America's Perpetual, Multi-generational Global War on Terror is Profitable for the Ruling Elite

A World Made by War

How old will you be when the American war state goes down? The other day, at the invitation of economics professor Marty Melkonian, I took a rare jaunt out of my hometown to Hofstra University on Long Island and gave a talk in that college’s lecture series, The International Scene, to a group of lively young students. It was filmed and will soon appear on CSPAN’s Book TV. In the meantime, here it is in print. I wrote it, as you’ll see, with 18-to-21-year-olds in mind.

By Tom Engelhardt, TomDispatch.com
October 17, 2010

When you look at me, you can’t mistake the fact that I’m of a certain age. But just for a moment, think of me as nine years old. You could even say that I celebrated my ninth birthday last week, without cake, candles, presents, or certainly joy.

I’ve had two mobilized moments in my life. The first was in the Vietnam War years; the second, the one that leaves me as a nine-year-old, began on the morning of September 11, 2001. I turned on the TV while doing my morning exercises, saw a smoking hole in a World Trade Center tower, and thought that, as in 1945 when a B-25 slammed into the Empire State Building, a terrible accident had happened.

Later, after the drums of war had begun to beat, after the first headlines had screamed their World-War-II-style messages (“the Pearl Harbor of the 21st century”), I had another thought. And for a reasonably politically sophisticated guy, my second response was not only as off-base as the first, but also remarkably dumb. I thought that this horrific event taking place in my hometown might open Americans up to the pain of the world. No such luck, of course.

If you had told me then that:

• We would henceforth be in a state of eternal war as well as living in a permanent war state,


• To face a ragtag enemy of a few thousand stateless terrorists, the national security establishment in Washington would pump itself up to levels not faintly reached when facing the Soviet Union, a major power with thousands of nuclear weapons and an enormous military,


• “Homeland” -- a distinctly un-American word -- would land in our vocabulary never to leave, and that a second Defense Department dubbed the Department of Homeland Security would be set up not to be dismantled in my lifetime,


• Torture (excuse me, “enhanced interrogation techniques”) would become as American as apple pie and that some of those “techniques” would actually be demonstrated to leading Bush administration officials inside the White House,


• We would pour money into the Pentagon at ever escalating levels even after the economy crashed in 2008,


• We would be fighting two potentially trillion-dollar-plus wars without end in two distant lands,


• We would spend untold billions constructing hundreds of military bases in those same lands,


• The CIA would be conducting the first drone air war in history over a country we were officially not at war with,


• Most of us would live in a remarkable state of detachment from all of this,


• And finally -- only, by the way, because I’m cutting this list arbitrarily short -- that I would spend my time writing incessantly about “the American way of war” and produce a book with that title,

I would have thought you were nuts.

But every bit of that happened, even if unpredicted by me because, like human beings everywhere, I have no special knack for peering into the future. If it were otherwise, I would undoubtedly now be zipping through fabulous spired cities with a jetpack on my back (as I was assured would happen in my distant youth). But if prediction isn’t our forte, then adaptability to changing circumstances may be -- and it certainly helps account for my being here today.

I’m here because, in response to the bizarre spectacle of this nation going to war while living at peace, even if in a spasmodic state of collective national fear, I did something I hardly understood at the time. I launched a nameless listserv of collected articles and my own expanding commentary that ran against the common wisdom of that October moment when the bombing runs for our second Afghan war began.

A little more than a year later, thanks to the Nation Institute, it became a website with the name TomDispatch.com, and because our leaders swore we were “a nation at war,” because we were indeed killing people in quantity in distant lands, because the power of the state at home was being strengthened in startling ways, while everything still open about our society seemed to be getting screwed shut, and the military was being pumped up to Schwarzeneggerian dimensions, I started writing about war.

At some level, I can’t tell you how ridiculous that was. After all, I’m the most civilian and peaceable of guys. I’ve never even been in the military. I was, however, upset with the Bush administration, the connect-no-dots media coverage of that moment, and the repeated 9/11 rites which proclaimed us the planet’s greatest victim, survivor, and dominator — leaving only one role, greatest Evil Doer, open for the rest of the planet (and you know who auditioned for, and won, that part hands down)!

Things That Go Boom in the Night

I won’t say, however, that I had no expertise whatsoever with a permanent state of war and a permanent war state, only that the expertise I had was available to anyone who had lived through the post-World War II era. I was reminded of this on a recent glorious Sunday when, from the foot of Manhattan, I set out, for the first time in more than half a century, on a brief ferry ride that proved, for me, as effective a time machine as anything H.G. Wells had ever imagined. That ferry was not, of course, taking me to a future civilization at the edge of time, but to Governor’s Island, now a park and National Monument in the eddying waters of New York harbor and to the rubble of a gas station my father, a World War II vet, ran there in the early 1950s when that island was still a major U.S. Army base.

On many mornings in those years, I accompanied him on that short ride across the East River and found myself amid buzzing jeeps and drilling soldiers in a world of Army kids with, among other wonders, access to giant swimming pools and kiddy-matinee Westerns. As a dyed-in-the-wool city boy, it was my only real exposure to the burbs, and it proved an edenic one that also caught something of the exotically militarized mood of that Korean War moment.

As on that island, so for most Americans then, the worlds of the warrior and of abundance were no more antithetical than they were to the corporate executives, university research scientists, and military officers who were using a rising military budget and the fear of communism to create a new national security economy.

An alliance between big industry, big science, and the military had been forged during World War II that blurred the boundaries between the military and the civilian by fusing together a double set of desires: for technological breakthroughs leading to ever more efficient weapons of destruction and to ever easier living.

The arms race -- the race, that is, for future good wars -- and the race for the good life were then, as on that island, being put on the same “war” footing.

In the 1950s, a military Keynesianism was already driving the U.S. economy toward a consumerism in which desire for the ever larger car and missile, electric range and tank, television console and submarine was wedded in single corporate entities.

The companies -- General Electric, General Motors, and Westinghouse, among others -- producing the large objects for the American home were also major contractors developing the big ticket weapons systems ushering the Pentagon into its own age of abundance.

More than half a century later, the Pentagon is still living a life of abundance -- despite one less-than-victorious, less-then-good war after another -- while we, increasingly, are not. In the years in-between, the developing national security state of my childhood just kept growing, and in the process the country militarized in the strangest of ways.

Only once in that period did a sense of actual war seem to hover over the nation. That was, of course, in the Vietnam years of the 1960s and early 1970s, when the draft brought a dirty war up close and personal, driving it into American homes and out into the streets, when a kind of intermittent warfare seemed to break out in this country’s cities and ghettos, and when impending defeat drove the military itself to the edge of revolt and collapse.

From the 1970s until 2001, as that military rebuilt itself as an all-volunteer force and finally went back to war in distant lands, the military itself seemed to disappear from everyday life. There were no soldiers in sight, nothing we would consider commonplace today -- from uniforms and guns in train stations to military flyovers at football games, or the repeated rites of praise for American troops that are now everyday fare in our world where, otherwise, we largely ignore American wars.

In 1989, for instance, I wrote in the Progressive magazine about a country that seemed to me to be undergoing further militarization, even if in a particularly strange way.

Ours was, I said, an “America that conforms to no notions we hold of militarism… Militarization is, of course, commonly associated with uniformed, usually exalted troops in evidence and a dictatorship, possibly military, in power.

“The United States, by such standards, still has the look of a civilian society. Our military is, if anything, less visible in our lives than it was a decade ago: no uniforms in the streets, seldom even for our traditional parades; a civilian-elected government; weaponry out of sight… the draft and the idea of a civilian army a thing of the past.

“In the Reagan-Bush era, the military has gone undercover in the world that we see, though not in the world that sees us. For if it is absent from our everyday culture, its influence is omnipresent in corporate America, that world beyond our politics and out of our control -- the world which, nonetheless, plans our high-tech future of work and consumption. There, the militarization of the economy and the corporatization of the military is a process so far gone that it seems reasonable to ask whether the United States can even be said to have a civilian economy.”

Of course, that was then, this is now. Little did I know. Today, it seems, our country is triumphant in producing only things that go boom in the night: we have a near monopoly on the global weapons market and on the global movie market, where in the dark we’re experts in explosions of every sort.

When I wrote in 1989 that the process was “so far gone,” I had no idea how far we still had to go. I had no idea, for instance, how far a single administration could push us when it came to war. Still, one thing that does remain reasonably constant about America’s now perpetual state of war is how little we -- the 99% of us who don’t belong to the military or fight -- actually see of it, even though it is, in a sense, all around us.

Warscapes

From a remarkable array of possibilities, here are just a few warscapes -- think of them as like landscapes, only deadlier -- that might help make more visible an American world of, and way of, war that we normally spend little time discussing, questioning, debating, or doing anything about.

