Wednesday, February 24, 2016

Election Year Analysis/Synthesis (you won't get from the New York Times)



I write this as a Christian, a Roman Catholic in the spirit of Dorothy Day, and as a retired member of the United States Army who spent a great deal of time in a subset of that armed force called Special Operations – a euphemism for operations that are highly secretive because they are outside the law and-or ‘politically sensitive.’

The State Department

In 1983, I was in Guatemala. I was there when General Mejia-Victores led a coup d’etat against Efrian Rios-Montt’s regime. In 1985, I was in El Salvador, at the same time that President Duarte’s daughter Inez Guadalupe was kidnapped by the FMLN and exchanged for a number of prisoners. In neither case was I involved directly with those most notable events, but in both cases I was working directly out of the United States Embassy. While my actual role in these places is still classified, what I have to say about these experiences does not relate directly to the work but to my observations of the inner workings of a US Embassy, and those observations are general enough to avoid running afoul of the law.

Secretary Clinton ran the Department of State for a time, and presided over the consolidation of a coup d'etat against the democraticallhy elected government of President Manuel Zelaya. We hear little about this coup from the corporate media, because they were complicit in covering it up, just as they did the attempted coup against the elected government of Venezuela by the Bush administration and the successful coup against Haiti's elected government by the same administration. All these coups were supported by both parties, and that is - in part - what this admittedly lengthy article will try to explain.

Embassies, I discovered, were not much different than the military staffs I’d encountered. They were bureaucratic, simultaneously authoritarian and conformist, and there was great deal of superficial courtesy that papered over a red-toothed and Hobbesian struggle for career advancement – war fought not with guns but catering allowances. But more to the point, I was obliged to check the Ambassador’s itinerary each day.

As it turned out in both cases, Guatemala and El Salvador, where each of these governments was waging war against its own people, the Ambassador’s most frequent visits were not to the chief of state, or the chief of state’s staff, or even to the host nation’s military chief of staff. The most regular and frequent meetings were with the national Chambers of Commerce. This is when – for a soldier who hadn’t thought enough about it – I came to realize that politics is about business, and that the political class serves the interests of the business class through a kind of interlocking directorate.

It was around that time, in the Reagan 1980s, that macro-economic forces were shaping a new form of international economy and corresponding changes in US foreign policy.



Oil Embargo makes petrodollars

In 1973, as a protest against the U.S. rescue of Israel from an impending defeat by the Egyptians in the Yom Kippur War, Arab nations implemented an oil embargo against the U.S., creating day-long gas lines that broke up only when filling stations pumped out their last drop of gasoline.

Oil prices rose dramatically, creating a tremendous windfall profit for oil producing states. Oil was denominated in U.S. dollars, and those additional dollars were invested on Wall Street by the same oil producers who were withholding gasoline from the U.S.

Petrodollars flow to Wall Street

Wall Street does not sit on money. Wall Street firms are rentiers, that is, they use money to make more money without actually producing anything in the process; and so the glut of ‘petrodollars’ from the Arab oil states was converted by Wall Street brokerage houses into vast development loans for poorer countries, especially in Latin America. The aim of these Wall Street rentiers was to gain a royalty – interest – on the loans.

Wall Street makes loans - oops, stagflation

These loans, not unlike the subprime mortgages we know and love from the 2007-8 crash, had adjustable rates. During the latter Carter years, the United States – for reasons we won’t elaborate here – suffered something the economists hadn’t anticipated: simultaneous lack of growth – stagnation – and rapid inflation, which came to be known as stagflation.

The Volcker Shock

Federal Reserve Chair Paul Volcker responded to this with something called ‘the Volcker Shock,’ that is, since inflation was the greater danger to the rentiers, he raised the prime interest rate from 7.5% to 21.5%, doubling U.S. unemployment rates, in order to make the large creditors whole. These elevated interest rates were passed along, via Wall Street institutions, to those Latin American countries that had received the aforementioned development loans, creating a devastating economic crisis in Latin America. This shock doctrine lasted from 1979 to 1982, and when President Ronald Reagan was in office in 1982, Mexico announced that it was about to default on its Wall Street loans, stranding Wall Street with more than $100 billion in losses.

Mexico threatens default - Wall Street stands to lose

Not for the first time, and certainly not for the last, the U.S. government stepped in to bail out Wall Street’s financiers. This was a bailout loan to Mexico, but the intent and the urgency was to ensure that Wall Street didn’t take a bath on the Mexican default. The vehicle for loans to cover the previous loans to Mexico was the International Monetary Fund (IMF), an international institution formed in the latter years of World War II, in which the U.S. exercises a very dominant role. But this time, the bailout loans ‘to Mexico’ had something attached to them in addition to interest, called conditionalities.

