Posts Tagged ‘imperialism’

War production and investment spending: how many divisions has Putin?

March 19, 2014

For a brief period in the 1920s, compelled by circumstance amid the daunting wreckage of Civil War, the new Soviet state became the world centre of development economics.

In swift order arrived Preobrazhensky’s model of surplus mobilization from agriculture (1926), Feldman’s theory of capital accumulation (1928) and Chayanov’s model of the peasant household (1925).

While the Soviet Union has since received its traumatic quietus, the topic at stake in these discussions — industrialization of a largely rural, middle-income economy, in a territory subject to repeated military incursions — never quite vanished.

Today’s reduced circumstances — notwithstanding recent short-lived bubbles of energy, real estate and stock market — grant it renewed relevance.

With the Tsarist state shattered by blows from the Hohenzollern Empire, harsh lessons were absorbed by its Bolshevik successors. One result was the theoretical flourishing described above.

With the Stalinist bureaucracy having since succumbed in no less catastrophic fashion — vast tracts of its territory excised and conceded, its population whittled down and industrial capacity reduced — no similar outbreak of reflection has been in evidence.

Yet, with capitalism restored in a diminished Russia, old issues have resurfaced for the Kremlin’s policy elite.

One the one hand, lack of internal macroeconomic development bridling Moscow’s military capacity and curbing its conduct of international statecraft. On the other, lopsided devotion to war industry pilfering resources that might otherwise augment Russia’s stock of capital equipment and infrastructure.

Such is the state of disarray, domestic and external, as NATO presses its forces and weaponry against ex-Soviet borders.

In 1930 Tukhachevsky’s proposal to create a ‘military-planning complex’ was dismissed by Stalin, who greeted it with the accusation of ‘red militarism.’

It was, Stalin said, ‘the result of an entertainment with leftist phrases, the result of a play with paper, bureaucratic maximalism… To carry out such a “plan” would certainly ruin the economy of the country, and the army’.

Tukhachevsky had mused about increasing the number of motorized and mechanized units, combining artillery and tanks with airpower:

The success of our socialist construction, as well as the changes in the countryside, put the whole question of a reorganization of the armed forces on the agenda, due consideration of all the new factors of technology and the possibility of mass-scale production of armaments.

By 1933, he suggested, the Soviet Union could maintain 40 000 operational aircraft and 50 000 tanks, allowing 240 infantry, 50 artillery and 20 cavalry divisions:

These figures characterize (by modest indications) our prospective production capacity in aeroplanes and tanks and call for the appropriate organizational forms of the Red Army, which the Army inevitably must adopt.

Stalin, in his clotted style, responded thus to Tukhachevsky’s ‘super rearmament’:

In his ‘plan’ the essential is lacking, that is, there is no calculation of the realistic possibilities in the economic, financial and cultural dimension. This ‘plan’ definitely distorts any conceivable and permissible proportions between the Army, as one part of the country, and the country, as an entity with limits in the economic and cultural dimension. ‘The plan’ fulfils the views of ‘purely military’ men, who often forget that the army constitutes a derivative of the economic and cultural condition of the country.

In other words, the armed forces did not generate their own surplus for reinvestment, nor cover their own operating expenses.

Instead, they depended in material terms upon subventions from the ‘basic’ industries, which set an upper limit to their size.

Ignoring this binding constraint, and engaging in drastic military expenditure, would eat away at potentially investible resources and prevent formation of the very fixed assets that might otherwise support the Red Army.

In 1930, due to the Soviet Union’s economic underdevelopment, the available surplus above current consumption seemed too meagre to squander on lofty goals of military construction, equipment and munitions procurement, which were starting from a very low base.

Supply bottlenecks obliged the Kremlin to choose between investment in new productive capacity (iron, steel, fuel, mechanized equipment, transport infrastructure) and military spending.

Yet by the end of the second Five-Year Plan in 1938, an armaments industry had been erected that, numerically speaking, met Tukhachevsky’s grandiose hopes: doubling its staff, and tripling its output, in the space of four years.

Once complementary investments had come on-stream, capacity existed to build a war machine.

RW Davis - Planning for mobilization

Mark Harrison - Second five-year plan

During interwar years, of course, this story was hardly unique to the new Soviet Union.

The developmental state in Japan provides the obvious comparison: accumulating a stock of fixed capital (shipyards, blast furnaces, automotive plants) that provided Tokyo with a heavy-industrial base for armaments production.

But after 1945 Japan became a US protectorate. Since then, under Washington’s security umbrella, Japanese militarism has no longer frittered away the investible surplus (nor, after MacArthur’s land reform, have an idle class of unproductive landowners). With the hegemon picking up Cold War military overheads, a high proportion of scientists and engineers became available for R&D in the civilian economy.

Partly as a result, down to the 1980s capital goods used per worker and labour productivity increased more rapidly in Japan than anywhere else in the world.

On the other hand, Russia has constituted a national anomaly. For in this perennial Kampfplatz the issue has reappeared insistently, history having contrived no resolution in the form of a benevolent suzerain.

Consider Engels’s remark in 1890 on the results of the Crimean War:

The war had proved that Russia needed railways, steam engines, modern industry, even on purely military grounds. And thus the government set about breeding a Russian capitalist class…

[The] new development of the bourgeoisie was artificially forced as in a hot-house, by means of railway concessions, protective duties, and other privileges; and thus a complete social revolution was initiated in town and country, which would not allow the spirits once set in motion to return to rest again.

Again and again, Moscow’s status as a Great Power, and the country’s security from external threat, has posed for the Kremlin the ‘conceivable and permissible proportions between the Army, as one part of the country, and the country’.

How should the surplus be divided between military spending (wastefully diverting resources from the civilian economy and thus impeding productivity growth) and accumulating new industrial capacity (investing in fixed assets that provide the economic basis for warfare and peacetime geostrategy)?

At different times, depending on parameter values, military expenditure and fixed-capital formation (and labour productivity) might be complementary, moving in sympathy as under Stalin during the 1930s (when both rose) and the 1990s under Yeltsin (when both collapsed). Or they could conflict, moving inversely as in the late Brezhnev years (again, to unhappy effect).

As Stalin noted, this was a problem of apportioning society’s total workforce and other resources to specific activities and different lines of production.

For any economy, some tradeoff necessarily exists: every society needs to allocate its aggregate labour resources  person-years per year, or simply working-age persons  between particular tasks or occupations.

A capitalist society generally does this by means of price signals: private investment flows into the most profitable lines of production, increasing labour demand and employment in these activities.

During wartime mobilization, however, labour is deployed to the desired tasks by ‘political’ methods: conscription of prime-age males, placement of orders and procurement by state planning boards, and other bureaucratic procedures.

Even during peacetime, resource planning proceeds at its highest level using ‘in-kind’ physical units. The US Defense Department specifies to Boeing or Northrup Grumman how many combat aircraft or jet engines it needs to procure.

RW Davies - Soviet weapon production

nimitz class supercarrier

What about ex ante mobilization by a state preparing to go to war?