As a start, let me try to conjure up a map of what “defense,” as imagined by the Pentagon and the U.S. military, actually looks like. You can find such a map at Wikipedia, but for a second just imagine a world map laid flat before you. Now divide it, the whole globe, like so many ill-shaped pieces of cobbler, into six servings -- you can be as messy as you want, it’s not an exact science -- and label them:

1. The U.S. European Command or EUCOM (for Europe and Russia),
2. The U.S. Pacific Command or PACOM (Asia),
3. CENTCOM (the Greater Middle East and a touch of North Africa),
4. NORTHCOM (North America),
5. SOUTHCOM (South America and most of the Caribbean), and
   
6. AFRICOM (almost all of Africa).

Those are the “areas of responsibility” of six U.S. military commands.

In case you hadn’t noticed, our map takes care of just about every inch of the planet, but — I hasten to add — not every bit of imaginable space. For that, if you were a clever cartographer, you would somehow need to include STRATCOM, the U.S. Strategic Command charged with, among other things, ensuring that we dominate the heavens; and the newest of all the “geographic” commands, CYBERCOM, expected to be fully operational later this fall with “1,000 elite military hackers and spies under one four-star general” prepared to engage in preemptive war in cyberspace.

Some of these commands have crept up on us over the years. CENTCOM, which now oversees our wars in Afghanistan and Iraq, was formed in 1983, a result of the Carter Doctrine — that is, of President Jimmy Carter’s decision to make the protection of Persian Gulf oil a military necessity — while both NORTHCOM (2002) and AFRICOM (2007) were creations of the Global War on Terror.

From a mapping perspective, however, the salient point is simple enough: at the moment, there is no imaginable space on or off the planet that is not an “area of responsibility” for the U.S. military. That, not the protection of our shores and borders, is what is now meant by that word “defense” in the Department of Defense. And if you were to stare at that map for a while, I can’t help but think it would come to strike you as abidingly strange. No place at all of no military interest to us? What does that say about our country — and ourselves?

In case you’re imagining that the map I’ve just described is simply a case of cartographic hyperbole, consider this: we now have what is, in essence, a secret military inside the U.S. military. I’m talking about our Special Operations forces. These elite and largely covert forces were rapidly expanded in the Bush years as part of the Global War on Terror, but also thanks to Secretary of Defense Donald Rumsfeld’s urge to bring covert activities that were once the province of the CIA under the Pentagon’s wing.

By the end of George W. Bush’s second term in office — think of that map again — Special Operations forces were fighting in, training in, or stationed in approximately 60 countries under the aegis of the Global War on Terror. Less than two years later, according to the Washington Post, 13,000 Special Operations troops are deployed abroad in approximately 75 countries as part of an expanding Global War on Terror (even if the Obama administration has ditched that name); in other words, Special Ops troops alone are now operating in close to 40% of the 192 countries that make up the United Nations!

And talking about what the Pentagon has taken under its wing, I’m reminded of a low-budget sci-fi film of my childhood, The Blob. In it, a gelatinous alien grows ever more humongous by eating every living thing in its path, with the exception of Steve McQueen in his debut screen role. By analogy, take what’s officially called the “IC” or U.S. Intelligence Community, that Rumsfeld was so eager to militarize. It’s made up of 17 major agencies and outfits, including the Office of the Director of National Intelligence (ODNI). Created in 2004 in response to the intelligence dysfunction of 9/11, ODNI is already its own small bureaucracy with 1,500 employees and next to no power to do the only thing it was really ever meant to do, coordinate the generally dysfunctional labyrinth of the IC itself.

You might wonder what kind of “intelligence” a country could possibly get from 17 competing, bickering outfits — and that’s not even the half of it. According to a Washington Post series, Top Secret America, by Dana Priest and William Arkin:

“In all, at least 263 organizations have been created or reorganized as a response to 9/11… Some 1,271 government organizations and 1,931 private companies work on programs related to counterterrorism, homeland security and intelligence in about 10,000 locations across the United States… In Washington and the surrounding area, 33 building complexes for top-secret intelligence work are under construction or have been built since September 2001. Together they occupy the equivalent of almost three Pentagons or 22 U.S. Capitol buildings — about 17 million square feet of space.”

Oh, and keep in mind that more than two-thirds of the IC’s intelligence programs are controlled by the Pentagon, which also means control over a major chunk of the combined intelligence budget, announced at $75 billion (“2 1/2 times the size it was on Sept. 10, 2001,” according to Priest and Arkin), but undoubtedly far larger.

And when it comes to the Pentagon, that’s just a start. Massive expansion in all directions has been its m.o. since 9/11. Its soaring budget hit about $700 billion for fiscal year 2010 (when you include a war-fighting supplemental bill of $33 billion) — an increase of only 4.7% in otherwise budget-slashing times — and is now projected to hit $726 billion in fiscal year 2011. Some experts claim, however, that the real figure may come closer to the trillion-dollar mark when all aspects of national security are factored in. Not surprisingly, it has taken over a spectrum of State Department-controlled civilian activities, ranging from humanitarian relief and development (aka “nation-building”) to actual diplomacy. And don’t forget its growing roles as a domestic-disaster manager and a global arms dealer, or even as a Green Revolution energy innovator.

You could certainly think of the Pentagon as the Blob on the American horizon, and yet, looking around, you might hardly be aware of the ways your country continues to be militarized.

With that in mind, let’s consider another warscape, one particularly appropriate to a moment when numerous commentators are pointing out that the U.S. seems to be morphing from a can-do into a can’t-do nation, when the headlines are filled with exploding gas lines and grim reports on the country’s aging infrastructure, when a major commuter tunnel from New Jersey to Manhattan, the sort of project that once would have been tattoo-ably American, has just been canceled by New Jersey’s governor.

Still, don’t imagine that the old can-do American spirit I remember from my childhood is dead. Quite the contrary: we still have our great building projects, our pyramid- and ziggurat-equivalents. It’s just that these days they tend to get built nearer to the ruins of actual ziggurats and pyramids. I’m talking about our military bases, especially those being constructed in our war zones.

I mean, no sooner had U.S. troops taken Baghdad in April 2003 than the Pentagon, and the crony corporations it now can’t go to war without, began to pour billions of taxpayer dollars into the construction of well fortified American towns in Iraq that included multiple bus routes, PXes, fast-food joints, massage parlors, Internet cafés, power plants, water-treatment plants, sewage plants, fire stations, you name it.

Hundreds of military bases, micro to mega, were built in Iraq alone, including the ill-named but ginormous Victory Base Complex at the edge of Baghdad International Airport, with at least nine significant sub-bases nestled inside it, and Balad Air Base, which — sooner than you could say “Saddam Hussein’s in captivity” — was handling air traffic on the scale of O'Hare International in Chicago, and bedding down 40,000 inhabitants including hire-a-gun African cops, civilian defense employees, Special Ops forces, the employees of private contractors, and of course tons of troops.

And all of this was nothing compared to the feat the Pentagon accomplished in Afghanistan, where the U.S. military now claims to have built something like 400 bases of every sort from the smallest combat outposts to monster installations like Bagram Air Base in a country without normal resources, fuel, building materials, or much of anything else. Just about all construction materials for those bases and the fuel to go with them had to be delivered over treacherous supply lines thousands of miles long, so treacherous and difficult in fact that, by the time a gallon of fuel reaches Afghanistan to keep those Humvees and MRAPs rolling along, it’s estimated to cost $400.

At some level, of course, all of this represents a remarkable can-do achievement and tells you a great deal about American priorities today, about where our national treasure and can-do efforts are focused.

Ziggurats or Tunnels?

And I could go on. The Pentagon and the military make going on easy. After all, the list is unending, the militarization of our American world ongoing, and it’s all happening in your time, on your watch. This is the world you are going to walk out into. I may be nine years old in TomDispatch terms, but I’ve been around for 66 years, and this won’t be my world for so long.

So let me ask you: Are you sure that you want the U.S. military to be concerned with every inch of the planet? Are you sure that you want your tax dollars to go, above all, into building pyramid-equivalents in Iraq or Afghanistan instead of tunnels at home, or into fighting a multi-generational war on terror planet-wide, instead of putting the unemployed to work here?

If you can’t imagine reducing the American military mission and “footprint” on this planet significantly, then, of course, it’s probably best to ignore this talk. But rest assured: you won’t save our country that way; you’ll destroy it.

