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Review :: International Relations

Iran in the Gunsights (Part 1)

Is the Bush administration about to commit the fatal imperial error in Iran? (Originally published in August, 2004, in the free section of From The Wilderness.)
Sabre Rattling: Neocons are frightening the rest of the US elite.

“The United States on Monday confirmed it had granted protected status to nearly 4,000 members of the People’s Mujahadeen, Iran’s main armed opposition group, now confined to a military-run camp in Iraq.

“However, the State Department stressed that the move, which has drawn a warning from Tehran, had no effect on the US designation of the group – also known as the Mujahadeen e Khalq (MEK) or National Council of Resistance of Iran – as a ‘foreign terrorist organization.’”

-Agence France Presse, July 26, 2004

Contrary to an increasingly popular belief, imperialism is not new, and it is not being produced by the right-wing clique that runs the present administration. This is easy to believe because of the slightly crazed character of the neocons, but it is deceptive precisely because it is such an easy conclusion to reach.

In the past three weeks, Jimmy Carter’s former national security advisor, Zbigniew Brzezinski, has been making the interview circuit to inaugurate a high level resistance to the apparent intent of the Bush administration to escalate – perhaps even to the point of armed aggression – its demonstrated hostility toward Iran.

The emerging fight between the “realists” and the neocons will only serve to further muddy the waters on the question of what the neocons are up to… and what the realists are up to as well.

The so-called 9/11 Commission report, that has shamelessly identified the wrong scoundrels (the intelligence agencies) for the September 11 attacks (since they are already the goats for Iraq intelligence “failures”), is a mirror image of the obfuscation now being generated by the realist-neocon debate. In every case, these public exchanges are designed to camouflage the real forces behind US policies.

The US already has a track record for regime change in Iran, when the CIA orchestrated a coup d’etat against Mohammed Mossdegh. Most political history buffs know this story, and the American Left is quick to cite it as a kind of passion play to demonstrate official hypocrisy on the question of democracy. But like many anecdotal accounts of history, this ignores a larger process and it obscures the relation of class forces that were the primary actors in many of these dramas.

This essay will try to trace not only the development of a uniquely US imperialism and the danger that system faces in the present conjuncture, amplified and accelerated by its engagement in Southwest Asia, but the interplay of Anglo-American relations throughout the 20th Century that accounts for the Bush-Blair relation we see today.

Iran is former Persia, and it is inhabited primarily by people who consider themselves Persians. This is to be specifically contrasted with Arabs, as I will explain. Persian civilization, like all “Old World” societies, underwent a series of often violent transformations that eventually led to a somewhat stable community that shared a language and a culture. They even had their own religion, Zoroastrianism, which endured as the state religion until the mid 7th Century, when Arab armies swept over Persia and forced the conversion to Islam. Nevertheless, the Persians amalgamated their own distinct beliefs into Islam, creating a heterodox form of the religion as a cultural weapon against the oppressive Arab rulers. That form became Shia. And while the Persians adopted the Arabic script, they reclaimed their own language, which we now call Farsi.

It was the 19th Century when Great Britain established itself in Iran, when the venal Qajar monarchy parceled Iran out to foreign concessionaires at fire sale prices. The first British interest to gain a foothold there was the British Tobacco Company. The other great nation that coveted Iran was Russia, and it invaded Iran in 1826 seeking a warm water port to its south. In 1856, Great Britain attacked Iran and forced her to surrender what is now Afghanistan. Throughout the second half of the 19th Century, Great Britain and Russia would share Iran.

It was at the turn of the century, in 1900, that a British company would stake its claim on a comparatively minor commodity, the petroleum of Southwest Iran, which would in short order become the most important commodity in the world. That company was the Anglo-Persian Oil Company. The Russians had begun taking oil from the north, around Baku.

With the introduction of the automobile, the airplane, and mechanized warfare, by the time World War I broke out, Iran had captured the interest of the all the Great Gamesmen. This was a key co-location of Russian and British interest in their combined struggle against the Ottoman Turks, who also shared a border with Iran and were equally covetous of Iranian oil.

In 1920, an Iranian cavalry officer, Reza Shah, led a rebellion against the Qajar dynasty, and five years later Reza crowned himself. This was troublesome but not critical to the British and the Russians… yet.

Between the two world wars, however, Reza opened up several new trade partnerships. One was with Germany. By the time World War II broke out, over half of Iran’s trade was with Germany, now controlled by Hitler’s Nazi Party. Reza had embarked on an industrialization program to more effectively exploit Iran’s oil, and most of its new machinery was German.

Iran declared itself neutral in WWII, but the reality was that the British needed the oil, and the now-Soviet Union needed the warm water port and a rail line to receive supplies from the Americans and English, and both Stalin and Churchill had strong reasons to doubt the neutrality of Reza, so the British and Soviets conducted a concurrent military occupation of Iran in 1941, that lasted through all of WWII.

This led to deep consternation in the United States, who – while allied with the Soviets and the British – had designs of its own, not the least of which was the British Empire itself. The US, as the dominant financial partner in the Allied enterprise, prevailed on Britain and the USSR to accept Reza’s son, whom the British and Soviets had themselves appointed as a figurehead, as the legitimate post-war ruler of Iran, and secured the promise of both occupiers that they would dismantle their military presence there upon cessation of hostilities.

The British left immediately after the war, and the suspicious Russians (for good reason it would turn out) hung on until 1946, when they too departed.

The Roosevelt administration that oversaw the entry into World War II was a new government imbued with a new philosophy of capitalist imperial governance. It is important to digress for a moment to describe that philosophy, because it goes to the heart of the tension between the neocons and the realists today.

