The St. Petersburg Times August 5, 2003 Tuesday EMEDIA-ACC-NO: 200308058113.m13 LENGTH: 891 words HEADLINE: Setting a Poor, Market-Driven Example, THE ST. PETERSBURG TIMES BODY: A Pentagon-sponsored project made news headlines last week. It was called FutureMAP and aimed to create a market to trade futures on some fundamentals of Middle Eastern politics, including coups and terrorist acts. The Pentagon was expected to formulate the subjects for the futures, while the Economist Intelligence Unit was to provide the country analysis. The market was open to government bodies and private traders, with winners and losers being determined by their ability to predict political developments. The pilot stage of the project was to be funded by $8 million of taxpayers' money. Like many, my first reaction to the story was that it had to be a joke. It was to absurd to be real. But it was a serious project developed by serious people. The organization behind the idea turned out to be DAPRA - a multi-million-dollar research branch of the Pentagon. Apparently, the U.S. government thought that trading on human lives and the fates of the countries is a business like any other. I wasn't the only one shocked as, a few days later, came the news that the project had been canceled and its supervisor was retiring. The name of the director was another surprise for me: retired Admiral John Poindexter - the onetime national-security adviser to Ronald Reagan, who was convicted for his involvement in the Iran-Contra scandal. While I'm happy that the idea was squashed, I can't say that I'm totally relieved. The idea itself was insane and the person who suggested it was probably a little bit crazy, but what about all other people who in due course authorized and sponsored the whole thing? It took a public-opinion firestorm to kill the misadventure. Journalists tried in vain to get answers from Pentagon officials. Deputy Secretary of Defense Paul Wolfowitz said that he, himself, had only learned about the project from newspapers. That type of statement sounds suspiciously like what Soviet bosses used to say in a similar situations. This is a scary kind of funny. When a system authorizes a crazy idea, there must be something wrong with that system. This is borne out by the fact that it is not an isolated incident. Earlier in July, the U.S. Congress cut off funding for another innovative project - the Total Information Awareness program. That idea of total electronic control was regarded as Orwellian and in clear conflict with constitutional guarantees of privacy. Something dangerous is obviously happening in the administration of President George W. Bush. Its obsession with technology is inspiring it to introduce new tools while ignoring any questions about legality or ethics. Combined with a quasi-religious belief in the value of market forces in all spheres of human life, this tendency becomes even more dangerous. Nobody should question the generic link between business and politics. But betting on future oil prices, ticket sales or even election results are different matters than wagering on political stability or human casualties resulting from a terrorist attack. I understand that real politics is neither a clean nor a moral business, but certain lines have to be respected. Some media sources report that FutureMAP was a technologically difficult project with prospective problems in avoiding the collapse or manipulation of the markets. The difficulties the United States has had in the last year in safeguarding financial markets against this type of manipulation bear this out. The United States has long been accused of improper acts of intervention into the internal affairs of smaller countries, and the crusade it claims to be waging against global terrorism has led the government to act as if it now enjoys carte blanche to act more aggressively and openly and where it feels that it is necessary, to change political regimes through military intervention. How a political futures market on the Middle East could be immune from speculation under these conditions from is a rhetoric question. From the point of view of pure business logic, there is an built-in conflict of interests. There can be no fair play or trading on such a market. All the failed project could have achieved was to make terrorism and regime change emerge as legitimate markets like any other. The worry is that, while Poindexter will retire, those who masterminded the idea will still be around. Those who initiated this risky project probably counted Poindexter as an essential part of their exit strategy if the things went wrong. He has experience in the role of the fall guy. Orwell's gloomy dystopia "1984" considered the future of totalitarian governance and, in many ways, predicted the end product in the Soviet Union. What he didn't write about was the possibility that distortions of this magnitude could also come from what is portrayed - economically, politically and ideologically - as the opposing position. It is also unfortunate that, at the same time that Russia is trying to navigate its way through a dramatic transition, it is next to impossible to find an appropriate positive example to follow. The Soviet past brought the country to national catastrophe, while the present in an advanced Western democracy appears to be immoral and humanly degrading. Igor Leshukov is the director of the Institute of International Affairs, a St. Petersburg-based think tank.