A decade ago, when I was born as TomDispatch.com, many of you were only ten or eleven years old, as were many of our soldiers now in Afghanistan and Iraq. A decade from now, if the war in Afghanistan (and increasingly Pakistan) is still being fought, most of you will be entering your fourth decade on this planet, and you may even have a 10 year-old of your own. A decade from then, if — as some top Washington officials insist — the global war on terror is “multigenerational,” that child may be fighting in Pakistan or Yemen or Somalia or some other military “area of responsibility” somewhere on the planet. A decade from then…

Of course, whatever skills we may lack when it comes to predicting the future, all things must end, including the American war state and our strange state of war. The question is: Can our over-armed global mission be radically downsized before it downsizes us? It will happen anyway, and it won’t take forever either, not the way things are going. But it will happen in an easier and less harmful way, if you’re involved, in whatever fashion you choose, in making it so. Had I had a birthday cake with candles on it for that ninth birthday of mine and blown them out, that, I think, would have been my wish.

[Note for TomDispatch Readers: Don’t miss Frederick Deknatel’s review in the latest Nation magazine of my new book, The American Way of War: How Bush’s Wars Became Obama’s, which he terms a “damning” account of just how war became the American way. Here are two lines:

“Engelhardt excels at extracting lurid details from the annals of America's ongoing state of war. He has an editor's eye for the most revealing line buried at the bottom of a war correspondent's dispatch or an intelligence report filed in Washington.”

But read the full review yourself by clicking here and then consider clicking on the title link above, going to Amazon.com, and buying my book (or anything else your heart desires). And, since my website gets a small cut of your purchase, TomDispatch receives a modest contribution at no extra cost to you. It’s one way we keep going. If you’re in an even more giving mood, click here and check out the super offer we made last week for a personalized signed copy of Nick Turse’s new book in return for a $75 contribution. Tom]

Regimented and Dense Urban Communities — That's What Life Will Be Like in the New World Order

China Wants to Construct a 50 Square Mile Self-Sustaining City South of Boise, Idaho

End of the American Dream
June 8, 2011

Thanks to the trillions of dollars that the Chinese have made flooding our shores with cheap products, China is now in a position of tremendous economic power. So what is China going to do with all of that money? One thing that they have decided to do is to buy up pieces of the United States and set up "special economic zones" inside our country from which they can continue to extend their economic domination.

One of these "special economic zones" would be just south of Boise, Idaho and the Idaho government is eager to give it to them. China National Machinery Industry Corporation (Sinomach for short) plans to construct a "technology zone" south of Boise Airport which would ultimately be up to 50 square miles in size.

The Chinese Communist Party is the majority owner of Sinomach, so the 10,000 to 30,000 acre "self-sustaining city" that is being planned would essentially belong to the Chinese government. The planned "self-sustaining city" in Idaho would include manufacturing facilities, warehouses, retail centers and large numbers of homes for Chinese workers. Basically it would be a slice of communist China dropped right into the middle of the United States.

According to the Idaho Statesman, the idea would be to build a self-contained city with all services included. It would be modeled after the "special economic zones" that currently exist in China.

Perhaps the most famous of these "special economic zones" is Shenzhen. Back in the 1970s, Shenzhen was just a very small fishing village. Today it is a sprawling metropolis of over 14 million people.

If the Chinese have their way, we will soon be seeing these "special economic zones" pop up all over the United States.

So exactly who is "Sinomach"?

The following description of the company comes directly from the website of Sinomach....

With approval of the State Council, China National Machinery Industry Corporation (SINOMACH) was established in January 1997. SINO-MACH is a large scale, state-owned enterprise group under the supervision of the State Assets Supervision and Administration Commission.

As you can see, Sinomach is basically an arm of the Chinese government.

The borrower is always the servant of the lender, and now China is buying up America.

The reality is that Sinomach is not looking only at Idaho. Sinomach is in discussions to develop "special economic zones" all over the United States. Sinomach has recently dispatched delegations to Ohio, Michigan and Pennsylvania to explore the possibility of establishing "special economic zones" in those states.

Will such "self-contained communities" soon start appearing from coast to coast?

According to Dr. Jerome Corsi, the U.S. government has already set up 257 "foreign trade zones" across America. These "foreign trade zones" will apparently be given "special U.S. customs treatment" and will be used to promote global free trade....

"The FTZs tend to be located near airports, with easy access into the continental NAFTA and WTO multi-modal transportation systems being created to move free-trade goods cheaply, quickly and efficiently throughout the continent of North America."

So what do our politicians think about all of this? Most of them are greatly in favor of it.

"Idaho’s the last state that should say we don’t want to do business with Asia," Idaho Lt. Gov. Brad Little said last year. "Asia’s where the money is."

So will all of this "foreign investment" really bring jobs back to the American people?

Perhaps a few, but the truth is that these "special economic zones" that the Chinese are setting up are designed to be self-contained communist Chinese communities. Some Americans will likely be employed in these areas, but not nearly as many as our politicians would have you to believe.

In addition, these "special economic zones" represent a massive national security threat. The communist Chinese could potentially be able to bring in and store massive amounts of military equipment virtually undetected.

In the days of the Cold War, we would have never dreamed of giving the Russians a 50 square mile city in the middle of Idaho. But today we have become convinced that the communist Chinese want to be our great friends.

The following quote originally appeared in the Idaho Statesman, but has since apparently been taken down....

"The Chinese are looking for a beachhead in the United States," said Idaho Commerce Secretary Don Dietrich. "Idaho is ready to give them one."

Indeed.

If relations between the U.S. and China go south someday, we will deeply regret giving China so many open doors.

The truth is that you can never fully trust the communist Chinese. Their top military officers talk about a coming conflict with the United States all the time. China is extremely interested in North America. In fact, the Chinese and the Mexicans have even been holding talks on military cooperation.

But even if you don't consider the communist Chinese to be a military threat, you should be deeply concerned about the economic implications of what is happening.

Today, tens of millions of Americans are wondering why the economy is so bad.

Well, there are a lot of reasons, but the fact that we have sent China thousands of our factories, millions of our jobs and trillions of dollars of our national wealth is a major contributing factor.

If you do not know the truth about how badly the Chinese economy is wiping the floor with the Americen economy then you need to read this article: "40 Signs The Chinese Economy Is Beating The Living Daylights Out Of The U.S. Economy".

Beautiful new infrastructure is going up all over China today, and meanwhile many of our once great manufacturing cities are turning into rotted-out war zones.

China would not be what they are today if we had insisted that they abandon the communist system and respect basic human rights before we ever opened up trade with them. But that did not happen. Instead we enthusiastically welcomed China into the WTO and we let the predatory Chinese system run wild.

In 2010, China had a "current account balance" of over 272 billion dollars, which was the largest in the world.

In 2010, the United States had a "current account balance" of negative 561 billion dollars. According to the CIA world factbook, that put us in last place in the entire world. In fact, our negative current account balance was more than 9 times larger than anyone else in the world. If you go check out this chart it will give you a really good idea of how nightmarish our trade situation has become.

The world is changing and nothing is ever going to be the same again.

Just ask the residents of Boise, Idaho - they are about to have a 50 square mile self-contained communist Chinese city plopped right into their backyard.

Life on the Edge: Four Visions for Inhabiting a World Transformed by Climate Change

Conceptual shelters that will protect us all from the perils of our rapidly changing environment: rising waters, extreme heat, rampant pollution and overpopulation

By Suzanne LaBarre, Popular Science
October 18, 2010

Wake of the Flood Circa 2080, New Yorkers could live in some 600,000 modular apartments strung along structural cables and held in place by powerful electromagnets. The support cables would be attached to the city’s existing skyscrapers.

Environmental disruptions and technological advances have always influenced where and how people live. Early humans may have left Africa after rapid fluctuations in rainfall destroyed their food supply, and the opening up of the American Southwest occurred roughly in parallel with improvements in air-conditioning technology.

In the decades ahead, a warming planet and a booming population will again alter where we live and how we construct our homes.

PROBLEM: RISING SEAS / SOLUTION: CITY(E)SCAPE

The most immediately disruptive force could be a rapid rise in sea levels. A coalition of scientists from Denmark, England and Finland predicted last year that by the end of this century, melting ice and thermal expansion will drive up the world’s sea levels by more than three feet. It’s unclear how many people that would displace, but the damage could be vast—approximately 10 percent of the world’s population lives in coastal areas lower than 30 feet above sea level. Land that remains above water will face increasingly frequent storm surges and flooding.

The residents of coastal cities could head for higher land, or they could do something distinctly more drastic: They could add a second city above the water.

Agriculture Model

New York City, for instance, is an archipelago that could lose as much as a fifth of its landmass by 2080. But Mustafa Bulgur and Sinan Gunay, recent graduates of Istanbul Technical University’s architecture school, suggest that New Yorkers could make up the lost housing by stringing cables between existing skyscrapers and suspending some 600,000 prefabricated homes among them. By tethering a cable over the flooded streets and avenues—and even extending those cables out to structural towers in New York Harbor—it would be possible, they say, to safely house up to 2.5 million people.

