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PERSIAN PERIL
Is the Bush administration about to commit the fatal
imperial error in Iran?
by Stan Goff
Saber-rattling Neocons are frightening the rest of the
US elite.
[Just when the Bush administration seemed to have figured
out that invading Iraq was a mistake, they tell us to expect the next act in
their Axis of Evil Traveling Roadshow. Iran is the subject of the latest
non-diplomatic broadsides, and the media are already buying ringside seats. So
what is this thing called "Iran"? Which corporation manufactured it?
Or is it one of those pre-American places where people wear funny costumes?
These and other questions may or may not be explored in the briefing rooms of
the Exceedingly White House. For the rest of us, a closer examination of the
history of this ancient and culturally unique regional power may help explain
the coming wave of imperial belligerence. FTW's military editor Stan Goff
presents a highly useful narrative of Iran's place in modern geopolitics and
asks, Is the Bush administration about to commit the fatal imperial error in
Iran? -JAH]
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 toÉ 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 ethno-cultural group 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. Persians 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, an Indo-European tongue (related to
a wide range of languages from India to Ireland - including English) which we
now call Farsi.
In the 19th Century 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. Russian and British interests converged
in a 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 RussiansÉ 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 the 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, which,
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, as it turned 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's 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 in 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; 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, which 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 virtual coup
d'etat against a
Fusion government in North Carolina in 1898.
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 exposing a host of social ills that afflicted the
various sectors of their emerging base - poor southern whites, western farmers,
and northern industrial workers - and offered federal solutions. This was the
policy essence of the New Deal. Its political essence was the control-driven
bureaucratization of the Democratic Party in order to protect it from undue
grassroots pressure.
In foreign policy, these technocrats preferred this jujitsu
to the karate of the gunboat, too. That didn't mean they were averse to
military power projection, but 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 was the
semi-feudal countryside, where the Majlis - the big landowners - subjected
millions of peasants. The other was a growing urban Iran, 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. They 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 like the rest of the xenophobic Majdi he
opposed US influence. And he supported land reform, which he said could be
financed with oil revenues, much of which would go to paying off the Majdi for
the land they would cede.
For the Americans and for the British, this raised the
specter of nationalization of the Anglo-Iranian Oil Company. They were right.
Mossadegh signed the expropriation order in March, 1951. This action - wildly
popular in Iran - ignited a prairie fire of grassroots activity 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, and 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,
forcing 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. But
Eisenhower 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 pissing off 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, that blunted 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 reserves 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 and 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
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. Lightning 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 the 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 fomenting in order to provoke a Soviet response -
hoping to trap the Russians 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 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.
As part of this fight against the left, the Shah in
neighboring Iran increased his repression 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. That security crisis
exacerbated 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; 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 Reagan's people 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 its illegal war in 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 materiel 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 foreign policy kept at least one partner stable within
the region, tacking back and forth between the tides and currents. It developed
a partnership with Zionist Israel as a surrogate US military in the region, and
the result has been a relatively stable American hegemony over the area for the
last sixty years. But such a policy causes pressurized violence in the imperial
periphery, the kind that eventually burst into the imperial center on September
11th, 2001. It came 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 the provocation, and not some generalized
"hatred of freedom and democracy."
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 powered by
immense hubris and the apparent belief that the US can simply impose its will
directly, and thereby restructure the global economy by dint of arms.
This is, in the eyes of the realist-technocrats, a grave
miscalculation. Whether the technocrats have an alternative solution to the
underlying crisis that is driving the neocons' assault on Southwest Asia is an
open question. But their fears may be very well founded.
Under the largest trade deficit in world history, the dollar
is propped up by dollar-denominated Saudi oil sales on one side and by American
bullets on the other. That system of monetary-military imperialism 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 bellsÉ for some.
By Stan Goff
[This is the second installment of Stan Goff's report on
the simmering Persian Peril. Where Part One set out a history of modern Iran in
its relations with Western imperial powers, the current piece explains the
petrodollar system that underlies our ugly situation in the Middle East and the
world. As Catherine Austin Fitts says, nothing will really change until we
change the way money works. "Petrodollar," "fiat currency,"
"speculative attack," "balance of trade" --- these are the
lexicographical little friends whom we need by our sides if we are to make it
out of the propaganda labyrinth. Goff's essay explains just why the world puts up
with the American bully. It isn't just the horrible weapons of death; it's the
horrible weapon of debt: in this ongoing American dream, "we" do the
borrowing - and everyone else does the owing. -JAH]
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 on a World Scale - Women in the
International Division of Labor, this way:
[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 passŽ.
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, and now they have 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 happenÉ. 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 taxesÉ 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 in a world with a lot of countries that are grossly unequal.
Here's my point about 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 isÉ dollars.
Other countries produce things to get dollars. (See US Dollar Hegemony has
got to go, by Henry
C. K. Liu, "Asia Times," April 11, 2002, at http://www.atimes.com/global-econ/DD11Dj01.html.)
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 goldÉ it doesn't matter. People just have to agree to accept it for a
lot of other things. Gold and silver were faves. But came 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.
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 limosÉ 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 thingsÉ 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 thatÉ
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 - the 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.
One country's currency can now change its value relative to
other currencies on any given day, which 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 colone (or any other currency, take your
pick) 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 it over mere bank directors. 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.
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 fundÉ 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)É then six
to oneÉ because when people see how many are being sold, the herd stampedes the
other wayÉ then eight to oneÉ 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 todayÉ except every
price in the country is being jacked up 50% to protect the merchants' bottom
line.
This is called 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, at http://www.gre.ac.uk/~fa03/iwgvt/files/9-gowan.rtf
. Gowan explained how these hedge funds became "weapons of US
statecraft."
Hedge FundsÉ 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 speculatorsÉ
they are not banks but partnerships, often registered offshore for tax-dodging
purposes. 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
fundsÉ
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 operatorsÉ
The Asian crisis began in Thailand in July 1997. The next
economy to fall was Indonesia. But the really decisive financial crisis was
that [of] 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 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 back in the
early 70s, while it was abandoning the gold-backing and the fixed currency
exchange rates that had prevented speculative attacks (Gee!). This was made
possible by American arrangements for the major oil producing nations to invest
all their surplus money in dollar-denominated assets too, and thereby ensure
that everyone around the world who had to pay for oil had to pay inÉ 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 successfully 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.