A state fighting a prolonged war cannot just myopically allocate all its labour resources to the war-front in the hope of immediate victory. It must prepare and maintain the civilian productive capacity of heavy industry and capital goods  steel production, shipbuilding, aviation, construction, munitions and armaments, chemicals and engineering, vehicles and parts, fuel and power supply  as well as food, clothing, medicine, transport, communication, etc.

Long-term creation of such a military-industrial base, in order to boost war-making potential, is known as ‘armament in depth.’

Under Stalin, much of this industrial base (e.g. Magnitogorsk) was deliberately dispersed eastward beyond the Urals and Siberia, far from European predation from the west and with its own nearby deposits of fuel and minerals (e.g. the Kuznetsk Basin).

Industrial facilities of this sort provide necessary inputs for the armed forces. Alternatively, during peacetime this military-productive base may produce civilian goods for households or firms, while being available to switch to armaments production in the event of mobilization.

During the 1930s, Stalin’s government maintained enormous peacetime spare capacity in its armaments sector. This exchange was recorded at a meeting of officials in the Heavy Industry Commission.

M.M. KAGANOVICH: You have 500 or 600 machine tools tied up with wire.

I.I. PAVLUNOVSKII: It’s not my fault that there is no war. (Laughter). It is better that these machine tools remain tied up. They are mobilization resources, special equipment, and we must base our current estimates on equipment which is actually working.

Factories and equipment did not merely lay idle, but were also used to produce civilian goods. The historian R.W. Davies records:

[A] document about the planned new artillery and ammunition factories proposed that the artillery factories should manufacture refrigerators, compressors, and road construction equipment, shell factories should make machine tools and ball bearings, explosives factories should make bicycles, gramophones, and metal goods, and gunpowder factories should make plastics and artificial leather.

Including this heavy-industrial base, during the Second World War the war economy of the belligerent states directly and indirectly mobilized up to a half of each society’s total workforce.

Harrison - workforce mobilization in WW2

This demanded enormous fiscal outlays: military expenditure absorbed between 50% and 75% of gross output in Germany, Britain and the Soviet Union.

Government borrowing on this unprecedented scale had been made possible by institutional changes during the previous few decades, which had stabilized government finances while improving credit.

In particular the establishment of central banks and collapse of the gold standard allowed liquid markets for state liabilities to develop.

Liberty bonds

Indeed, most Great Powers had already undertaken such changes, which allowed them to appropriate a huge share of economic output, in time for the Great War.

WW1 government spending in national income - Broadberry and Harrison

The United States, something of an imperial laggard, had more than rectified this lack by the 1940s.

In Stalin’s Soviet Union, where the amount of state procurement was decided in physical terms by the planning bureaucracy and then balanced via a turnover tax, military spending rose from 2% of national output in 1928 to 6% in 1937 and 15% in 1940, roughly the same proportion as in Hitler’s Germany.

Harrison - resource mobilization in world wars

Recall that the level and direction of military spending tells us how labour and other resources are distributed, by whatever means, between different sectors and branches of industry. Resources deployed for military purposes thereby become unavailable for alternative uses.

Diverting resources away from these alternatives uses may, as Adam Smith pointed out, be self-defeating for security purposes. A growing military depends on productivity improvements in other sectors (so that resources are freed up for unproductive use on warfare), yet in return technical improvements in the military sector exercise no such beneficial effect on other industries (I’m referring here to final output rather than intermediate products such as engines).

If, due to some technical innovation, farming grows more efficient then food and livestock become cheaper and more peasants, freed from the land, are available to send to the armed front, and once there will be provisioned at lower cost. But if some invention makes cruise missiles cheaper to produce there is no flow-on to make any production process in future periods cheaper. The state can simply afford more of them. A cruise missile, being purely destructive, is like a luxury good in that it doesn’t enter into the production of other goods, either directly or indirectly.

f-16

By 1950 Soviet military spending had declined to 9% of national output. But it spiked again with the Korean War and would subsequently yo-yo obediently over the next 40 years in response to each geopolitical exigency, arms race or change of mood in Washington.

Thus from the early 1970s Brezhnev’s Kremlin dramatically increased the level of R&D devoted to military ends. This, which diverted technical employees (engineers and scientists) away from the civilian economy, helped lead to slower productivity growth in the productive core of the economy.

Coal, oil and steel  the foundation of the Soviet productive base  performed calamitously from 1975 as existing low-cost reserves were depleted and, with technical progress stalled, no adequate replacements found (e.g. the resort to low-quality lignite). The oil price collapse of 1986 would strand hunks of high-cost infrastructure: ageing fields, pipelines and railways littered across West Siberia from Kazakhstan to the Arctic Ocean.

The CIA concluded that by the early 1980s military spending as a proportion of Soviet GDP was around 16%, one-third above its level in the 1960s, and made up one-third of total budget outlays.

A series of RAND Corporation reports claimed that Soviet military clients enjoyed preferential input supply and other priorities that were impeding productivity growth in the civilian economy:

The military R&D sector benefits from a high-powered priority system that overrides the planning network. It receives ample resources and facilities; it has first claim on supplies, specially produced items, and scarce resources. Finally, there are no spillover effects to the civilian economy. This disadvantage stems from secrecy, the need to limit new materials and components, and lack of funds to diffuse the achievements of military R&D.

High-voltage power transmission and oil pipelines from Siberia and Kazakhstan to the country’s west, improved exploration and drilling technology and other projects necessary to maintain and upgrade the Soviet industrial base (and with it the armaments sector) were neglected.

With a falling share of net investment in the plans of the 1970s and 1980s, the immediate needs of the armed forces and those of expanding the country’s productive capacity had entered into sharp conflict.

Robert Allen - Soviet productivity growth by industry 1965-1985

Robert Allen - Soviet TFP 1928-1989

Worse was soon to come after the Kremlin bureaucracy, sensing its moment, opted to restore the old regime.

From 1991, rundown and destruction of the former Soviet Union’s capital stock had the useful result (for Washington) of shrivelling Moscow’s industrial base for military activities.

Absolute deindustrialization would be prolonged and severe. Under Yeltsin, and with technical assistance provided by the US Treasury and Harvard Boys, Russian fixed investment fell by 40% in a single year, reaching an abysmal 12% of GDP in 1999.

With its factories, capital equipment and infrastructure depreciated or sold for scrap, with local savings plundered and assets filched abroad, the Russian state would not rejoin the world market as a peer competitor, but only as supplicant.

Anointed on a glad-handing visit to Washington, and eager to please, a supine Yeltsin agreed to reduce military spending by 15% in a single year.

Yeltsin

Since the ‘recovery’ engendered by the oil-price takeoff after 2001, productive investment has remained feeble, barely reaching levels necessary to cover physical depreciation.

A speculative inflow of liquidity from 2004 channelled funds into Russia’s financial system, prompting appreciation of the ruble and an asset-price bubble in local stocks and real estate.

These financed a consumption splurge as foreign goods became cheaper and borrowing more affordable (credit grew by 36% in 2006-2007). But the high exchange rate made non-oil exports uncompetitive and further hollowed out the industrial base. The crash in 2008 saw GDP fall by 8 percent, amid a chain of bankruptcies and defaults.