The homes themselves, most of them no larger than 800 square feet, would be made from lightweight titanium plates and held together by even lighter-weight carbon nanotubes. Each would be secured to its support cables by powerful electromagnets. It will be hotter in 2080, too, so the northern and southern facades would be covered in photochromic Plexiglas, which adjusts its translucency according to the strength of the sun. The remaining surfaces would be covered with spiky eight-inch-thick photovoltaic panels. (The spikes, Bulgur says, generate more energy than standard flat panels, because they increase the surface area of the solar collector.)

Each unit would contain its own “agricultural module”—a tall column of soil, held together by a silicone net, that would provide fresh fruit and vegetables and also help insulate the house. A tank would store more than 5,000 gallons of freshwater from the citywide supply, which itself would use highly efficient desalination processes to transform the source of the city’s trouble into its nourishment.

Other architects have proposed a different approach: homes that require no land at all.

Zigloo, a firm in Canada, envisions a narrow underwater skyscraper, deeper than the Empire State Building is tall, that by collecting rain for freshwater and using sun and wind for power would provide a self-sufficient home for 2,000 people (zigloo.ca). Gro Architects in New York proposes harvesting tidal motion to power a network of floating single-family homes (groarc.com). And with the Sub Biosphere 2, architect Phil Pauley imagines a completely submergible habitat for as many as 200 daring aquanauts (philpauley.com).

Monument Squatting: The architect Stéphane Malka proposes taking over La Grande Arche de la Défense in an overcrowded Paris of the future.

PROBLEM: POPULATION / SOLUTION: AUTO-DEFENSE

In 2008, for the first time, more than 50 percent of the people on Earth lived in cities. This was good news for the environment; New Yorkers, for example, have a carbon footprint that is a third of that of their suburban and country-dwelling counterparts. But that population shift will also present major challenges.

By 2030, some five billion people are expected to live in cities, up from more than 3.3 billion this year­—and those cities are expected to be packed. In the 2000 national census, for instance, New York City had a density of 26,400 people per square mile. In 2030 that number is expected to be about 30,000.

New construction will help to alleviate some of the crowding, but Stéphane Malka has another idea: to make better use of the buildings that are already there. Malka, a 35-year-old French architect, proposes taking over La Grande Arche de la Défense, a 361-foot-tall office building and monument to national brotherhood in Paris. It’s the perfect building to showcase a system of infill design.

In Malka’s vision, the arch’s hollow belly transforms into a colony of 450 388-square-foot prefab apartments.

Prefab Topview

Auto-Défense, as he calls the project, relies on basic modular assembly. Housing units would be prefabricated from steel, glass and wood facades stripped from other buildings, then flat-packed and delivered to the arch by truck. On arrival, they would be maneuvered into a structural scaffolding, which itself would already have been anchored to the interior facade of the arch, and locked into place by means of simple mortise-and-tenon joints. In La Défense, the units could be stacked as many as 25 high, but Malka’s design could be applied to the side of any building.

Prefab Frontview

To get in and out of their homes, residents could catch elevators among the offices on either side of the arch­—the two sides of the arch would be connected by elevated catwalks supported by suspension cables­—and move from house to house by way of more catwalks, attached to the scaffold itself.

Malka’s vision of close-packed homes has precedent, particularly in Japan, where small-space living has been common for decades.

In 1952 the architect Makoto Masuzawa built the 538-square-foot Minimum House. Architect Makoto Koizumi revived the design, which can house a family of five, in 2002; the Tokyo firm Boo-Hoo-Woo currently produces a line of 15 different dwellings for tiny urban lots based on Koizumi’s revival of the Minimum House (9tubohouse.com/eng).

In Amsterdam, Keetwonen, a high-density dormitory made of shipping containers, already houses students in 1,000 studio apartments (tempohousing.com).

And someday, when even Los Angeles needs to give up its sprawling ways, architect Houston Drum will be ready with his design for the 25-Hour City, a 1,900-foot-high multi-tower skyscraper that houses 800,000 Angelinos at 26 times the city’s current population density (houstondrum.com).

Prefab Floorplan

The Oasis: The Positive Impact House harvests energy and water from the environment for self-sufficient living.

PROBLEM: DESERTIFICATION / SOLUTION: POSITIVE IMPACT HOUSE

One of the paradoxes of global warming is that even as it leads to flooding in some parts of the world, it will lead to severe water shortages in others.

According to the United Nations, climate change is likely to reduce rainfall in drylands, which cover 41 percent of the land on Earth, including much of the American West. In 2007, the U.N. estimated that desertification could eventually affect some one billion people in at least 100 countries.

Yet architect Robert Ferry of Studied Impact Design, which operates out of Pittsburgh and Dubai, proposes that deserts need not be unlivable, or even uncomfortable. His Positive Impact House, a 3,200-square-foot single-family home, is not only designed to draw enough water and cool air from the environment to sustain five people, it will also send energy back into the grid.

Surplus Power: Roof-mounted solar cells and eggbeater turbines together generate nearly twice the house’s daily energy needs.

The water comes by way of an atmospheric water generator, similar to commercial units used today. These devices run refrigerant through metal coils, which attract condensation that is then funneled into a purifying holding tank. (The desert air is moister than you might think; Dubai, for example, averages 80 percent relative humidity at certain times of day in January.) Two generators would produce enough freshwater for drinking and showering, and the shower water would be recycled for use in flushing toilets and growing food. (A related composting system would also generate biogas for cooking.)

Most of the year, the natural flow of air through the house’s windows would be enough to cool it. But during the hottest months, a fan would draw hot outdoor air into an underground chamber, where the temperature is 50ºF to 60º year-round, and then into the basement and up through floor vents. As the cool air warms back up again, it rises and escapes through a 200-square-foot interior courtyard, whose slim vertical cavity would create a wind tower.

Roof-Mounted Solar Cells

The 24 panels of roof-mounted, sun-tracking, concentrated photovoltaics, which use lenses to magnify solar rays by a factor of as much as 2,000, would be capable of generating all of the 80 kilowatt-hours of electricity the homeowners consume daily. Eggbeater wind turbines on the roof would produce another 40 kilowatt-hours. The extra energy would help with any sudden need for additional power, but on a normal day they could pump it back into the grid, thereby generating income. In the U.S, a homeowner sending 40 kilowatt-hours of energy to the grid every day would earn as much as $3,000 annually.

Nearly all of this technology is in small-scale use today.

A nonprofit group called FogQuest is harvesting fog to provide water to Ethiopian villages. In Zimbabwe, the Eastgate Centre shopping mall uses huge, perforated, chimney-shaped structures to draw air in from the outside. (Zimbabwe is hot, but air that moves is cooler than stagnant air.) And in Orange County, California, the Groundwater Replenishment System makes sewer water suitable for drinking (gwrsystem.com).

Breezeway: In the hottest months, a fan draws air through a naturally cooling underground tunnel into the basement, where it rises into the house by way of floor vents. Meanwhile, 18-inch-thick, rammed-earth walls help keep the house cool during the day and warm at night.

Sustainable Habitat 2020

PROBLEM: POLLUTION / SOLUTION: SUSTAINABLE HABITAT 2020

In the coming decades, advances in pollution control may not be enough to counteract the air- and water-poisoning effects of dual explosions in population and energy consumption.

Within 20 years the number of cars in the world will rise to two billion, and most of them will be powered by gasoline or diesel.

By 2100 air quality in Southern California is expected to violate federal standards 50 more days a year than it does now. Pollution will be particularly vexing in fast-developing countries like China, which according to the World Bank is already home to 20 of the 30 most polluted cities in the world. In one third of China’s cities, for example, the groundwater is contaminated. Buildings are part of the problem too.

The nonprofit group Architecture 2030 estimates that the residential-building sector is responsible for about a fifth of global greenhouse-gas emissions.

Multifunctional Exterior Skin

In response to these challenges, designers at the Dutch electronics giant Philips imagined Sustainable Habitat 2020, an apartment building engineered to make life healthy even in the smoggiest urban environment.

“The question we’re posing is a depressing one,” says Clive van Heerden of Philips Design. “At this rate of urbanization, what do you do if the pessimists are right? How do we begin to start making buildings sustainable?”

The high-rise apartment tower, composed of hundreds of 431-square-foot units, is intended for future Chinese megacities. The multifunctional exterior skin is the most important part of the structure. Dotted with suction-cup-shaped “funnels,” it forms a membrane between the indoors and outdoors that controls the inflow of light, air and water.

Green House: Air-cleaning, solar-energy-harvesting, water-capturing funnels coat the Sustainable Habitat 2020 apartment building. The funnels change shape to make most efficient use of prevailing weather conditions.