From 1860 until 1933, the Republican Party dominated American politics. This was a period of the rapid expansion of national capitalism. The Civil War not only broke the political power of the formerly predominant slave-holding South, it engendered a period of rapid technological innovation alongside the concentration of capital into the first big US corporations. Its ideology was laissez faire, and its practice was expansion, economic and territorial.

This resulted rapid industrialization, which led to inevitable conflicts between capitalists and labor. It was no accident, for example, that the military occupation of the South that was Reconstruction was officially ended in the same year, 1877, that the US saw its first wave of nationwide strikes. This open class antagonism lasted all the way into the first year of the FDR administration.

The Republican Party was the party of labor suppression but also the party identified with manumission and Reconstruction, and they were centralizers, identifying themselves with Hamiltonian federalism, and they tended to support a strong and activist central government. The Democratic Party was avowedly white supremacist, and identified with the more decentralist South, who had associated the struggle to preserve Slavery with “states rights,” the more Jeffersonian political tradition.

A challenge to both parties erupted in the 1890s with the Populist movement, which in the South even forged political alliances between Black Republicans and white Populists, the Fusionists. This movement was violently suppressed in the South by the Democrats, including a coup d’etat against a Fusion government in North Carolina in 1898, that North Carolina history books refer to as a “race riot.”

This led to the development of an elite political movement of “progressive” federalists who sought to contain the turbulence of grassroots politics, and to co-opt social movements. These “reformers” included Franklin Roosevelt. Their philosophy was, in the words of Loren Goldner, “to transform politics into management by experts.” They set about actually exposing a whole host of social ills, directly reflecting the sectoral consciousness of their emerging base (poor southern whites, western farmers, and northern industrial workers), and offered federal albeit bureaucratized solutions to those problems. This was the policy essence of the New Deal. Its political essence was the bureaucratization (for control) of the Democratic Party in order to inoculate it from undue grassroots pressure.

In foreign policy, too, these technocrats preferred this jujitsu to the karate of the gunboat. That didn’t mean they were averse to military power projection, but that they were sensitive to the ebb and flow of international power politics and they understood that sometimes you bend so you don’t break.

In today’s inescapably international, interdependent world, isolationism is no longer an option. But the predisposition of the federalist technocrats – like Brzezinski – is to move through the room without breaking the China (no pun intended). There is still a strong appreciation of the danger lurking in the grassroots. This is the danger that they believe the neocons – who have adopted Jeffersonian decentralism for their racist domestic agendas – are ignoring. On that account, they may be right.

At any rate, the technocratic tradition was inherited by Harry Truman after the war, where it was combined with the emerging Cold War in Iran.

Shah Pahlavi became the unquestioned autocrat of Iran after the Soviet withdrawal in 1946. He presided over two nations: one the semi-feudal countryside, where the Majlis – the big landowners – subjected millions of peasants, and the other in the city, where the oil business was articulating its own industrial proletariat.

In 1949, Mao Zedong stunned the world when his People’s War succeeded in seizing state power over the most populous nation in the world, even in the face of massive US assistance to Mao’s nemesis, Chiang Kai-shek. Truman’s advisors noted that the system and conditions that engendered the Chinese Revolution were similar in many respects to the situation in Iran, and that Iranian industrial workers were filling the ranks of the Tudeh, the new Iranian communist party. The Truman administration advised – being veteran technocrat federalists – assistance for modernization and land reform. But Truman was so spellbound by the phenomenon in China that he staggered into a proxy war with the Chinese on the Korean peninsula only a year later.

The Iranians were in fact watching China, and the resistance to the Shah accelerated. There were two powerful sectors who opposed him: the Majdi, who controlled the parliament, and who weren’t keen on the land reform program being suggested by the United States, and the industrial workers, who also saw Pahlavi as an Anglo-American puppet. It was this theme, that Pahlavi was a puppet of the US, which resonated with both sectors, and so the resistance developed – as had the Chinese Revolution – as a struggle for national independence.

The National Front that developed was led by the Majdi, Mohammed Mossadegh. In 1951, under great grassroots pressure, the Shah appointed Mossadegh prime minister. Mossadegh was a good choice from the perspective of the peasants as well, because while he opposed US influence – as the rest of the xenophobic Majdi did – he supported land reform, which he said could be financed, including paying off the Majdi, with oil revenues.

For the Americans and for the British, this raised the specter of nationalization of the Anglo-Iranian Oil Company. They were right. He signed the expropriation order in March, 1951. This action – wildly popular in Iran – ignited a prairie fire of grassroots activity then that threatened to become revolutionary.

When the next US president, Dwight Eisenhower, managed to cut free the Korean anchor around the US neck, it was 1953.

His CIA Director, the infamous Allen Dulles, told him, “If Iran succumbs to the Communists, there is little doubt that in short order the other areas of the Middle East, with some 60% of the world’s oil reserves, will fall under Communist control.”

This fear was “confirmed” in its own self-fulfilling way, when the US engineered a trade embargo against Iran and force Mossadegh to sign a trade agreement that same year with the only nation that had the inclination or ability to violate the embargo – the Soviet Union.

A month later, the Shah abdicated.

By August, with substantial aid and direction from the CIA, monarchists in the Iranian army staged a coup, and the Shah was restored.

Dulles – himself a crafty technocrat – was running policy in Iran by then, and he badgered Eisenhower to push Pahlavi into social reforms as soon as possible to preclude another build-up of grassroots resistance. Eisenhower, however, dithered with studies and policy pronouncements, kept the money flowing to Pahlavi, and then turned the whole mess over to John F. Kennedy.