Today Russia’s surplus product is dissipated on baubles and kitsch displays, embodied in luxury consumption goods imported from abroad for its rentier class. Under Putin, the latter have grown plump but the territory’s productive capacity wanes.

The surviving stock of capital equipment and buildings is disproportionately old, low quality and economically unviable.

Yeltsin’s procurement cutbacks during the 1990s have meant that Russian military equipment is older still: successive Chechen campaigns revealed heritage trucks, helicopters, weapons and armour to be scarcely operable. The Georgian performance in 2008 provided little reassurance.

Though oil revenues have recently allowed Moscow to commence a modernization drive in military hardware, two decades of atrophy have taken their strategic toll. Force disposition reflects straitened circumstances.

Russian military capability 2013

Local conditions were thereby prepared for NATO’s strategic encroachment on the ex-Soviet space (‘From containment to enlargement’, in the words of Clinton’s National Security Advisor).

Since 1991, the latter has involved territorial dismemberment of the collapsed state across its southern and western perimeters, followed swiftly by NATO’s absorption of ex-Soviet Baltic states.

Poland, Lithuania, Latvia, Estonia and Ukraine now provide a cordon sanitaire between Russia and Germany, while extension of NATO’s security alliance to include Romania, Bulgaria and perhaps (long touted) Ukraine allows US domination of the Black Sea and Caspian basin, and thus of the Caucasus and Central Asia.

Moscow’s capacity for naval power projection into the Baltic and Mediterranean, and overland links to the Persian Gulf via the Caucasus and Caspian Basin, have been abruptly diminished.

The extent of the ‘peace dividend’ won by Washington was bluntly spelt out by Brzezinski in The Grand Chessboard (1997):

The collapse of the Soviet Union produced a dramatic historical reversal. In the course of merely a few weeks in December 1991, Russia’s Asian space suddenly shrank by about 20 percent, and the population Russia controlled in Asia was cut from 75 million to about 30 million. In addition, another 18 million residents in the Caucasus were also detached from Russia. Making these reversals even more painful to the Russian political elite was the awareness that the economic potential of these areas was now being targeted by foreign interests with the financial means to invest in, develop, and exploit resources that until very recently were accessible to Russia alone.

[...]

The collapse of the Soviet Union produced monumental geopolitical confusion. In the course of a mere fortnight, the Russian people  who, generally speaking, were even less forewarned than the outside world of the Soviet Union’s approaching disintegration  suddenly discovered that they [sic] were no longer the masters of a transcontinental empire but that the frontiers of Russia had been rolled back to where they had been in the Caucasus in the early 1800s, in Central Asia in the mid-1800s, and much more dramatically and painfully  in the West in approximately 1600, soon after the reign of Ivan the Terrible.

[...]

In brief, Russia, until recently the forger of a great territorial empire and the leader of an ideological bloc of satellite states extending into the very heart of Europe and at one point to the South China Sea, had become a troubled national state, without easy geographic access to the outside world and potentially vulnerable to debilitating conflicts with its neighbours on its western, southern, and eastern flanks. Only the uninhabitable and inaccessible northern spaces, almost permanently frozen, seemed geopolitically secure.

Brzezinski former Soviet Union

At this turn of events, Brzezinski, like Clinton, felt the Kremlin’s pain:

Most painful of all, Russia’s international status was significantly degraded, with one of the world’s two superpowers now viewed by many as little more than a Third World regional power, though still possessing a significant but increasingly antiquated nuclear arsenal.

But the foreign-policy strategist must keep his head and focus on the prize:

The disintegration late in 1991 of the world’s territorially largest state created a “black hole” in the very center of Eurasia. It was as if the geopoliticians’ “heartland” had been suddenly yanked from the global map.

The collapse of the Russian Empire created a power void in the very heart of Eurasia….

For America, this new and perplexing geopolitical situation poses a crucial challenge… [The] long-range task remains: how to encourage Russia’s democratic transformation and economic recovery while avoiding the reemergence of a Eurasian empire that could obstruct the American geostrategic goal of shaping a larger Euro-Atlantic system to which Russia can then be stably and safely related.

In this project of permanently subjugating an enfeebled Moscow, and reducing its territorial influence to a narrow rump, one (Ruthenian) treasure held particular value:

Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire. Russia without Ukraine can strive for imperial status, but it would then become a predominantly Asian imperial state, more likely to be drawn into debilitating conflicts with aroused Central Asians… However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as its access to the Black Sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia. Ukraine’s loss of independence would have immediate consequences for Central Europe, transforming Poland into the geopolitical pivot on the eastern frontier of a united Europe.

The truth of the matter was crisply put: ‘Now a non-Eurasian power is preeminent in Eurasia — and America’s global primacy is directly dependent on how long and how effectively its preponderance on the Eurasian continent is sustained.’

This sober reckoning of respective forces supplies a bracing antidote to today’s Euro-American media consensus, the weight of the political class behind it, for which a ravening Muscovite bear again stalks Eurasia.

Brzezinski - NATO axis 2010

Income distribution, technical change and foreign policy in Germany since reunification

September 26, 2013

The less than innocuous totems of the Kohl-Schröder-Merkel years Luftwaffe flying combat missions over the Balkans for the first time since 1945, Joschka Fischer’s theatrical turn at the UN, monetary rules devised in Frankfurt acquiring continental sway, Bundeswehr preserving NATO’s client state in Afghanistan, Lisbon Treaty signed under German presidency of the EU  — require some explanation deeper than that offered, typically, by polite journalism.

What, besides momentary calculation of interest and symbolic expediency, drives the Aussenamt since its return to Berlin?

How, in particular, do the internal features of German society — broadly, the manner in which economic output is generated and the pattern of its distribution between classes  affect Berlin’s external stance?

Influence running in the opposite direction — from world conditions to domestic performance and growth trajectory — is plain enough to see, and widely acknowledged.

With exports making up around 50% of German GDP, the chronic global macroeconomic imbalances of the last 45 years have governed the recent evolution of the German economy more than most.

This post is a quick guide to how and why some of Germany’s key economic variables have changed since 1990.

What, finally, does their trajectory imply for Berlin’s future role in world affairs? Above all, how resilient is German Atlanticism, the keystone in the arch of the postwar Federal Republic, likely to prove?

As Angela Merkel embraces photo opportunities in Afghanistan, and deploys new expeditionary forces to Central and West Africa, are Strobe Talbott and his juniors at the Brookings Institution correct to fret about a fraying of Berlin’s commitment to NATO?

In the 1970s, following the Nixon Shock, West German firms and their Japanese counterparts famously maintained export competitiveness, despite sharp currency appreciation, by switching rapidly to new capital-intensive techniques (those using more capital goods per worker).

Mechanization, for a time, reaped higher levels of labour productivity (output per worker).

To be sure, technical progress during the 1970s and 1980s would be slower than it had been in the previous ‘miraculous’ two decades.