The funnels are embedded with photovoltaic cells and sensors, which track humidity, wind direction, and the brightness and angle of the sun. As the sensors detect changing weather conditions, they direct the funnels to change into the most effective shape for the task at hand. For example, on clear days, the funnels follow the path of the sun like flowers, transmitting light indoors and generating enough solar power to provide all the building’s electricity. (Energy stored during the day is used for lighting at night.) When it rains, the funnels change shape to become water-capturing cups. As rain trickles into the cones, the water is pumped to a cell structure behind the facade, where it is filtered, stored, and channeled into a closed-loop system in which everything, even toilet water, gets recycled. When it’s breezy, the funnels elongate into a trumpet shape—a natural wind tunnel that directs air through a filter and then indoors. (When it’s sunny and breezy, the funnels multitask.)

Other architects have begun working on projects in the same spirit as Sustainable Habitat 2020.

The San Francisco firm IwamotoScott Architecture, for example, has proposed a low-rise dwelling called the Jellyfish House for a decommissioned military base on San Francisco Bay’s Treasure Island. The project’s creators say the house, with its permeable skin, will be like a living creature (iwamotoscott.com).

Cell Walls: The translucence of exterior wall cells [at right] can be adjusted by touch. The interior wall [blue] works as a water tank, purifying and storing rainwater captured by the funnels on the apartment’s exterior.

The United Nations' Agenda 21 action plan is Sustainable Development. Sustainable Development works to abolish private property in order to manufacture natural resource shortages and other alarms in order to facilitate governmental control over all resources and, ultimately, over all human action. So-called public/private partnerships are the major tool used to accomplish this objective. What makes the United States of America unique is that this is the only country in the history of the world where management of the natural resources is under citizen control. Everything that city residents obtain originates from the natural resources that come from rural lands. If public/private partnerships achieve control over natural resources, urban citizens are doomed. - Freedom Advocates, Transforming America: Sustainable Development, 2005

Happiness, which the Founding Fathers equated to owning property, is having a tough go of it. The second action plan of Sustainable Development — a term that represents the efforts to eliminate private property in America and to control and limit human action — is called Smart Growth. Smart Growth will increasingly herd Americans into regimented and dense urban communities. Smart Growth is Sustainable Development’s ultimate solution, as it will create dense human settlements subject to increasing controls on how residents live and increased restriction on mobility. In the words of one Smart Growth activist: “It will be the humans in cages with the animals looking in.” - Berit Kjos, Transforming America: Sustainable Development

The Livable Communities Act is a social-engineering bill to restrict residence in the suburbs and rural areas and force Americans into city centers. It has passed the United States Senate Banking Committee and is on the fast track to passage in the Senate. Defending the right of every citizen to maximize his potential and pursue happiness on his own terms makes opposition to the Livable Communities Act necessary. The threat to our mobility is but one aspect of the Livable Communities Act that deserves resistance. Property rights, private enterprise, and affordable homeownership are also threatened under this command-and-control legislation, despite the clever catchphrases that soften its message. - Bob Livingston, Social Engineering Bill in Senate Will Force You into City, Personal Liberty Digest, September 10, 2010

Eliminating Cash and the 'Unbanked' in the New World Order

Policymakers are embracing mobile banking as a means of providing financial access to the unbanked poor. More than a billion people worldwide lack bank accounts, but do have mobile phones, providing a dramatic opportunity to achieve greater financial inclusion.

On September 18, 2009, a panel of financial services and policy experts met in Washington to discuss alternative financial services, particularly products and services focused on the estimated 100 million underbanked Americans. A big topic of discussion was the use of prepaid debit cards. The panel was sponsored by the New America Foundation, and a video of the event is shown above.

Marketing to the Unbanked Population

BankersOnline.com
April 30, 2007

Question: To grow revenues, should our bank be reaching out to the unbanked market?

Answer: The U.S. population of unbanked — people who are not currently clients of mainstream financial institutions — is estimated to be around 10-20 million. Research has shown that a majority of the unbanked population are immigrants, low-wage earners and members of minority groups.

As an alternative to having a checking account, the unbanked often use services such as check-cashing operations, currency exchange businesses, and payday loan providers. Driving this population to mainstream financial institutions would, in fact, be in their best interest as these alternative services result in high fees and zero credit history.

That said, many people may question why the unbanked population remains unbanked. The main reason is lack of trust and understanding. Not only are there likely to be language barriers, but some feel uncomfortable using services they simply don’t understand.

As this is an educational issue above all else, it is important to help the target market ease into your financial service. Here are a few ways financial institutions have educated their unbanked communities.

• Schedule a series of seminars about new products and services. Also, use this opportunity to interview and recruit additional individuals from minority and immigrant populations to help diversify the staff and allow others in the unbanked populations to feel more comfortable.


• Offer payroll cards. These are stored-value cards issued by employers (commercial accounts of your bank) instead of a traditional paper paycheck. Money is deposited directly into a bank account from which the employee can withdraw cash using the card at an automated teller machine.


• Introduce a remittance service. In the unbanked population, remittances, or money sent from an individual in one country to someone in a different country, are used often. Setting up a remittance service can allow customers to send money for a low fee (often less than what they are paying with other providers).


• Partner with community groups to educate. A series of workshops with a third-party is valuable. Attendees can learn about budgeting, how to manage their credit and what banking services are available to them. In the end, they earn money to either pay down debt or put into savings.

Targeting the unbanked population is a great way to grow revenue but you must be patient. The majority of this market does not understand how mainstream financial institutions work. Again, this could be due to language barriers but the major issue to trust. Many immigrants are uncertain about banks due to their experience with the banking system in their home country. Investing time in educating the unbanked in your community will help them better understand you services and what you can do for them.

Policymakers Embrace Mobile Banking to Reach Unbanked Poor

Payment News
March 9, 2009

Despite regulatory challenges and the financial crisis, policymakers are embracing mobile banking as a means of providing financial access to the unbanked poor. More than a billion people worldwide lack bank accounts, but do have mobile phones, providing a dramatic opportunity to achieve greater financial inclusion, according to officials meeting near London today.

"Mobile banking services offer millions of poor people a route out of poverty by helping them to improve their incomes and pay for healthcare and education. It is vital that policymakers ensure that the needs of the poor are central as they develop regulation for this innovative and emerging sector," said Mike Foster, UK Minister for International Development.

To promote effective regulation of mobile banking, CGAP, DFID, and the Alliance for Financial Inclusion (AFI) have organized the second Global Leadership Seminar for high-level policymakers and regulators who set policy for branchless banking, including mobile banking.

"Mobile banking holds great potential, and CGAP is encouraged to see that governments everywhere are being deliberate and thoughtful as they merge the domains of finance, payments, and telecom to create a framework that balances customer needs with concerns around security and prudential regulation," said Elizabeth Littlefield, CEO of CGAP, a microfinance center based at the World Bank.

Seminar participants represent countries where branchless banking is growing quickly, or is poised to do so soon: Argentina, Bangladesh, Brazil, Colombia, Egypt, India, Kenya, Maldives, Mexico, Pakistan, Peru, the Philippines, Russia, Rwanda, Sri Lanka, South Africa, Tanzania, and Zambia.

Core issues around regulating mobile banking

Mobile banking is a triangle, with customers and providers joined by local merchants that act as the crucial interface between poor people's electronic value on their phone and the cash economy in which they live. Special challenges these services present for policymakers include the following:

• Allowing nonbank third parties, such as local merchants, to conduct "cash-in/cash-out" transactions and interact directly with customers.
• Adapting the anti-money laundering and combating the financing of terrorism rules (AML-CFT) so they are based on real risks and are adapted to the realities of transactions conducted through remote agents.
• Figuring out the right regulatory space for the issuance of e-money and other stored-value instruments (particularly when issued by parties other than fully licensed and supervised banks).
• Determining how to ensure effective consumer protection (on a variety of fronts).
• Making sure payment systems are open to all players and adequately supervised.
• Getting the balance right in competition policies -- the right incentives for pioneers to get into the branchless banking business without allowing customer-unfriendly monopolies.

CGAP's Technology Program is supported by the Bill and Melinda Gates Foundation.

Coverage of the seminar will be available at http://technology.cgap.org.

The Alliance for Finance Inclusion is a global network of policymakers in developing countries that provides its members with the tools and resources to share, develop and implement their knowledge of evidence-based financial inclusion policies that deliver tangible results. Established in September 2008, the Alliance is managed by GTZ (German Technical Cooperation) with funding from the Bill and Melinda Gates Foundation. For further information, visit http://www.afi-global.org.

CGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors. More at http://www.cgap.org.