Kennedy was aggressive to the point of occasionally enraging Pahlavi, but by 1963 he prevailed on Pahlavi to begin a process of modernization and reform. This was a top-down program of reform called the White (as opposed to Red!) Revolution. Land reform was implemented, and there was massive improvement in health and (secular, male/female) universal education. This led to ten years of relative stability, blunting the nationalist charges of “US puppet” that continued to come from the Tudeh on the left, and from the anti-modernization clerics on the right, one of whom was Ayatollah Ruhollah Khomeini.

Richard Nixon took office in 1968, inheriting the hair-raising collapse of the US Treasury Department’s gold pool and the unwinnable war in Vietnam that had caused it.

In 1969, the Nixon administration started hinting to key allies that US oil production was about to peak then go into irreversible decline. This and the destruction of the gold pool had everyone’s thinking caps on, and the one weapon that the US had in its economic arsenal was the-dollar-as international-currency.

There is strong circumstantial evidence that suggests the Nixon administration then colluded at some level with Saudi Arabia and Iran in the so-called Arab Oil Embargo of 1973.

The Nixon administration had completed is abandonment of gold and fixed exchange rates, allowing a 20% devaluation of the dollar that hammered European and Japanese creditors. They were also facing the growing threat of autarkic national liberation movements in Latin America (Chile was overthrown that same year by the Nixon administration.) and Africa. Since oil payments were denominated in dollars, the jump in the price of oil from the embargo was a destabilizing jump in the price for Europe, Japan, Africa, and Latin America. The US, on the other hand, owned the printing press for dollars. By recycling the oil crisis, via petrodollars, through these regions, the US effectively killed several birds with one stone.

By all accounts, Nixon’s relationship with Pahlavi was very warm. They had been personal friends since Nixon was Eisenhower’s vice president. William Safire, Nixon’s former speech-writer, once stated that Pahlavi was Nixon’s favorite head of state. Nixon offered to sell Pahlavi’s regime any weapon they needed, short of nuclear. That offer was not rescinded during the ostensibly hostile oil embargo in 1973-4, and Iran continued to make outlandish weapons procurements from the US.

Those procurements coincided with the jump in oil prices, and the combination completely destabilized Pahlavi’s Iran. Lightening inflation ensued, and with it mass migration into the cities, followed by housing shortages, compounded by inadequate urban infrastructure, and a re-expanding chasm between the richest and poorest. Grassroots agitation, from almost every sector now, resumed.

Then in 1978, in neighboring Afghanistan, the Washington-approved strong man Mohammed Daoud Khan began arresting the leaders of the influential People’s Democratic Party, a pro-Soviet political formation that had substantial support within the Afghan army. As it turns out, this was an action that Washington was pursuing in order to provoke a Soviet response that would trap the Soviets in a guerrilla struggle in Afghanistan. The author of this plot was none other than arch-realist/technocrat Zbigniew Brzezinski, Jimmy Carter’s national security advisor.

It worked.

The leftist Afghan officers organized a coup against Daoud and shot him, establishing a secular socialist government. The CIA began funneling support to right-wing clerical opponents of the regime inside and outside Afghanistan, and the Soviets were eventually drawn into a protracted and destructive military occupation of Afghanistan.

Not surprisingly, one of the chief grievances of the Islamist guerrillas against the Soviet-sponsored government was its granting legal equality to women.

As part of his own fight against the left, the Shah in neighboring Iran increased his suppression of left secular forces inside Iran, driving them back into a tactical alliance with Iran’s own clerical right-wing, and this alliance poured into the streets in 1978 creating the security crisis on top of the existing economic and political crisis that broke Pahlavi’s power.

Carter’s Ambassador in Tehran, William Sullivan, tried to warn the administration of the impending revolution. A contingency plan was even organized for a US military takeover of Iran that was later rejected as unlikely to succeed.

In 1979, the Shah was overthrown, the clerical forces had suppressed the secular left within the revolutionary alliance, and fifty-two Americans were taken hostage inside the US Embassy in Tehran. For the US, this was an utter debacle, and it led to Jimmy Carter’s defeat in the 1980 election.

When the Reagan administration took power, they turned to the one leader in the region who might be able to confront Persian-clerical Iran, Iraq’s Arab secular nationalist, Saddam Hussein, even as the administration was colluding behind the scenes with Iran to finance the US’s illegal mercenary intervention against Nicaragua.

Massively supported by the US, Saddam’s Iraq inaugurated a grueling eight-year, high-attrition border war with Iran that chewed up around a million human beings. On the other side of Iran, in Afghanistan, the US was providing massive material and training support to the Sunni jihadists who would eventually constitute the Taliban government of Afghanistan and the network associated with Osama bin Laden. This element operated out of Pakistan for more than a decade, and came to exert a tremendous social and political influence on large sectors of Pakistan, including its intelligence service and military.

This fjord-navigating foreign policy that kept at least one partner stable within the region, tacking back and forth between the tides and currents, and developing a partnership with Zionist Israel as a surrogate US military in the region, has maintained the US grip on the region for 60 years.

But the chickens had to come home to roost eventually, which they did with a terrible vengeance in September 2001… not from Iran, and not from Iraq, but from Saudi Arabia and tangentially from Pakistan in response to the basing of military troops in Saudi Arabia, home to the holiest sites in Islam.

The general outcry in reaction to 9/11 was for retaliation, with very little understanding of the provocations and machinations that led to the attacks, and less notice still that the US actually withdrew its troops from Saudi Arabia shortly after 9/11, clearly recognizing that the Wahabbist grievance, as stated, was provocative, and not some generalized “hatred of freedom and democracy.”

