnson Associates, say the annual income of those in his position is easily in the seven figures and net worth often rises to more than $20 million.

“He is on his way,” said Alan Johnson, managing director of the firm, speaking of people on career tracks similar to Dr. Glassman’s. “He is destined to riches.”

Indeed, doctors have become so interested in the business side of medicine that more than 40 medical schools have added, over the last 20 years, an optional fifth year of schooling for those who want to earn an M.B.A. degree as well as an M.D. Some go directly to Wall Street or into health care management without ever practicing medicine.

“It was not our goal to create masters of the universe,” said James Aisner, a spokesman for Harvard Business School, whose joint program with the medical school started last year. “It was to train people to do useful work.”

Dr. Glassman still makes hospital rounds two or three days a month, usually on free weekends. Treating patients, he said, is “a wonderful feeling.” But he sees his present work as also a valuable aspect of medicine.

One of his tasks is to evaluate the numerous drugs that start-up companies, particularly in biotechnology, are developing. These companies often turn to firms like Merrill Lynch for an investment or to sponsor an initial public stock offering. Dr. Glassman is a critical gatekeeper in this process, evaluating, among other things, whether promising drugs live up to their claims.

What Dr. Glassman represents, along with other very rich people interviewed for this article, is the growing number of Americans who acknowledge that they have accumulated, or soon will, more than enough money to live comfortably, even luxuriously, and also enough so that their children, as adults, will then be free to pursue careers “they have a hunger for,” as Dr. Glassman put it, “and not feel a need to do something just to pay the bills.”

In an earlier Gilded Age, Andrew Carnegie argued that talented managers who accumulate great wealth were morally obligated to redistribute their wealth through philanthropy. The estate tax and the progressive income tax later took over most of that function — imposing tax rates of more than 70 percent as recently as 1980 on incomes above a certain level.

Now, with this marginal rate at half that much and the estate tax fading in importance, many of the new rich engage in the conspicuous consumption that their wealth allows. Others, while certainly not stinting on comfort, are embracing philanthropy as an alternative to a life of professional accomplishment.

Bill Gates and Warren Buffett are held up as models, certainly by Dr. Glassman. “They are going to make much greater contributions by having made money and then giving it away than most, almost all, scientists,” he said, adding that he is drawn to philanthropy as a means of achieving a meaningful legacy.

“It has to be easier than the chance of becoming a Nobel Prize winner,” he said, explaining his decision to give up research, “and I think that goes through the minds of highly educated, high performing individuals.”

As Bush administration officials see it — and conservative economists often agree — philanthropy is a better means of redistributing the nation’s wealth than higher taxes on the rich. They argue that higher marginal tax rates would discourage entrepreneurship and risk-taking. But some among the newly rich have misgivings.

Mark M. Zandi is one. He was a founder of Economy.com, a forecasting and data gathering service in West Chester, Pa. His net worth vaulted into eight figures with the company’s sale last year to Moody’s Investor Service.

“Our tax policies should be redesigned through the prism that wealth is being increasingly skewed,” Mr. Zandi said, arguing that higher taxes on the rich could help restore a sense of fairness to the system and blunt a backlash from a middle class that feels increasingly squeezed by the costs of health care, higher education, and a secure retirement. The Federal Reserve’s Survey of Consumer Finances, a principal government source of income and wealth data, does not single out the occupations and professions generating so much wealth today. But Forbes magazine offers a rough idea in its annual surveys of the richest Americans, those approaching and crossing the billion dollar mark.

Some routes are of long standing. Inheritance plays a role. So do the earnings of Wall Street investment bankers and the super incomes of sports stars and celebrities. All of these routes swell the ranks of the very rich, as they did in 1989.

But among new occupations, the winners include numerous partners in recently formed hedge funds and private equity firms that invest or acquire companies. Real estate developers and lawyers are more in evidence today among the very rich. So are dot-com entrepreneurs as well as scientists who start a company to market an invention or discovery, soon selling it for many millions. And from corporate America come many more chief executives than in the past.

Seventy-five percent of the chief executives in a sample of 100 publicly traded companies had a net worth in 2004 of more than $25 million mainly from stock and options in the companies they ran, according to a study by Carola Frydman, a finance professor at the Massachusetts Institute of Technology’s Sloan School of Management. That was up from 31 percent for the same sample in 1989, adjusted for inflation.

Chief executives were not alone among corporate executives in rising to great wealth. There were similar or even greater increases in the percentage of lower-ranking executives — presidents, executive vice presidents, chief financial officers — also advancing into the $25 million-plus category.

The growing use of options as a form of pay helps to explain the sharp rise in the number of very wealthy households. But so does the gradual dismantling of the progressive income tax, Ms. Frydman concluded in a recent study.

“Our simulation results suggest that, had taxes been at their low 2000 level throughout the past 60 years, chief executive compensation would have been 35 percent higher during the 1950s and 1960s,” she wrote.

Trying Not to Live Ostentatiously

Finally, the owners of a variety of ordinary businesses — a small chain of coffee shops or temporary help agencies, for example — manage to expand these family operations with the help of venture capital and private equity firms, eventually selling them or taking them public in a marketplace that rewards them with huge sums.

John J. Moon, a managing director of Metalmark Capital, a private equity firm, explains how this process works.

“Let’s say we buy a small pizza parlor chain from an entrepreneur for $10 million,” said Mr. Moon, who at 39, is already among the very rich. “We make it more efficient, we build it from 10 stores to 100 and we sell it to Domino’s for $50 million.”