But, under the SPD administrations of Brandt and Schmidt, followed by Kohl’s long reign, the Bonn republic’s annual growth rates (labour productivity at 2.7%; capital intensity at 3.4%) still outpaced those of other advanced economies besides Japan.

Since labour productivity grew faster than real wages, the wage share in West German national income fell steadily from 1974 onwards.

Wage share GDP - West Germany

Yet this capital-deepening approach was no longer feasible by the time of later currency shocks: the 1985 Plaza Accord, the Exchange Rate Mechanism and the 1999 advent of European monetary union.

In the decade following the collapse and annexation of the Stalinist DDR, unfavourable technical conditions prevailed in the Bundesrepublik. The much-decried fiscal burdens of reunification, mesmerizing popular media if not policy elite during Kohl’s prolonged dotage, distracted from this deeper malaise.

By the early 1990s, further accumulation of fixed capital (by German firms switching to more capital intensive techniques) no longer yielded a proportionate rise in labour productivity.

In other words, adding more capital goods per worker did not sufficiently increase output per worker.

It also reduced ‘capital productivity’ (the output-capital ratio, or value-added per D-Mark of capital used).

Labour productivity - Germany

Output-capital ratio - Germany

Labour productivity and capital productivity - Germany

Constrained by declining profitability, fixed investment slowed down.

Capital-labour ratio Germany

How then were German firms, unable to resort to currency devaluation, to retain their export markets against competitors?

Unit labour costs needed to be held downwards, as before. But since labour-saving technical change was exhausted, real wages would tend to rise faster than labour productivity.

A deflationary solution was soon provided.

Following the opening of vast labour reserves in eastern Europe, came the ascent to power of the SPD-Greens coalition in 1998.

In 2002, amid much excitement in the press at delivery of cures long prescribed, Gerhard Schröder unveiled his Hartz/Agenda 2010 ‘reforms’ to the labour market.

To the applause of the Economist and the OECD, German real wages entered a decade of prolonged stagnation and decline, amid the growth of sporadic or intermittent employment (so-called ‘mini-jobs’).

Real wage - Germany

Since labour productivity, though still sluggish, now rose faster than real wages, the share of value-added won by employees fell.

Wage share GDP - Germany

The declining wage share counteracted the fall in the output-capital ratio, allowing profitability to rise.

Profit rate - Germany

In 2005 at the World Economic Forum in Davos, Schröder boasted that his government had ‘built up one the best low-wage sectors in Europe.’

The combination of slowing accumulation of fixed capital with greater income inequality (the ratio of non-wage income to wages) has indeed restored the profitability of German firms.

Nonetheless, as the country’s enormous trade surpluses since 2002 show, this has entailed a shortage of domestic spending.

The sum of workers’ consumption, capitalist consumption and private investment, plus government spending is insufficient to absorb Germany’s surplus product domestically.

Instead, locally-owned firms depend for their demand on global liquidity from deficit countries in southern Europe, the United States and Britain (whose propertied classes thereby appropriate a share of the surplus produced by German workers).

Meanwhile Germany’s persistent trade surpluses allow its firms, like those in China and Japan, the opportunity to acquire claims over capital assets in these net debtor countries and elsewhere.

Particularly in the satellite economies of Mitteleuropa  the Czech Republic, Poland, Hungary, Slovakia, Slovenia, Romania, Bulgaria, Austria, Belgium, the Netherlands, Sweden, Finland, northern Italy, etc.  German firms have acquired title to growing numbers of capital assets: shipping out machinery, factory equipment and outsourced or offshored operations.

Germany’s increasing stock of capital holdings abroad, plus its dependence on export markets sustained by US spending, helps explain Berlin’s strategic posture since 1990.

This may be seen in the remarks of German president Horst Köhler, a former president of the IMF, who in 2010 explained the Bundeswehr’s mission in Afghanistan:

A country of our size, with its focus on exports and thus reliance on foreign trade, must be aware that… military deployments are necessary in an emergency to protect our interests  for example when it comes to trade routes, for example when it comes to preventing regional instabilities that could negatively influence our trade, jobs and incomes.

For the moment, German property-owners and the German state rely, for a stable internal social order and the fulfilment of external aspirations, upon the successful functioning and continued growth of a world economy that operates under US leadership.

While an integrated world market is intact and international financial architecture continue to function under US protection, the German ruling elite benefits from access to markets and resources, maintained asset values, custodial military support and access to advanced technology, inward investment and protection of external property holdings.

Berlin, to be sure, has real interests and strategic goals which strongly contradict those of Washington.

Nonetheless it is committed, for the moment, to aiding, sponsoring and materially supporting US hegemony. This subordination is embodied in the post-1945 alliance structure of NATO unified command.

Hence Berlin’s support for (if not always fulsome participation in) successive US military expeditions since the 1990s.

Yet, as the case of Willy Brandt (if not Joschka Fischer) makes clear, the lofty sentiments of German Atlanticism rest on a merely temporary alignment of interests.

The convergence between Berlin and Washington will not survive a systemic breakdown and crisis of international markets and finance capital that stifles international trade and investment flows.

Latent competitive ambitions can be perceived without much effort. Concealed beneath the overtly sterile phrases of contemporary state officials are the same fixations that preoccupied German imperialism in the 1930s.

Recent years saw the formation by BASF, Bayer, ThyssenKrupp, Daimler and other German firms of a Resource Alliance. This lobby aims to ‘secure key raw materials in the face of mounting competition from emerging economies.’

Its website explains that ‘international markets can no longer guarantee the availability of relevant raw materials in the required quantities. Thus, German industry therefore again needs direct access to raw materials through involvement in commodity projects in foreign countries.’

Handelsblatt February 2013

In July this year the Frankfurter Allgemeine Zeitung hosted an Energy Security conference which brought together ‘high-level policy makers, representatives from the energy industry and energy experts from non-governmental organisations.’

Speakers included Deutsche Bank executives and the German environment minister, as well as officials from the oil ministries of Iran, Turkey and Iraqi Kurdistan.

They were to ‘focus on political developments in producing countries, particularly the security and geostrategic implications of changing global energy supply routes’:

In the face of growing dependency on oil and gas imports, safeguarding the reliable supply of energy lies at the heart of national and international policy agendas.

The German foreign ministry, its troops placed astride the Oxus river since 2001, touts Central Asia for its ‘as yet untapped gas and crude oil reserves which could be a factor in diversifying Europe’s energy supplies.’

The Central Asian Water Initiative, by which Berlin directs and oversees ‘regional agreement and cooperation on vital resources’, seeks to use the ‘green economy’ to expand its diplomatic influence, while favouring German construction, energy, agriculture and transport firms in the Central Asian marches of the former Soviet Union.

Since 2002, the Termez airbase in Uzbekistan has provided logistical support and a regional footprint.

termez

Finally, one may heed the words of Angela Merkel’s parliamentary spokesman for foreign affairs:

As an open economy closely integrated into the world market, Germany owes much of its prosperity to the stability of the international financial system and open world markets, as the current global economic and financial crisis has so starkly demonstrated…

In addition to this, as a heavily export-oriented economy, we have a great interest in securing maritime trading routes. This is why it is right for the German Navy to be involved in fighting piracy at the Horn of Africa.

