Yesterday’s Financial Times included an interview by its Beijing correspondent with a senior executive from the Chinese-owned engineering and construction firm Sinohydro.
In it, Wang Zhiping lamented the billions in dollars of asset write-downs and lost contracts suffered by Chinese firms due to ‘political instability’ (i.e. US-promoted regime change, state failure and secession) in Libya, South Sudan, Mali, Central African Republic, Iraq, Afghanistan and Burma.
The article described the fallout – regrettable and inadvertent, of course – from NATO’s recent African military ventures, diplomatic intrigues and assertions of force majeure:
After years of expansion into emerging markets and developing a reputation along the way for taking on projects in difficult environments, experiences such as Libya are prompting a change in the way that Chinese companies assess risk. The shift – backed by Beijing – comes as Chinese companies increasingly compete with Bechtel, Hyundai Engineering, Leighton and other international contractors.
[...]
Chinese engineering companies last year produced $117bn in revenues from contracts outside China – a 10-fold increase over the past decade, according to the Chinese government. Five of the world’s top 10 contractors are now Chinese, according to the Engineering News Record, a trade publication.
While Chinese contractors can compete on technological prowess, they face a big challenge dealing with political risk, particularly after hard-earned lessons through kidnappings in war-torn areas such as Libya, Mali and Afghanistan.
Many of Sinohydro’s overseas projects – from mines and roads to power stations and football stadiums – are funded by Chinese loans to the host country, which are repaid with resources such as crude oil.
While the model has helped cash-strapped governments that might otherwise shy away from building needed infrastructure, it has left Chinese companies exposed in many of the world’s conflict zones.
[...]
“If the risks are too high, we just won’t go there [now],” says Mr Wang. “Our greatest concern is the instability caused by political risk in overseas markets, including armed conflict.”
Sinohydro’s “caution” list includes Iraq, Afghanistan and Myanmar, where the military junta unilaterally suspended a $3.6bn hydropower project in 2011.
The shifting attitude reflects some costly lessons. Mr Wang says the conflict in Libya cost Sinohydro $1.2bn in suspended contracts and $200m in writedowns.
“That is just an estimated figure,” says Mr Wang. “For other losses, like how many cars have been blown up, or exact losses for every physical asset . . . it is very difficult to get an exact number.”
Sinohydro has also been caught up in other conflicts with workers either killed or kidnapped in South Sudan and Afghanistan. And the current conflict in Mali threatens to jeopardise one of its hydropower projects.
To these methods of overt US aggression and tortious interference, we can add the less objectionable corporate watchword of ‘green growth.’
In recent years, the need to invest in ‘clean energy’ has supplied public justification for the state-assisted efforts of US- and European-owned engineering, construction and mining firms (Bechtel, ABB, RWE, Skanska, etc.) to secure infrastructure contracts and fasten down supplies of raw materials ahead of their Chinese competitors.
But these developments aren’t the real interest of the FT article.
What the piece quietly makes clear is that the sovereign needs of the US government now conflict with the system-wide needs of world capitalism.
Washington’s exercise of its imperial power is no longer the benevolent, positive-sum game of yore, in which it could pursue its own interests while acting as guarantor of private property rights, monopolizer of force, keeper of civil peace and manager of the global division of labour on behalf of the world’s governments and propertied elite.
Rather than satisfying the wishes of the world’s investors for stable political institutions, Washington’s need to maintain strategic pre-eminence now leads it to create continent-wide zones of political turmoil, state failure, secession and insecure property rights.
Amidst such basic uncertainty, where one’s assets may be seized, obligations repudiated or agreements turn out to be worthless, how is stable global accumulation possible?
Such questions, no doubt, rankle the editorial board at the FT.
Sunday’s New York Times featured an article about the ‘secret airlift of arms and equipment for the uprising against President Bashar al-Assad’, overseen by CIA officers:
From offices at secret locations, American intelligence officers have helped the Arab governments shop for weapons, including a large procurement from Croatia, and have vetted rebel commanders and groups to determine who should receive the weapons as they arrive, according to American officials speaking on the condition of anonymity.
Suzerainty means being able to fund your proxy wars in a roundabout way: by directing the Qatari, UAE or Saudi Arabian holders of your government liabilities (private agents as well as the central banks and sovereign wealth funds of net creditor countries) to do so.
In this respect, the provision of arms, loans and military training to proxy forces is another branch of ‘aid’ or development assistance. It regularly involves the same multilateral organizations, NGOs and donor conferences, and is justified publicly using the same messianic ideologies of imperial benevolence and munificence.
It is US indebtedness, however, that allows it to act as banker, arms supplier and instructor to the world’s jihadis and regime changers. An outflow of dollars is needed both to furnish ‘less-developed’ countries with the liquidity needed to service their debt obligations, and to allow an ‘opposition’ to purchase weapons from NATO and its allies and pay the salaries of rebels.
Since the 1960s the emission of dollars abroad through US external deficits has fuelled the growth of liquid international money markets (Eurodollar bank deposits) domiciled outside the US.
These offshore markets – with the City of London being the first and biggest – usefully supplement the domestic Fed-governed system’s supply of dollar-denominated credit with a private pool of dollar balances.
An immense volume of offshore transactions (the Eurodollar money market is the world’s most liquid) allows alternative funding routes to be designed when official channels, for whatever reason (domestic regulations, international sanctions, arms embargoes, diplomatic amour-propre), won’t do.
Offshore banking centres and tax havens flourish in jurisdictions that were created and now endure for the purpose of financial racketeering, for laundering the blood-stained proceeds of arms trading, gold smuggling, drug trafficking, prostitution and gambling.
These include the City of London, Dublin, Switzerland, Luxembourg, Singapore, Hong Kong, the Cayman Islands, British Virgin Islands, the Channel Islands, Gibraltar, Antigua and Barbuda, Bermuda, the Bahamas, Sint Maarten, Panama, Cyprus, Malta, Vanuatu, the Cook Islands, Monaco, the UAE, Bahrain, Qatar, Oman and Kuwait.
The complexity and volume of transactions creates a lucrative niche for financial-services and other professionals (accountants, lawyers, ‘consultants’). Criminals and illicit firms also engage in ‘legitimate’ business ventures: real estate, construction and development, cash-intensive enterprises like tourism and hotels, and above all banking.
Dirty money can be converted into ‘clean’ capital gains by investing funds in highly liquid assets (e.g. gold or precious metals, fine art, bulk commodities like oil or wheat) which are anticipated to appreciate in price.
Thus transnational so-called ‘organized crime’ is not a distinct world. It is intertwined with, rather than divorced from, the ordinary economy, and overlaps with the political establishment, public officials and law-enforcement agencies.
It has intimate links with intelligence and diplomatic agencies: as shown by BCCI and Banco Ambrosiano; Iran-Contra; funding of the mujahideen in Afghanistan, Solidarnosc in Poland, and the KLA in Yugoslavia; Khodorkovsky’s Menatep Bank and capital flight from Russia (abetted by Harvard advisors funded by the US State Department); and operations in Francophone central Africa and East Asia involving the French political elite, defence contractors (EADS and Thale), the oil company Total/Elf and the ‘Clearstream affair’.
‘Black market’ activities allow intelligence agencies to stretch their budget for covert operations, and to evade international sanctions and NATO-created embargoes (e.g. in the ex-Yugoslavia, Iraq, and now Iran and Syria). Civil wars, as Somalia demonstrates, provide ideal settings for profitable kidnapping, extortion and protection rackets.
Equally, accusations of participation in or association with organized crime can be made to strengthen the repressive power of law enforcement or intelligence agencies, pollute popular opinion, settle intra-elite scores, or move state policy in a desired direction by sidelining ‘tainted’ individuals or entities.
Nixon’s smashing of the ‘French connection’ had as its useful by-product the reduction of the Quai d’Orsay’s influence in Turkey and the Levant and the consolidation of the Maronite elite’s hold over the Lebanese state and local commerce (against the Muslim upstarts in the Intra Bank). British journalist Claire Sterling was the conduit for black propaganda associating Bulgarian intelligence with the assassination attempt on Karol Wojtyla.
And, since the late 1990s and especially after the World Trade Center and Pentagon attacks of September 2001, governments have enacted laws against ‘transnational organized crime’ and the financing of terrorism, giving them the authority to seize property and confiscate ‘proceeds of crime’ or terrorism.
In reality, it is the manoeuvres of imperialism itself (destabilization campaigns in preparation for armed interventions, regime change, IMF loan conditionality, financial liberalization and deflationary crises) that have criminalized the Balkan region and eastern Mediterranean. Together they have created a latitudinal band of turmoil, official corruption and mass pauperization that sweeps clear across central Asia.
These symptoms of entrenched crisis and misery in the peripheral zones of the world economy are the obverse of US external deficits. The reflux of dollars caused by global payments imbalances (from the surplus countries, to their US debtor, to ‘emerging markets’) ensures that the disarray of the advanced capitalist countries is visited upon the hinterlands, since Washington itself faces no binding liquidity constraint.
Whole regions slide stealthily off the economic map as the promise of ‘development’ recedes.
Washington’s increasingly brazen militarism and belligerence over the past two decades is thus bound up with changes in the financial institutions, credit mechanism and monetary arrangements of world capitalism, which have also transformed the very nature of money.
By 1945, and especially after 1971, the best-quality money – as measured by the willingness of other central banks, sovereign wealth funds and private holders of foreign exchange to accept and accumulate it, and by the preparedness of private buyers and sellers to establish commodity prices denominated in terms of it - was the dollar liabilities of the United States government.
Institutions of money and credit are hierarchical: some promises to pay are more credible than others, and one specific form of money is acknowledged (generally by legal definition) as the best-quality measure of value and ultimate means of payment.
At the top of the monetary pyramid sit those agents whose liabilities (e.g. private promises to pay, commercial bills, state currency, Treasury bonds, central bank deposits) are most socially acceptable in transactions and are used as stores of value.
A government settling its external account with foreign counterparts needed gold. Alternatively (and increasingly during the late nineteenth century) it used some commonly accepted reserve currency or monetary standard such as the pound sterling (in which, thanks to the Empire and London’s role as world banker, governments typically held a portion of their external balances).
Changes to the monetary hierarchy and to the system of international settlements during the twentieth century (above all, shedding of convertibility of currencies to gold at a fixed rate) involved adjustments to the respective monetary space commanded by national currencies such as the pound sterling, the franc and the dollar, i.e. the domains of economic activity in which each of them circulated.
World capitalism’s discarding of a metallic standard to underpin its monetary system was an index of the strength of one imperial state.
This reflected the nature of the new global order, in which the US state (as well as claiming jurisdiction and tax authority over the world’s greatest concentration of productive resources) was able to suppress the foreign-policy independence and direct the regional and domestic affairs of other advanced capitalist state in a manner never before seen.
Imperial rivals, once subdued, could not pursue strategic objectives outside of US-dominated institutions – which is to say, scarcely at all.
Deranged ambitions for a Kautskyite ultra-imperialism, dominated permanently by US arms, continue to receive a public airing, as with G.W. Bush in his 2002 address to West Point graduates:
We have our best chance since the rise of the nation state in the 17th century to build a world where the great powers compete in peace instead of prepare for war.
The history of the last century in particular was dominated by a series of destructive national rivalries that left battlefields and graveyards across the earth. Germany fought France, the axis fought the allies, and then the East fought the West in proxy wars and tense standoffs against the backdrop of nuclear armageddon. Competition between great nations is inevitable, but armed conflict in our world is not.
More and more civilized nations find themselves on the same side, united by common dangers of terrorist violence and chaos. America has and intends to keep military strengths beyond challenge. Thereby making the destabilizing arm races of other eras pointless and limiting rivalries to trade and other pursuits of peace.
Today the great powers are also increasingly united by common values instead of divided by conflicting ideologies. The United States, Japan and our Pacific friends, and now all of Europe share a deep commitment to human freedom embodied in strong alliances such as NATO. And the tide of liberty is rising in many other nations.
But Washington’s policymaking elite is under no illusions: US pre-eminence can only be prolonged at the expense of other imperial powers. Thus the historical emergence of dependence, cooperation and servility among Washington’s junior partners (Western European states, Tokyo) merits investigation, not least for what it can tell us for about the ultimate lifespan or historical limit to this state of affairs.
For what underpins the ability of states to borrow, to have their liabilities (cash, deposits accounts at the central bank, Treasury bonds, etc.) accepted?
But, today, Washington’s strategic primacy rests ever more directly on its use of military power to pursue its goals and subdue its competitors, rather than on its ability to mobilize real resources through taxation. For the moment, US military activities and armaments spending, undertaken without heed to any binding liquidity constraint, provide their own best guarantee.
Facing stark choices brought about by global imbalances, the US ruling elite has adopted political methods of last resort: permanent war financed by a colossal pyramid of dollar liabilities.
The volume of funds flowing into Eurodollar money markets swelled dramatically after 1973. At the insistence of Washington, a large share of oil-export receipts held by the central banks of OPEC countries were invested in US Treasury securities purchased outside the regular auctions.
In return for disbursing oil rents in the desired fashion, the obliging governments of Saudi Arabia, Kuwait and Iran received US military hardware, security training and guarantees of protection.
Some of the petrodollar inflow was recycled outward as loans to ‘developing markets’ (Argentina, Brazil, Mexico, Greece, Turkey, South Korea, Yugoslavia and the Philippines). The injection of credit to these economies sparked speculative bubbles in commodity prices or local real estate, rendering domestic producers less competitive and hollowing out industry before terminating in debt crises, inflation and currency depreciation – as in the Mexican crises of 1982 and 1994, the East Asian crisis of 1997-98 and the ruble collapse of the same year.
Today, these same dutiful energy-exporting Arabian peninsula members of the Gulf Cooperation Council (together with Turkey) are the proximate source of weapons wielded against the Syrian government on behalf of Washington.
Two days ago the Wall Street Journal published information from US officials that the CIA was ‘expanding its role in the campaign against the Syrian regime by feeding intelligence to select rebel fighters to use against government forces’:
The expanded CIA role bolsters an effort by Western intelligence agencies to support the Syrian opposition with training in areas including weapons use, urban combat and countering spying by the regime… The provision of actionable intelligence to small rebel units which have been vetted by the CIA represents an increase in U.S. involvement in the two-year-old conflict, the officials said…
Syrian opposition commanders said the CIA has been working with British, French and Jordanian intelligence services to train rebels on the use of various kinds of weapons. A senior Western official said the intelligence agencies are providing the rebels with urban combat training as well as teaching them how to properly use antitank weapons against Syrian bunkers.
The agencies are also teaching counterintelligence tactics to help prevent pro-Assad agents from infiltrating the opposition, the official said.
Among other U.S. activities on the margins of the conflict, the Pentagon is helping train Jordanian forces to counter the threat posed by Syria’s chemical weapons
Despite long-standing evidence of Washington and its allies’ efforts to ‘shape the outcome in Syria’, Australia’s Socialist Alternative has led cheers for the proxy forces of what it insists on calling the ‘Syrian revolution’:
Imperialism, in the sense of Western neo-colonialism, is not the main threat facing the masses of Syria, or of the Arab world as a whole.
This can seem a sacrilegious statement to anyone who got their political education on the left in the post-9/11 world. After the 9/11 attack, when the US went to war on Afghanistan, there were a tiny number of political voices who stood against the tide and protested against the war. We were denounced as “knee-jerk anti-imperialists”.
In those turbulent days we wore the “knee-jerk” accusation as a badge of pride. If the US military did it, we were against it. And we were right. In those years, anti-imperialism was a crucial starting point because US imperialism was the decisive element in world politics. The time for “knee-jerk anti-imperialism” has now passed. Not because US imperialism has disappeared from the Middle East, or shed its malevolent intent, but because the world has changed.
The Arab revolution has transformed everything. We now live not in a “post-9/11 world” but in a “post-Tahrir world”.
The characteristically puerile tone ought not to distract from the deplorable message itself. Intellectual infirmity is one thing, and political efficacy quite another. Many well-meaning but politically naive people will doubtless have thrown their support behind NATO-led regime change in Syria due to these ’left’ arguments, which complement the liberal-humanitarian ones propounded by the mainstream media outlets. Thus an avowedly socialist organization partakes in a US and Israeli strategic move to advance their regional position.
US foreign policy is now hostage to the pursuit of oil in a way that resembles fascist Germany during the 1930s. The keystone of Washington’s global power is military control over West Asian oil, secured by US advantages in weapons systems and logistics that grant it control of sealanes, skies and communication networks while allowing it to establish land-based Eurasian protectorates.
Over the past decade the nexus of energy industry and imperial state has grown denser both in Washington and among its allies.