Bailout conditions

These conditions included several ultimatums – that Mexico’s internal markets be opened to U.S.-based investors, including US multinational corporations, that labor and environmental standards be rolled back to increase the rate of profit in order to pay back the restructured loans, and that regressive tax structures be implemented – all to assist in the payback of the loans. A structural imperative, though not one of the specified conditions, was also that Mexican enterprises – in particular, agriculture – be converted from production for local consumption to export products to get more of the U.S. dollars required to service the restructured but now vastly expanded external debt. Note: Agriculture that had been oriented toward local markets was to be redesigned to make the most money in the least time, and that money had to be in American dollars.  This meant exporting to the United States.

The SAP model - or Wall Street begins running the government

Using similar crises, the IMF proceeded then, over the next few years, to impose these conditionalities – called structural adjustment programs (SAPs) – on the majority of ‘under-developed’ nations. This effectively undermined their national sovereignty inasmuch as the IMF, the World Bank, and the World Trade Organization, all US-dominated pre-market institutions that manage the so-called ‘free’ market, came to dictate the economic policies of these structurally-adjusted nations.

While these were originally contingent measures used to take advantage of Mexico’s crisis, the Reagan administration soon realized that they had stumbled onto a model that could be used around the world to open home markets to U.S. investment under conditions that were very advantageous to U.S. investors. Moreover, it was a way to capture the political leadership of debtor nations in a dollar-dominated system, which would come to be known as neoliberalism.

The N-word

I realize that this is a fly-over at several thousand feet, and that I am overlooking many of the details of this process, but I only want to establish a kind of historical context wherein neoliberalism is intelligible, in order to explain subsequent claims about U.S. foreign policy, which has been largely formed by the imperatives of neoliberal policy, administered by both Republican and Democratic leadership ever since.

Neoliberalism itself is now in a bit of a crisis, because the same financial establishment that was turned loose on the world by the emergence of neoliberalism has both worn out its welcome around the world – creating great popular resistance to its diktat – but it has also created tens of trillions of dollars of fictional value from runaway speculation, threatening the very currency around which the entire system is based. Fictional value is another way of describing what it is that fills those ‘financial bubbles’ we hear so much about.  It is value unattached to anything material.

Currency and credit

The U.S.-dominated financial system, called the “Dollar-Wall Street regime” by Peter Gowan and Susan Strange, also found a way to exercise managerial control over first world economies like Western Europe and emerging market economies like China and Brazil. This power was exercised not in the U.S. role as creditor, but paradoxically in the US role as debtor. This may seem counter-intuitive, but it is actually fairly simple to explain.

The high cost of war

This story actually begins at the end of World War II and continues to the present. The Soviet Union – itself savagely wounded by the war – attempted to secure a post-war partnership with its capitalist war allies in order to regroup. More than 27 million Soviet citizens had been killed, and cities were in ruins all the way to Stalingrad. When the Truman administration opted for the National Security State as an industrial strategy that could capitalize on the ramp-up for the war, it needed an enemy to justify the expenditures of what Eisenhower would later christen the “military-industrial complex.” The overtures from the USSR for a post-war peace were rejected in favor of official hostility by Truman. This provocative posture locked Western Europe into a military alliance with the U.S., and put an official stamp on the US foreign policy of “containment” that would persist through the Cold War and into the present.

This inaugurated a long period of proxy war, the first in Korea, later in Vietnam. While the U.S. was enjoying the fruit of post-war dollar dominance, Keynesian high employment, and a robust trade surplus, however, the militarization of U.S. domestic and foreign policy created a mounting national debt. The U.S. was indebting itself to other metropolitan nations. The U.S. was borrowing money from Europeans to finance its military adventures in Asia, then running printing presses to make up the difference. Because the dollar’s value was still fixed for redemption at 1/35th of a Troy-ounce of gold, the U.S. could print money without fear of draining the dollar of its value, which was being used for capital investment in Europe.

Inflation and exchange rates

In the theoretical market, the value of a currency is determined by how it balances against an aggregate ‘basket’ of commodities. Too few units of currency and prices fall. Too many units of currency and prices rise. The latter is inflation – the nemesis of loan sharks and bankers because it reduces the future purchasing power of collected principle and interest. So the dollar was losing purchasing power on the market, even as it remained exchangeable for European currencies at the same fixed rate of exchange.