Germany’s security depends not least on the most unrestricted possible access to the markets for energy and other raw materials. The German Federal Chancellor has made energy and raw material security an important theme of her chancellorship. The risks that are associated with our heavy dependence on energy supplies from abroad were made abundantly clear by the Russian-Ukrainian gas conflict at the beginning of the year.

Climate protection is closely connected with questions of energy security….

Recently the Handelsblatt was unable to resist characterizing the Desertec project, a North African venture of Deutsche Bank, E.ON and RWE, as a search for Germany’s ‘place in the sun’.

Invoking a ‘hunger for energy’, the business newspaper explicitly recalled the ‘historical precedent’ of the Berlin-Baghdad railway line.

Since the 1960s, and especially since the late 1980s, German and French policymakers have tried with meek persistence to build up an autonomous European military instrument. This would have the capacity to act independently of Washington, projecting power outside Europe in pursuit of their own distinct strategic goals.

The collapse of Stalinist rule in Moscow and Berlin stirred pious hopes that the US-led Cold War security apparatus might also be dissolved.

Instead, European ambitions have again been subordinated to Washington, as NATO has found a new line of business in ‘humanitarian interventions’, peacekeeping operations and the Global War on Terror. Creation of a new supranational political entity, the EU, has not changed matters.

Berlin thus remains reliant, for now, on US cruise missiles and logistics capacity for any expeditionary operations. It cannot openly defy Washington, cut its own deal with energy suppliers, etc.

Yet a prolonged downturn in growth trends, or some other rupture in the capitalist world-system  final annulment or momentary suspension of the postwar practice of interstate benefaction and mutual conviviality of trade — may soon force German rulers to seek a specifically German solution to their problems.

Swimming in it

September 18, 2013

From Part Six of Paul Carell’s Hitler Moves East, 1941-1943:

In the economic field Hitler’s obsession was oil. Oil to him was the element of progress, the driving force of the machine age. He had read everything that had ever been written about oil. He was acquainted with the history of the Arabian and American oilfields, and knew about oil extraction and refining. Anyone turning the conversation to oil could be sure of Hitler’s attention. Goering was put in charge of the economic four-year plan because he was playing Hitler’s favourite card: oil.

Typical of Hitler’s attitude is an attested remark he made about an efficient civil servant in the Trade Policy Department of the German Foreign Office: “I can’t bear the man – but he does understand about oil.” Hitler’s Balkan policy was based entirely on Rumania’s oil. He had built into the Barbarossa directive a special campaign against the Crimea, merely because he was worried about the Rumanian oilfields, which he believed could be threatened by the Soviet Air Force from the Crimea.

[...]

Every one of Hitler’s idées fixes played its fatal part in the war against Russia – but most decisive of all was his obsession with oil.

From a lengthy secret report produced in 1946 by the British Defence Ministry, titled ‘Oil as a Factor in the German War Effort, 1933-1945′:

Bent upon the total mobilisation of all domestic resources, the National Socialists, from the moment of their seizure of power, did everything possible to expand crude oil production.

The Mining Laws were immediately altered to permit large-scale exploration and a comprehensive geophysical survey was set on foot. A large programme was worked out for increased drilling and exploration with public funds and, in addition, industry was compelled to spend large sums of its own for the same purpose.

As a result of these measures total drilling increased from 62,000 metres in 1932 to 220,000 metres in 1938, the exploration drilling in virgin areas increasing from 13,000 to 100,000 metres. The effect was a 150 per cent, growth in crude oil output.

Addendum to Hitler’s Directive No. 34, addressed to the Army’s High Command (OKH) on 15 August 1941:

The most important missions before the onset of winter are to seize the Crimea and the industrial and coal regions of the Don, deprive the Russians of the opportunity to obtain oil from the Caucasus… rather than capture Moscow.

Case Blue

Hitler to Friedrich Paulus and other members of the OKH, 1 June 1942, at the Ukrainian headquarters of Army Group South: ‘If I do not get the the oil of Maykop and Grozny, then I must end this war.’

Hitler’s table talk from August 1942, speaking from his new HQ Werwolf:

We must at all costs advance into the plains of Mesopotamia and take the Mosul oil-fields from the British. If we succeed here, the whole war will come to an end, for the British have now only Haifa as their sole loading port for oil.

As regards oil, statistics show that the Russians until quite recently obtained 92 per cent of their oil from the Caucasus.

Carell on Operation Blue (see Hitler’s directives number 41 and 45), June 1942:

[Hitler] had decided to try something entirely new after the unfortunate experiences on the Central Front in the previous year, and to seek the decision in the south by depriving Stalin of his Caucasian oil and by thrusting into Persia. Rommel’s Africa Army played a part in this plan.

The “desert fox,” who was just then preparing his offensive from Cyrenaica against the British positions at Gazala and against Tobruk, the heart of the British defence of North Africa, was to advance right across Egypt and the Arabian Desert to the Persian Gulf.

In this way Persia, the only point of contact between Britain and Russia, and after Murmansk the greatest supply base of US help for Russia, would be eliminated. Moreover, in addition to the Russian oilfields the very much richer Arabian oilfields would fall into German hands.

German military intervention in Iraq had commenced the previous year, threatening what Time magazine called ‘the carotid artery of the British Empire, the Mosul-Haifa oil pipeline.’

Hitler’s Directive No, 30 announced support for ‘forces hostile to England in the Middle East’, while Rommel undertook ‘an offensive against the Suez Canal, finally to break the British position between the Mediterranean and the Persian Gulf.’

Directive No. 32 then envisaged the ‘despatch of a motorized expeditionary force from Transcaucasia against Iraq’.

Meanwhile British and Soviet forces had occupied Iran to secure oil wells, refineries and export terminals in Khuzestan, and preserve their supply lines through Central Asia.

Iraq petroleum company pipeline

Persian Corridor

Hitler in August 1942, after Maykop was taken: ‘In the East it will be all over once we have cut their communications to the south and to Murmansk. Without oil they are finished!’

The opportunities for plunder offered by the Ukraine and Caspian oil excited particular giddiness and dreams of autarky:

There are here a million tons of wheat in reserve from last year’s harvest. Just think what it will be like when we get things properly organised, and the oil-wells are in our possession! …

When the war ends, the German people need not bother its head about what it is going to do during the next fifty years!

We shall become the most self-supporting State, in every respect, including cotton, in the world. The only thing we shall not have will be a coffee plantation — but we’ll find a coffee-growing colony somewhere or other! Timber we shall have in abundance, iron in limitless quantity, the greatest manganese-ore mines in the world, oil — we shall swim in it!

And to handle it all, the whole strength of the entire German man-power!

NY Times Maykop 1942

The German chancellor, dazzled by cornucopian visions, anticipated the realization of Generalplan Ost, the most ruthless of 1930s imperial projects, which had succeeded the earlier visions of the Pan-German League and the September Program.