Thus yesterday a press release by the Australian Mines and Metals Association welcomed Julia Gillard’s appointment of Gary Gray as federal resources and energy minister. Gray, it said, was ‘highly regarded by the resources sector.’
Gray was national secretary of the ALP during the 1990s, and later became director of corporate affairs at Woodside Petroleum.
Between jobs, in 2001 he served as a lobbyist for Woodside when ‘Australia’s biggest oil and gas company’ sought to repel a bid by Royal Dutch Shell to acquire a controlling interest in the company.
In what was described as a ‘lobbyist’s heaven’, Gray reportedly earned a seven-figure bonus after Treasurer Peter Costello and the Foreign Investment Review Board refused the takeover on ‘national interest’ grounds.
Ashton Calvert, chief of the Department of Foreign Affairs and Trade from 1998 to 2005 (during which time Canberra undertook two military interventions in East Timor) later became a director of Woodside and Rio Tinto.
In 2004 senior DFAT official Brendan Augustin, now general manager of Woodside in East Timor, was granted two years leave from the government department to work for Woodside in Mauritania. After the Mauritanian government was overthrown by a military junta in 2005, Augustin negotiated a new production-sharing agreement for the Chinguetti offshore field.
We needed someone with French-Arabic cultural skills and we thought the arrangement would also benefit DFAT because at the end of it they would get back a person with knowledge and experience of the oil sector in western Africa. Brendan was an excellent candidate. He had experience in Dili. His wife, I think is a GP from East Timor. He knew the circumstances of living in the Third World.
Just like Socialist Alternative (and its international counterparts) today, in 1999 so-called left-wing organizations like Socialist Alliance and the now-defunct DSP provided a ‘progressive’ veil for Australian military intervention in East Timor. As with contemporary support for regime change in Libya and Syria, this is not to be explained by intellectual limitations or momentary confusion of the groups in question.
As imperialism grows more rapacious and belligerent, turning desperately to delinquent methods, dirty money and dubious individuals – as a seamless web of elite criminality forms to seize the world’s resources by the throat – at just this moment its ‘human rights’ chorus grows more supplicant and beguiling, its demands grow more insistent, and it seduces one after another ‘radical’ or progressive group.
Now, your Honor, I have spoken about the war… For four long years the civilized world was engaged in killing men… It was taught in every school, aye in the Sunday schools. The little children played at war…
We read of killing one hundred thousand men in a day. We read about it and rejoiced in it – if it was the other fellows who were killed. We were fed on flesh and drank blood. Even down to the prattling babe. I need not tell your honour this, because you know; I need not tell you how many upright, honourable young boys have come into this court charged with murder, some saved and some sent to their death, boys who fought in this war and learned to place a cheap value on human life. You know it and I know it. These boys were brought up in it. The tales of death were in their homes, their playgrounds, their schools; they were in the newspapers that they read; it was a part of the common frenzy – what was a life? It was nothing. It was the least sacred thing in existence and these boys were trained to this cruelty.
It will take fifty years to wipe it out of the human heart, if ever…
Your Honor knows that in this very court crimes of violence have increased growing out of the war. Not necessarily by those who fought but by those that learned that blood was cheap, and human life was cheap, and if the State could take it lightly why not the boy?
‘During the latter half of the nineteenth century’, wrote Keynes in his Treatise on Money, ‘the influence of London on credit conditions throughout the world was so predominant that the Bank of England could almost have claimed to be the conductor of the international orchestra.’
By 1919 the baton had been wrested away, though not all of its attendant privileges were yet conceded.
War had left several of the European imperial powers as broken reeds, while the victorious Allies – Britain, France and Italy – incurred heavy debt obligations to the US Treasury.
Over the next decade, with the US Federal Reserve now holding nearly half the world’s gold reserves, the US State and Treasury departments used this privileged status as a lever to intervene in the fiscal and monetary affairs of debtor governments, most notably in Europe, and thereby to shape their foreign and security policies.
Despite the conventional picture of après-guerre ’isolationism’, it was this hypertrophy of the US state during the 1920s – extra-territorial incursions of its policymakers into other jurisdictions, including encroachments within the world’s developed European core – that provided both a staging post and testing ground for later expansionism.
Washington’s political domination of its European ‘partners’ during this earlier epoch would eventually allow imperialism, after 1945, to take the new institutional forms henceforth associated with Wilson, Franklin Roosevelt and Clinton’s ‘liberal internationalist’ foreign policy.
In 1921 the new Republican administration announced that a swiftly growing pool of US overseas assets was ‘assuming an increasing importance’ for ‘foreign political relations’.
Proclaiming official ‘alarm’, in mid-1921 President Harding, along with Treasury Secretary Mellon, Commerce Secretary Hoover and Secretary of State Hughes, met in Washington with representatives of JP Morgan & Co. and other investment houses and banks.
It was finally agreed that all proposals for new foreign loans should be submitted to the State Department for its opinion, and a public notice to that effect was issued on March 3, 1922. The State Department in turn was to submit these proposals to Commerce and Treasury. The Commerce Department gave advice to the promoters, as to security and reproductive character. The State Department advised upon political desirability and undesirability. We made no pretense of authority, but relied upon cooperative action.
In 1926, writing in Foreign Relations, John Foster Dulles would describe the ease with which cooperation ensued: ‘There is, generally speaking, a real willingness on the part of American bankers to subordinate their interest in aid of the attainment of important national objectives in the field of international relations.’
Indeed the US foreign policymaking elite – which from 1921 found permanent organization outside the State Department via the Council on Foreign Relations – was heavily populated by J.P. Morgan & Co. partners like Henry Davison, Thomas Lamont, Dwight Morrow and Russell Leffingwell (the CFR’s inaugural president was Morgan’s legal counsel John W. Davis).
(Other New York investment banks like Lazard, through figures like Frank Altschul, also contributed personnel straddling the business elite and foreign-policy formation.)
Lamont attended the Paris Peace Conference as a Treasury Department delegate; he and Morrow served as diplomatic envoys to the 1924 Conference of London, where Whitehall and Paris agreed reluctantly to the Dawes Plan.
In 1922 Lamont confided to Jack Morgan that Mellon appeared to think ‘that if we keep alive all these notes owing to us from dinky little countries all over Europe, the fact that we are holding these notes will give us a sort of stranglehold politically on some of those countries and enable us to tell them what they shall and shall not do. Herbert Hoover has the same benevolent idea.’
The [State Department’s] attitude is expressly one of watchfulness in the country’s larger interests of foreign relationships. It seeks (and has obtained) the cooperation of bankers, and its checks are applied so informally as to rely upon telephonic and verbal communication…
No matter how mild it is, any government action has unique and dominant implications. A request becomes a command when it emanates from a government department. To the bankers the request for cooperation was agreeable enough, for, apart from their desire not to impede the attainment of national objectives in the domain of foreign policy, the imprimatur (if the action of “passing” a loan application may be so called) of the State Department on any issue would connote a certain, if ambiguous, standing for the bonds to be marketed. It follows that any other course than acquiescence in the department’s wishes or acceptance of its ban would make it difficult for the issuing house to dispose of its loan to the American investor.
The pattern of formal objections and refusals of permission conformed exactly to strategic considerations.
And from 1924 the French government was unable to refinance its sovereign debt until it agreed to negotiate a repayment schedule with Washington’s World War Foreign Debt Commission (a three-year moratorium on interest had expired in October 1922).
The State Department’s refusal of permission to float a $100 million French loan through J.P. Morgan had the desired chastening effect on the Quai d’Orsay. It was soon brought to heel amid the Ruhr Crisis, rapid depreciation of the franc (one-fifth its prewar value), and the effective closure of the London capital market before Britain’s 1925 return to the gold standard.
The annual US Treasury Department report describes the calculated, sharp and precisely-timed application of pressure:
Early in 1925, after much consideration, it was decided that it was contrary to the best interests of the United States to permit foreign governments which refused to adjust or make a reasonable effort to adjust their debts to the United States to finance any portion of their requirements in this country. States, municipalities, and private enterprises within the country concerned were included in prohibition. Bankers consulting the State Department were notified that the government objected to such financing.
Henry Bérenger was sent to Washington to negotiate repayment terms with Mellon. In April 1926 he cabled back to Paris that the ‘salvation of the franc and of the credit of France’ demanded their swift ratification.
By 1924, having wrested away effective control of the Inter-Allied Reparations Commission from Paris, business ‘experts’ from Wall Street and advisors from the US departments of Treasury and State were granted the right to monitor public expenditure in several Central European states.
These included Germany (via the Dawes Plan), parts of the former Austro-Hungarian Empire and newly created (and solidly anti-Bolshevik) states carved out from the former Tsarist Empire.
Conditionality attached to these loans compelled the indebted parties to undertake various institutional changes decreed by the creditors – including establishing central banks.
Under the borrowing protocols, these central banks would be constitutionally forbidden from refinancing government debt. (Adherence to this principle would later see the Reichsbank’s Hjalmar Schacht incur the ire of Hitler for refusing to finance 1930s armaments spending. The same prohibition would be included in the 1992 Maastricht Treaty of the European Union).
The terms also obliged the borrowing governments to submit to the oversight of a League of Nations Commissioner-General, who would monitor and adjust government expenditure to enforce compliance with the repayment schedules and other binding loan conditions.
The League Commissioner-General in Budapest, described by Time magazine as ‘the financial dictator of Hungary’, was the US’s Jeremiah Smith. Earlier attempts to have Roland Boyden, the US representative on the Reparations Commission, deployed to Vienna had been scuttled by the State Department.
Meanwhile S. Parker Gilbert, Mellon’s undersecretary at the US Treasury Department and later a J.P. Morgan & Co. partner, was installed as Agent-General for German reparations under the Dawes Plan.
The Polish government, recently turned over amid hyperinflation to the military strongman Jozef Piłsudski, also avoided League of Nations financial administration. Ignoring the imprecations of the Bank of England, Warsaw preferred oversight by a Wall Street ‘money doctor’.
The US ambassador in Warsaw had greeted Piłsudski, following his 1926 coup, as ‘the only man… who can prevent a Communistic uprising.’ Meanwhile he wrote to New York Federal Reserve Bank governor Benjamin Strong: ’The net result of the revolution will be a strong and honest government which will lean towards America and American ideas rather than towards France.’
Upon consultation with Strong at the New York Fed, the new Polish government turned to the US economic advisor Edwin W. Kemmerer. Kemmerer and his ‘commission of American financial experts’ undertook a review of the Polish economy and its institutions.
Bank of England officials affected to find it ‘incredible’ that the Polish government would accept loan controls administered by ’a more or less irresponsible body of American bankers.’
The Kemmerer group’s policy advice for attaining ‘stability’ strayed far and wide: ‘As long as Poland’s international problems remain as they are … a strong army must, of course, be maintained.’
Since the war the great bulk of the foreign loans floated throughout the world have been floated directly or indirectly in the American market; and this situation is likely to continue for some years to come. A large part of the world today is zealously seeking foreign capital. The United States is the principal source of such capital. A country that appoints American financial advisers [sic] and follows their advice in reorganizing its finances, along what American investors consider to be the most successful modern lines, increases its chances of appealing to the American investor and of obtaining from him capital on favorable terms.
Kemmerer was followed in Warsaw by US Treasury official Charles S. Dewey, who became a director of the Bank of Poland.
But installation of a debt-collection agency within the domestic state, staffed by foreign agents of the imperial powers and with the authority to directly control excise or customs revenue, might also be compared to the Chinese Imperial Maritime Customs Service, the Ottoman Public Debt Administration, or Greece’s International Financial Commission.
In 1922 the US State Department sent Arthur Milspaugh to Tehran as administrator-general of Persian finances; Jeremiah Jenks had travelled to China in 1904 to collect indemnities on behalf of the imperial Powers following the Boxer Rebellion.
Similar US outposts had been installed throughout the Caribbean basin and Central America over previous decades. The most notable case came from the Dominican Republic, where the Santo Domingo Improvement Company assumed the fiscal functions of state in 1893. Backed by warships, the Roosevelt administration took over Dominican finances in 1905.
Following this precedent, and after the announcement of the so-called Roosevelt Corollary to the Monroe Doctrine, US officials and New York bankers assumed administrative control of the customs houses of Nicaragua in 1910, Honduras and Guatemala in 1911, and Haiti in 1915.
In 1918 the Austrian economist Schumpeter had observed that ‘the budget is the skeleton of the state, stripped of all misleading ideologies’.
Thus Washington’s administrative control over the fiscal resources of its debtors, European as well as Latin American and Asian, allowed it to alter the substance of the domestic politics and internal social order of those countries.
German aspirations for a continental Mitteleuropa were thus exposed as idle daydreams, as were French hopes for a Europe threaded together by the loans of Société Générale and the Parisian bourse.
In January 1923 a British delegation, led by Chancellor Stanley Baldwin and the Bank of England’s Montagu Norman, travelled to Washington to negotiate a settlement of Britain’s sovereign liabilities with Treasury Secretary Mellon and the World War Foreign Debt Commission.
A business transaction at that date between Mr. Mellon and Mr. Baldwin was in the nature of a negotiation between a weasel and its quarry. The result was a bargain which brought international debt collection into disrepute… [This] crude job jocularly called a settlement, was to have a disastrous effect upon the whole further course of negotiations on international War Debts. The United States could not easily let off other countries with more favourable terms than she had exacted from us… Equally the exorbitant figure we had promised to pay raised by so much the amount we were compelled to demand from our debtors… I cannot help saying that I think in this matter of Debt Settlements Great Britain has had very shabby treatment, and had Great Britain been the creditor… I should have been a little ashamed as a Britisher if we had treated in this fashion a country so closely linked with ours in language, history and race.
Mellon boasted of having ‘made for the United States the most favourable settlements which could be obtained short of force… The only other alternative which they might urge is that the United States goes to war to collect.’
At this time, the US, UK and Japan were in fact engaged in an arms race. Each rival power was frantically increasing the size of its naval fleet, in particular capital ships.
Hoover deplored how Allied governments were channelling national resources towards armaments instead of repaying wartime debts to the US Treasury: ‘loans that are dissipated . . . in military expenditure or in unbalanced budgets, or in the bolstering up of inflated currencies, are a double loss to the world.’
Following the 1922 announcement of the new policy on State Department oversight of external investment, Hoover explained to Benjamin Strong of the New York Federal Reserve Bank that a ‘governmental interest lies in finance which lends itself directly or indirectly to war or to the maintenance of political and economic stability’:
We are morally and selfishly interested in the economic and political recovery of all the world. America is practically the final reservoir of international capital. Unless this capital is to be employed for reproductive purposes there is little hope of economic recovery. The expenditure of American capital, whether represented by goods or gold in the maintenance of unbalanced budgets or the support of armies, is destructive use of capital. It is piling up dangers for the future of the world…
The most pertinent fact with regard to Europe today is that the whole political and economic life is enveloped in an atmosphere of war and not of peace. Restrictions on loans made from the United States to reproductive purposes will at least give the tendency to render impossible that form of statesmanship which would maintain such an atmosphere.
The Washington Naval Conference was held from November 1921.
There, the Five-Power Treaty (which included France and Italy) imposed limits on construction of new capital ships (aircraft carriers) while in the Four-Power Treaty the state parties (UK, Japan, US and France) agreed on bases and territorial possessions in the western Pacific. The Nine-Power Treaty sought to hold other powers to the terms of Washington’s Open Door Policy, forbidding dismemberment of China.
The combined outcome reduced the relative weight of British naval power, and broke the Anglo-Japanese naval alliance in the Pacific.
In 1923 British military spending fell by £50 million.
Meanwhile US-British strategic rivalry proceeded along several fronts.
An Anglo-French condominium (established through Sykes-Picot, the San Remo conference and secret protocols to the Treaty of Sèvres) had divided the oil-rich territory of the former Ottoman Empire and excluded US interests.
British armed forces had captured Mosul after signing the armistice with Turkey.
Lloyd George’s Cabinet Secretary Maurice Hankey had noted that ‘oil in the next war will occupy the place of coal in the present war, or at least a parallel place to coal’:
The only big potential supply that we can get under British control is the Persian and Mesopotamian supply. [Therefore] control over these oil supplies becomes a first-class British war aim.
‘I do not care under what system we keep the oil’, Lord Balfour had said of northern Mesopotamia and Iraqi Kurdistan in 1918. ‘But I am quite clear it is all-important for us that this oil should be available.’
The ‘system’ settled upon was a British League of Nations mandate over Mesopotamia, and the enforcement of an oil exploration and production concession granted in 1914 by the Ottoman government to the Turkish Petroleum Company (in which Anglo-Persian held a 50% stake, Royal Dutch Shell 25%, and the remaining 25% formerly held by Deutsche Bank was re-allocated after the war to the French government).