The U.S. was printing more money, but because the dollar was fixed to gold, the Europeans were watching their markets flooded with overvalued dollars, which they had to accept. The market may have been saying that a dollar should be redeemable for francs or marks or pounds at one rate, but the post-war currency-control regime determined that Europeans had to continue to give away purchasing power with every currency exchange for devalued dollars. The U.S. was exporting its inflation to Europe by repaying its military expansion debts to Europeans in under-valued dollars.

Vietnam

So when the first Special Forces advisors went to Vietnam in 1957, the system that appeared so robust on the surface was already creating the conditions for its next crisis.

The Europeans, later buying gold elsewhere at well above the $35 per Troy-ounce rate, held onto their dollar-denominated assets, hoping to redeem their dollars at something approaching their initial investment later. But by 1967, with the Vietnam War driving the U.S. deficit to record levels, France started cashing dollars out for US gold at the undervalued $35-an-ounce rate, draining the US gold stock. The Keynesian system of tightly controlling rentiers (whose unregulated speculation had led to the Great Depression in the interwar years), which included fixed currency exchange rates pegged to a gold-backed dollar, began to collapse in the face of the U.S. decision to militarize its domestic and foreign policy.

On March 31, 1968, millions of Americans heard Lyndon Johnson announce on television that he would not run again for the presidency, and that he would not substantially escalate the Vietnam War, despite the strategic setback of the Tet offensive nearly two months earlier.

Unperceived by the public at large, the point finally had been reached at which depletion of the U.S. gold holdings had abruptly altered the country’s military policy. As financial historian Michael Hudson noted, “The European financiers were forcing peace on us. For the first time in American history, our European creditors had forced the resignation of an American president.”

But when the 1968 elections arrived, we saw a scenario that is familiar to us again. Democrats could not publicly argue for an end to the war, because withdrawal would mark the destruction of the myth of U.S. military invincibility. The options available in response to the collapse of the U.S. Gold Pool were (1) withdrawal from Vietnam, (2) continue the war and accept further losses of gold and with it the erosion of U.S. global power, or (3) force the abandonment of the entire Bretton Woods regime beginning with the gold standard. Because the Democrats had alienated a huge fraction of their base by refusing to oppose the war, Republican Richard Nixon was elected. In 1971, he selected Option 3. He abandoned the gold standard for the U.S. dollar.

The Global Gamble & Treasury Bonds

This was a staggering checkmate against the U.S.’s alleged global allies. They had to do something with their trainloads of dollars to prevent their uncontrolled devaluation. They did so by investing in U.S. Treasury Bonds, which are actually loans to the U.S. treasury. Quoting Hudson, "By going off the gold standard at the precise moment that it did, the United States obliged the world’s central banks to finance the U.S. balance-of-payments deficit by using their surplus dollars to buy U.S. Treasury bonds, whose volume quickly exceeded America’s ability or intention to pay. . . Twenty-five years [after WWII], the United States [discovered] the inherent advantage of being a world debtor. Foreign holders of any nation’s promissory notes are obliged to become a market for its exports as the means of obtaining satisfaction of their debts."

As the old saying goes, “if you owe the bank a thousand dollars, you have a problem. If you owe the bank a billion dollars, the bank has a problem. Europe, as ‘the bank’ in this case, had the problem.

Nixon had not only erased U.S. debt held by allies and forced perpetual European support for US military expenditures with the threat of tearing everyone’s financial house down, he had opened the way for Wall Street’s rentiers to begin their escape from the regulations placed on them during the New Deal. That is precisely why Peter Gowan referred to Nixon’s risky destruction of the Bretton Woods fixed currency exchange rates as the “global gamble.”

New system: ‘debtor imperialism.’

The banker joke

Susan Strange referred to the new system as “casino capitalism.” The rentiers were free to speculate without constraints; but more importantly, the U.S. government, by the Reagan era,  in collusion with Wall Street, had a new weapon to use against recalcitrant nations. Domestic currencies could be speculatively attacked; which is exactly what the U.S. did to several Asian countries in 1998, which unexpectedly almost crashed the world economy. The threat of attack on currencies obliged central banks abroad to hold U.S. dollars – in the form of US Treasury Bonds – in reserve, as a defense against speculative attacks on their currencies. These nations then became U.S. creditors; but they were the banks who – as in the banker joke – had the problem.