The fertile and mineral-rich East would supply German enterprises with raw materials, and German farmers would populate a soon-to-be denuded steppe:

The river of the future is the Danube. We’ll connect it to the Dnieper and the Don by the Black Sea. The petroleum and grain will come flowing towards us.

The canal from the Danube to the Main can never be built too big.

Add to this the canal from the Danube to the Oder, and we’ll have an economic circuit of unheard-of dimensions.

Europe will gain in importance, of herself. Europe, and no longer America, will be the country of boundless possibilities. If the Americans are intelligent, they’ll realise how much it will be to their interest to take part in this work.

There is no country that can be to a larger extent autarkic than Europe will be. Where is there a region capable of supplying iron of the quality of Ukrainian iron? Where can one find more nickel, more coal, more manganese, more molybdenum? The Ukraine is the source of manganese to which even America goes for its supplies.

And, on top of that, so many other possibilities! The vegetable oils, the hevea plantations to be organised. With 100,000 acres devoted to the growing of rubber, our needs are covered.

[...]

Through the Black Sea and up the Danube will come iron, manganese ore, coal, oil, wheat — all in an unending stream.

In 26 July 1942 one could find Hitler daydreaming over lunch about the discovery of vast new oil deposits:

The presence of oil in the Caucasus, in the vicinity of Vienna and in the Harz leads one to suspect the existence of an oilfield of whose magnitude and importance one had not the least idea. This is not in the least surprising. As in the case of mineral wealth, the trusts would immediately buy up any newly discovered oil-bearing territories, with the intention of restricting their development to a degree compatible  with their other interests; in this, their primary object would be to prevent exploitation by others.

One must give the Russians their due and admit that, in this respect, they have succeeded in limiting the power of monopolies and eliminating private interests. As a result, they are now in a position to prospect throughout their territory for oil, whose position and probable extension are studied by experts with the assistance of very large-scale maps. In this way, they have not only been able to trace the course of the oil-veins, but have also verified their  facts and extended their knowledge by test borings carried out at the expense of the State. There is a lot we can learn from them.

There is no limit to what we could have extracted from the sources in the vicinity of Vienna, if the State had undertaken the necessary exploitation in time. This, added to the oil-wells of the Caucasus and Rumania, would have saved us from all anxiety for the future. One must not, however, forget that oil-wells are not inexhaustible; and that is why I am still in favour of gas-driven public vehicles, and particularly of gas-driven vehicles for the Party.

Yet these lofty goals were prompted not by grandiose delusion but by simple exigency.

Hitler’s private fixation on oil wasn’t simply a matter of his personal idiosyncracies or predilections. It met the most remorseless, pressing imperative facing the German elite: to secure oil for the Wehrmacht and deny it to the Red Army and British Empire.

Oil lay at the root of Hitler’s notorious difficulties with the Army’s High Command (OKH), whom he said ‘know nothing about the economic aspects of war.’

Germany had abundant supplies of coal in the Ruhr and Silesia, but other strategic materials were less plentiful. For their ongoing supply to be assured against interruption or blockade, it was vital to assert military control over these sources and transport routes, both maritime and overland.

Thus Berlin’s attempt to annex the iron ore of France’s Lorraine basin during the First World War, and the last-ditch lunge for Caspian oil by General Ludendorff in 1918.

In November 1918, the British war cabinet could boast it had ‘floated to victory on a wave of oil’. Later, when describing the actions of Hitler’s government from 1933, the British Defence Ministry would recall this remark of Curzon’s, and the lessons it had imparted to Berlin.

In 1938 Göring’s Reich Office for Economic Development, chaired by the IG Farben’s Carl Krauch, had conducted technical studies into the volumes of raw materials and inputs – oil, rubber, chemicals, tungsten, copper and nickel – that Germany would need for sustained military mobilization.

It estimated that the armed forces would need 485 000 tons of oil products per month, and the entire war and armaments machine would consume almost 700 000 tons.

Estimates of German oil consumptionYet Germany had limited domestic production and refining capacity (200 000 tons per month) and deficient stocks of strategic reserves: only 2.1 million tons, barely enough to cover a few months of civilian commercial activity.

By contrast, Britain had 6.7 million tons of oil in storage at the outbreak of war. The United States, meanwhile, produced 164 million tons of crude oil in 1938, and the Soviet Union 32 million tons.

For aerial warfare, which consumed vast quantities of fuel, Berlin was dependent on unconventional, high-cost sources of energy. The Luftwaffe depended for its aviation fuel on synthetic oil produced from coal via the Bergius hydrogenation process (an alternative to the Fischer-Tropsch process).

In addition, the diesel-powered and fuel oil-driven ships and submarines of the Kriegsmarine would also need ready supplies of crude oil. So would the petrol-fuelled trucks, tanks and motorized artillery of the army divisions.

The territorial boundaries of the German state did not contain the wells and refineries sufficient to meet these needs. In 1939 Germany’s net imports reached 5.2 million tons.

Moreover, Germany’s weak balance of payments position on the current account, and the legacy of Versailles, meant that it had acquired few net assets abroad during the 1920s.

German energy firms therefore lacked the stock of external oil investments held by their continental rivals in France, Belgium and the Netherlands.

German oil production 1944

Given this deficit between its domestic oil production and consumption, and the predictable wartime imposition of naval blockades, interdictions and disruption to overland supply routes (imposed by the British and French from September 1939), German oil stocks would be rapidly depleted.

This meant that the German government’s fuel would have to come from abroad, and would need to be seized.

The Wehrmacht would capture its own oil supplies and deny them to the Red Army and British Empire:

Four days after the [June 1940] signing of the Franco-German Armistice the Office of the Four-Year Plan produced a “Petroleum Plan for Europe.” This plan foresaw a Continental oil deficit, exclusive of the requirements of Great Britain and Russia, of 18 500 000 tons a year. This deficit was to be met by 18 200 000 tons of oil from the Middle East. It is interesting that this plan made no allowance… for any consumption by Great Britain which was presumably envisaged as either standing in unconquerable isolation or as a vassal State no longer worthy of the benefits of oil.

This 1940 plan, drafted by Alfred Bentz, Göring’s plenipotentiary for petroleum, concluded: ‘To keep Europe supplied it is essential to secure the petroleum of the Middle East.’

German oil consumption

As it turned out, in 1941 the Luftwaffe consumed about 100 000 tons of oil per month, the Kriegsmarine about 100 000, and the army 200 000, for annual oil consumption of 4.8 million tons.

To meet these needs, in 1940 the Romanian oil interests of recently conquered French, Dutch and Belgian firms were acquired by German firms like Deutsche Bank, and Romanian exports were redirected to supply German industrial needs.

German shareholders had owned 0.2 percent of Romanian oil assets in 1939; by 1941 this figure reached 48 percent. One million tons of Romanian oil went to Germany in 1940 and 2 million in 1941 – by then, being distributed directly to the Wehrmacht on the eastern front.

But this wasn’t nearly enough.