The US State Department was naturally displeased by the Anglo-French monopoly, seeking to open the region to investment by US-owned oil firms.
Secretary of State Frank Kellogg remarked to the Navy Secretary:
In view of our probable future dependence upon foreign reserves of petroleum, the importance of keeping the Government of the United States in a position consistently to support and assist American interests… will be appreciated.
Open Door principles of equal commercial opportunity were thus invoked, while Allen Dulles of the State Department’s Near Eastern Division insisted that the Turkish Petroleum Company’s concession was invalid.
In September 1919 Standard Oil of New York (Socony) sent geologists to undertake exploration in Mesopotamia:
One of them incautiously sent a letter to his wife telling her “I am going to the biggest remaining oil possibilities in the world” and “the pie is so very big that whatever had to be done should be done to gain us the rights which properly belong to American citizens.
The British Foreign Office intercepted the letter and the geologists were detained in Baghdad.
Several years of diplomatic acrimony followed between Washington and London. By October 1920 the British ambassador in Washington commented: ‘At the moment there is an hysteria of hatred against England and all her works.’
Throughout early 1921 the Foreign Office’s intransigent response to US State Department appeals continued. But in mid-1921 members of the British political elite suddenly decided to accommodate US oil interests in Iraq.
Cabinet declared that: ‘Britain cannot quarrel with the United States.’ Winston Churchill wrote to Lord Curzon that ‘so long as the Americans are excluded from participation in Iraq oil we shall never see the end of our difficulties in the Middle East… The importance of reconciling American oil interests… is so great that we may well pay a high price for it.’
In March 1922 Stanley Baldwin personally met the president of New Jersey Standard Oil, and Cabinet agreed to send John Cadman as Whitehall’s envoy to the US to arrange a deal.
Following extended negotiations, Standard Oil of New Jersey, Socony and Gulf Oil were granted an equity stake (a combined 23.75%) in the Turkish Petroleum Company (renamed the Iraq Petroleum Company).
But this obviously was a pragmatic and limited retreat by the British empire – reculer pour mieux sauter - rather than a broad assent to Open Door principles that might further crack open the British and French spheres of influence to US firms.
Plainly it was not true, as Keynes claimed, that since the war the United States could ‘influence the international situation’ to suit itself.
The British, French and other colonial empires still remained as exclusive economic zones. Meanwhile the gold-exchange standard agreed at the 1922 Genoa Conference had retained the role of the pound sterling as a reserve currency.
As suggested by Keynes’s opening quotation, this conferred privileges on the City of London and authority on the Bank of England, and partially immunized Britain from balance-of-payments problems.
Between 1870 and 1914 the international payments regime, nominally a gold standard, had effectively been a ‘sterling exchange standard’, with foreign governments holding much of their external balances in sterling reserves, and international payments settled using British state liabilities and adjustments to the London discount rate.
‘Pax Britannica’, said Polanyi, frequently ‘prevailed by the timely pull of a thread in the international monetary network’, with London sucking in capital flows through a tweak of the discount rate.
But during the 1920s London and Paris faced balance-of-payments pressures that they had avoided during the Belle Époque.
With the British and French states now struggling, by the mid-1920s, to maintain convertibility of their debt into gold at a fixed rate, their currencies lost safe-haven status and automatic acceptability as a means of payment. Unchallenged pre-eminence as world financial intermediaries and sources of credit was also lost.
The political authority of the Bank of England and Banque de France in European capitals was reduced as European borrowers, traditionally reliant on loans underwritten and floated in London by Barclays or in Paris by Société Générale, now turned increasingly to Wall Street investment houses to secure financing.
British and French involution thus heralded, for the US business and political classes, a glorious morning of national extroversion.
What hitherto had been domestic agencies like the Federal Reserve Bank of New York suddenly acquired an international policy reach, expanding their perimeter of influence to Warsaw and Budapest, as well as Tehran and Bogotá.
Across central and eastern Europe during the mid-1920s, currency stabilization, emergency loans and ‘reconstruction’ programs allowed US officials and economic advisors to take over administrative functions of debtor states (e.g. Horthy’s Hungary, Piłsudski’s Poland) that, a few years earlier, had faced the threat of socialist revolution and now were bulwarks of anti-Bolshevism.
Washington was thus able to affect the balance of forces within the propertied classes and governing elites of other countries.
US rulers could encourage the British and French states to promise to maintain convertibility of their debt into gold at a fixed rate, then watch as their governments enacted the wrenching policies needed to defend gold convertibility. (During the 1920s the Federal Reserve sterilized gold inflows, inflicting deflationary pressure on other economies.)
In 1920s Britain, as described by Keynes, deflation expressed the social supremacy of banks, financial institutions and the saving classes over the interests of borrowers – industrial and commercial firms – and their employees.
The result of credit restriction, besides stuffing money ‘into the pockets of the rentiers’, was that during Britain’s interwar years net additions to the stock of productive fixed capital (buildings, equipment, machinery) were meagre.
Since a higher level of output per unit of capital, alongside a lower share of value-added going to wages, raised profits, the domestic propertied classes were satisfied with this arrangement and a stable elite coalition persisted in Britain as it did not throughout much of Europe.
Yet the absorption of the surplus product by unproductive expenditure (dividends, interest payments, luxury consumption, etc.) prevented investment in new technology and impeded productivity growth.
Postwar technological backwardness would have lingering effects, the absence of an advanced and large-scale capital-goods sector (and the export weakness and chronic external deficits that resulted) providing an enduring economic basis for London’s ever deeper military-political submission to Washington.
The events of the 1920s would have lasting consequence for all the European powers that had been left weak by accumulated wartime liabilities and the social crises of the immediate postwar years.
In conditions that approximated Washington’s later imperial tutelage of ‘less-developed’ countries, personal connections were established and ideological affinities were cemented between a generation of US and West European financiers, businessmen, lawyers and state officials.
Individuals like John Foster Dulles, Jean Monnet, John J. McCloy and Dean Acheson – the first two of whom met at the 1919 Paris Peace Conference then worked intimately together in 1927 on a Polish stabilization loan underwritten by Bankers Trust and Chase National – would later emerge during the 1940s as eminences of the Atlantic alliance and ‘the father of Europe’ (Monnet).
It would take the Second World War, the Atlantic Charter, Lend Lease and the Bretton Woods agreements (if not the Suez Crisis) before the institutions of world capitalism were finally remade to fit the designs of the US propertied classes.
But the 1920s laid solid foundations for Roosevelt’s later renovation: establishing circuits of financial, productive and commercial capital, and nurturing the personnel (technical advisors, diplomatic officials, etc.) and the intra-elite channels that would eventually guide Bretton Woods negotiations, the Marshall Plan, NATO, the European Coal and Steel Community and the Treaty of Rome.
Here, in the years of so-called isolationism, was the seedbed for the protection racket established after 1945, and never dissolved.
In this latter development, the other advanced capitalist states of Europe and East Asia were subordinated within a US-controlled Cold War military and security ‘alliance’: a hub-and-spokes network of ‘partners’ in which Tokyo was reduced to a diplomatic underling and European strategic goals could find no independent expression, being corralled within NATO integrated command.
Thomas Pynchon’s 2006 novel Against the Day is set in a typically fantastic version of the period 1890-1915.
In his pre-release synopsis, Pynchon joked: ‘With a worldwide disaster looming just a few years ahead, it is a time of unrestrained corporate greed, false religiosity, moronic fecklessness, and evil intent in high places. No reference to the present day is intended or should be inferred.’
This Gilded Age is also (like our own) an era of intense Great Power rivalry. Each character seems to have his or her own Lewisian counterpart, a spectral double working for the enemy.
This is the case, for example, with the novel’s two geographers, British and German, modelled on the real-world figures H.J. Mackinder and Karl Haushofer:
[A] pair of rival University professors, Renfrew at Cambridge and Werfner at Göttingen, not only eminent in their academic settings but also would-be powers in the greater world.
Years before, in the wake of the Berlin Conference of 1878, their shared interest in the Eastern Question had evolved from simple bickering-at-a-distance by way of professional journals to true mutual loathing, implacable and obsessive, with a swiftness that surprised them both. Soon enough each had come to find himself regarded as a leading specialist, consulted by the Foreign Office and Intelligence Services of his respective country, not to mention others who preferred to remain unnamed. With the years their rivalry had continued to grow well beyond the Balkans, beyond the ever-shifting borders of the Ottoman Empire, to the single vast Eurasian landmass and that ongoing global engagement, with all its English, Russian, Turkish, German, Austrian, Chinese, Japanese – not to mention indigenous – components, styled by Mr. Kipling, in a simpler day, “The Great Game.”
[...Over] their cloistering walls and into the map of the megacosm, the two professors continued to launch their cadres of spellbound familiars and enslaved disciples. Some of these found employment with the Foreign Services, others in international trade or as irregular adventurers assigned temporarily to their nations’ armies and navies – all sworn to loyalties in whose service they were to pass through the greater world like spirit presences, unsensed by all but the adept.
Later one of the protagonists visits Renfrew at Cambridge, allowing the professor to rehearse his/Mackinder’s Heartland Theory. This strategic outlook was distilled by the actual Mackinder into the dictum ’who rules the World-Island commands the World’.
In Pynchon’s fictional version:
[Renfrew] motioned Lew to a smaller room, where a globe of the Earth hung gleaming, at slightly below eye-level, from a slender steel chain anchored overhead, surrounded by an ether of tobacco smoke, house-dust, ancient paper and book bindings, human breath…. Renfrew took up the orb in both hands like a brandy snifter, and rotated it with deliberation, as if weighing the argument he wished to make. Outside the windows, the luminous rain swept the grounds. “Here then – keeping the North Pole in the middle, imagining for purposes of demonstration the area roundabout to be solid, some unknown element one can not only walk on but even run heavy machinery across – Arctic ice, frozen tundra – you can see that it all makes one great mass, doesn’t it? Eurasia, Africa, America. With Inner Asia at its heart. Control Inner Asia, thefore, and you control the planet.”
“How about that other, well, actually, hemisphere?”
“Oh, this?” He flipped the globe over and gave it a contemptuous tap. “South America? Hardly more than an appendage of North America, is it? Or of the Bank of England, if you like. Australia? Kangaroos, one or two cricketers of some discernible talent, what else?” His small features quivering in the dark afternoon light.
“Werfner, damn him, keen-witted but unheimlich, is obsessed with railway lines, history emerges from geography of course, but for him the primary geography of the planet is the rails, obeying their own necessity, interconnections, places chosen and bypassed, centers and radiations therefrom, grades possible and impossible, how linked by canals, crossed by tunnels and bridges either in place or someday to be, capital made material – and flows of power as well, expressed, for example, in massive troop movements, now and in the futurity…”
The Chums of Chance, meanwhile, are a group of young balloonists. They are employed or contracted by a shady organization that accepts missions from various governments and private detective agencies.
The Chums are commanded to set out for Bukhara, on the Silk Road. Ostensibly in search of Shambhala, the balloonists learn that their true mission has to do with Great-Power rivalry between Britain, Russia, Japan, China and Germany.
The historical reference here is to covert expeditions, across central Asia and into northwest China, made by imperial envoys such as the Tsar’s military-intelligence offiicer Mannerheim (who set off in 1906).
Soon the Chums are visited by a mysterious figure from the future:
“We are here among you as seekers of refuge from our present – your future – a time of worldwide famine, exhausted fuel supplies, terminal poverty – the end of the capitalistic experiment. Once we came to understand the simple thermodynamic truth that Earth’s resources are limited, in fact soon to run out, the whole capitalist illusion fell to pieces. Those of us who spoke this truth aloud were denounced as heretics, as enemies of the prevailing economic faith. Like religious Dissenters of an earlier day, we were forced to migrate… We might ask you to accept a commission from us now and then – though, regrettably, with no more detailed explanation than you currently receive from your own Hierarchy.”
[...]
“So this is supposed to be like Squanto and the Pilgrims,” Chick reported to the plenary session called hurriedly next morning. “We help them through their first winter, sort of thing.”
“And suppose it isn’t like that,” said Randolph. “Suppose they’re not pilgrims but raiders, and there’s some particular resource here, that they’ve run out of and want to seize from us, and take back with them?”
Confused but unwilling to turn back, the Chums see prophetic visions of the terrible events due to take place, soon, in the grasslands, deserts and tundra of central Eurasia:
“Whatever is to happen,” [the visionary] reported upon his return, “will begin out here, with an engagement of cavalry on a scale no one living has ever seen, and perhaps no one dead either, an inundation of horse, spanning these horizons, their flanks struck an unearthly green, stormlit, relentless, undwindling, arisen boiling from the very substance of desert and steppe. And all that incarnation and slaughter will transpire in silence, all across this great planetary killing-floor, absorbing wind, stell, hooves upon and against earth, massed clamor of horses, cries of men. Millions of souls will arrive and depart. Perhaps news of it will take years to reach anyone who might understand what it meant…”
…”Who are they?”
“German or Austrian, would be likely, though one mustn’t rule out the Standard Oil… Make your way to the surface, get back to England at all cost. They must be told in Whitehall that the balloon is up… Go! find someone in the F.O. intelligence section. It is our only hope!”
[...]
Meanwhile, for days, weeks in some places, the battles of the Taklamakan War were raging. The earth trembled. Now and then a subdesertine craft would suddenly break the surface with no warning, damaged mortally, its crew dead or dying… petroleum deposits far underground were attacked, lakes of the stuff would appear overnight and great pillars of fire would ascend to the sky. From Kashgar to Urumchi, the bazaars were full of weapons, breathing units, ship fittings, hardware nobody could identify… which all the Powers had deployed. These now fell into the hands of goat-herders, falconers, shamans, to be taken out into the emptiness, disassembled, studied, converted to uses religious and practical, and eventually to change the history of the World-Island beyond even the unsound projections of those Powers who imagined themselves somehow, at this late date, still competing for it.
Here – with the description of an apocalyptic military engagement in Central Asian Turkestan, as the contending imperial powers nurture and suppress various local ethnic separatists – the book’s reference to contemporary realities is obvious.
China’s northwestern frontier (bordering Afghanistan, Pakistan, Kyrgyzstan, Kazakhstan and Tajikistan) is a gateway for locally-owned firms (and a bridgehead for Beijing’s armed forces) to the energy resources of the Caspian basin and southwest Asia.
On the far side of the Central Asian republics, along China’s western flank, sit deepwater oil and gas fields off Azerbaijan and Turkmenistan, and the giant Tengiz, Karachaganak and Kashagan fields in Kazakhstan.
Slightly to the south is the greatest prize of all: the vast bounty of the Persian Gulf, along with access to Indian Ocean ports like Karachi.
From the 1990s an increasingly dense supply network of railways, roads and pipelines has been laced across the central Eurasian steppe. As ever, commercial trade routes do double duty as military lines of communication. They are available, if needed, to provide logistic support linking combat units with bases of supply.
Xinjiang itself contains uranium and coal reserves, and its Tarim Basin apparently has non-trivial hydrocarbon deposits.
Since the 1960s Lop Nur in Xinjiang has been the site of a nuclear weapons test range, missile storage facility, production complex and an air base with launch facility.
As discussed on this blog many times before, one key plank of US grand strategy, over the past few decades, has been to establish client governments and military protectorates in parts of the world where large deposits of energy and raw materials are found.
Washington has pursued this agenda through various violent means: ‘preventive’ regime change, humanitarian intervention and so forth.
The US state leadership no longer enjoys the clear-cut strategic primacy granted to it, as in decades past, by the competitive ascendancy of US-owned firms; nor is it able to prevent rivals with strong balance-of-payments positions from gradually gaining international influence through outward flows of investment and cheap loans. Therefore it has been forced to rely on the one dimension in which its supremacy remains unchallenged: military power, in which the international gradient is steep.
But, as well as planting garrisons near the world’s largest oilfields themselves (in southwest Asia, the Caucasus and Caspian basin in Central Asia), Washington has also sought to achieve military control over the energy supply corridors and transit routes that link them to China, Russia, Europe, Japan and India.
This ability to interrupt the flow of oil and gas, and thus to cut off the supply of fuel available to competitive rivals for use in industrial activity and for military purposes, is of the utmost strategic worth.
As Churchill, Hitler and Stalin insisted to their generals (who listened with varying degrees of buy-in and obtuseness) sequestering and controlling energy supplies is decisive during war. The ability to disrupt supplies is also useful during peacetime as a means of gaining leverage during commercial and diplomatic negotiations. (Among other things, it now sustains demand for US Treasury securities and thus underpins the liquidity of the world’s deepest financial markets.)