To this day, no one – including China, about which there is a great deal of financial panic-mongering – can afford to begin a sell-off on the dollar. Too many nations hold too many dollars to sell the dollar down without cutting off their noses to spite their faces. And yet all these creditor nations know that the U.S. has neither the capacity nor the intention of paying back those loans.

China holds over a trillion dollars in U.S. Treasury Bonds. Japan holds almost a trillion. The United Kingdom holds over 400 billion. Brazil holds more than 200 billion. The list goes on. If China were to initiate – as some China-phobes suggest – a cash-out of its Treasury Bonds, and that cash-out caused a run on the dollar destroying half its value, China would lose more than half a trillion dollars in purchasing power. This is a game of chicken that the U.S. has, so far, won every time.

The key to dominance in the world of the late 20th and early 21st Centuries has been dependency. . . interdependency, but of a very unequal nature. We see this in really bad, really patriarchal marriages. A husband depends on his wife for the management of the household, for a lot of unpaid labor, and for the care of children, and the wife depends on the husband for economic security; but in the event of a divorce, we find that the wife comes out much worse than the husband, giving the husband a threat to hold over the head of the wife. They depend on one another, but that interdependence is not synonymous with equal status or parity of power.

This is how U.S. foreign policy is constructed for the most part, as interdependences in which the U.S. is the dominant partner. And there are few things that human beings depend on more urgently than food; which brings me to a subject that is imbricated with finance, but not the same as finance.
Money is not theoretically necessary for life. Human life sustained itself before general purpose money. Human life cannot be sustained, however, without its material basis in food. We all know that, with very few exceptions, in spite of this theoretical ability to live without money, most of us do not have access to enough food without first having access to money. If one controls access to money, except in subsistence economies, one controls access to food.

A strange chemical history

If I might, I’d like to actually go deeper on the topic of food than we generally do, into the realms of chemistry and biology, for just a moment. I want to say a few things about energy and nitrogen.

If you touch another person, you will find that they are heaters. We who are still alive are warm. That heat is thermal energy that is part of the overall energy system that constitutes your existence as an organism, as a mammal, as a primate, and as an omnivore. You eat plants and animals that have energy stored in them. The plant energy that animals eat comes from the sun, whose energy is stored in the plants by photosynthesis.

One of the chemical components of our world that is necessary for most plant growth, therefore necessary for food, and therefore necessary for our survival, is nitrogen. Oddly enough, after Timothy McVeigh blew up a federal office building in Oklahoma City, everyone – even non-farmers – came to know that fertilizer is made with nitrogen. Yet nitrogen is the most abundant element in the atmosphere, so why should anyone have to “produce” it as a fertilizer? We live our entire lives literally swimming in the stuff.

As it turns out, atmospheric nitrogen, like atmospheric oxygen, is a Siamese twin. It consists of two, fused molecules: N2, as it were. Plants have to break this down into single molecules (N1), then mix it with other stuff, in order to turn sunlight into food. The process is called biological nitrogen fixation. Prior to human intervention, this fixation process was accomplished by prokaryotes (or non-nucleated bacteria) and diazotrophs (or ammonia-making bacteria.)

During World War I, the introduction of new technology, i.e. the machinegun, and the adherence to pre-machinegun tactical doctrines, led to huge armies being first mowed down like grass, then trapped them facing each other from pestilential trenches. One of the bright ideas for taking advantage of this horror-film stalemate was the idea of killing the enemy with poisonous gas.

During the war, Fritz Haber, a German-Jewish chemist, was appointed director of the Berlin-based Kaiser Wilhelm Institute for Physical Chemistry. One of his jobs became the development of chemical weapons. He would eventually invent a gaseous chemical called Zyklon-B, a cyanide derivative, which would later be used by his government to wipe out millions of his own co-religionists; but during WWI he was preoccupied with chlorine and ammonia for the development of poisonous gases for the battlefield.

His other preoccupation was nitrogen fixation. He had learned how to do that, synthetically, by combining hydrogen and N2 under heat and pressure, along with an iron isotope and aluminum oxide as catalysts. He had already patented this process before the war; but it would take Carl Bosch, the eventual co-founder of I. G. Farben (the company that marketed Zyklon-B) to commercialize the process. . . which laid the basis for a population explosion from 1.6 billion in 1900 to more than 7 billion today. What he’d made was chemical fertilizer, and it meant that even land that was unfit for agricultural cultivation could be rendered ‘productive.’  The food that feeds that additional 5 billion people is largely produced with the assistance of chemical fertilizers and chemical poisons.