My own belief is that 9/11 is part of Osama bin Laden’s larger goal of overthrowing the House of Saud, and he is closer than ever now to achieving it, thanks to the Bush adminstration.

It was this recognition, that there was a real threat growing in the streets of places like Riyadh, as political Islam had come to give voice to mass grievances in the place of the very nationalism that Islamism had been deployed to crush, that gave the sense of urgency to the entire US ruling class to re-establish control over this key strategic region. The only argument was over the method, which does not speak to the issue of whether it was or is possible to contain the social crisis in Southwest Asia.

The Bush doctrine in the region is certainly one powered by immense hubris and the apparent belief that the US can simply impose its will directly, and thereby restructure by dint of arms the architecture of the global economy.

This is, in the eyes of the realist-technocrats, a grave miscalculation. Whether they technocrats have an alternative solution to the underlying crisis that is driving this drive to conquer Southwest Asia is an open question. But their fears may be very well founded.

The system is unique monetary-military imperialism of the US is tottering with contradictions, and the only question is where and when the catalyst will come that tips it over. If the military failure in Iraq caused consternation, talk of attacking Iran is setting off alarm bells… for some.

Money, Money, Money

Rosa Luxemburg and Geography

“Imperialism is the expression of the political accumulation of capital in its competitive struggle for what remains still open of the non-capitalist environment.”

-Rosa Luxemburg, “The Accumulation of Capital,” 1913

Rosa Luxemburg, as unfortunately happens all too often with notable women in history, has been badly overlooked. She is remembered mostly as a leftist leader in Poland and Germany who was the victim of political assassination, and for her sharp debates with Lenin. But in her 470 page opus, The Accumulation of Capital, she made a significant contribution to the theoretical understanding of imperialism, one that has been incorporated into world system theory and into feminist critiques of political economy.

Luxemburg said that “capitalism,” an economic system based on the self-expansion of monetary value for a propertied class, has never functioned nor can it ever function without external, non-capitalist inputs. The expansion of British capitalism, for example, could not have happened without colonization and exploitation of more “primitive” economies, or without direct military plunder of colonized people and resources. The same applies to American capitalism that was built up first using non-waged (slave) labor, and military expansion into indigenous lands.

Marx himself recognized this as an essential dynamic for the build-up of modern capitalism in Volume I of Capital, where he stated:

“The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalised the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation. On their heels treads the commercial war of the European nations, with the globe for a theatre. It begins with the revolt of the Netherlands from Spain, assumes giant dimensions in England’s Anti-Jacobin War, and is still going on in the opium wars against China, &c.”

Luxemburg’s point is that this reliance on “primitive accumulation” is a constant within developed capitalism and that it is magnified as capitalism generalizes into various forms of imperialism.

Even today, this is demonstrably true. Because geography has divided the industrial capitalist centers from the subjugated peripheries, we can easily delude ourselves that our bustling, SUV-infested highways, our shopping malls crammed with luxury commodities, and our shiny grocery warehouses bursting with food are natural features of a superior social system. We do not see the exhausted legions of foreigners – many living in pre-industrial, pre-capitalist societies – or their exhausted lands, which make this licentiousness possible.

But now we have arrived in a historical moment where one key and irreplaceable resource, a resource that forms the energetic foundation of the global system, has opened a window on the international interdependence – petroleum.

Maria Mies paraphrased Luxemburg’s analysis in her own 1986 work, Patriarchy and Accumulation of a World Scale – Women in the International Division of Labor, like this:

“[Luxemburg] had come to the conclusion that Marx’s model of accumulation was based on the assumption that capitalism was a closed system where there were only wage laborers and capitalists. [She] showed that historically such a system had never existed, that capitalism had always needed what she called ‘non-capitalist milieux and strata’ for the extension of labour force, resources, and above all the extension of markets. These non-capitalist milieux and strata were initially the peasants and artisans with their ‘natural economy,’ later the colonies. Colonialism for Rosa Luxemburg is therefore not only the last stage of capitalism [as Lenin claimed], but its constant necessary condition. In other words, without colonies capital accumulation or extended reproduction of capital would come to a stop.”

Robert Biel in The New Imperialism – Crisis and Contradictions in North/South Relations (2000) said that “the general problem raised by Luxemburg’s contribution to imperialism theory [is the question] is capital accumulation renewing itself or merely exhausting its own basis?”

Peak oil is a dramatic answer to this question, and it is central to the occupation of Iraq and the saber-rattling at Iran, no matter how many sophisticates attempt to portray petroleum as secondary or passé.

When we speak of capital in this way, we are talking about money. So it seems important at this juncture to examine money itself, because what we don’t think about with regard to money may contain the key to a number of riddles.

What is money? When you think about it, this is not easy to answer. We know it when we see it, but do we really know how it works? Why do people accept it as a universal equivalent of exchange? Are all moneys really universal? What does it really represent?

On the international exchange today, I can get around 11.4 pesos for one US dollar. So if I go to Wal-Mart down the road to pick up a DVD of “Jaws” for $9.44, that’s $10.13 with tax, why won’t they accept 116 Mexican pesos? Not only will they not accept it, my bank won’t take them either. But when I was in Xalapa, Mexico three years ago, I had no problem getting Mexican merchants and bankers to accept or exchange dollars on the spot. What’s up with that?

The first time I was in Haiti, I could get 15 gourdes for one US dollar. That same dollar now gets me about 48 gourdes. This may seem like a great deal, except that many things in Haiti are being shipped there from the US – especially the main food, rice. For Haitians, this is a disaster, because prices went up without pay going up, when they had to pay 48 gourdes for a dollar’s worth of rice instead of 15 gourdes.