Early in 1941, before the attack on the Soviet Union, the Wehrmacht’s chief of war economy Georg Thomas warned Göring that the German armed forces only had enough fuel for a few more months of operations:

It is crucial to seize quickly and exploit the Caucasus oilfields, at least the areas around Maykop and Grozny… If this is not successful, we must expect the most serious repercussions, with unpredictable consequences for military operations after 1 August and for the survival of the economy.

Göring replied that the oil resouces of Baku would soon be seized ‘at all costs.’ His notorious Green Folder, a June 1941 OKW directive setting out priorities for the Soviet operation, read:

To obtain the greatest possible quantity of food and crude oil for Germany – that is the main economic purpose of the campaign.

The same month, Thomas drafted a memo for Göring’s Economic Organization East:

The military leadership has again and again to be reminded that a campaign against Russia has largely economic motives and that in this campaign the demands of the economy must be taken into account more than is usually the case.

When winter fell early, Hitler instructed his armies to secure a position on the lower Don and Donets, and prepare for a spring offensive against the Caucasian oilfields.

Soviet Marshal Timoshenko, charged with protecting the latter, observed in late 1941: ‘The only thing that matters is oil… [We] have to do all we can (a) to make Germany increase her oil consumption and (b) to keep German armies out of the Caucasus.’

Meanwhile the Wehrmacht was attempting to seize the shipment ports and airfields of the Black Sea, to protect the Romanian oilfields on its western shore.

In Tehran in 1943, in one of his pithy wartime toasts, Stalin acknowledged that Moscow and its US and British allies were engaged in ‘a war of engines and octanes’.

In the preparation and conduct of this conflict, the supposedly private fixations of the German leadership – Hitler’s obsession with oil, which he shared with Churchill, Roosevelt and Stalin – was most propitious for German imperialism.

The interwar years had brought fragmentation of the capitalist world economy. The benevolent, positive-sum game of the Pax Britannica and the Gold Standard had broken apart into rivalrous autarkic blocs, each armed to the teeth and engaged in zero-sum competition for resources, colonial possessions and markets.

Then, as now, in any conflict between territorial states the winner would be the party that could mobilize the greatest volume of economic resources to squander on war: that could tax, requisition, procure, conscript or plunder the largest surplus from its domestic economy or external sources.

Raymond Goldsmith - WW2 munitions production

Mark Harrison - Military spending as proportion of national income

In this contest to expand war production, certain commodities, in particular oil, presented a strategic bottleneck for each contending power.

Petrol, lubricants and other oil products and distillates (POL) limited a state’s productive (and military) capacity since they were a necessary input for armament production, chemicals, transport and logistics, and military operations themselves.

A state that would advance its interests through extra-territorial aggression was therefore condemned to stalk the earth with heaving breast and slavering mouth, thirsty for oil, sequestering oil reserves from its rivals, and asserting control over supply routes.

That is why US president Roosevelt, in his April 1939 telegram to Hitler, had asked the German chancellor to ‘give assurance that your armed forces will not attack or invade the territory or possessions’ of several European states as well as ‘Turkey, Iraq, the Arabias, Syria, Palestine, Egypt and Iran.’

If Berlin would publicly commit to a ‘a minimum period of assured non-aggression – ten years at the least – a quarter of a century, if we dare look that far ahead’, then:

The Government of the United States would be prepared to take part in discussions looking towards the most practical manner of opening up avenues of international trade to the end that every nation of the earth may be enabled to buy and sell on equal terms in the world market as well as to possess assurance of obtaining the materials and products of peaceful economic life.

After 1945, Washington itself would successfully prise open the European colonial empires and, through the Atlantic Charter and Bretton Woods institutions, secure ‘equal access’ to raw materials.

In the past, once or twice I’ve mentioned Nazi Germany’s preoccupation with oil, and its central place in Hitler’s grand strategy and war aims.

But I suspect these little asides and brief allusions haven’t been very useful, since the topic is now familiar to few people.

Back in 1973, Martin Van Creveld could write that it was ‘fashionable’ to see oil as the chief motivation behind Germany’s Balkan campaign, as well as in North Africa and the Soviet East.

Who today retains this impression?

General historiography remains more fascinated than ever by the Innenpolitik of Nazi racial doctrine, the microhistory of ‘everyday life’ under Hitler, and, in the (mostly Anglophone) scholarly backwaters, the psychology of political leaders.

For Hans Mommsen, ‘the regime’s foreign policy ambitions were many and varied, without any clear aims’: merely the haphazard outcome of domestic contingencies.

Thus, for the most part, the striving for oil in Hitler’s Drang nach Osten is judiciously left to the narrow and specialized attention of military historians. The recognized scholarly monuments afford oil a passing mention, at most.

‘Left-wing’ histories, like Ernest Mandel’s The Meaning of the Second World War or Clement Leibovitz’s In Our Time: The Chamberlain-Hitler Deal, do little better.

Meanwhile, military historians writing for a popular audience (Antony Beevor’s Stalingrad or William Craig’s Enemy at the Gates) deliberately divorce their precise ‘soldier’s-eye view’ descriptions of famous battlefield ‘showdowns’ from any broader historical context, strategy, antecedents or consequences.

Thus the thirst for oil is absent from today’s conventional view of Hitler’s wars of aggression. Such an obvious elision of historical fact was not necessary until recently.

Robert L Baker 1942

Today, however, Washington is itself engaged in a full-scale drive to secure military control over the world’s energy installations, transport networks and sea lines of communication.

Once again, a desperate and predatory imperial power is trying to sweep through Iraq, Iran, the Caucasus, Central Asia and North Africa.

As this project has proceeded, it has been necessary to obliterate a prior stock of nationalist myths, wartime slogans, popular knowledge and historical interpretations, in order to sustain ‘the Allied victory over Nazi tyranny’ as an enduring ideological symbol supporting the institutions of US hegemony.

Even respectable, mainstream British historians of Nazi Germany have noted this deliberate cleansing of the historical record.

Thus Richard Overy observed, with reference to the US-led invasion of Iraq, how ‘popular ignorance about the nature of oil politics’ had been encouraged via the ‘view that oil is some kind of Marxist red herring’.

Yet, deplorably, such political confusion and historical ignorance has been spread with the help of several self-described Marxists, including the historian Robert Brenner and his epigones like Vivek Chibber.

These academics, linked to the group Solidarity, have derided as un-Marxist the idea that the 2003 invasion of Iraq was a ‘war for oil’:

With respect to neo-liberalization, the Bush offensive was, at best, beside the point, an unnecessary distraction. At worst, it could conceivably endanger the globalization project…

Because the Gore administration would have sought both to sustain the post-Cold War status quo and to further the neo-liberal offensive, it would almost certainly have confined itself to attacking Afghanistan, most likely via NATO, but eschewed a military campaign in Iraq. Against this background, the shift in US policy represented by the attack on Iraq was not even conceivable apart from 9/11…

Given the already achieved level of US geo-political hegemony — in the sense of legitimized dominance — there was so little to be gained in terms of standard US geopolitical and pro-capitalist goals, that the risk-adjusted cost — especially taking into account the multiple ways in which things could go disastrously wrong — ruled out any campaign to significantly revise the world political order.