DFID, the Department for International Development: leading the British government's fight against world poverty. DFID supports long-term programmes to help eliminate the underlying causes of poverty. DFID also responds to emergencies, both natural and man-made. DFID's work aims to reduce poverty and disease and increase the number of children in school, as part of the internationally agreed UN's 'Millennium Development Goals'.

Concerning Stored Value Cards, a Letter to the Federal Reserve Chairman from the Consumers Union

Editor's Update: Since July 1, 2007, federal law gives protections under the Federal Electronic Fund Transfer Act for a payroll card established by an employer to deliver recurring wages, salary, or other employee compensation.

June 23, 2004

Chairman Alan Greenspan
Federal Reserve Board
20th & C Streets, NW
Washington, DC 20551-0001
202-452-3819 (by fax)

Re: Request for interpretation that Regulation E applies to stored value cards such as payroll cards, child support cards, unemployment payments cards, loan proceeds cards, and prepaid debit cards

Dear Chairman Greenspan,

Request for Action

Consumer, labor, community reinvestment and community development organizations ask the Federal Reserve Board to issue an interpretation of federal Regulation E to apply its consumer protections to stored value cards, particularly for payroll cards and other cards holding funds such as unemployment payments or child support payments which are critical to a household’s financial stability.

Reasons for Request

Individuals are increasingly being asked to accept stored value cards to receive payments of funds which are essential for day to day family expenses. Consumer groups and organizations who work with employees, child support recipients, and others who are being offered these cards are deeply interested in ensuring that these cards offer the same level of consumer protections as those bank debit cards which are linked to individual consumer checking accounts.

These cards, sometimes called stored value cards, are increasingly targeted to those not using traditional deposit accounts. These cards include payroll cards, prepaid cards sold to individuals for Internet and in-person card use, cards used to deliver income tax refund monies or income tax refund loan proceeds, child-support cards, and cards used to draw unemployment payments.

Payroll cards, one form of stored value cards, are increasingly offered to low- and moderate-wage workers. These products are being marketed to workers as serving the same functions as a bank account ...

Payroll cards are being actively marketed to employers as a way to reduce the costs of handling paper checks for employers and as a way to serve the needs of the millions of U.S. households who do not currently have bank accounts. A study issued by the Office of Comptroller of the Currency reported that 10% of unbanked households, representing 1 million families, were using payroll cards at the end of 2002 [Payroll Cards: An Innovative Product for Reaching the Unbanked and Underbanked, OCC Community Development, October 2003].

Usage has grown dramatically since then. In May 2004, the Associated Press reported that 1,000 companies were using payroll cards in the U.S., distributing $11 billion annually in payroll and $4 billion annually in employee incentive or commission payments [New Payroll Cards Sub for Paychecks, Associated Press Online, May 31, 2004]. In that same story, a VISA spokesperson claimed “triple digit growth rates for this category.” AP cites the Mercator Advisory Group for an estimate that the potential U.S. market for payroll cards for unbanked, temporary, and remote location workers is $109.8 billion ...

Marketplace facts

Stored value cards, including payroll cards and prepaid debit cards, are being marketed to consumers as account substitutes.

Stored value card marketing emphasizes account-style features. At an October 2003 presentation on non-EBT government benefits payment cards such as cards to distribution state-collected private child support, one provider told the NACHA Electronic Benefits Services Council that custodial parents often use these cards as savings devices, carrying portions of their child support payments over from month to month, perhaps in anticipation of larger than usual periodic expenses such as holidays or back-to-school spending. Payroll cards also are touted as a way not to spend the whole paycheck at once, an account-substitute feature. Indeed, web descriptions by payroll card issuers frequently use terms such as “your account” and “your money” in addressing the cardholders. Here are a few examples:

Paychex:

“The AccessCard only lets you get money you already earned and is in your account.”

“The money is already in their account!” referring to the individual employees.

www.paychex.com/products/accesscard.html (as of September 26, 2003, still posted May 26, 2004).

PayMaxx:

“Direct to cash features include…” “Account cannot be overdrawn.”

www.paymaxx.com/paying.cfm
Subsubpages =2058 subpage=1508 master = 1 (as posted January 6, 2004, still posted May 26, 2004).

Money Network:

“You can initiate your own money transfer; use free TransChecks, which work like a traditional cashier’s check or request information about your balance and deposits via ATM or telephone.”

and

“Access your Moneynetwork payroll card account by phone.”

www.moneynetwork.com (as posted January 6, 2004, still posted May 26, 2004).

Advantage Financial Systems:

“Paychecks and/or Federal Benefits are electronically deposited into your account.”

and

“Your account is FDIC insured up to $100,000 for your piece [sic] of mind.”

www.advantagefinancialsystems.com/electronicpayrollcard.html (as posted May 26, 2004).

Serving Unbanked Consumers in the Transit Industry with Prepaid Cards

This article is the second in a series looking at approaches to serve the unbanked consumers in the transit industry. The third article in the series will look at how network-branded prepaid cards could be used to serve the unbanked transit customer.

Smart Card Alliance
June 2008

Prior to the advent of smart card-based AFC systems, serving unbanked transit riders was simple: riders paid cash at a fare box or used cash to buy fare media at ticket vending machines and retail outlets. Ownership of a bank account was irrelevant as to whether or not a transit rider could pay a fare or otherwise have full access to the public transit system, since nearly every transit fare media sales channel accepted cash. (Exceptions included ticket-by-mail programs and, more recently, ticket vending machines that accept credit/debit cards only.)

Over the past 10 years, the introduction of smart card-based AFC systems such as the Washington, D.C. area’s SmarTrip, Chicago’s Chicago Card, and the San Francisco Bay Area’s TransLink, have made ownership of a bank account relevant to transit access and availability.

In many cases, the smart card programs offer a feature that allows the transit rider to link the transit smart card to a credit card or checking account that automatically replenishes fare value when the card's balance falls below a certain value, on the first of the month, or when a pass expires.

The Bay Area’s transit agencies have identified this feature, known as autoload, as the preferred method for vending value to transit riders. Autoload maximizes the convenience of the smart card, minimizes the cost of vending fare value, and creates a predictable revenue stream for the agencies. In the Bay Area, the autoload feature is proving to be popular among the initial group of TransLink cardholders. As of April 2008, about 50% of the approximately 20,000 cardholders who used their cards within the past year were registered for autoload. However, neither TransLink’s autoload feature nor similar features offered by other programs are available unless a transit rider has a bank account or credit card.

Pilot programs underway in New York City and Salt Lake City further emphasize the importance of being banked. These programs accept bank-issued credit and debit cards for fare payment. Like closed-system smart card programs, these programs are intended to maximize customer convenience and lower the cost of vending and collecting fare value.

Establishing approaches for offering unbanked transit riders automated replenishment of fare value is in the best interests of both transit riders and the transit agencies. The ability of smart card programs to offer customer-friendly and cost-effective approaches to serving unbanked transit riders will partially determine whether such programs succeed. If the programs are unsuccessful in reaching the unbanked rider market segment, transit agencies will find it difficult to eliminate legacy fare collection systems. And if the cost of reaching this market segment is too high, transit agencies will not be able to reap the full benefits of new smart card-based AFC systems.

Isis Riding the Rails of Public Transit to Mobile Payments Success

PaymentsU.com

The payments industry has been fond of train metaphors for years. We often speak of the payments ‘rails’ provided by networks like Visa and MasterCard. And so, perhaps it is only appropriate that Isis, the mobile payments joint venture of three major wireless carriers plus Discover, announced on April 4, 2011 that its first market (in early- to mid-2012) will be Salt Lake City and that an important component of that launch would be a deal to enable the Utah Transit Authority (UTA) for mobile fare payments.

In fact, the public transit industry has become a pretty interesting and important venue for payments industry innovation. Our firm, Morris Advisors, has spent a fare (fair, sorry couldn’t resist) amount of time working with various stakeholders in public transit relating to two important transitions:

• Transition #1: From closed-loop proprietary transit-only smart card systems to open fare payments using contactless bank cards as the fare media, and
• Transition #2: From card-based fare payment systems to mobile payments.

Historically, transit fare payments were predominantly cash based. The patron would purchase a little metal coin known as a ‘token’ and that would be presented as fare for the train or bus ride. The problem with these systems is that a large amount of fare revenue never made it to the transit agency’s accounts due to patron fraud and employee theft. As a result, transit agencies began to implement more secure automated fare collections systems whereby patrons’ prepaid fare or transit passes are stored on smart cards dispensed by ticket vending machines and agents. Contactless readers were then installed on fare gates and buses along with sophisticated back office fare accounting systems to authorize fare payment and manage the complicated fare products and rules.