On the other hand, if I were to exchange US dollars for Euros today, I’d get fewer Euros than I did two years ago.

There are two points to be made here. (1) The value of money is not fixed. It fluctuates. (2) Some money is more ‘universal’ than others.

If a hypothetical country lives in a bubble, isolated from all other countries, in a ‘money economy’, this country has a central bank that is run by the government. That central bank says how much money to print, controls interests rates, and so on. Many bankers like to talk about a “free” market, but they know that this is complete horseshit, because without a regulated market a lot of bad things happen…. really fast. And who decides what passes for legitimate money, after all? The government needs to begin by making that decision, then controlling the supply of money by exercising a monopoly over the printing presses. If not, they have no means of collecting taxes… unless they want to start accepting chickens, sacks of flour, wool sweaters, free haircuts, and such.

In this fictional isolated country, the central bank tries to measure the total value of all commodities circulating in the economy and to maintain around the same value in circulating money with a little extra to extend credit for something called “growth.”

If the central bank prints too much money, then prices go up (inflation). This might not seem like a big deal if wages go up, too. But lenders (banks, loan-sharking companies, etc.) have an issue with this, because it eats into the buying power of the interest they collect on debts.

If the government prints too little money, prices fall (deflation), which sounds like a good deal until you think about owing money. If you owe $10,000 in debts, and suddenly $10,000 buys twice as much as it did before you incurred the debts, your debts represent a greater liability against your buying power. In the United States right now, with the average household debt at nearly $20,000, this would be seriously bad news. It wouldn’t bother me much because I had someone do the numbers for me recently, and my net worth is minus $15. I can eat that without much pain. But a lot of people, when they look at their debt liabilities, have much scarier minuses. It’s scary, because with deflation, wages drop through the floor, people get laid off by the zillions, but all those debts still stand at the same numerical value.

The problem is there is no such fictional Bubble-Country. We live it a world with a lot of countries that are grossly unequal.

Here’s my point on printing money. There is one country right now that prints all the money it wants to, and everyone else in the world will accept this money for all the stuff they make, even though they know damned well it’s not fair. It’s the United States.

The standard of living that is being maintained right now in the United States is being maintained because we can print all that money and because other countries are forced to accept it regardless of how few commodities we actually produce. The main commodity we produce is… dollars. Other countries produce things to get dollars.

It’s a scam of the first order, and if it quits functioning, the dollar will fall to its “natural” market value, and all you Visa shoppers and home mortgage equity borrowers will be joining the legions of the depressingly destitute in a modern-day version of the Dust Bowl migrations.

So how does this work? Why does the US dollar continue to soar around like a turkey buzzard on an Appalachian updraft, instead of falling to the ground like a homesick brick the way the market says it’s supposed to when you are running the printing presses at the velocity of a meth lab?

Okay, I’ll get to that.

Let’s return for a moment to what money is. It used to be any damn thing people would accept as a universal exchange equivalent, but an actual thing. Pretty shells, or pastry dough, or gold… it doesn’t matter. People just have to agree to accept it for a lot of other things. Gold and silver were faves. But then it became paper money (more portable, for one thing), that supposedly you could cash in at the central bank for silver or gold, which made it sort of a government check against precious metal.

Then we slipped into ‘monetary faith’ by degrees, when money was only partly redeemable for gold, then in 1971, in the US, for reasons I’ll touch on later, they said to hell with it, we’ll just issue paper without the gold backing. Well, by then people were used to it, and everyone had a stake in the stuff being accepted, and paper “fiat” money (that means without anything behind it but faith in the system) stuck. Nowadays, you don’t even need to handle paper. You can send virtual money around with computers. So, okay, what is this “money”… really?

It’s an entitlement. It’s a claim on someone else. But on what exactly? This is where radical political economists can help us out. They say it’s an entitlement to your energy… your work-energy, that is.

Money is an entitlement to someone else’s labor, okay, labor-power to the nitpickers.

We don’t see it that way, because when I buy the “Jaws” DVD I don’t head over to Wal-Mart thinking I’m going to use this money to lay claim to the expended energy of the people who work in the DVD factory or the residuals due to the people who worked to make the movie or to the truck driver that delivered the DVD’s, etc., etc., etc. Nobody does that. We just go buy the DVD. But the monetary value of that DVD is based on all the energy that was expended to get it to the rack at Wal-Mart. Since we don’t SEE the work being done, from rendering silicon for chips to packing those little plastic containers into cardboard boxes, we tend not to think about it, so we also fail to think about money being this claim, this entitlement.

Think about it. No one gave you the money. You had to go someplace you didn’t want to be for eight hours every day, put up with some dim-witted boss’s bullshit, and deal with people you wouldn’t give the time of day otherwise, just to get paid the money. That money claimed you. It entitled the boss to your energy and time.

This is the whole system, really. People who have the inside skinny on accumulating money (by owning everything) then assert their “claims” by working the shit out of all the rest of us so they can have wild cocaine orgies, buy yachts, collect million dollar horses, or ride around in limos… different things float their boats, but you get the picture. They play, and we serve. Because we “need” the money.

Yet there is a dimension to all this that goes beyond the rich and the not-so-rich in one place. It’s the geographical dimension.

There is an international division that is even sharper than what most of us in the industrialized metropolis ever realize.

Just like Rosa Luxemburg said, there are a few rich countries that suck the labor and resources out of a lot of poor countries. But the rich countries can’t get away with this unless at least most of their own population is complacent. So to get this political complacency, they allow key fractions of their own working people to have some nice things… a ranch house, a line of credit to buy that useless, gas-guzzling SUV, cheese sticks in individual wrappers, liquor, televisions, and DVDs.