Since 1945, Washington’s naval pre-eminence has granted it control of the world’s sealanes and made the US state the ultimate guarantor of global maritime trade (and sea lines of communication). If necessary, these shipping channels may be closed and the maritime commerce (including energy supplies) of rivals interdicted.
But the ability to deny its rivals’ land-based transit (and military logistics) has been another matter, one inherently more difficult. Advancing its position there, at the centre of the Eurasian landmass, has been the chief goal of US militarism since the end of the Cold War.
Thus the oft-stated focus from US policy strategists on bringing Poland and Ukraine into NATO. During the 1990s, Zbigniew Brzezinski, RAND’s Stephen Larrabee and Sherman Garnett from the Carnegie Endowment stressed that Ukraine was the ‘keystone in the arch’ of Washington’s Drang nach Osten.
NATO’s eastward expansion would not only create a cordon sanitaire between Germany and Russia, and allow US missiles to be placed up against Russia’s western border. It would also secure Washington’s military-strategic position in the Black Sea (Moscow retains a naval base in Sevastopol). And with this the US ruling elite would completely dominate the Caucasus and energy-rich Caspian basin.
Meanwhile, from the south, Washington has sought strategic control over the Transcaucasus transport corridor for oil and gas products (which the EU-funded TRACECA styles as ‘the Silk Road of the 21st century’). In a bid to destroy Moscow’s influence over this southern export route, the US State Department has struck security ‘partnerships’ and helped to foment a sequence of ‘revolutions’ in the GUAM countries (Georgia, Ukraine, Azerbaijan and Moldova). The Kremlin has attempted to stall Washington’s advance by encouraging separatism in Moldova (Transnistria), Georgia (Abkhazia and South Ossetia) and Azerbaijan (Karabakh).
Most obviously, the invasion and decade-long military occupation of Afghanistan has created a Central Asian buffer that separates the Persian Gulf from the US’s competitive rivals.
The overall result fulfils what Brzezinski in The Grand Chessboard (1997) presented as the basic desiderata of Washington’s Eurasian geostrategy:
To put it in a terminology that hearkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.
This means (1) preventing the European ‘vassal’ states from developing any autonomous capacity, outside the NATO security umbrella, for projecting military-strategic power (and similarly for Japan); and (2) obstructing those potential peer competitors that are not integrated into Washington’s set of hub-and-spokes military ‘partnerships’, namely Russia and China, from striking alliances with each other and with energy producers and regional powers such as Iran.
(An identical outlook, from a different wing of Washington’s policymaking elite, was laid out in the Pentagon’s 1992 Defense Planning Guidance. This document decreed that post-Cold War ‘strategy must now refocus on precluding the emergence of any potential future global competitor’ and ‘preventing the domination of key regions by a hostile power.)
To help resist this agenda, Moscow and Beijing have formed the Shanghai Cooperation Organization with Central Asian republics. The two imperial powers have managed to build a few bilateral and regional instances of diplomatic, commercial and military cooperation. But within the ‘strategic partnership’ the conflicting interests of the parties are insurmountable. And even the slightest move towards a regional military-political bloc is enough to induce hysteria in US security-policy circles. In 2010 an alarmist article written by Robert Kaplan for the CFR magazine Foreign Affairs featured the following map. It purported to display the geographic scope of Beijing’s strategic influence.
The tendencies described above – and above all the belligerence of the US state elite – presage another terrible global conflagration between imperial rivals.
I therefore want to conclude this post by returning to the period written about in Pynchon’s long novel.
I wrote an earlier post here regarding the lead-up to the First World War. It described the decades of self-delusion and obliviousness before general war arrived abruptly, like ‘a clap of thunder in the summer sky’. Yet the plot of Against the Day, over the course of 1000 pages, reveals the slow accretion of countless monitory signs, clear evidence pointing to the coming catastrophe. It is not merely in fiction or in retrospect that these clues appear: contemporary observers, properly equipped, were indeed alert to a looming showdown between the contending powers.
What then accounted for the mass confusion and unpreparedness that was revealed when war eventually arrived?
Next month marks the 100th anniversary of the Second International’s Basel Congress. This extraordinary congress was called following the outbreak of hostilities on the Balkan peninsula. The manifesto agreed upon by social-democratic delegates in Basel declared the ‘complete unanimity of the Socialist parties and of the trade unions of all countries in the war against war’:
[Each] section of the international has mobilized the public opinion of its nation against all bellicose desires. Thus there resulted the grandiose cooperation of the workers of all countries which has already contributed a great deal toward saving the threatened peace of the world. The fear of the ruling class of a proletarian revolution as a result of a world war has proved to be an essential guarantee of peace…
The Congress records that the entire Socialist International is unanimous upon these principles of foreign policy. It calls upon the workers of all countries to oppose the power of the international solidarity of the proletariat to capitalist imperialism… Let the governments remember that with the present condition of Europe and the mood of the working class, they cannot unleash a war without danger to themselves… It would be insanity for the governments not to realize that the very idea of the monstrosity of a world war would inevitably call forth the indignation and the revolt of the working class…
The Congress therefore appeals to you, proletarians and Socialists of all countries, to make your voices heard in this decisive hour! Proclaim your will in every form and in all places; raise your protest in the parliaments with all your force; unite in great mass demonstrations; use every means that the organization and the strength of the proletariat place at your disposal! See to it that the governments are constantly kept aware of the vigilance and passionate will for peace on the part of the proletariat!
Mainstream historians have compared this resolution from November 1912 to the social democrats’ spectacular embrace of the national cause in August 1914. In these scholarly examinations, the later treachery is presented as an abrupt reversal of the earlier position. But these events, and the history of subsequent antiwar and ‘pacifist’ movements, hold another great lesson for today:
It is not possible to prevent war by ‘mobilizing the public opinion’ of a nation against the ‘bellicose desires’ of its leaders. Neither the strengthening of trade unions, nor the placement of social-democratic representatives in parliament, nor ‘great mass demonstrations’, not the raising of protests nor loud proclamations of the common people’s desire for peace are adequate. None of these contributes a ‘great deal toward saving the threatened peace of the world’, nor provides an ‘essential guarantee of peace.’ The ruling classes’ fear of ‘the indignation and the revolt of the working class’ will not stay the hand of capitalist imperialism – only the latter’s complete annulment will do.
Though it may be ‘insanity not to realize’ that ‘they cannot unleash a war without danger to themselves’, the governing elite of the various rival states cannot be swayed by pleas for them to see reason, any more than than they can be persuaded by appeals to their better nature.
By allowing the working population of Europe to hope for ‘the possibility of normal progress’, the social-democratic parties and the trade unions misled their class constituency, and gave advance warning of their eventual opportunism.
In 1911 Rosa Luxemburg sought to dispel the mirage of what she called ‘peace utopias’:
[The] friends of peace in bourgeois circles believe that world peace and disarmament can be realised within the frame-work of the present social order, whereas we, who base ourselves on the materialistic conception of history and on scientific socialism, are convinced that militarism can only be abolished from the world with the destruction of the capitalist class state.
[...]
To explain this to the masses, ruthlessly to scatter all illusions with regard to attempts made at peace on the part of the bourgeoisie and to declare the proletarian revolution as the first and only step toward world peace – that is the task of the Social Democrats with regard to all disarmament trickeries, whether they are invented in Petersburg, London or Berlin.
In other words, the consolations of parliamentary reformism, activism and ‘protest politics’ (as described in the previous post) are dangerous illusions. They themselves threaten ‘the annihilation of the flowers of all peoples’.
Next month will mark 20 years since Russia’s capitalist restoration culminated with the ‘voucher privatization’ scheme of Yeltsin and Chubais.
Under this program of fire sales, the price of state-owned assets was fixed (amid hyperinflation) at their book value of July 1992.
Then managers and workers of an enterprise were given preferential options to buy 51 percent of the firm’s stock (with the price of firm equity set at 170% of the total book value). Twenty-nine percent of the remaining stock was available for purchase by the general public through vouchers distributed to them at a nominal price (25 rubles or about 10 US cents).
Predictably, amid the social misery caused by withdrawal of state services, rising food prices and unemployment (millions of employees were laid off by privatized firms), these tradeable vouchers were sold off, quickly and cheaply, by members of a population hungry for cash.
The buyers were enterprise managers and, from outside, wealthy institutional investors. Thanks to their liquidity and privileged social status, these parties accumulated large blocks of vouchers and converted them into ownership of newly private firms.
Thus the so-called ‘Red Directors’, the former managers of state-owned firms who during the 1980s under Gorbachev had acquired enterprise autonomy and limited ‘control rights’, now acquired full property rights.
By June 1994 two-thirds of Russian industrial employment was in privately-owned firms.
Writing later, Harvard’s Andrei Shleifer and Chicago’s Robert Vishny, who together with Harvard economist Jeffrey Sachs were policy advisors to Chubais, noted with professional ingenuousness:
One of the most interesting aspects of voucher auctions is the prices at which assets sell… [Results of privatization up to June 1993 put] the total value of the Russian industry at about $5 billion. It is possible to make these calculations differently and to come up with numbers as high as $10 billion. The point, however, is inescapable: the entire Russian industrial complex is valued in voucher auctions at something like the value of a large Fortune 500 company…
One way to calibrate how low the prices of manufacturing companies are is to note that U.S. manufacturing companies have market value of about $100,000 per employee. Russian manufacturing companies, in contrast, have market value of about $100 per employee – a 1,000-fold difference!
Throughout the 1990s, observers from the World Bank, Harvard University, RAND Corporation, the US Council on Foreign Relations and the Brookings Institute attributed the ‘challenges’ faced by post-Soviet Russia to the country’s lack of ‘social capital’ and ‘good governance’.
Russia, it was said, was an ‘anti-modern society.’ Its people had unfortunate behavioural proclivities that made them unlike the populations of advanced capitalist countries: they trafficked their women for sex, abused alcohol and other drugs, refused to procreate, lacked ‘trust networks’, didn’t value hard work, were prone to interpersonal violence, were corrupt and criminal.
This is the familiar métier of the ‘development’ report. The calamity of post-Soviet Russia is registered more vividly (and without the State Department songsheet) in its chilling headline figures.
Since 1991, and following the Stalinist bureaucracy’s restoration of capitalist property relations, there have been several million excess deaths. The life expectancy of Russia’s population fell by three years in the course of three years, and by five years in five, from 1992; it dived sharply again from 1998. Premature mortality disproportionately struck working-age men (aged 15-64). Among women, the total fertility rate in 1999 was slightly more than half its level in 1987; Russia’s rate of induced abortion remains by far the world’s highest.
Altogether, since 1991 the country’s resident population has contracted by seven million.
Far more than in other developed countries, death in Russia has arrived from medically treatable conditions developed by young adults and middle-aged people (e.g. stroke, and heart disease caused by hypertension). Tuberculosis and pneumonia rates more than doubled in the course of five years from 1991; death from diabetes rose steeply due to a fall-off in affordable insulin supplies and difficulty in receiving dialysis.
External causes of death rose dramatically (mostly for males aged 20-50), due seemingly to chronic stress and alcohol consumption. The death rate from suicide increased by 50% in the two years from 1991; death by homicide and accidental poisoning more than doubled over the same period; trauma from traffic accidents and violence showed a substantial rise.
Mortality and indices of morbidity spiked again from the crisis year of 1998.
The scale of post-Soviet Russia’s social, economic and demographic collapse has no precedent in the peacetime history of any industrialized country. But over the past half-millennium, as I described in a previous post, devastation of this sort has been seen in many noncapitalist societies following conquest or settlement by states bringing with them the novel institutions of capitalism.
The sharp fall in the birth rate, the rise in alcoholism, prostitution and interpersonal violence are behavioural features exhibited time and again by populations defeated by imperialism, and constrained (by the coercive power of the victors) to adopt new cultures, property rights and other forms of economic governance, child-rearing practices, schooling and constitutions.
So the diagnosis made of the former Soviet Union’s defeated people - shiftless, criminal, sterile, with addictive tendencies – has been heard before. Familiar too are the contemptuous depictions of Russians by filmmakers and novelists, the exasperated reports by social scientists returned from ‘capacity-building’ missions, the condescending journalistic well-wishing and subsequent expressions of disappointment at being ‘let down’, the racist dinner-party humour indulged in even by liberal sophisticates, the excursions of charitable organizations, development agencies and missionaries, and the solemn prophecies of demographic involution.
Notoriously, the pastoralist Herero of South-West Africa were said to be committing ‘race suicide’ under Wilhelmine rule. And in the first 30 years of the twentieth century, across equatorial middle Africa from Leopold’s Congo through British Uganda to Tanganyika, fertility rates were chronically below reproduction level. This prompted European colonists to fret about ‘dying races’, since they sought a guaranteed workforce for rubber and cotton plantations while maintaining a taxable population of subsistence farmers.
Examples from Australia, North America, Mesoamerica and South America need no description.
There are other less familiar cases. The Hawaiian population declined catastrophically throughout the 1800s: successive epidemics lowered fertility and killed thousands of people, as the monarch established alienable title to land and assigned it to prominent locals. Meanwhile norms governing religion, sex and the education of children were displaced, with conversion encouraged by Christian missionaries.
Less familiar still is the terrible fate of nomadic pastoralists from the grasslands and deserts of central Eurasia – crushed, during the seventeenth and eighteenth centuries, beneath the onrushing wheels of the Qing and Muscovite agrarian empires. Local herding societies (above all the Zunghar of Mongolia and Xinjiang) were eliminated by smallpox and military defeat. The depopulated pastures were soon filled by immigrant cultivators assigned private title to land, protected by military garrisons and provided with irrigation and other infrastructure for tilling.
These examples vary in the type of societies that were supplanted and in the type later constructed. But in each case a similar genocidal logic applied.
The introduction of exclusive, possession-based property rights meant that, suddenly, personal entitlements with regard to worldly things (e.g. natural resources) – including the power to use such material resources or facilities to satisfy basic needs, undertake sustenance-drawing activities or secure personal livelihood – were conferred only by virtue of owning the resource, or from the consent or authority granted by owners. Unless an individual held personal property rights, was a joint owner through membership of a group or entity that held communal property rights, or received permission from such an owner, he had no claim at all over the owned resources: they were unavailable to him.
Abruptly deprived (usually through violence or its threat) of familiar sources of livelihoods, the vast majority of people were thus compelled on pain of starvation to hire out their capacity to work in ramshackle new labour markets. Meanwhile authorities attempted, in the manner of war victors, to eradicate the behavioural patterns, basic social units, forms of cultural transmission and child-rearing practices of the defeated societies, and to replace them with norms and preferences more suited to the new market-based economy. As even small perturbations may do, these vast social experiments tended to produce imbalanced sex ratios: changed sexual practices then encouraged the spread of venereal diseases, which led to a sharp and prolonged fall in fertility. Such catastrophic social disruption then produced the sort of demoralization and dysfunctional behaviour that nowadays is attributed to poor ‘trust networks’: alcoholism, prostitution and high rates of interpersonal violence.
In the case of post-Soviet Russia, some clear causes of the high death rates stand out:
Withdrawal of timely, effective, free public healthcare with universal population coverage (in today’s Russia, patients’ private out-of-pocket payments at the point of delivery now account for 25% of service-provider funding);
Worsened nutritional delivery (more expensive and less fruit, vegetables, meat) and poor dietary habits due likely to removal of food subsidies and failed retirement provision.
The reinstatement of capitalism also brought a collapse of Russian agriculture, with an end to state provision of credit, seed, fertilizer and machinery. Tractors, combine harvesters and irrigation equipment depreciated beyond repair. Livestock inventories fell by a half within ten years; land devoted to grain production fell by one quarter over the same period; and the application of fertilizer per hectare fell by nearly half in the three years from 1990, and by 80 per cent by 1998. Yields (particular during winter) dropped accordingly.
The magnitude of this collapse can be seen in the following time series of global consumption of synthetic fertilizer, the basis of agriculture since the Second World War and Green Revolution. The Soviet Union was the world’s largest single user of this product.
The Volga watershed was one of the largest grain production regions in the world.
Societies whose continued existence impedes the outward growth of capitalism have, naturally enough, historically evoked an implacable hostility among the agents of imperialism. The more stubborn the resistance, the more hysterical such (entirely functional) attitudes grow. Eventually they may provoke the urge to exact vengeance through annihilation, to watch whole populations roast, in agony, on the pyre, as a way to teach holdouts a collective lesson.