But ‘heat and pressure’ are not some infinite essence like space, nor are they immediately available like atmospheric nitrogen. They are transient phenomena that must be created through some procedure; in this case, burning fossil hydrocarbons. . . lots of them.  Haber was looking at a crisis created by the depletion of guano – bat and bird droppings used as fertilizer – mostly collected from the islands off the coast of Chile; so he generated a new system that depended on another exhaustible resource: fossil fuel.

Poisons and 'developmentalism'

After WWII, American farmers were using prodigious quantities of chemical fertilizer across prodigious expanses of arable land, along with a new chemical weapon itself, nerve gas. . . or organophosphates, as insecticides, expanding their harvests far beyond the American public’s capacity to consume.

The American manufacturing base had also expanded during the war, and given that the U.S. did not suffer the devastation that Europe and Asia did during the war, the U.S. emerged from the war as a uniquely powerful actor. The other variable in the expansion of food production was the thoroughgoing mechanization of agriculture, another net consumer of fossil energy. The U.S. began to build farm machinery; and as part of its goal of maximizing profit for farm machinery industries, as well as agricultural chemicals, it began to promote something called developmentalism for the so-called ‘under-developed’ nations. Passed off as a charitable effort, it was actually a scheme to sell American products.

In 1943, the Rockefeller Foundation, Ford Motor Company, and the Mexican government established a joint venture called – in English – the International Center to Improve Corn and Wheat. Standard Oil – a Rockefeller company – was manufacturing fertilizer, and Ford was building tractors. This was the beginning of the organized effort by first world corporations, with the active support of the U.S. government, to push agricultural commodities into these so-called ‘under-developed’ nations. By 1959, they had opened rural development academies in Pakistan, and by 1963 in the Philippines. These academies were performing research and development on high-yielding cultivars of wheat, corn, and rice. By the time of the Nixon administration, 120 of the largest agribusiness multinationals had established a joint program with the United Nations Food and Agriculture Organization.

Control of food more powerful than nukes

The transformation in agriculture that followed was called the Green Revolution, a term coined in 1968 by US Agency for International Development Director William Gaud.  If ever there were a ‘revolution from above,’ this was it. And it did accomplish a great deal. Caloric intake from cereal grains worldwide increased 30 percent per capita by 1990, and the prices of grains fell. The availability of more staple grains also supported a doubling of world population between 1960 and 2000.

But these very general statistics don’t tell the whole story. There were a number of qualitative changes that accompanied these statistical quanta. One early condition of World Bank development loans was that recipient nations industrialize their agriculture.

Smallholders were pushed off land to make way for large monoculture fields. Mechanization cut the number of necessary field workers to a fraction, and a process began whereby millions of formerly rural people – who were monetarily poor, but capable of self-reliant subsistence agriculture – were pushed into hellish slums in the cities, where they came to rely more directly on the mass-produced staple cereals, which they now had to buy, and where they provided a windfall to urban manufactories of desperately cheap labor.

Peripheral nation agricultural production was being exported, in order to get precious U.S. dollars for use in international markets and to service external debts. The agri-barons of the poorer nations were not feeding their own countries, but engaging in monoculture for export, like coffee, sugar, and bananas (ergo the term, “banana republic”).

Urban hunger is a specter that most leaders understand only too well.  I witnessed two food riots when I was in Haiti, and I can say they were among the most memorable experiences of my life.  Political leaders know very well that mass urban hunger is a recipe for political destabilization, and they avoid it at all costs. Because many of these nations were exporting crops, they fell short in providing basic nutrition to their own growing urban populations.

The United States, however, was uniquely positioned to take advantage of this situation, because the agricultural subsidies of the New Deal, originally meant to rescue family farms, had been carried forward to the benefit of large agribusiness corporations that were pushing the American family farm into the dustbin of history. Price supports for U.S. grains meant that agribusiness could produce as much grain as possible, and for every bushel produced the government would pay them a subsidy.

This, along with the arable land mass of the American Midwest, quickly led to massive overproduction of U.S. grain in the face of periodic grain shortages around the world, which gave U.S. agribusiness unprecedented pricing power in grain markets.  In 1973, Secretary of State Henry Kissinger said that the dominance of U.S. grain production in the world was a foreign policy weapon that was more powerful than nuclear bombs.