[...]

Because the goals of the Bush administration are, in effect, so sweeping, they are not remotely capable of being put into practice. Because, in so far as they are practicable, they speak to such narrow interests, they are not easy to sell to the US elite as a whole (although it must be admitted that they command major support within the Republican Party, precisely because those interests are disproportionately represented there). In the end, in view of its meager foreign policy payoffs, how the program of these adventurers could achieve such a powerful grip upon the US state constitutes a real conundrum, from the standpoint of both theory and history.

[...]

The paradoxical conclusion of the foregoing analysis is that very broad sections of US capital support, or at least acquiesce in, a new, and breathtakingly ambitious, imperialist project that, in itself, speaks in no obvious way to their interests.

[...]

In terms of the premises that had underpinned US postwar foreign policy, there seemed little requirement, or motivation, for the sort of global campaign that the Bush administration has now unleashed.

Brenner again:

Is it really conceivable that world oil, today capitalism’s most globalised and profitable industry, would be subjected – in its production, pricing, distribution, and so forth – to government regulation by the most free-market, oil industry-dominated régime in American history? … On the other hand, any attempt by the US to use control over the oil spigot as a geopolitical weapon, by withholding oil from an opponent to extract concessions, would be considered tantamount to war – as in World War II, when the US sought to close off the supply of oil to Japan. But if the US were willing essentially to declare war by preventing another nation from accessing Middle-East oil, there would be no need to invade the Middle East in order to do so. It could merely use its control of the air and the sea to interdict the flow from that region.

And, repeatedly, from the economist Cyrus Bina:

[Why] do people find it necessary to appeal to anachronistic and misleading phrases, such as “No Blood for Oil”? Would it not be better for the Left, and for the global peace-movement in general, to re-examine the meaning of their actions and slogans? Isn’t it worthwhile for the Left to study the stigma of commodity fetishism behind this phrase?

Such remarks bespeak a view in which imperialist war constitutes an unnecessary, regrettable and messy diversion from the ordinary, clean, peaceful business of capitalism.

Today such a view is even less sustainable than it was in 1938.

Making the world unsafe

April 11, 2013

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.

FT April 10 2013

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.

construction and engineering industry

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.

But the options for elite decisionmakers are bleak. They are faced with a structural impasse, since demographic and resource constraints, and economic and political factors, militate against any prospect of imperial succession with Beijing or any other power supplanting US hegemony. There will be no repeat of 1945 and no escape from prolonged disorder.

The institutions of world capitalism are therefore in acute and probably terminal disarray.

Criminal networks and donor conferences: bankrolling insurgencies and arming them

March 26, 2013

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.

Arms shipments - Syria

Washington’s imperial caravan of weapons dealing and covert funding of political interference in other states proceeds via the aid of financial globalization, and with wheels greased by the international role of the dollar as global reserve currency and source of aggregate demand.

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, for whatever reason (domestic regulations, international sanctions, arms embargoes, diplomatic amour-propre), official channels 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.

Tax havens

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; Nugan Hand Bank in Australia; 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.

hierarchy of money

That the state issues the ultimate domestic money is natural because it has the best quality debt: a state with the power to impose tax obligations in its own currency faces virtually no liquidity constraint and is the most creditworthy borrower.

Its liabilities (i.e. currency or central-bank deposits) serve as the ultimate means of settlement for domestic payments.

But typically, most notably during the international gold standard formed after 1870, the ultimate international monetary unit has been the ‘outside money’ of gold, an asset of central banks that was no-one’s liability.

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.

Dean Acheson NATO

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 (West 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, deposit accounts at the central bank, Treasury bonds, etc.) accepted?

National currency is a token that can be used to discharge tax obligations, while state debt securities promise to yield a revenue stream of interest financed out of taxation.

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.

External holdings of US Treasuries

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.

Timor Sea - oil and gas reserves

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.

Gray later claimed responsibility for Woodside’s request for a DFAT official:

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.

Some more antiquarianism

March 21, 2013

From Clarence Darrow’s closing summation in the 1924 Leopold-Loeb murder trial:

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?

Terror Tuesdays - Obama's kill list

Short of force: US debt diplomacy in the 1920s

February 27, 2013

‘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.

Washington found itself in the novel position of global creditor, thanks largely to the enormous wartime growth of intergovernmental liabilities.

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.

Inter-Ally loans

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.

Dawes London Conference 1930

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.

Hoover described the result:

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 AffairsJohn 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 CFR’s 1928 Survey of American Foreign Relations described how federal supervision of foreign loans worked:

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.

With the suppression of Bolshevism being the foremost concern of postwar diplomacy, an embargo (not airtight) was imposed on lending to Soviet Russia.

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.

Following episodes of hyperinflation, the Hungarian ($50 000 000) and Austrian ($100 000 000) governments each borrowed stabilization funds from the League of Nations.

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.’

But above all, to stabilize its currency and return to gold convertibility, the Polish government was enjoined by Kemmerer’s experts to abandon its traditional reliance on French creditors:

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 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.

A 1927 publicity pamphlet written by John Foster Dulles for Bankers Trust read: ‘Polish stabilization is the first such operation to be realized under distinctively American leadership in all its phases.’

Poland loan 1927

Historians have drawn attention to how these ‘financial reconstruction’ programs, involving administration by external creditors, precociously anticipated features of later IMF structural-adjustment programs (compare, for example, the conditions imposed in Britain following its 1976 balance of payments crisis).

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 1927 the poet Paul Valéry observed mordantly: ‘Europe visibly aspires to be governed by an American commission. Its entire policy is directed to that end.’

September 1924 - S. Parker Gilbert - Agent General for German Reparations

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.

Lloyd George remarked:

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.

Washington used its position as global creditor to demand that its European debtors reduce their military spending.

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).

Iraq petroleum company pipeline

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.

Capital intensity in interwar Britain

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.

Interwar British profit rate

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.

Britain’s 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).

John Foster Dulles funeral 1959

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.

Dean Acheson NATO

At the crossroads

October 16, 2012

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.

And, over the past decade, Turkey’s status as Washington’s energy broker between the Caspian and Europe has been elevated. This has assumed particular importance lately during Syria’s slow-motion regime change.

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 minatory 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’.

The experience of defeat

September 26, 2012

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.

Russians had, as well, inherited a kind of ‘Oriental despotism’. Property rights weren’t secure and contracts weren’t enforced because there was no rule of law.

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:

  1. 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);
  2. Labour turnover (i.e. unemployment following rapid privatization) leading to unavailability of basic sources of livelihood, with material deprivation causing psychosocial stress (‘labour market shock’); and
  3. 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.

George Kennan, the US author of anti-Soviet ‘containment’, had complained of ‘the little group of spiteful Jewish parasites in Moscow’, who had ‘abandoned the ship of Western European civilization like a swarm of rats.’

This was a prevailing theme among twentieth-century rulers and intellectuals: 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).

The statesman speaks

September 9, 2012

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 The Atlantic and 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.


Follow

Get every new post delivered to your Inbox.

Join 77 other followers