Nearly every major U.S. transit system invested tens of millions of dollars to upgrade to smart card systems with a supporting business case based on the greater efficiency of revenue collection. But now, amazingly enough, the same group of transit agencies have become enamored with a new approach (see Transition #1 above).

Wouldn’t every other merchant category love to have 100% of payments being made with a proprietary prepaid payment product (see Starbucks)? But a series of events over the last several years (long story) has led many transit agencies to believe that they would be able to lower their costs (really?) and provide a more convenient fare payment system for patrons if those contactless readers on fare gates and buses could be used to accept contactless bank cards as fare media.

With the history lesson complete, this leads us back to Isis. It just so happens that the first commercial deployment of this ‘open fare payment’ approach using contactless bank cards was at the Utah Transit Authority in Salt Lake City. Today only a very small percentage (single digits) of UTA total ‘taps’ are currently from bank cards, but the account-based systems required to authorize bank card payments at fare gates have been installed by the UTA and received a good test drive. And certainly the UTA will welcome mobile payments as a means to further enhance their value proposition for transit patrons.

What is more interesting is how transit is beneficial for Isis… Let us count the ways:

1. Ideal use case for the speed and convenience of ‘tap and go’ mobile payments.
2. Contactless readers already installed at every point of sale.
3. Core customer base with two transactions every weekday.
4. Opportunities for retail spend at merchants along transit routes.
5. Location-based marketing opportunities powered by both GPS and transit system data.
6. And on, and on…

Truly, this is a great strategic fit for Isis… a rather obvious target merchant category for the new mobile commerce network. It will be interesting to see how well Isis can ‘tap’ (sorry again) into the opportunity presented by public transit, not just for payments but also for customer self-service and mobile marketing.

Another little wrinkle for Isis to consider is that a generous percentage of public transit patrons are unbanked or underbanked (perhaps not in Salt Lake City, but in many other metros). For this reason, many of the transit agencies moving to open fare payments are also considering issuance of a contactless general purpose reloadable prepaid debit card as a part of their program. Isis has publicly stated that prepaid cards are among the payment types that can be stored in an Isis ‘mobile wallet’ and this certainly will be a requirement for public transit, although it is uncertain how Isis will prioritize this underserved market.

Reaching Out with Smart Cards on Public Transit Systems Worldwide

By Smart Card Alliance Transportation Council
September 2008

As public transport systems worldwide continue a steady move toward automated fare collection systems, smart cards can help to reach those left-out by the changes.

Transit agencies worldwide have been implementing smart card-based automated fare collection (AFC) systems to reduce operating costs, facilitate boarding, and make public transit more convenient to use. To date, fare collection systems have used a stored value model with a single-purpose transit payment card or device.

Increasingly, however, transit agencies are recognizing the benefits of coupling transit payment with a bank account payment device, such as a credit or debit card. Linking AFC systems to bank products has many benefits for the agency, but raises concerns that patrons who lack bank accounts will be disadvantaged. Agencies have always supported a variety of payment forms to enable the “unbanked” to ride as easily as any other user. Virtually all agencies accept cash, something unlikely to ever change.

While there may be other methods employed by agencies to serve their unbanked customers, there are two specific approaches to extending AFC payment media to such consumers who constitute a significant portion of transit riders. One is to offer a re-loadable prepaid card, topped up at specific load stations. The other is the use of contactless chips on existing prepaid cards. With these approaches, there is scope for technology providers to help supply transit agencies with the necessary tools to service unbanked customers and continue their implementation of smart card-based AFC systems.

Typically, agencies make sure fare media is widely available, because providing easy access to the transit system is a major objective. Public officials would look askance at any system that was not as available to the poor or underprivileged as it was to other groups, especially if this were due to a requirement that riders have credit cards or traditional bank accounts with a financial institution.

The Power of Plastic: How Banks Are Using Technology to Reach the Unbanked

In 2003, for the first time, electronic payments surpassed cash and checks as consumers’ preferred payment method for in-store purchases — thus eliminating the cost and effort associated with having to manage currency.

By John D. Hawke, Jr., U.S. Department of Treasury, Comptroller of the Currency
Fall 2004 Community Affairs Newsletter

Through its Community Affairs function, the Federal Reserve Bank of New York provides financial institutions, not-for-profit organizations and others with information and technical assistance on issues related to community and economic development, access to capital and credit for low- and moderate-income communities and the Community Reinvestment Act.

Technology is rapidly transforming the banking industry — and expanding its ability to reach the unbanked.

Employers are turning increasingly to electronic payroll cards as a cost-effective way to reduce the burden of writing and processing checks. Consumers are using their payroll cards and other versions of prepaid debit cards — also known as stored value cards — as a substitute for cash and checking accounts.

Monitoring this trend, the American Bankers Association reported last December that in 2003, for the first time, electronic payments surpassed cash and checks as consumers’ preferred payment method for in-store purchases — an “evolution of payment behavior,” the ABA noted, “driven by the increasing popularity of debit cards.”

Debit cards accounted for nearly a third (31 percent) of in-store purchases in 2003, up from 21 percent only four years ago. Reliance on credit cards held steady during that time, at about 21 percent. Cash and checks, which accounted for 57 percent of in-store purchases in 1999, dropped to about 47 percent last year.

Evolution or revolution?

These data confirm that since the mid-1990s, when I became involved with the use of technology to reach the unbanked, there has indeed been a dramatic evolution in this field — really almost a revolution.

Consider, for example, the Navy Cash system, a smart card application allowing U.S. Navy surface ships to go cashless. Individual sailors and Marines at sea use their Navy Cash debit cards for everything from buying soft drinks at shipboard vending machines to withdrawing funds in foreign currency from ATMs at ports of call. The program is proving to be a highly efficient and economical way for individuals to move part of their pay onto prepaid debit cards.

With nearly 10 million unbanked households in the United States, prepaid debit products are increasingly being used by employers to remit wages electronically to their employees. Six years ago, the Treasury Department introduced the Electronic Transfer Account (ETA) as a model product to enable all federal government employees, retirees, and beneficiaries to receive their checks via direct deposit.

Many banks have since adapted the ETA concept, developing their own fully electronic, low-cost accounts to serve the unbanked market. They’ve found that these products have wide appeal — not only for unbanked retirees but also for college students, people who are new to the workforce, people who change jobs frequently, and immigrants and others who haven’t had conventional banking relationships or aren’t comfortable handling the costs and logistics of a checking account.

So what we’re seeing now is the convergence of two powerful financial forces. It’s newsworthy, for example, when many of the nation’s most influential corporations begin shifting to payroll cards, as they have been doing in recent months. And it is newsworthy when consumers decide, in effect, that a plastic card in their wallet is about all the bank they need — at least for now.

New banking relationships

Payroll cards can eliminate the need to stand in line and pay high fees at a check-cashing store. Functioning as “checkless bank accounts,” prepaid debit cards offer a convenient and generally safe way to store funds, pay for purchases at stores and restaurants, access ATMs, and pay bills.

Banks have also recognized their value as low-cost, high-efficiency mechanisms for immigrants to send money home. Remittance services are emerging as one of the many new ways in which banks can use debit cards to build relationships with previously unbanked customers. According to the Inter-American Development Bank, U.S. consumers sent more than $30 billion in 2002 to their families and friends in Latin America, with about one-third of the total flowing to Mexico. Banks can provide remittance services at lower cost and with greater security than other providers.

But the power of plastic goes beyond merely making connections with new customers. For example, innovative banks are also creating links between payroll cards, tax preparation services, and the earned income tax credit (EITC) — rightly described as the federal government’s most powerful anti-poverty weapon — to help move tax refunds directly into dedicated savings accounts that can aid lower-income Americans in building wealth. Similarly, banks working with nonprofit community development organizations and various funding sources are helping hard-working families to leverage their own assets through matched-deposit Individual Development Accounts, a potentially powerful wealth-building tool (see IDAs: Savings Incentives to Build Wealth”).

Consumer education is essential to the overall success of these new banking innovations and initiatives. Financial institutions have a clear responsibility to ensure that debit cardholders understand the fees and risks involved, even though those fees and risks generally may be lower than with, say, high-balance credit cards, and certainly lower than when relying on check-cashing and predatory payday-loan operations.

But there are also opportunities to take consumer education to another level. For instance, an initiative to help lower-income renters move to automated electronic rent payments has been coupled with an incentive program through which they can obtain, at low cost, a brand-new home computer. For families with school-age children, the motivation to acquire a computer is powerful — and those children can help their parents become computer-literate, an almost absolute necessity these days whether one is looking for work or managing money. The common sense underlying this approach (every adult of a certain age has been humbled by watching a child at a computer) is breathtaking — and very welcome.