As a result, not only the entrepreneur gets rich; so do Mr. Moon and his colleagues, who make money from putting together such deals and from managing the money they raise from wealthy investors who provide much of the capital.

By his own account, Mr. Moon, like Dr. Glassman, came reluctantly to the accumulation of wealth. Having earned a Ph.D. in business economics from Harvard in 1994, he set out to be a professor of finance, landing a job at Dartmouth’s Tuck Graduate School of Business, with a starting salary in the low six figures.

To this day, teaching tugs at Mr. Moon, whose parents immigrated to the United States from South Korea. He steals enough time from Metalmark Capital to teach one course in finance each semester at Columbia University’s business school. “If Wall Street was not there as an alternative,” Mr. Moon said, “I would have gone into academia.”

Academia, of course, turned out to be no match for the job offers that came Mr. Moon’s way from several Wall Street firms. He joined Goldman Sachs, moved on to Morgan Stanley’s private equity operation in 1998 and stayed on when the unit separated from Morgan Stanley in 2004 and became Metalmark Capital.

As his income and net worth grew, the Harvard alumni association made contact and he started to give money, not just to Harvard, but to various causes. His growing charitable activities have brought him a leadership role in Harvard alumni activities, including a seat on the graduate school alumni council.

Still, Mr. Moon tries to live unostentatiously. “The trick is not to want more as your income and wealth grow,” he said. “You fly coach and then you fly first class and then it is fractional ownership of a jet and then owning a jet. I still struggle with first class. My partners make fun of me.”

His reluctance to show his wealth has a basis in his religion. “My wife and I are committed Presbyterians,” he said. “I would like to think that my faith informs my career decisions even more than financial considerations. That is not always easy because money is not unimportant.”

It has a momentum of its own. Mr. Moon and his wife, Hee-Jung, who gave up law to raise their two sons, are renovating a newly purchased Park Avenue co-op. “On an absolute scale it is lavish,” he said, “but on a relative scale, relative to my peers, it is small.”

Behavior is gradually changing in the Glassman household, too. Not that the doctor and his wife, Denise, 41, seem to crave change. Nothing in his off-the-rack suits, or the cafes and nondescript restaurants that he prefers for interviews, or the family’s comparatively modest four-bedroom home in suburban Short Hills, N.J., or their two cars (an Acura S.U.V. and a Honda Accord) suggests that wealth has altered the way the family lives.

But it is opening up “choices,” as Mrs. Glassman put it. They enjoy annual ski vacations in Utah now. The Glassmans are shopping for a larger house — not as large as the family could afford, Mrs. Glassman said, but large enough to accommodate a wood-paneled study where her husband could put all his books and his diplomas and “feel that it is his own.” Right now, a glassed-in porch, without book shelves, serves as a workplace for both of them.

Starting out, Dr. Glassman’s $150,000 a year was a bit less than that of his wife, then a marketing executive with an M.B.A. from Northwestern. Their plan was for her to stop working once they had children. To build up their income, she encouraged him to set up or join a medical practice to treat patients. Dr. Glassman initially balked, but he was coming to realize that his devotion to research would not necessarily deliver a big scientific payoff.

“I wasn’t sure that I was willing to take the risk of spending many years applying for grants and working long hours for the very slim chance of winning at the roulette table and making a significant contribution to the scientific literature,” he said.

In this mood, he was drawn to the ad that McKinsey & Company, the giant consulting firm, had placed in the New England Journal of Medicine. McKinsey was increasingly working among biomedical and pharmaceutical companies and it needed more physicians on staff as consultants. Dr. Glassman, absorbed in the world of medicine, did not know what McKinsey was. His wife enlightened him. “The way she explained it, McKinsey was like a Massachusetts General Hospital for M.B.A.’s,” he said. “It was really prestigious, which I liked, and I heard that it was very intellectually charged.”

He soon joined as a consultant, earning a starting salary that was roughly the same as he was earning as a researcher — and soon $100,000 more. He stayed four years, traveling constantly and during that time the family made the move to Short Hills from rented quarters in Manhattan.

Dr. Glassman migrated to Merrill Lynch in 2001, first in private equity, which he found to be more at the forefront of innovation than consulting at McKinsey, and then gradually to investment banking, going full time there in 2004.

Linking Security to Income

Casey McCullar hopes to follow a similar circuit. Now 29, he joined the Marconi Corporation, a big telecommunications company, in 1999 right out of the University of Texas in Dallas, his hometown. Over the next six years he worked up to project manager at $42,000 a year, becoming quite skilled in electronic mapmaking.

A trip to India for his company introduced him to the wonders of outsourcing and the money he might make as an entrepreneur facilitating the process. As a first step, he applied to the Tuck business school at Dartmouth, got in and quit his Texas job, despite his mother’s concern that he was giving up future promotions and very good health insurance, particularly Marconi’s dental plan.

His life at Tuck soon sent him in still another direction. When he graduates next June he will probably go to work for Mercer Management Consulting, he says. Mercer recruited him at a starting salary of $150,000, including bonus. “If you had told me a couple of years ago that I would be making three times my Marconi salary, I would not have believed you,” Mr. McCullar said.

Nearly 70 percent of Tuck’s graduates go directly to consulting firms or Wall Street investment houses. He may pursue finance later, Mr. McCullar says, always keeping in mind an entrepreneurial venture that could really leverage his talent.

“When my mom talks of Marconi’s dental plan and a safe retirement,” he said, “she really means lifestyle security based on job security.”

But “for my generation,” Mr. McCullar said, “lifestyle security comes from financial independence. I’m doing what I want to do and it just so happens that is where the money is.”