In Russia’s case, racist contempt had been mixed, during 80 years in the combustion chamber of anti-communist ideology, with glowering elite hostility towards the property relations that had been established by the Bolshevik revolution and that later were maintained precariously under the rule of the bureaucratic caste. Thus Churchill’s claim that the contest between Bolshevism and Zionism was a ‘struggle for the soul of the Jewish people’ (and his earlier promise to ‘strangle the Bolshevik baby in its cradle’), Hitler’s Vernichtungskrieg against ‘Judeobolshevism’, and Wittfogel’s dismissal of the bureaucratic regime as another ‘Asiatic’ hydraulic civilization.
Broadly comparable historical circumstances had earlier produced similar features. In the cases described above (South-West Africa, etc.), imperialist rapine was helped along by a supercilious disdain for low-yield ‘garden’ cultivators (horticulturalists), livestock herders and foraging peoples. These societies usually kept their hunting, pastoral or cultivated land, waters, etc. as open-access resources, common property or small family plots. The absence in these benighted realms of exclusive property rights, and the low productivity of agrarian activities, allowed them to be categorized anthropologically as ‘savage’ or ‘barbaric.’ (Compare this contempt to the fraternal recognition with which the likes of Cortés greeted the high-yield agrarian empires of Aztec Mesoamerica and Andean South America).
For two whole days, earlier this week, a storm of cheers and hurrahs rang out across the liberal commentariat – your Brad DeLong-types along with columnists from TheAtlanticand The Nation - for what was described as the persuasive force and uncommon seriousness of Bill Clinton’s speech at the Democratic National Convention in Charlotte.
Liberal writers have occasionally turned a critical eye on the style of such televised events, with their gaudy solemnity and razzmatazz religiosity. Generally, however, the likes of Eliot Weinberger reserve their scorn for one wing of the US state leadership. Few professional rewards are sacrificed nor any social standing risked with such efforts. Rare is the non-radical who will portray with real venom an entire assembly of establishment creeps and crooks, as did Philip Roth in his description of Richard Nixon’s 1994 funeral – at which Clinton delivered one eulogy:
[The] whole funeral of our thirty-seventh president was barely endurable. The Marine Band and Chorus performing all the songs designed to shut down people’s thinking and produce a trance state: ‘Hail to the Chief’, ‘America’, ‘You’re a Grand Old Flag’, ‘The Battle Hymn of the Republic’, and, to be sure, that most rousing of all those drugs that make everybody momentarily forget everything, the national narcotic, ‘The Star-Spangled Banner’. Nothing like the elevating remarks of Billy Graham, a flag-draped casket, and a team of interracial pallbearing servicemen – and the whole thing topped off by ‘The Star-Spangled Banner’, followed hard on by a twenty-one gun salute and ‘Taps’ – to induce catatonia in the multitude.
Then the realists take command, the connoisseurs of deal making and deal breaking, masters of the most shameless ways of undoing an opponent, those for whom moral concerns must always come last, uttering all the well-known, sham-ridden cant about everything but the dead man’s real passions. Clinton exalting Nixon for his ‘remarkable journey’ and, under the spell of his own sincerity, expressing hushed gratitude for all the ‘wise counsel’ Nixon had given him. Governor Pete Wilson assuring everyone that when most people thing of Richard Nixon, they think of his ‘towering intellect’. Dole and his flood of lachrymose clichés. ‘Doctor’ Kissinger, high-minded, profound, speaking in his most puffed-up unegoistical mode – and with all the cold authority of that voice dipped in sludge – quotes no less a tribute than Hamlet’s for his murdered father to describe ‘our gallant friend’. ‘He was a man, take him for all and all, I shall not look upon his like again.’ Literature is not a primary reality but a kind of expensive upholstery to a sage himself so plumply upholstered, and so he has no idea of the equivocating context in which Hamlet speaks of the unequalled king. But then who, sitting there under tremendous pressure of sustaining a straight face while watching the enactment of the Final Cover-up, is going to catch the court Jew in a cultural gaffe when he invokes an inappropriate masterpiece? Who is there to advise him that it’s not Hamlet on his father he ought to be quoting but Hamlet on his uncle, Claudius, Hamlet on the conduct of the new king, his father’s usurping murderer? Who there at Yorda Linda dares to call out, ‘Hey, Doctor – quote this: ‘Foul deeds will rise / Though all the earth o’erwhelm them, to men’s eyes’?
Who? Gerald Ford? Gerald Ford. I don’t ever remember seeing Gerald Ford looking so focused before, so charged with intelligence as he clearly was on that hallowed ground. Ronald Reagan snapping the uniformed honour guard his famous salute, that salute of his that was always half meshugeh. Bob Hope seated next to James Baker. The Iran-Contra arms dealer Adnan Khashoggi seated next to Donald Nixon. The burglar G. Gordon Liddy there with his arrogant shaved head. The most disgraced of vice presidents, Spiro Agnew, there with his conscienceless Mob face. The most winning of vice presidents, sparkly Dan Quayle, looking as lucid as a button. The heroic effort made by that poor fellow: always staging intelligence and always failing. All of them mourning platitudinously together in the California sunshine and the lovely breeze: the indicted and the unindicted, the convicted and unconvicted, and his towering intellect at last at rest in a star-spangled coffin, no longer grappling and questing for no-holds-barred power…
The style of these official events has been honed to even more ghastly effect over the subsequent two decades, as the US president has actually acquired no-holds-barred power.
Since Washington made its strategic turn towards unrestrained belligerence to counteract the emergence of competitive rivals - and since the state’s executive branch arrogated for itself the right to conduct ‘military and national security operations’, such as killing people anywhere any time, without having to grant due process or ‘publicly disclose the criteria which guide its actions’ – the praetorian flavour to proceedings, the loving attention devoted to the murderous deeds of the ‘finest warriors in the history of the world’, has become more pronounced. So has the vicious gangsterism of the speakers’ language (see John Kerry, Joe Biden, etc.)
Witness the vice president’s extraordinary performance.
Faced with this, it seems reasonable to quote Walter Benjamin’s 1936 remarks on the aesthetics of imperialist war: on the historical emergence of a social order that allows ‘war to supply artistic gratification’, and encourages the population to ‘experience its own destruction as an aesthetic pleasure of the first order.’
Elsewhere I’ve described the brutalizing effect on audiences of many contemporary mass-entertainment products (TV, films, video games), and the functional purpose such cultural decay serves.
In Nixon’s day, US society had room for professionally-successful ‘progressive’ antiwar intellectuals, producing material like Roth’s Our Gang. But our own time is rather different. Special historical circumstances are needed to make possible something like the following scene from the TV series The Newsroom, created by the Democrat servant Aaron Sorkin.
The Australian historian Ann Curthoys has often spoken of her time in the Eureka Youth League, Sydney University Labor Club, Vietnam Action Campaign, Student Action for Aborigines and Women’s Liberation. This impeccably Stalinist upbringing acquainted her with fellow CPA scions like Brian Aarons and Patricia Healy, left-wing activists like Bob Gould and the Percy brothers, as well as future establishment figures like Jim Spigelman and Charles Perkins.
Curthoys later described these years as ‘a middle-class baby-boom generation experience, not uncommon, but not typical either.’ She drifted into the New Left around the time the CPA, under the leadership of Laurie Aarons, turned Eurocommunist.
Meanwhile her parents were among those hardcore Moscow loyalists who split to form the Socialist Party of Australia. In 1990 Barbara Curthoys was granted access to the Comintern archive in Moscow; she later published an article describing how the parents of historian Lyndall Ryan were expelled as right deviationists from the CPA in 1929.
Strangely enough, during the early 1970s Ann Curthoys shared a Sydney residence with Lyndall Ryan while each undertook postgraduate studies at Macquarie University. They helped to co-found the Women’s Liberation periodicals MeJane and Refractory Girl. Joyce Stevens, a prominent member of the CPA until its 1991 dissolution, also sat on the editorial collective of MeJane.
By 1988, having re-examined the ‘shibboleths of the left’ in an academic discussion group, Curthoys declared herself persuaded by Alec Nove’s vision of market socialism. The future, she now believed, lay with ‘competition and markets.’
She wasn’t a fulsome and direct participant, as were others like Stuart Macintyre. But, as I’ll explain, her scholarly contributions to the field of labour history – most importantly her work with Andrew Markus on working-class racism and anti-immigrant movements during the nineteenth century – did provide useful ideological tools for that elite policy program.
The latter was presented to the population as ‘a root-and-branch re-examination of many long-standing features of our national life’, ‘dismantling some of our most cherished orthodoxies… deeply embedded in the very psyche of the nation.’ The state leadership openly sought to conscript historians to its project, which it described as a ‘process of deepening our sense of national identity, national responsibility and national maturity. We have altered the focus on our past. With that new focus on the past, has come a reassessment of the past’ (Hawke).
This modification to official nationalism had mundane objectives.
First there was the ‘competitiveness agenda’, which, on the pretext of repairing the current-account balance, took an axe to real wages, working conditions and the social position of employees (while a ‘war on inflation’ subordinated asset-poor borrowers to wealthy creditors).
Then there was the ‘process of national reinvigoration and reinvention’ (Keating) demanded by Canberra’s regional policy. The latter, pursued through ‘multilateral’ forums, in fact aimed to prevent the economic and political integration of East and Southeast Asia independently of Washington’s hub-and-spokes framework of military and diplomatic alliances. The growth of external investment by Japanese firms, alongside the re-entry of China to the world market and the industrial development of various SE Asian countries, raised the possibility that a regional bloc could be formed which could conceivably produce a military-political competitor to Washington – thus threatening the position of Canberra and of Australian-owned firms in the region. Hawke linked so-called ’regional engagement’ to ‘changes which have occurred in our attitudes to our history, our culture, and our relations with the rest of the world, especially with the peoples of our own region… [which] may be said to have begun with the fall of Singapore in 1942.’
Finally there was the attempt to channel the frustration and disappointment of Aboriginal and Torres Strait Islander people into a political response based on ethnic identity, by granting administrative powers, limited property rights and other privileges to an Indigenous elite. This project involved bringing Indigenous people into ‘the Australian legend’ (Keating).
The old labour radical nationalism (associated with one-time CPA members and historians Russel Ward, Robin Gollan, Ian Turner and Eric Fry) was inadequate to this new age.
In the hands of Curthoys and others, this old labour history, and the nationalism it supported, received a postmodern makeover. The superseded account, Curthoys explained, ‘has suffered many theoretical blows, has met with other desires, multicultural, postcolonial, feminist. It has been seen as inappropriate to postwar, culturally diverse, urban Australia, expressing the aspirations of a British Australia that no longer exists.’ The retrofitted model would be attentive, in the words of Curthoys and John Docker, to ‘heterogeneity, difference, contradictoriness, and indeterminacy’.
Journals like Labour History therefore applied new methodological and interpretive strictures to contributions. Property relations should be denied any categorical primacy or priority in historical explanation. Social class would instead hold the same conceptual status as various ascriptive traits (e.g. race, gender, ethnicity, generational cohort and religion). Class, like these personal attributes, would be seen primarily as a badge of identity or a label of group membership. This involved various lamentable concessions to intellectual fashion, as can be seen from the following embarrassing passage. It is by Curthoys, from a 1991 article in the journal Hecate, in which she described the treatment by historians of sex, ethnicity and class:
Many have noticed the similarity of chaos theory to poststructuralist theory in the humanities, in the questioning of older theories of order… [The] similarity between chaos theory in the sciences and recent theory in the humanities is intriguing… Having read my way through [a book by the journalist James Gleick] and learnt something about fractals and strange attractors and bifurcations and iteration and nonlinear equations and the like, I started to think about possible specific connections between feminism and chaos theory… Feminist theory has long had its own “three body problem.” Our three bodies are the concepts of sex (or gender), ethnicity (or race), and class.
In the midst of Australia’s so-called History Wars, Curthoys spoke of the need to ‘develop the kind of pluralist inclusive account of the past that might form the basis for a coherent national community.’ This might have been said by Hawke or Keating, or by Manning Clark, Brian Fitzpatrick, Stuart Macintyre or Don Watson. Indeed, her stated objective was shared by all those ‘left’ historians who, during the 1980s and 1990s, combined their avowedly progressive politics with a taste for sitting on committees and advisory panels appointed by ALP governments, tasked with investigating civics education or a ‘re-founded’ national identity. For Curthoys, the purpose of the historian’s craft was still to support nationalism, now re-cast in the language of identity politics:
At the forefront, then, of the construction of national identity in the Australian context – as, perhaps, everywhere else – is the question of history. As a cultural practice, history is tied to questions of belonging, kinship, betrayal, inheritance, attachment, fear, and danger. Representations of history are, we know, constructions of social identity… The insight that all social groups, whether defined by gender, ethnicity, nationality, or politics, construct an account of the past that works to authorise their identity as a group is as relevant and lively in Australia as elsewhere.
It seems likely that such views were prepared by Curthoys’s political upbringing. As part of her youthful education, she would have been exposed to Austro-Marxist theories on the ‘national question’, as well as those of her own party, and subsequently to those varieties of Third-Worldism prevalent in her later radical milieu. It’s not generally appreciated by people unfamiliar with the Marxist tradition how many of the issues and topics that preoccupied late-twentieth century thinkers (e.g. national identity, unity and diversity within a mass movement, etc.) were originally debated, usually with far greater depth and seriousness, during the first quarter of the twentieth century, by adherents, interlocutors and opponents of classical Marxism. The idea of the nation as a ‘narrative’ that ‘works to authorise their identity as a group’ – favoured by post-structuralists, post-colonial theorists and ethno-symbolists, as well as by people like Benedict Anderson and the New Left Review crowd – emerged from this background and contained unmistakeable echoes of it. The path from Stalinist nationalism to postmodernist nationalism is short, a fact which must be recalled when considering the intellectual origins and political implications of Curthoys’s ‘pluralist inclusive account of the past that might form the basis for a coherent national community.’
What then was Curthoys’s contribution to this new liberal-progressive Australian nationalism?
Much of her early scholarly research concerned labour history, and examined the place within it of racism, sexism and colonialism. In her doctoral thesis, Curthoys had discussed the 1861 anti-Chinese riots on the New South Wales goldfields at Lambing Flat. Thirty years later she returned to the historical episode, linking it to contemporary issues under the Howard government:
Our treatment of these Chinese men shames many of us… As a nation, our fears and our hatreds, and our interest in the exotic and the Other, live with us still. In imagining those who observed, met, liked, hated, loved and traded with those Chinese gold seekers we see, ultimately, ourselves as we were and in some respects continue to be.
Here was the ideological raw material of nationalism: a supra-individual personality (‘the nation’), a grammatical person that possessed beliefs and attitudes (‘our fears and our hatreds’), stable traits giving rise to repeated behaviours, a ‘national character’ to which events more than a century apart could be attributed. This was not an idiosyncratic treatment. The nation as collective actor was similarly invoked at this time by Sir William Deane and by Paul Keating.
More specifically, throughout her scholarly career Curthoys returned, again and again, to an idea: the notion that, for two centuries, the male, non-Indigenous Australian working class had benefited from racism, colonialism and sexism, at the expense of women, Aboriginal and Torres Strait Islander people, and immigrants.
Through her work, readers and students of Australian history were taught a curious lesson: they were encouraged, correctly, to consider instances of racism (both in episodes of anti-immigrant chauvinism, and in the exterminist logic of settler colonialism) as obviously wicked and repugnant (at least from a contemporary standpoint). Yet with this negative evaluation was packaged the factual claim that racism had had beneficial consequences for the majority, or at least a large minority, of Australians.
In a 1978 article in Labour History (later published in a very influential book on the history of Australian working-class racism, which she co-edited with Andrew Markus) Curthoys wrote that the ‘super-exploitation’ of Aborigines, Melanesians and women in late nineteenth-century pastoral, sugar, clothing and food-processing industries ‘may have enhanced the wage rates of the greater part of the workforce, the male European workers’:
The relative roles of capital and labour in the emergence of a movement against Chinese immigration are [therefore] somewhat clearer. Organised labour’s position as the defender of jobs and wages meant that it was the logical leader of opposition to the Chinese as economic competitors with European workers. In so far as the anti-Chinese movement went beyond the specific cheap labour issue into the realm of social, political, moral, race-purity, and general economic complaints against the Chinese themselves, labour’s leadership was augmented by small employer, self employed, and general middle class concern. For their part, the larger representatives of capital were at this stage anti-Chinese in the sense of supporting their super-exploitation, but not in the sense of wishing to exclude them from the colony.
Markus added that ‘for the labour movement the campaign against non-European immigration was part of a broader battle to maintain established standards by restricting access to the labour market.’
On this account, popular racism and exclusivism were not tragic errors that divided Australian workers from their class allies, thus playing into the hands of the propertied elite. Instead (according to Curthoys and Markus) they had followed rationally from the material interests of Australian employees.