Opportunities and obligations

Computer education goes hand in hand with financial literacy education. As more people, many of them lower-income, turn to the convenience of plastic, there are both opportunities and obligations for financial institutions to work with consumers — directly or through community-based organizations — to ensure that previously unbanked customers understand debit-card finance and that they are offered access to savings accounts and similar wealth-building products.

Banks reaching out to low- and moderate-income consumers with low-cost debit accounts, remittance services, EITC links, individual development accounts, and similar products and services may receive Community Reinvestment Act (CRA) service test credit for such initiatives.

In 2003, for the first time, electronic payments surpassed cash and checks as consumers’ preferred payment method for in-store purchases ...

The United States is, as we all know, an increasingly diverse nation. Many come from countries where banks may not have been trusted allies; others, whether immigrant or native-born, may have never had the chance to do more than go from paycheck to paycheck, or from one month’s assistance payment to the next. A bank that doesn’t write-off this market segment can help create many kinds of wealth, including some that aren’t measured in dollars alone. That’s the true power — and promise — of plastic.

Banking Without Borders: How Citibank’s New Services Help Consumers in the U.S. and Mexico

By Mark Rodgers, Vice President, Citigroup
Fall 2004 Community Affairs Newsletter

When Banamex, Mexico’s leading bank, merged into the Citigroup family of financial companies in 2001, we began looking for ways to better serve customers on both sides of the border. Citigroup’s acquisition in 2002 of Golden State Bancorp, gave us an expanded branch network and a greater ability to reach Hispanic customers in the western U.S.

We knew that many recent immigrants had banking needs but lacked even the most basic banking relationships. Chief among their needs were inexpensive and user-friendly remittance services to enable them to send funds to families or friends back home, and basic bank accounts offering security and convenience.

In April 2003, we introduced Citibank Global Transfers, which offers U.S. bank customers affordable, convenient, real-time money transfers domestically or to Mexico for a flat $5 fee. With a money remittance service in place, we then turned to offering products to support sending funds from the U.S. and receiving them in Mexico. Our solutions are the Citibank Access Account and the Banamex Tricolor Card, two new products that we rolled out in the fall of 2003...

Reduced Churn for Stored Value Cards

By Rivka Gewirtz Little
September 15, 2009

The prepaid card market is experiencing solid growth despite a tough economy, but competition is fierce and it can be difficult to retain customers for stored value cards. So providers and retailers are combining an ecosystem of value-added features and creative business models to help retain customers and fuel the market in the long-term.

The overall prepaid stored value market — including both open and closed-loop cards — will reach $421 billion by 2010, according to the Mercator Advisory Group. While some segments of the market are expected to remain flat, others are expected to see inflated growth despite the economy.

Some segments of the market are, in fact, expected to grow because of the recession, according to the Center for Financial Services Innovation. Government cards, general purpose cards, consumer incentive cards and payroll cards are all expected to experience healthy growth in the coming year, with the government segment leading the way. Healthcare and education related prepaid cards are also expected to do well.

Card providers are increasingly creating card programs that capitalize on the markets that are thriving in a tough economy. With the government market segment leading the way, smart companies are tailoring programs for that sector. The bottom line is if card providers can spin programs that fit specific government needs, they will retain and grow their customer base.

TSYS (Total Systems Services, Inc.), an electronic payment services company with a strong prepaid division, did exactly that when the company created a private label card program that enabled the government to help consumers who had analog televisions make the transition once all T.V. broadcasting went digital last winter.

The change in broadcasting required that all consumers either have digital televisions or converter boxes that enabled digital signal to be received on an analog box. The National Telecommunications and Information Administration (NTIA) knew it had to reach out those users who didn’t have the financial means to make the transition. So it set out to provide subsidized converter boxes. The catch was getting out millions of dollars in vouchers to consumers without opening the program to fraud. The NTIA figured private label cards were the best bet.

Private label cards use networks from major companies like MasterCard and Visa, but they only display the name of the issuing retailer (or group of retailers) – and sometimes within that, even just the specific product being promoted. Ultimately, the card programs can create a “neighborhood” of participating companies that all use their POS technology to accept the payment method.

For the NTIA, TSYS developed private label cards that could be used at retailers selling converter boxes.

“They knew that 70 million households had TVs that couldn’t get digital signal and they wanted to create a subsidy to the public for televisions … offering a converter box that would take the digital signal and convert it back to analog so you wouldn’t have to go out and buy a new television,” explained Kathy Heitmueller, director of sales for TSYS, at the recent Prepaid Press Expo 2009 in Las Vegas. “They offered $40 for a box and most of those boxes ran between $50 and $60.”

TSYS issued red plastic cards with $40 loaded on them. The cards were sent out in a mailer that also included information on where consumers could buy the converter box. The program included 35,000 participating retailers, ranging from major electronics box stores like Best Buy to smaller shops. It was TSYS’ job to create the “neighborhood” of stores that could accept the payments.

“You could take your card to Best Buy to purchase your converter box. You hand them the card, they would scan the box, and we would receive the UPC (universal product code) and validate it in real time,” Heitmueller said, adding that providing real-time service meant retailers had to do “some development” in their payment systems. “The government was not going to pay the retailer back unless they could confirm it was the box (that was sold).”

The program went off without a hitch.

“We issued over 64 million cards with no fraud,” Heitmueller said ...

U.S. Senate Hearing on "Bringing More Unbanked Americans Into the Financial Mainstream" (May 2002)
Banking the Unbanked Using Prepaid Platforms and Mobile Telephones in the U.S.
Mobile banking: A boon for unbanked
Federal Reserve Board: Stored Value Cards as a Method of Electronic Payment for Unbanked Consumers
Payments: Automation is Washing Money Orders Away
Payday? Reload your plastic payroll card
FDIC: "Tapping the Unbanked Market" Symposium
U.S. Comptroller of the Currency Advisory Letter on Payroll Card Systems
Findings from the FDIC Survey of Bank Efforts to Serve the Unbanked and Underbanked
Banking on the Unbanked
Smart Card Alliance: Public Transit Cards for the Unbanked Consumer
Attitudes & Habits of the Unbanked: Key Learnings to Better Understand the Unbanked Population in America
NovoPayment Predicts $200B Latin American Prepaid Market
Reaching Underbanked Latinos
Channeling People Into the Economic Mainstream: Financial Access in Puerto Rico
Banking the Unbanked: The Wells Fargo Approach
The lowdown on Wal-Mart's debit card
Tax Refund Services Can Attract the Unbanked
The Cost Effectiveness of Stored-Value Products for Unbanked Consumers
Stored Value Cards: Challenges and Opportunities for Reaching Emerging Markets
Reaching the unbanked: A highlight at ATMIA's ''ATMs in Africa 2' Conference
Banking the Unbanked: Going Mobile in Africa
Inviting the unbanked into the credit system
Market Trends: Opportunities In the "Unbanked" Consumer Market
Electronic Banking: Reaching the Unbanked and Underbanked with Self-Service Technology
Payroll Cards An Innovative Product for Reaching the Unbanked
A Guide to Building Products and Strategies for Underbanked Markets
U.S. Treasury Department: Regional Conferences on Reaching the Unbanked
U.S. Treasury Department: Midwest Regional Conference on Reaching Unbanked People
Strategies for Banking the Unbanked: A Global Market Opportunity
Using Network-Branded Prepaid Cards to Support the Unbanked Transit Customer
The Unbanked: Market and Opportunities for Global Remittance
2004 Press Release: Payment Data Systems Files Patent on Industry's First Debit Card Bill Payment Technology
Payment Data Systems, Inc. Forms Strategic Partnership to Reach 40 Million Unbanked Customers - Payment Data Systems, Inc. an integrated electronic payments solutions provider, announced today that it has filed for patent protection from the U.S. Patent Office for the technology that will enable bill payment using a debit card. In expectation of this patent, Payment Data Systems has entered into a strategic relationship with Secure Cash Network, Inc. to provide the electronic payment industry's first bill payment debit card. The debit card technology for which Payment Data Systems has filed for patent protection, allows a cardholder to use their stored-value Secure Cash Network debit or ATM card to pay local, national or international bills with the card from their electronic balance. Because it does not require linkage to a traditional checking or savings account, this new debit technology is unique in that it allows for use by 'unbanked' consumers.
FlexiPay
Convenient, low-cost, and secure. Flexipay reloadable payroll debit cards are the next evolution in pay delivery for employers who want to reduce costs and improve productivity. Part-time and temporary employees, as well as employees who don’t use a checking account, will appreciate the convenience and money-management features Flexipay offers.
3rd Prepaid Cards Conference (2009)
Tap into the Global Unbanked Market of Nearly 2 Billion People
The Brookings Institution - Bringing Unbanked Households Into the Banking System
Reaching the Unbanked with Stored Value Cards
The Promise of Stored Value