The worst of these rich countries is the United States, where statistics show that we are on average the most wasteful, expensive individuals in the world. We have plenty of poor people, but on average we use more land per capita to feed ourselves, consume more water per capita, burn up more fossil fuel, make more trash, and consume more non-essential luxury crap than any society in history. It has made many of us soft and stupid, which is why we don’t realize that…

…we couldn’t do that right now if we didn’t have monetary printing presses and the most expensive, unwieldy, and lethal military on the planet. And the two – printing press and the military – are inseparable. Lose one, and the whole party comes to a screeching halt.

I’ll come back to that, too.

Since one country’s currency can now change its value relative to other currencies on any given day, it has led to gambling on the price of money.

When I was in El Salvador in 1985, the official exchange rate was 4 colones to $1 US. But the rate in the street – the black market – changed almost hourly. Rich Salvadorans could not use colones to pay their big international debts. They had to have dollars, the recognized international currency. So ever so often there would be a bidding war for dollars that spilled into the street where the mini-mafiosi had hundreds of money-exchangers. When that happened, if you got out there fast (Bring your firearm!), you might get a temporary rate of ten or eleven to one, so you could cash out $5,000 for 50,000 colones, then go to the bank that same day and get $12,500. That’s a sort of microscopic version of currency speculation on the world market. Good deal, huh? But it doesn’t last. Eventually, the banks get wind and the official rate has to be changed to reflect the reality of this “speculative” market. The colon or (pick you currency) gets “devalued.”

Now let’s pump up this scenario. Let’s say you are a huge securities account of pooled funds from a lot of ultra-rich bastards, who can lord over mere bank directors like peons, and you can mobilize as much credit in one day as, say, the GDP of California. Let’s also say that you don’t like Country X because they haven’t gone along with your program… like letting you come in and buy up all their industries.

Country X’s currency is the gimcrack. It exchanges for ten to the dollar. Your giant account –called a hedge fund – pulls together $10-12 billion through its credit resources and uses intermediaries to begin buying up gimcracks. With so many gimcracks being bought up, the gimcracks begin to exchange more dear, first at nine to one, then at eight to one, right up to five to one.

The herd mentality takes over in the Big Casino, and everyone wants to get in on the action – kind of like everyone did during the dot-com boom right before they all lost their asses.

Meanwhile, these intermediaries that have been intentionally heating up the market for gimcracks on behalf of the hedge fund… they start cashing out. They cash out fast, turning gimcracks into dollars as quick as they can, at five to one (remember, they bought in at ten and nine)… then six to one… because when people see how many are being sold, the herd stampedes the other way… then eight to one… by now the hedge fund is out, richer by a fair piece, but the gimcrack is in stampede-over-the-cliff mode, and won’t hit bottom until it is at twenty to one, meaning the entire Country X just suffered a 50% devaluation. If you were making 10 gimcracks an hour in your local sweatshop yesterday, you are making 10 gimcracks an hour today… except every price in the country is being jacked up 50% to protect the merchants’ bottom line.

This is a speculative attack. It is what caused the 1998 “Asian meltdown.” Not bad management. Not cronyism. Not loose loan policies. It was done on purpose, by the Clinton administration, on the orders of Commerce Secretary Robert Rubin, and carried out by giant hedge funds from the finance-capital sector of the USA. Among the attackers was George Soros, the favorite of many liberal NGOs in the US, and a key supporter of the Kerry campaign. If you’d like to read about it, pick up Peter Gowan’s The Globalization Gamble – The Dollar-Wall Street Regime and its Consequences. Gowan explained how these hedge funds became “weapons of US statecraft.”

“Hedge Funds… is a euphemism: these are speculator organizations for making money through the buying and selling of securities on their own account to exploit price movements over time and price differences between markets. The biggest of these hedge funds are not marginal speculators… they are nor banks but partnerships, often registered offshore to dodge taxes. The biggest of the banks then lend huge sums of money to what are, in effect, their creations [the hedge funds], in order that the hedge funds can play the markets with truly enormous resources. This scale of resources is vitally important because it enables the speculator to shift prices in the market in the direction he wants the prices to move in through the sheer scale of funds…

“There is no doubt whatever that the hedge funds were the driving force of the attack first on the Thai baht, then on other regional currencies and the Hong Kong stock market. The first hedge fund assault on the baht occurred in May 1997, one month after the Clinton administration launched its campaign demanding that Thailand and Indonesia open their financial sectors fully to US financial operators…

“The Asian crisis began in Thailand in July 1997. The next economy to fall was Indonesia. But the really decisive financial crisis was that to South Korea. It was the South Korean crisis which ended the temporary stabilization of Indonesia and which finally brought complete collapse there. And the South Korean crisis was responsible for plunging the whole region into slump.”

(Gowan also noted that during the Reagan administration, since the US was running a trade deficit, the expansion of the military, especially new military hardware, “meant that the US state was acting as a surrogate export market for the industrial sector.” This is at least part of the calculation of our present-day neocons for preserving the wealth of their industrial-capital cronies in a time of indeterminate war.)

How does a country protect itself from such a speculative attack? That’s a very good question. What they do is have the central bank hold enough assets denominated in the most internationally recognized currency (the US dollar), so in an emergency, they can use those dollars to buy up their own currency and pull it out of the line of fire of the speculators. A significant portion of any country’s reserve currency needs to be denominated in dollars, then, as a shield against this kind of assault.