Curthoys and Markus’s interpretation of events rested upon the assumption that Labor parliamentarians and union officials reliably represented the views and well-being of their constituents, rather than having encouraged parochialism and nurtured atavism out of their own self-interest. As one historian has recently pointed out, ‘no evidence is provided to justify this assertion.’
In its absence, readers were left with Curthoys’s claim that employees were the ‘logical leader of opposition to the Chinese’ since racism ‘enhanced the wage rates of the greater part of the workforce.’
But she likewise offered no empirical or theoretical support for this claim, merely pointing readers to the work on segmented labour markets by Berkeley economist Michael Reich. (In reality, she was relying upon the influential theory of discrimination offered by the Chicago economist Gary Becker, for whom employees find it in their interests to support racist prejudice, while profit-maximizing firms cannot do so, since otherwise they will be driven out of business by low-cost competitors. Reich, on the other hand, had just published a paper called ‘Who Benefits from Racism?’ which reached the opposite conclusion: ‘Capitalists gain and white workers lose.’ He had written as much several years earlier: ‘the economic consequences of racism are not only lower incomes for blacks but also higher incomes for the capitalist class and lower incomes for white workers… where racism is greater, income inequality among whites is also greater… [Racism] is in the economic interests of capitalists and other rich whites and against the economic interests of poor whites and white workers’.)
Many decades later, Curthoys’s ideas about who benefits from imperialism and racism continue to inform her historical work and her recently expressed political attitudes.
They account for her repeated claim (which I mentioned in a post some time ago) that all ‘non-Indigenous Australians’ are ‘the beneficiaries of the colonisation process’ which devastated Aboriginal and Torres Strait Islander societies.
[All] migrants and their descendants, including those of non-Anglo-Celtic background, [have come] to be recognised as colonisers, as part of and benefiting from colonisation with its history of indigenous dispossession.
These ideas are favoured and expressed most relentlessly by members of a particular milieu: those, like Curthoys, with a tribal affiliation to the ALP, the children of union officials and public servants, Stalinists and social democrats.
In the political education of her youth, Curthoys would have encountered the idea of the ‘labour aristocracy’, a Marxist term applied to the privileged layer of union bureaucrats and labour party officials. In Lenin’s canonical account, the income, social influence and living standards of this stratum were supported by ‘morsels of the loot’ extracted from the direct producers, particularly the super-exploited toilers in colonies and other low-wage countries. Material self-interest then gave rise to this group’s reformist and conservative political outlook, which (thanks to their degree of social influence) contributed to maintaining the prevailing order. Above all this meant their encouragement of racism, xenophobia and allegiance to the flag. The social-democratic leaders of the Second International stood as object lesson and exemplar of this type. The nationalism of the Stalinist parties provided a sad historical echo.
This ideology (i.e. the one expressed in the above image, that all Australians without Aboriginal or Torres Strait Islander ancestry are ‘beneficiaries of the colonisation process’) has been promoted by the state elite (most emblematically in Keating’s Redfern speech and in Sorry Day, and in literature and film).
It has become a core proposition of one contending strand in Australian historical thinking: the ‘progressive’ left-liberal version. The latter is one of the acceptable interpretive options, presented to tyro students and readers on big historical questions, and from which set of alternatives they are invited to choose (the options are exhaustive) based on ideological inclination. It’s the version favoured in bien-pensant organs of opinion, spanning from the ABC and ALP-aligned thinktanks to the ‘radical’ left, and adhered to by all avowedly ‘progressive’ people.
Historian Marilyn Lake, with whom Curthoys recently edited a book on ‘transnational history‘, expressed something like the above notion when describing the formation of Australian ‘national identity’:
Aboriginal people were active in identifying all settlers – whether hut-keepers, clergymen, convicts or military officers – as one people, as ‘white men’, whom they held jointly responsible for taking their land… [The indiscriminate nature of] Aboriginal retaliation and revenge… is explained by the Aboriginal perception that a group of people defined by their ‘whiteness’ had taken their country.
Curthoys’s claim that ‘all migrants and their descendants’ have ‘benefited from colonisation’ serves an obvious social function. It implies that Australian history has been, and contemporary society remains, a zero-sum conflict between various ethnic groups. The fortunes of every member of one group (Indigenous Australians) have varied inversely with the welfare of every member of all other ethnic groups (non-Indigenous Australians): the two parties have contended over relative shares of some fixed pie, with the fruits shared out according to ethnic distinctions rather than any other relevant social category.
The political implication of this argument is dire and reactionary: if A benefits by inflicting some loss on B, then B can only gain or recover the loss at A’s expense, in which case A isn’t a credible ally for any project by B to advance its material interests, for in doing so A would be harming itself. B can only satisfy its wants by breaking with A. In other words, there is no basis for common cause between Aboriginal or Torres Strait Islander people and any other Australian people.
Curthoys has declared she developed this idea (i.e. that all migrants had benefited from colonialism) from reading feminist writers, as well as from the ‘wages of whiteness’ theory of the US historian David Roediger.
I suspect that during the 1970s she would also have encountered the idea of ‘unequal exchange’ from Arghiri Emmanuel and the Latin American dependency theorists. The latter were popular in the Third-Worldist circles of the New Left, and they purported to describe the relations between imperialist countries and underdeveloped economies. Emmanuel enlarged the category of ‘labour aristocracy’ to include all waged and salaried employees in the advanced economies, all of whom were now considered to share in the spoils of imperialism (via differences in wages relative to labour productivity). Emmanuel suggested that the ‘chief beneficiaries’ of imperialism ‘since the middle of the nineteenth century’ had been ‘labourers and ordinary skilled workers’. In an exchange with Charles Bettelheim published in Monthly Review, he mocked the ‘delusions of internationalism’ and socialist hopes for worker solidarity: ‘a majority of mankind is suffering from hunger whereas in certain countries the workers are struggling to acquire washing machines.’
[The] antagonism between rich and poor nations is likely to prevail over that between classes… It is not the conservatism of the leaders that has held back the revolutionary élan of the masses, as has been believed in the Marxist-Leninist camp; it is the slow but steady growth in awareness by the masses that they belong to privileged exploiting nations that has obliged the leaders of their parties to revise their ideologies so as not to lose their clientele… Today everything suggests that there is more socialism and internationalism in the brains of the intellectuals of the Labour Party, and perhaps more still in those of some bourgeois liberals, than in the feelings and reactions of the British working class.
Emmanuel thus claimed that the ‘imperialism of trade’ gave rise to a ‘de facto united front of the workers and capitalists of the well-to-do countries, directed against the poor nations’.
This wouldn’t have been too alien to someone, like Curthoys, who received a Stalinist education in the early 1960s. At this time the Soviet leadership claimed that ‘national bourgeoisies’ of newly independent countries (represented by Nasser, Nehru, Nkrumah, etc.) were allies of the propertyless classes in the struggle against imperialism.
Support for such thinking (i.e. the Curthoys-Markus theory of Australian racism, and the Curthoys-Lake theory of colonization) is broad. It attracts adherents despite the unwillingness of people like Curthoys to lend empirical backing or persuasive advocacy to what, as a result, becomes a mere ideological edict. Even allowing for the functional purpose it serves for the ruling elite, part of its success derives from a genuine appeal it holds for a fraction of middle-class opinion. Why?
I’ve said elsewhere that guilt is a positional good. Like private consumption choices and leisure activities, expressed political attitudes sometimes involve the signalling of good taste and discernment. What today passes for ‘progressive’ political activity increasingly involves a person’s public declaration of alignment with a cause, or loud expression of opposition to an entity or person (e.g. Andrew Bolt or Pauline Hanson). This has little to do with political principle. Instead it’s about the signalling of correct thoughts, possession of good taste, and status as a Serious Person. Being ‘right-thinking’ requires a costly investment (i.e. of time and effort to learn the group-appropriate ideas and perform the necessary ablutions). It thus works as a kind of screening device that reveals one’s underlying ‘type’, since only certain kinds of people can afford the investment.
Following the death of social democracy, evident in the decline of trade unions and the ALP as mass-membership organizations, the electoral politics of parties like the ALP and Australian Greens (which both now pursue a kind of social liberalism) are increasingly based around appealing to a narcissistic, educated social stratum (skilled professionals, often self-employed or earning partnership income, with control over productive assets and their own labour process). The members of this layer habitually see the broader population (mere employees) as racist, less sophisticated, vulnerable to demagogy, etc. In contrast to those whose work involves contracting to provide specific labour services (e.g. lawyers, consultants, tradespeople) employees hired by firms surrender decision-making authority and independent direction over their own work process. Within firms, low-level workers are accustomed to submitting diligently to the orders of managers and supervisors, and responding to external rewards and sanctions rather than (as higher-level functionaries must) internalizing the values of the organization and acting out of personal initiative.
These workplace experiences do have an ongoing effect on individual personality development and attitudes.
Many supporters of left-liberal parties accordingly flaunt what they see as their heightened sensitivity (especially their taking on of collective guilt), compared to the boorish masses. It is an article of faith for these people that inter-ethnic hostility arises mostly from competition within the low-skilled, low-wage labour market. (The work of economist David Card suggests otherwise.)
The racist bogan is a fantasized character against which the chattering classes define their own social existence and understand their own political role.
‘Progressive’ left-liberal opinion-makers and figures of cultural authority – in schools, in the mainstream media, etc. – thus insistently tell the population, just as their openly chauvinist and right-wing counterparts do, that internationalism is a ‘delusion’: that anti-immigrant parochialism and race hatred are explained by their rational pursuit of their own interests.
Both versions of ‘legitimate’ opinion promote, delight in and license the spread of racial discord.
The latest piece of World Bank policy advice concerning land, issued in 2003, emphasizes the need for ‘tenure security, not necessarily formal title’. According to the World Bank, ‘sometimes communities are perfectly capable of handling the situation, by continuing to enforce and adapt the traditional rules governing property rights’.
In other words, the task of enforcing private-property rights need not be left to the centralized coercive power of the state (e.g. the registration of title deeds with government agencies, or their recognition in statute or common law). It can be performed, in decentralized fashion, by ‘traditional’ sources of authority and with local instruments of sanction:
It is now widely realized that the almost exclusive focus on formal title in the 1975 paper [by the World Bank on land reform] was inappropriate… In customary systems, legal recognition of existing rights and institutions, subject to minimum conditions, is generally more effective than premature attempts at establishing formalized structures.
Moreover, the appropriate ‘subject of right’ isn’t necessarily the individual. In some circumstances, says the World Bank, it may be wise to assign ownership of tracts of land to a clan, lineage, local community or ethnoregional group, incorporated as a legal person. There are ‘many contexts where group rights will be more feasible and cost-effective than individual assignment of property rights’:
Group rights will be more appropriate in situations characterized by economies of scale in resource management or if externalities exist that can be managed at the level of the group but not the individual. Group ownership is also often adopted in situations where risk is high and markets for insurance are imperfect or where the resource in question is abundant and the payoff from any land-related investment that individuals could undertake on their own is low.
Private-property rights are now justified by their role in protecting the rights of indigenous groups and women:
[For] indigenous groups, herders, and marginal agriculturalists, definition of property rights at the level of the group, together with a process for adjusting the property rights system to changed circumstances where needed, can help to significantly reduce the danger of encroachment by outsiders while ensuring sufficient security to individuals…
[Ensuring] secure land tenure will be of particular relevance for groups that were traditionally discriminated against. In addition to being warranted based on basic considerations of equity, attention to women’s land rights will have far-reaching economic consequences where women are the main cultivators, where out-migration is high, where control of productive activities is differentiated by gender, or where high levels of adult mortality and unclear inheritance regulations could undermine women’s livelihood in case of their husbands’ death…
Greater control of assets by women often translates into higher levels of spending on children’s education, health, and food. Similarly, even though the significance of land for indigenous peoples and herders goes beyond economics, even its economic impact has often been underestimated. Transferring property rights to indigenous communities, especially if combined with technical assistance, can allow them to manage these better or to derive greater benefits from the resources associated with their land.
This is fairly representative of the current outlook of national governments undertaking land reform in ‘less-developed’ countries, and that of ‘development’ circles (NGOs like Landesa, government agencies like USAID and DFID, and international bodies like the World Bank and the UN’s Food and Agriculture Organization), which bestow policy advice and donor funds on the former.
Since the 1980s, these parties have come increasingly to favour arrangements in which private-property rights to tracts of land are assigned (nominally) to groups or collective entities, and enforced by ‘customary’ sources of juridical-political authority.
This is evident in the substance and lexicon of recent laws and in planning documents on tenure reform. (It’s also apparent in the scholarly ascendancy of ‘common property’ advocates of natural resource management. a prominence only increasing since Elinor Ostrom was awarded the Swedish Riksbank’s ‘Nobel’ prize).
Development agencies like USAID and AUSAID run permanent and ad-hoc property-rights and tenure-reform programs. These programs encourage, promote and fund the extension of what they term ‘secure and well-defined’ private property rights to agrarian land and waters. But these organizations adjust, based on country-specific circumstances, what USAID terms ‘new programmatic approaches to foster property rights around the world… [adopting] new strategies and sequencing in reforms to promote property rights in diverse economic, political, and cultural settings.’ In other words, while the goal is the same in each case, the means of pursuing it will vary depending on local factors.
Respect for ‘customary rights’, ‘legal pluralism’, and the ‘empowerment’ of ‘local communities’ has thus found favour, as a means by which to establish exclusive and indefeasible rights to land and other resources.
Policies are given names like ‘community-driven development’ and gestion de terroirs. Following examples of endowing ‘tribal’ property in the Philippines, Cambodia and Botswana, recent land reforms in countries like Mozambique, Benin, Niger and Rwanda have included provisions recognizing the ownership claims of ethnoregional groups. Administrative powers are wielded either by ‘traditional leaders’ – village chiefs, lineage heads – or by directors of incorporated entities or trusts. Timor-Leste, which in February passed several new laws on land tenure, was advised by USAID and Australianacademics to follow those recent examples.
‘Customary’ group property has generally been invoked in arid and infertile parts of the world, in humid tropical conditions, and in remote or economically marginal regions like the Sahel, sub-Saharan Africa and the South West Pacific. These areas are occupied by small farmers, ‘garden’ cultivators, livestock herders and foragers. As the World Bank observes, population densities are usually low enough, in such settings, that land is a relatively plentiful resource, and ‘the payoff from any land-related investment that individuals could undertake on their own is low.’ In such circumstances agrarian land and other resources is usually not subject, initially, to exclusive private ownership. Hunting, pastoral or cultivated land may be organized as an open-access resource, common property or small individual plots (in many cases, post-colonial governments brought most of the land into public hands). Whatever the precise arrangement, in such societies usufruct or access rights are generally not exclusive (i.e. outsiders or non-owners are not prevented from using the resource or subtracting units, e.g. water).
In these societies, the enclosure of agrarian land has proceeded via the assignment, to an ethnoregional group or other collective entity, of property rights to these assets and resources. For this purpose the pragmatic acknowledgement of ethnically-based group property isn’t new: a recent post described how British colonial administrators recognized the communal property rights in land of ethnic Fijian clans as long ago as the 1880s.
The economic historian Robert C. Allen has described how it worked, around the same time, in colonial British West Africa:
Communal ownership usually became a custom, so people could acquire farm land only by being members of a tribe – and at the discretion of the chief, to whom they were subservient… The new-style chiefs became the foremen of empire, levying taxes, compelling labour, and using their powers to amass personal fortunes. Colonialism created a system of rent-seeking petty despots to rule the countryside.
Thus the evolution of World Bank thinking in the three decades from 1975: ‘customary land tenure’, having formerly been marked for eradication, is now considered a suitable tool by which (or under which aegis) to impose private ownership rights in places where they currently are absent: among ‘indigenous groups, herders, and marginal agriculturalists’.
This shift in official ideology is a manoeuvre repeated by the envoys of imperialism, again and again over the past 500 years, whenever they have encountered and sought, on behalf of capitalism, to engulf and destroy a foraging, herding or horticultural society.
In the first place it is loudly announced that these societies have none of the features necessary for ‘development’, and must be remade immediately; before it is declared that hold on! we may have something useful here, after all. In no case has the second step signalled the dawning of enlightenment, a progressive recognition of some hitherto ignored truth about colonized societies. The change in official ideology, like that today of the World Bank or USAID, was in every case a calculated and instrumental espousal of whatever theory, given the circumstances, was likely to advance strategic objectives: a turn to ‘new strategies and sequencing in reforms to promote property rights in diverse economic, political, and cultural settings.’
Colonists and their successors evaluated these societies using categories familiar to their own. In the first stage, this was to find ‘savage’ and ‘barbarian’ peoples lacking: they didn’t know how to farm, dress properly, or treat their women, etc., in ways that ‘civilized’ peoples did. When such a society was conquered or settled by forces (states, organizations, etc.) bringing with them the novel institutions of capitalism, its defeated members were constrained (by the coercive power of the victors) to adopt new cultures, property rights and other forms of economic governance, child-rearing practices, schooling and constitutions. Australia and Hawaii can stand as examples of these practices, and of the devastation they unleashed.
Eventually, in the second stage, local societies (or rather the wasted wreckages of them that remained) were discovered to possess, after all, some familiar and characteristic attributes: ‘customs’ and ‘traditions’ that resembled, however imperfectly, the laws and institutions of an advanced society. In Australia, anthropologists, historians, novelists, politicians, missionaries, lawyers and civil servants gradually detected in Aboriginal societies all the common paraphernalia that Talcott Parsons suggested were evolutionary universals: monarchs, territorial possession, social stratification, incipient markets. Ethnographers claimed to recognize the existence of tribal ‘kings’ and ‘chiefs’. Others, as recently detailed by Ian Keen at ANU, detected the presence of ’estates’ of land to which ‘tribes’ held property rights.
Which of the two attitudes predominated at a given time depended on which was most propitious for the needs of imperialism.
(This functional relationship worked either through the deliberate tailoring of ideas to suit ruling needs, or through a kind of selection process: ideas that contributed to the successful flourishing of imperialism were fostered, rewarded and differentially transmitted throughout society by funding, the granting of advisory and consultative roles, recognition as an ‘authority’, inculcation through media and schools, etc., whilst those deemed unhelpful were thwarted, penalized and ignored.)
W.E.H. Stanner was the anthropologist appointed by Prime Minister Harold Holt to the Council of Aboriginal Affairs. His name is inevitably invoked (inviting cheers or boos) in public discussions about the origin of Indigenous land-rights policy. Stanner defended the horde model of Radcliffe-Brown, in which a clan or totemic descent group was considered to possess its own territorial ‘estate’ and foraging ‘range’, and ‘acts of trespass’ on the proprietary lands of another group could be punished by death. (Of this theory Marc Gumbert noted: ‘there was an homology between the economic and political background of colonialism, and its ideology which crystallized in the Radcliffe-Brown horde’.)
In a 1978 book, Kulinma: Listening to Aboriginal Australians, the high-level civil servant H.C. Coombs could assert that the opposition of Aboriginal people to environmental despoliation by mining companies was based on a prohibition, within ‘traditional cultures’, of ’infringement of property rights’.
The historian Henry Reynolds, quoting the diaries of G.A. Robinson, could reveal the existence of ‘exclusive possession of territory’, as well as ‘patriotism’ and martial spirit, in Aboriginal and Torres Strait Islander societies.
To untrained but hopeful and well-meaning ears, the recognition of Indigenous ‘customary rights and interests’ by the Australian state leadership over the past four decades, as with the recent policy advice from the World Bank on land reform, may seem vaguely ‘progressive.’ Each promises to assist ‘groups that were traditionally discriminated against.’ Group-based ownership rights hold obvious appeal to such terribly oppressed groups as the San, some of whose members now seek recognition as the First People of the Kalahari. The pursuit of ethnically-based property rights finds ready adherents amongst the desperate mass of asset-free people, as well as amongst elite figures, who hope thereby to gain social status, decision-making authority and income streams.
But the appearance of progress is illusory. The recognition of ‘customary rights’ and the candidly racist contempt of the past are obverse sides of the same Janus-faced beast. Imperialism is driven by necessity to extend private ownership and capitalist property relations into every available domain, and compelled to overrun and devour whatever gets in its way. The adoption of ‘new programmatic approaches to foster property rights’ is the behaviour of an insatiable predator, remorselessly circling its quarry in search of the latter’s most vulnerable point.
From whichever direction the attack proceeds, the consequences are the same. For a forager or herding society, whose members are dependent for survival on access to unowned things, the enforcement of private claims on resources, however it occurs, has a genocidal logic. On these societies imperialism imposes a new principle, to which it brooks no objection and admits no query: personal entitlements with regard to worldly things (e.g. natural resources) – including the power to use such material resources or facilities to satisfy basic needs, undertake sustenance-drawing activities or secure personal livelihood – are conferred only by virtue of holding property rights in the resource, or from the consent or authority granted by owners. Unless an individual holds personal property rights, is a joint owner through membership of a group or entity that holds communal property rights, or receives permission from such an owner, he has no claim at all over the owned resources: they are unavailable to him.
Since, everywhere, the distribution of productive assets is drastically unequal, only a tiny number of owners benefit from the enforcement of property rights. ‘Customary rights’ and related concepts usefully invoke national distinctions and ethnoregional parochialism to persuade the remaining people – to whom private ownership will mean at best a sharp decrement in welfare – that their salvation too rests in the latter’s embrace.
To explain the meaning of ‘Asian engagement’ and APEC regionalism under the Hawke and Keating ALP governments, I’m posting something I wrote back in 2003.
The near-simultaneous visits to Canberra of George W. Bush and Hu Jintao had prompted me to write a long essay (part 1, part 2, part 3) on Canberra’s attempts to straddle and exploit the dyadic competition between the hegemon and its challenger.
In a public speech given that October, Keating deplored the Howard government’s posture as ‘vicar of empire, or deputy of the United States’. He compared it unfavourably to the ‘multilateral regionalism’ of his own government.
But was it really possible to distinguish Keating’s ‘strategic promiscuity’ from Howard’s ‘realism’? And, if so, then what explained the apparent switch by Australian state elites from one stance to the other?
I wrote at the time:
October’s events in Canberra were not a pageant of Napoleonic bourgeois solidarity, but signs of an historical impasse. The issue of strategic orientation figures in all the semi-public theoretical models and policy discussions of Australian imperialism right now.
Last month former PM Paul Keating addressed a congress in Melbourne on ‘Australia’s Economic and Geopolitical Positioning’.
It is precisely because Keating is the avatar of Australia-in-Asia, of the integration of Australian state and capital within some fantasized Asian co-prosperity sphere, and in the geostrategic architecture of an ASEAN-type framework, that his views so clearly reveal the various underlying tensions and projects at the heart of the Australian state at a time of tectonic movements between Japan, China and the USA.
They do more than indicate an individual’s mindset: the joint visits of Bush and Hu saw a rash of ruling-class strategic daydreaming around altering Australia’s historical relationship with US imperialism.
Of course, Canberra cannot choose or decide to do anything, tied as it is by millions of economic, political and military threads to US strategy, unless there is first of all a substantive regional weakening of US hegemonic power, which could only come about through failure to compete with China…
While the world market and international financial architecture continue to function under US protection and political legitimation, then the Australian state and its capitalist firms continue to benefit as a regional power from access to markets and resources, maintained asset values, custodial military support and inward investment.
As a lesser regional power, Canberra depends upon the successful functioning and continued growth of the capitalist world market, and while it may have real interests and goals which strongly contradict those of the US, it is nonetheless committed to aiding, sponsoring and materially supporting US hegemony.
The same applies to larger rival states such as Japan, Germany and China.
This mechanism of internal social reproduction and external geopolitical regulation, whereby states acquire missions and operate in an imperial world system, serves as an efficient model of accumulation, and is the only alternative to revolutions and inter-imperialist wars.
The failure of the US-Australian alliance will only occur when internal social unrest interacts with external geopolitical realities to produce ruptures in the system.
What deeper currents lay beneath the shimmering, rippling surface appearances of Canberra’s foreign policy?
In the wake of the 1997-98 Asian financial crises, new entities like ASEAN Plus Three (China, Japan, the Republic of Korea along with the 10 ASEAN nations) and the Asia-Europe Meeting were created. These were supposed to allow regional coordination in the event of balance-of-payments and liquidity problems, thus easing dependence on the IMF for dollar borrowing.
Australia and the United States had deliberately been excluded from these bodies. Malaysian PM Mahathir had long suggested the creation of an East Asian Economic Caucus (‘caucus without Caucasians’).
The first major step towards breaking dependence on extra-regional funds and currencies came in 2000 with the Chiang Mai Initiative, a bilateral and multilateral currency-swap agreement concluded by ASEAN Plus Three finance ministers. This had followed a series of smaller bilateral swap facilities. The Singapore meeting of September 2000 announced the initial step on the road towards a 10+3 free trade agreement.
ASEAN Plus Three began developing into a key institution of East Asian organization and Chinese regional authority.
Following the Manila heads of government meeting of November 1999, regional cooperation had acquired momentum and matured at a rate exceeding most expectations, through bodies such as the Shanghai Cooperation Organisation, Asia Cooperation Dialogue and the Boao Forum for Asia, some of which spoke of currency unification, until then an unthinkable proposition.
In November 2002 China signed several agreements with the ASEAN 10, including the Framework Agreement on Comprehensive Economic Cooperation Between ASEAN and the PRC, the Declaration on Conduct of Parties in the South China Sea, and the Joint Declaration on Cooperation in Non-Traditional Security Issues.
Further negotiations on sovereignty in the Spratly and Paracel islands involving the Philippines, Vietnam, Malaysia and Taiwan seemed likely to cement Chinese maritime control of the South China Sea, a key strategic, commercial and energy-supply zone.
In 2003, the ALP’s foreign policy spokesman, Kevin Rudd, called for the revival and reform of the APEC project. Rudd claimed to have ‘grave concern for our future trade and our future exports to these areas and therefore our future standard of living in this country’. He suggested that the Australian government needed to take up the APEC drive alongside Japan, as had occurred under former Labor PM Bob Hawke and, of course, his successor Paul Keating.
At the same time, the Sinophile Rudd reiterated the priority of the US ‘special relationship’, the base-rock of Australian imperialism, which anchored Canberra firmly (and perhaps finally) in the US geopolitical framework. Rudd would later return to this project as Prime Minister, in his plan for an Asia Pacific Community. This initiative provoked Washington’s hostility before Rudd’s sudden removal from office in June 2010.
What was the nature of APEC? It allowed Australia and Japan to fulfil their special roles as US Trojan horses in the regional architecture, rather like Britain and some eastern European states do in the European Union (Washington encouraged London to join the European Community during the 1960s).
By implementing the US-sponsored economic reforms of the 1980s (e.g. removing capital controls and trade barriers), the Australian state had (unwittingly?) furthered the integration of domestic economic activity with northeast Asia.
Labor governments, under the stewardship of Hawke and Keating and the aegis of ‘consensus’, helped to liquidate Australia’s industrial base, deeming it ‘a completely uncompetitive lump of industrial archaeology’ (Keating).
With the withdrawal of subsidies and tariffs, manufacturing firms like CSR and the steelmaker BHP moved increasingly into minerals extraction and processing. (Mining, together with finance, had become the most internationalized industry in Australia from the late 1960s.) Manufacturing output collapsed to just 12% of GDP, amid mass unemployment, de-unionization and declining real wages.
Trade was thereafter structurally skewed towards Asian markets. East Asian and Southeast Asian firms displaced local steel producers, car makers, heavy engineering and clothing, textiles and footwear manufacturing, etc. This shifted the centre of gravity of Australian-based production toward agricultural and mining commodities and simply-transformed raw materials, with most of them exported to industrializing East Asian countries. By 1996, Japanese trading houses made up six of the ten largest exporting firms in Australia.
In a famous report to Prime Minister Hawke, Ross Garnaut spoke of the trade ‘complementarity’ resulting from the ‘northeast Asian ascendancy.’
This sectoral re-composition of the Australian economy, which reallocated labour between industries, also meant a change in the material form taken by the social surplus product (the output over and above that required to meet the consumption needs of producers), i.e. the visible embodiment of class power and appropriated wealth.
From the Hawke-Keating years onwards, a smaller portion of this surplus was embodied in capital goods: buildings, machinery, etc. Instead it increasingly took the form of luxury consumption goods and services (e.g. the grand harbourside house of Hawke himself) and unproductive expenditure on ‘financial services’, advertising, administration (which then took the form of new offices for financial institutions and law firms, the personal consumption of bankers), etc.
This was a more complex regional division of labour than might have appeared by looking merely at bilateral trade relationships.
Despite high rates of investment (recycled from retained earnings), wages were so low in China and ASEAN countries that the domestic market was not sufficient to absorb produced output. A large fraction of the Chinese surplus product was therefore appropriated by the propertied classes in external-deficit countries like Australia.
But a disproportionately large fraction of the Australian economy was devoted to unproductive activity like finance. So this capital could not be imported productively (i.e. funding investment in new plant and equipment). Therefore it was absorbed in the form of consumer credit, borrowed mostly on US and European financial markets, themselves made liquid by the currency reserves of Chinese and Japanese central banks. Unproductive consumption was financed by loan capital: external borrowing was a way to accommodate global trade imbalances, including the permanent export surpluses of China, Japan and Germany and the structural trade deficits of Australia, the US and Britain.
Meanwhile Tokyo lost its economic competition with Washington in the 1980s. Nixon’s abandonment of the Bretton Woods/gold convertibility system in the 1970s was followed by successive dollar devaluations in a bid to secure manufacturing competiveness. The competitive strategy of Japanese firms (along with those from the German federal republic) was to raise domestic labour productivity through increasing quantities of capital per worker, alongside technological advance and wage restraint.
The Japanese elite thus, for a time, made a virtue of necessity. They used the enforced deflationary consequences of high yen currency values as a mechanism to restructure domestic capital. They raised manufacturing quality and productivity, instead of themselves devaluing to avoid the loss of external markets.
The neo-mercantilist strategy led to a Japanese bubble which, despite the stock market crash of 1987 in New York and London, permitted Tokyo alone to maintain prices and keep world markets afloat long enough to prevent global depression. In fact, the Nikkei thereby took the strain of global reflation, and following the asset-price boom it paid the bill for Eighties excess. The Japanese bust of the Nineties was (until 2007) the biggest of them all.
At the same time, US capitalism garnered almost all the fruits of NATO victory in the Cold War. For decades the unstable situation of inter-imperialist rivalry and bitter battle for long-term economic supremacy, created by Washington’s refurbishment of Japanese (and West German) capitalism after 1945, had been contained within a framework of Cold War unity and alliance.
First as anti-communist glacis and client state, then as imperial rival, both the Japanese boom and bust were determined by Japan’s subordinate place as the anchor of US policy in Asia.
The collapse of Japanese competitiveness against the USA obliged future restructuring of the regional order in line with new realities.
This was calculated to prevent the future re-emergence of a potent competitor: China. It would fatally trap Japanese capital on an export-led platform (in case anyone in Tokyo considered a temporary 1930s-style autarkic withdrawal from the world market involving deficit spending, restructuration, rearmament and future forced re-entry through warfare and aggression).
The new arrangement would ideally bind the Japanese elite into even greater dependency than before, preventing them from forming a regional bloc independent of US capitalism and its strategic interests.
This was the story behind the founding and subsequent development of APEC, in which historians now consider the Japanese MITI to have been the initiator and key player, as opposed to the traditional Australian-centred view.
For several decades Japan’s stock of fixed capital (buildings, equipment, etc.) had grown at a much faster rate than its workforce, leading eventually to declining rates of return.
Japanese firms responded by looking abroad for profitable investment.
The country’s large trade surplus put it into a position to be a substantial capital exporter, converting dollar holdings into equity capital and building up a stock of overseas assets. Capital outflow increased from $US3 billion in 1975 to $US81 billion in 1985. Much of this was directed towards south-east Asia, leading to rapid development of the so-called Asian Tigers.
Tokyo’s initial plans to further East Asian integration, in line with its own imperial interests and plans for regional hegemony, were co-opted by the US agenda.
After strong US criticism of the proposed New AID plan for coordinating Japanese trade and investment in Asia, MITI considered a US-Japan free trade agreement to avoid a protectionist contest it could no longer win, before eventually proposing a multilateral network for regional economic co-operation in trade and investment. ie. for the implementation of GATT and the Uruguay Round, SAPs and trade liberalization.
Washington originally viewed the new arrangement as a typically effete and ineffectual creation, incapable of securing its own future. This stance changed as APEC grew in authority, allowing the region’s two subordinate imperial powers, Japan and Australia, to respectively act as the ‘northern and southern claws of the US crab’ and its strategic interests (as Beijing put it).