So most countries’ central banks have collected the most available dollar-denominated asset they can get their hands on – treasury bills. These are like Savings Bonds. They are a loan to the US government, which the US government will theoretically pay back with a variable interest rate after maturity. So in effect, the reserve currency in most central banks in the world to protect the local currency from an attack is US dollars. Every country, therefore, now has a vested interest in ensuring that there is no speculative run on the dollar – even if by market standards it deserves to be dumped like a dirty diaper – because devaluation of the dollar would knock the stuffing out of their very own currency reserves.

That’s some catch, that Catch-22.

Not only that, the US engineered it all the way backing the early 70s, while it was abandoning gold-backing and fixed currency exchange rates that prevented speculative attacks (Gee!), for the major oil producing nations to invest all their surplus money in dollar-denominated assets too, and thereby made sure that everyone around the world who had to pay for oil had to pay in… dollars. One of the key factors in the thinking of the Saudis, Kuwaitis, United Arab Emirates, et al, was that there was only one country around who could guarantee and monopolize the military security of the major sea lanes leading out of the Persian Gulf.

Guess who?

Here’s the big problem. There are now so many countries holding so many US treasury bonds that the US is categorically not capable of paying them all off. That’s right, boys and girls. If everyone we owe money to called in their debts, Uncle Sam would be bankrupt. So no one is going to do that, because if Uncle Sam goes bankrupt, what will happen to all those treasury notes in our central banks? The US can now borrow from as many people as it wants, and the debt turns into further security against anyone calling in the debts.

Michael Hudson, the financial historian who authored Super Imperialism – The Origin and Fundamentals of U.S. World Dominance, explained in a 2003 interview:

“The U.S. has said it can’t pay back its dollar debts and doesn’t intend to. As an alternative, it has proposed ‘funding the US dollar overhang’ into the world monetary system. Other countries would get IMF credit equal to their dollar holdings, but these holdings no longer would be US Treasury obligations. The US would wipe its debt to foreign central banks off the hook. This would mean that it would have got all the balance-of-payments deficits for the past 32 years for free, with no quid pro quo.”

The US has been proposing this for 30 years whenever Europe raises the issue of payment for its dollar holdings. American diplomats have said that they won’t allow central banks to use their dollars to buy US corporations, for instance. When OPEC countries proposed this after 1973, the US Treasury reportedly informed them that this would be considered an act of war.

Meanwhile, people still have to have dollars to pay their international debts. Where do you get dollars? From the United States, of course. So the treasury note system has other countries locked in at the central banks, and the need to pay off bigger and bigger external debts – in dollars – forces the majority to convert their entire economies away from local development – like the old import substitution industrialization (ISI) strategy – into export commodity platforms oriented to the US.

“The US makes dollars; everyone else makes things to get dollars.”

The two pillars of the US imperial edifice are monetary and military. And the development of this unique ability was closely related to the unique geographical position of the United States, outside the lethal circumference of European wars.

Today’s Imperialism – Uniquely American

How credit and debt put the United States on top

The United States is dominant in the world, materially dominant, and not merely financially dominant. But the theories of Hilferding, Hobson, and Lenin on imperialism do not accurately describe the actual character of US domination unless we selectively censor a lot of information – as certain sectors of the left have been wont to do.

From the very beginning, the Hilferding-Hobson-Lenin theses centered on the needs of monopoly capital as the driving force that led to inter-imperialist rivalry, and to the First World War. These theses held true for Europe and the stage of imperialism that they witnessed.

But as Michael Hudson exhaustively documents in Super Imperialism, the United States began in the First World War by exploiting this rivalry itself to gain advantage, and the predominant actor was not monopoly capital, but the US state. While there is no doubt that the state was acting on behalf of its own capitalists, it was not doing so in a largely reactive way but in a leadership role.

The US did so first in the role of national creditor, then – even more stunningly – in the role of national debtor.

While the US had employed direct conquest and domination in its own hemisphere, it was not drawn into the inter-imperialist rivalry that sparked WWI. So the US did not find itself predominantly “exporting capital” to its colonies via private institutions, but exporting it to the advanced capitalist states, particularly Great Britain, as loans for its war with the Germans and Ottomans, loans approved and guaranteed but by the United States government.

The United States stayed out of the war until it became likely that without US intervention, the Allies would lose and thereby lose its loan repayments. Once the war was over, Great Britain and France were heavily indebted, and the US – far from being the benevolent post-war ally – behaved much like any Brooklyn loan shark, bleeding its former allies so severely that they in turn wrecked the post-war German economy with reparations to assist the allies in their debts. This led directly to the rise of Hitler fascism and the Second World War.

Whereupon, the US began its participation, again, not as a fellow combatant, but as a creditor to the other allies. It is very clear now that Franklin Roosevelt developed financial designs on the colonies of the British Empire, and that he maneuvered throughout the war to let others – particularly the Soviet Union, but also England and France – take the brunt of Hitler’s aggression to weaken them, while he built up the geographically war-immune US industrial base, and positioned the US to again be a post-war creditor and the new super-power.

It is a demonstrable fact that England has been a satellite of the United States ever since the First World War, and this accounts today for the unsavory affinity of Tony Blair’s lips for George W. Bush’s faux-cowboy ass. Tony will eagerly jump aboard the bandwagon to attack Iran soon.

Britain was the principle (but not only) target of US post-war loan-sharking in the 20s and 30s. Prior to the 1929 crash, the US bled the British Empire like a financial vampire, driven more by an archaic banker’s ruthlessness than any prescient self-interest. In fact, the US state had no idea at the time that they were becoming the principle cause of what would become the world’s most destructive war only two decades down the pike.

After the speculative crash in 1929, with the US in the worst economic doldrums it had ever experienced, and with significant sectors of the US working class looking with great interest at Russia’s example from 1917, Franklin Roosevelt was elected the 33rd President of the United States in 1933, with a mandate to take extraordinary measures ostensibly to relive the suffering of the American working class masses, but more importantly – from the point of view of US elites – to take the increasingly revolutionary edge off of their agitations.

Roosevelt then became the first president to abandon the gold standard and conduct a cold-blooded strategic devaluation of the US currency as a weapon against its putative allies in Europe. This was a policy of deliberate inflation domestically to raise prices as part of his domestic pre-Keynesian overhaul, but it further battered the European exporters, especially Britain, who needed to export to the US in order to acquire the dollars to pay their compounding WWI debts.

This was the first intentional foray into state-initiated economic warfare using currency as a weapon, and it displayed just a glimmer of understanding that in state-to-state economic competition, the central banks would become the primary battlefield. In the competition between private capitals, the state would eventually become the referee to ensure the health of the whole, and one state would dominate the general direction of global capital accumulation. But this was only a glimmer then.

The Law of Unintended Consequences caused WWII, and hit the US with an even deeper economic crisis. The combined refusal of the US to negotiate new terms with the Europeans for repayment of war debts and the strategic devaluation of the gold-free dollar led to a series of competitive devaluations of European national currencies – a destructive race to the bottom – that ended up hitting the United States like a tsunami.

Consistent with Luxemburg and later world system theorists, this period of economic disaster in the capitalist metropoles loosened the exploitative grip on the under-developed periphery. Andrew McKillop wrote that:

“Through 1929-35 or 1929-36 in some countries of the “civilized world” there were unremitting falls of activity in ‘key sectors.’

“The uncivilized world was however less than concerned by the event … it gained. (A. Gunder Frank, S. Amin and suchlike will give you… the related and unrelated sequences of economic change governing metropole-colony relations). Simple facts and figures show considerable economic growth in the ‘colonial South’ of the 1929-39 period.

“This strengthened many of the colonies even as their colonial ruler-states were being weakened, and contributed to the creation of conditions that would lead to the wave of national liberation movements that were folded into the Cold War dynamic later on. This was unanticipated by the US, even as its assault on the British was coldly calculated. The intent was never to take over as British (or other) surrogates in the colonies, but to replace the Sterling as the world reserve currency, bringing not only the peripheral ’south’ under its sway, but Europe itself, beginning with Great Britain.”

Michael Hudson writes:

“It would be false to say that the United States provoked World War II out of malice or out of knowledge of the results of insisting on repayment of its war debts by a world utterly unable to repay them… intolerable burdens that the United States imposed on its allies of World War I and, through them, on Germany. Every US administration from 1917 through the Roosevelt era employed the strategy of compelling repayment of these war debts, above all Britain’s. The effect was to splinter Europe so that the continent was laid open politically as a possible province of the United States.

“Private finance capital could not have achieved that end… [but] the world tumbled into a depression. Not only did the United States not escape the Great Depression, it became the principle sufferer from a collapse of its own creating… The first great foray of U.S. governmental finance capital into world power politics thus ended in ignominious failure, and ultimately in a war dimensions vaster even than World War I.”

Roosevelt was a determined man, and after implementing heroic Keynesian measures to ensure the political stability of the United States, he turned the lemon into lemonade through his carefully calculated commitments of the US to World War II.

The Lend-Lease Act, by which the US supported the Allies without troops in the Second Word War for almost two years before it intentionally provoked the Japanese into the attack on Pearl Harbor, was an instrument that just as intentionally broke down the British Empire with debt for the purpose of dissolving the Imperial Preference – a set of relaxed trade rules within the British Empire – in the commonwealth. This set the stage for the post-war displacement of the Sterling as the global reserve currency by the dollar.

The intent was never to destroy the British, any more than it was to replace the direct European colonial rule that World War II would mortally wound. It was to bring Europe and ascendant Asia under the sway of the United States as sub-imperial powers in a new global hierarchy that would extend the influence of the US state beyond anything ever yet imagined by former empires – in a qualitatively new way.

The British were subsumed by the United States into the financial pole of capital, and were eventually reduced to a US financial satellite on the border of Europe.

This goes a long way toward explaining the seemingly inexplicable subservience of successive British governments in toadying to the US – even in harebrained military adventures like the current Iraq quagmire. UK has now been transformed into a financial and military appendage of the US state.

Mark Jones (1999):

“The British working class has been restructured out of its birthright and out of its collective identity. The country is now a fiefdom of [US] international finance capital, its working class little more than servitors of the City [of London – a banking consortium], which has now consolidated its national hegemony while totally internationalising itself.

“The country now exists as an adjunct of the City. Apart from finance capital, Britain’s most successful trades are the Intelligence Service, the Armed Forces and the arms industry…For this reason, the world slump which is now in its early stages will have peculiarly sharp social effects in Britain.

“Britain’s role as the world’s largest financial offshore island, the world’s leading money-launderer (as much as $200bn of narcodollars and dirty money in some years is washed in the City’s giant laundry), its self-appointed segregation from Europe and refusal to participate in EMU (economic and monetary union) means that the fate of sterling, pummeled between the euro and the dollar, will likely be grisly… The disproportionate weight of banking, finance and transnational corporate capital in the British economy means that the effects of crisis in these sectors will spread with lightning speed and devastating effect through what passes for the specifically-national economy.”

Gowan noted how the US actually used the City of London to break down the post-war Bretton Woods system after the Vietnam War almost bankrupted the United States.

“It is true that the Nixon administration was able to exploit a breach in the Bretton Woods system, Gowan writes, “that had already existed since the 1950s: the international role of the City of London in financial transactions.” For the details of this, see Gowan’s aforementioned extensive essay.
 
 

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