Through joint US-Japanese-Australian efforts, APEC quickly became a forum for structural reform and regional trade liberalization, with ministers agreeing at the 1990 meeting that ‘it was desirable to reduce barriers to investment and trade in goods and services among participants – and liberalization in a manner consistent with GATT principles’. Australia chaired the Informal Group on Regional Liberalization, which formed an eminent persons group with US economist Fred Bergsten as chairman and effective head of APEC. Through Bergsten’s aggressive direction, outlined in ‘A Vision of APEC’, the move to liberalization accelerated with the celebrated Bogor leaders’ summit in 1994, which agreed on a timetable for free trade and investment.
The Bogor summit was assuredly the zenith of APEC ‘new regionalism’, and probably the highpoint of Keating’s ‘Asian engagement’. Keating’s regionalist project involved a recognition that Japan was Australia’s ‘natural ally’, with a shared outlook on Asia-Pacific affairs based on the US alliance, common interests in security matters, an approach to free trade and the APEC partnership.
This was a remnant of Cold War geopolitical realities and the evolution of both Japanese and Australian economies, but also an aftershock from the collapse of Tokyo’s competition with the USA and declining regional power.
Japan became Australia’s largest trading partner in the 1970s, and the two states signed a Basic Treaty of Friendship and Cooperation in 1976, after three years of planning.
DFAT submitted a paper to a Senate inquiry into Japanese defence policy in 1992, stating that the two countries were the ‘southern and northern “anchors” of the Western alliance in the Western Pacific’. In line with this approach, Keating declared in a 1995 visit to sign the Joint Declaration on the Australia-Japan Partnership, that Australia was Japan’s only real regional partner, and that Japan should ‘take the reins of leadership’ in APEC.
From this perspective, Keating’s engagement followed a logic later shared by the Howard government. The latter’s 1997 White Paper described the Japanese relationship as ‘by far the most substantive and successful’, and called for the upgrading and consolidation of defence and security ties with Japan.
The Coalition government identified the US and Japan as the two most important strategic relationships in the rapidly shifting regional equation, which called for a US-Japan-Australia strategic triangle. Howard’s Foreign Minister Alexander Downer called for Japan to ‘enhance regional security and the security architecture’.
This merely continued the basic thrust of Keating’s regionalism, particularly its underlying anti-Chinese framework.
While Defence strategic planning after Howard’s victory declared that ‘it would not be in Australia’s interests for China’s growing power to result in a diminution of US strategic influence’, this was in no way distinctive or opposed to Keating’s earlier programme, which moved closer to Indonesia due to strategic concerns about China.
The focus of Keating’s ‘special relationship’ with Indonesia was to encourage closer engagement between Indonesia and the US alliance network in Asia-Pacific, ensuring that Australia and Indonesia were not pulled into China’s orbit.
This move culminated in the Australia-Indonesia Agreement on Maintaining Security, signed by Keating and Soeharto in 1995. This formalized a network of military and security arrangement, cooperative activities and regular consultation.
Keating leaned towards Indonesia as a buttress for regional security and Australia’s imperial sphere of influence: in his words, Australia did not want to be in the ‘Chinese orbit’ or the ‘pull of gravity of China’ (interestingly, Downer criticised these remarks).
Indonesia itself had always been concerned over China’s territorial claims in the South China Sea and Natuna Islands, and of course was home to general anti-Chinese chauvinism, resentment and repression. According to Keating, Indonesian foreign policy was defined by suspicion of China and its maritime capacity in the South China Sea.
Meanwhile Australia was anxious that Japan’s declining regional imperialism was destined to create a new Asian power-axis of Chinese economic and political dominance over Japan, and opposed to the US.
The 1994 Defence White Paper, ‘Defending Australia’, foreshadowed this change in the regional balance of power, with Chinese growth eventually surpassing Japan, forming a regional bloc which would rival the US and cause competitive conflict for markets and resources:
This will affect global power relationships and become a dominant factor in the strategic framework of Asia and the Pacific. Economic growth is already allowing China to increase its military capabilities, especially of its maritime forces.
Chinese displacement of the US as dominant regional power was in the script, and formed the basis of Australian strategic manoeuvring.
A DFAT report circulated in late 1995, leaked and published in the Fairfax press in January 1996, stated that China constituted the greatest security threat in the Asia-Pacific. Indonesia was in turn ‘our most important [relationship] in the region and a key element in Australia’s approach to regional defence engagement’.
Throughout the early to mid-Nineties, publications in the official journal of the Japanese Ministry of Foreign Affairs (Gaiko foramu) frequently echoed this general line, which was the basis of APEC partnership and the goal of creating an Australia-Japan negotiating axis within APEC and other multilateral forums.
Australia and Japan thus advocated the full ‘engagement’ of the US in the region, and participated as junior partners towards maintaining the successful function of American hegemony and its imperial world system, international trade and investment architecture, and the US-regulated world market.
Led of course by Washington’s Bergsten, APEC advocacy of structural adjustment and trade liberalization (along with the benefits of seigniorage, the IMF and other parastatal institutions) allowed North America to export its own accumulation crisis to Asia.
This strategy was inherently limited and self-defeating. The Washington Consensus and SAPs obliged wrenching, stressful change.
From the late 1990s this led to the complete collapse of societies and failure of states in the Asia-Pacific region. The loss of functional integrity experienced by the Melanesian states has been described as ‘the Africanization of the South Pacific.’
Meanwhile endemic deflationary pressures strangled Japanese growth in the 1990s. The symptoms of Japanese crisis – over-saving, deflation, high unemployment levels – were outcomes of an historical defeat, of internal social policies to increase productivity and export capacity, and of US offloaded costs.
The Asian financial crisis, which began in July 1997, was caused by short-term foreign credit and overvalued fixed exchange rates, defended by foreign reserves which were rapidly drained, leading to devaluation, defaults on dollar debts, and sudden capital flight.
The meltdown was clear proof that Japan’s decline implied the ultimate failure of its regional authority, collaborative formations and political institutions. While intra-regional trade cooperation was strengthened throughout the 1990s, internal East Asian financial and investment flows were still light. There was no strong Asian debt or bond market, causing an over-reliance on short-term external loans denominated in foreign currencies. When lack of foreign exchange (mostly dollar) assets disturbed debt repayment and led to the devaluations and financial devastation of 1997-98, there was no regionally-aligned financing facility ready to provide liquidity.
In short, the Asian financial architecture was uncoordinated and underdeveloped, resulting in a vicious spiral of crisis.
Simultaneously, APEC began its terminal decline, as the strong US and Australian push for the Early Voluntary Sectoral Liberalization (EVSL) program, part of the ‘concerted liberalization’ mechanism, met Japanese opposition and broke down at the Kuala Lumpur summit.
With the onset of financial crisis, the Indonesian state apparatus showed signs of increasing disarray and limited custodial capacity for its resources, people, property rights and frontiers. Among other problems, this implied the possibility that Jakarta’s agreement with Canberra on development of the Timor Sea oil and gas fields could be nullified.
Acute generalized disorder presented itself to the imperialist ruling classes on many different fronts at once.
An underlying ‘arc of instability’, hitherto largely invisible, had seen whole regions slide stealthily off the economic map, with societal and state failure. All the efforts of Washington to privilege the unique weight and power of its economy had done nothing to resolve US problems, and everything to exacerbate them.
The devastating blow dealt to the idle dreams and pretensions of hegemonic rivals such as Japan, the overheads of crisis exported to global economic extremities, had only creating wastelands of despair and turmoil, intensified contradictions and produced evolving multiform crises whose blowback-effect now threatened the geopolitical formations of the US late-imperial system.
Suddenly an abyss had opened at the feet of the ruling classes, generating political incoherence, confusion and loss of strategic direction.
Behind the hypnotic repetition of mindless apologetics and delusional mantras, the soft words of its diplomats and academics, the liturgy of neoliberalism – with its polite talk of reforms, open markets and global democratic freedom – foundered abruptly as its intellectual models and practical policies faced grim new challenges.
It was time to stop the rot and reconstruct the framework of imperialism in Southeast Asia, to restabilize strategic positions there before rivals (above all Beijing) rushed in to fill the vacuum with promises of development aid and long-term investment. In this abrupt change of direction, vestigial international structures without real power or influence were discarded: the choices were now incalculably starker, and couldn’t be left to social-democratic wimps and their faint-hearted multilateralism.
This is the meaning of the so-called Howard Doctrine as it was implemented from 1999, through military and police interventions (‘stability operations’) in East Timor, the Solomon Islands and Papua New Guinea.
In Fred Benchley’s notorious 1999 interview with John Howard in the Bulletin, the Prime Minister apparently described Australia as Washington’s ‘deputy sheriff’ in the southwest Pacific and southeast Asia. According to the PM, the INTERFET operation in East Timor was a ‘turning point in external relations’, with Australia responsibly acting ‘above and beyond its immediate interests’, bringing into play its ‘unique characteristics as a Western country in Asia – with strong links to North America’.
The ‘arc of instability’ (a favoured term of Rudd’s) forced Australia to become ’the strong man of Asia’, with a large scope for war-preparation, undisguised repression and the political reconstruction of alliances and coalitions of interest.
These were political methods of last resort, which state breakdown and basic disequilibria in the peripheries made both desirable and necessary. Thus future restructuring of the global or regional order demanded the creation of a new Asia-Pacific power-axis.
This meant colonial intervention in the peripheries and reassumption of the ‘White Man’s Burden’ of colonial administration by US-aligned states like Australia and New Zealand.
Nonetheless, the Howard Doctrine only arose because history had temporarily closed off all options for the Australian ruling elite. Despite the long-run systemic disarray of US hegemony, there had been as yet no successful historical move for Asian economic integration and the definitive emergence of a powerful Asian politico-military competitor to the US.
In these profoundly constraining historical circumstances - with the current absence, yet with the looming possibility, of a powerful centralized East Asian state gaining strategic and economic domination of Asia as a whole, saturating its markets and controlling its skies, sealanes and information networks, and ending US unicentric financial domination - Canberra became ever more tightly aligned with Washington.
Kevin Rudd’s suggested APEC solution therefore suffered from the fatal combination of being both too much and too little.
It was impossible to remake the utterly anachronistic APEC omelette, which was at any rate an institution of US regional hegemony, not some assertion of ‘independence’ from Washington.
At the same time, avoidance of full-scale Australian participation in US adventures was politically unacceptable to Washington in the epoch of its decline (‘You are either with us or against us’) and would be regarded as the passive, effeminate, perfidious action of an unreliable subordinate obviously in need of constant supervision. [So it seems to have turned out for Rudd in 2010!]
Any Australian government that tried this trick would get smacked over the head with a balance of payments crisis, while imperilling the bilateral security cooperation which is the basis of subimperial strategic planning and Canberra’s main source of advanced military technology (the information network arising from the UKUSA agreement is also the technical basis for Australian signals intelligence and geospatial imagery).
The claim that Australia ‘can have a thoroughly robust alliance with the US while pursuing an independent policy of engagement with Asia’, because ‘foreign policy is not a zero-sum game’, ignored the inevitable fate of the US-regulated world market, in which competitive conflict underlies the lesser powers’ overt support for the hegemon.
What would happen when a downturn cut short growth trends, and when systemic breakdown and crises of international markets and finance capital stifled international trade and investment flows?
The fragmented regional blocs (EU, East Asia), which were economic and political rivals of the US, would be forced into autarkic restructuration and remilitarization. As the regional architecture was rebuilt, possibly under Chinese hegemony, some fractions of Australian capital and state would evolve a position of overt opposition to the USA, despite fear of what a vengeful US could still do. Some political wing, most likely the ALP, would then take up this cause, draped in the finery of the ‘national interest’, i.e. whatever it took to preserve capitalist property relations in Australia.
Their principal source of demographic support would nonetheless come from various non-bourgeois social layers, stung by the collapse of the US Ponzi scheme and the global debt pyramid… Such a vicious collapse would surely elicit a minimum of popular resistance, cause internal unrest and threaten social peace, even from the cowed population that vocally supports the chauvinist hysteria of the Howard regime.
This open crisis would expose the hitherto latent and concealed contradictions between the Australian propertied classes and the US elite.
[...]
Manipulation of public attitudes and mass consciousness has been sufficiently refined by the ruling class to build on a small but established base-rock of anti-American chauvinism, if necessary. The nationalism of the Australian Greens may be useful here, though the party has nurtured an even more virulent Sinophobia.
[...]
Howard and the more canny members of the Australian ruling class do not really base their ad-hoc international Realpolitik on ‘special relationships’, but through an ideological prism of ‘the national interest’ and tactical blocs dictated only by short-run advantage. Howard will anyhow be long gone before the occasion of a split and strategic reorientation, replaced by a more suitable figure.
[...]
While the panjandrums will continue to inexorably press ahead on all fronts until they are confident of achieving both short-term and long-term aims, which means aligning with the United States for now, Australian sub-imperialism is ultimately confronted with an impasse, and the possibility of being destroyed in future competitive conflict between East Asia and the US. For the moment they cling feebly to the thesis of complementarity, mutual dependency, ‘international community’ and generalized bourgeois law and right.
That is, they speak as if paid-up Chinese membership in the capitalist club will prevent regional conflict and geopolitical crises.
Keating’s position reveals the truth behind this evasion.
The kinds of policies he recommends, while superficially innocuous (going for RMB revaluation, China satisfying domestic demand more etc.) are potentially devastating to US rentier-imperialism, whose predicament mirrors that of late c19 Britain: while controlling global money, and possessing military force-of-last resort, the hegemon is comparatively uncompetitive relative to rivals experiencing intensive, deflationary productivity growth.
China may indeed abandon the export-led path and transfer production towards satisfying the domestic market, as Keating predicts: Wen Jiabao has recently foreshadowed this long-term reorientation, which emerged officially if not in reality in the ninth and tenth Five-year Plans (1996-2000 and 2001-2005). Feldman and Xie suggest this has already occurred if we integrate mainland and Hong Kong trade data into a single unit.
It is nonetheless unlikely to initiate such a move.
The US, with its own wild external deficit, should eventually try to rebalance its economy through out-competing its trade rivals in export markets. Such a move would imply a massive reduction in US consumption levels and a slump in global demand, hitting major exporters such as China. Despite the blather about US productivity gains and the New Economy, China surely has the competitive edge in any such conflict, which would not be the beneficent positive-sum struggle of Keating’s neoliberal lore.
Rather, the scenario suggests the fragmentation of the world market amidst a turbulent deflationary spiral of protectionism, currency devaluations and militarization, of profit crises, mass unemployment and colonial redivisions of markets and resources.
Readjustment of Chinese production and the industrial base towards domestic demand entails economic war with the US, a restructuration of Asian economic and political space, and in turn an ineluctable step-change for Australia.
China’s pretensions for regional dominance may appear strong, but it would have to ride the tiger of its own internal contradictions, with real potential for demographic, agricultural and ecological catastrophe.
Since re-entering the capitalist world market, Chinese development has continued the traditional trajectory of Chinese development, centred on an axis embracing Shanghai, Jiangsu and Guangdong’s Pearl River Delta. The eastern coastal provinces have historically been tied in closely with the world market, both functionally through transport links and structurally through the interlinking of domestic Chinese capital, diasporic investors and foreign finance capital.
Recent decades have seen a demographic wave of displacement from the Chinese countryside towards the cities and towns, correlating to the law of combined and uneven development, which drains out peripheries and concentrates development and populations around poles of accumulation. Beijing’s scheme to increase effective demand by tilting the economic axis towards innercontinental development in the northern and western hinterlands (Sichuan, Yunnan etc – the ‘West China Plan’ itself has received RMB 600 billion in investment over two years) may well combine with interethnic conflict, the rural strains of WTO accession, tidal immigration and the fate of state-owned enterprises in the Northeastern rustbelt to threaten internal stability and external relations with adjacent neighbours: South Asia, Russia, Central Asia and the menace of US bases beyond Tien Shan.
Continued growth will eventually – rather soon – come up against ecological and resource limit-points. These factors mitigate against the possibility of any true imperial succession with China supplanting US global hegemony. They increase the likelihood of prolonged global turmoil punctuated by war and revolution.
Possible outcomes include deepening systemic disarray and outright endgame of the capitalist world economy, a cul-de-sac from which there will be no escape.
It is clear that the United States must maintain its pre-eminent position, and cannot voluntarily cease to be world hegemon: its productive forces are too irrational and geared to military-industrial requirements to allow anything else, while 400 years have effectively exhausted the raw materials and energy resource base of the Americas.
Meanwhile the US government’s Energy Information Administration predicts that China will consume oil at the rate of 10.5 million barrels per day by 2020, indicating that it will eventually oppose US strategic manoeuvring and cut its own deal with Middle Eastern energy suppliers.
The short-term outcome to this stalemate – along with the fate of the dollar and the priceless benefits of seigniorage – is being decided in Iraq.