Grain politics

Grain was on a lot of political minds those days. Hubert Humphrey, the 1968 Democratic challenger for the presidency, had received an illegal campaign contribution of $100,000 – a fact that would emerge during the Watergate hearings. The same contributor would also give the Nixon administration $25,000 to assist in its cover-up of the Watergate break-in. These were not insubstantial sums then, as they seem now.  Not many people had then heard of this fountain of largesse, whose name was Dwayne Andreas. Andreas pushed through a historic grain sale to the Soviet Union for the Nixon administration, worth $700 million, with his company as the middleman. That company was named Archer Daniels Midland.

It was the next year, however, when Green Revolution food production was exposed to another vulnerability, the aforementioned Arab oil embargo.  It is here that we can see how the history of the Green Revolution as an instrument of U.S. foreign policy interweaves with the history of neoliberal finance – which we covered earlier – that began its gestation with the Nixon administration.

By 1973, the US was running not a trade surplus but a deficit of $6.4 billion. We exported $6.4 billion more than we imported.  Even more momentously and permanently, U.S. domestic production of crude oil had peaked and was now in a decline that would increase U.S. dependence on imports of this commodity into the foreseeable future. Oil remained the principle feedstock of American domestic agriculture, and of the Green Revolution that was articulating the decolonizing peripheral nations into a new, neo-colonial order. At the same time, the U.S. would become increasingly dependent on fossil energy imported from abroad, not merely to power its machines and transport, but to eat, and to maintain the power of the U.S. over food markets worldwide.

Even the Soviet Union had been pulled into the American grain-trade orbit by Nixon, proving Kissinger’s thesis that food was more powerful than nukes.

The increasing dependency of peripheral nations on American agricultural goods, as well as American support for the industrial capitalist model being adopted for peripheral nation export agriculture, would lead to decreases in national per-capita food production as well as financial and ecological bankruptcy.

Nixon broke up the old order; but the new order was not firmly established except serendipitously by the Reagan administration. In the interim, after a period of three years stewardship of the White House by the immanently forgettable Gerald Ford, the next elected president would have a dual-resume: a Naval officer and an agribusiness CEO.

Jimmy Carter.

Under Jimmy Carter, a southern agribusiness-man (a peanut ‘farmer’), an interesting thing happened. Something we Southern folk used to call ‘white liquor’ or ‘white lightning’ became legal and began magnetizing massive cash flows from US taxpayers in the form of corn subsidies.  Corn liquor has been produced for many years by rural scofflaws. My own father did a short stretch in the hoosegow when he was discovered with a car trunk full of it in the 1930’s.

When Nixon was taking money from Dwayne Andreas, the CEO of the sugar and corn conglomerate, Archer Daniels Midland, ADM was concocting a new scheme that would simultaneously justify more ‘farm’ subsidies to agribusiness and claim to address the ‘energy crisis’ of 1973, which was also such a windfall to Wall Street. The scheme was to make massive quantities of corn liquor, flammable alcohol, and re-christen it ethanol. This was proposed as an ‘energy independence’ measure for the U.S. It is made, to the delight then of Dwayne Andreas, with sugar and corn.

ADM found a friend in Jimmy Carter, man who has in later years repented of much and spoken truth to the power of which he was once a part.  Carter called the energy crisis the “moral equivalent of war,” and his administration exempted ethanol-spiked gasoline from a federal fuel tax.  Carter began a loan program to build ethanol plants, which was halted by the Reagan administration. . . for a while, until farm lobbyists paid serial visits to Capitol Hill, whereupon the Reagan administration recanted.  To this very day, neither party will challenge agribusiness subsidies; and to this day, both parties are avid ethanol boosters.

It was this influence, in conjunction with neoliberal ‘free trade’ policies, that allowed U.S. grain producers to begin a process called agricultural dumping. Dumping is introducing a domestically-subsidized surplus into a foreign market below market value, which results in local producers’ inability to compete. Taxpayer-subsidized U.S. corn, for example, is still routinely dumped into foreign markets at prices often as little as 30 percent of market value. This leads to bankrupted local markets, and a growing and increasingly poor urban population that becomes hostage to an imperial food market.

A Mexican farmer who grows traditional corn is wiped out by genetically modified, chemical-industrial corn that is subsidized by a foreign power. His family loses their land to debt, moves to the city, where they may or may not find work to get money to feed themselves, and barring that, they may take the risk of illegal migration to the north to find work in the United States. One seldom hears about neoliberalism or agricultural dumping when the subject of illegal immigration comes up in the United States; but the connections are clear. U.S. policies have created the conditions that make mass migration inevitable.

After many NAFTA provisions went into effect that allowed U.S. dumping in Mexico, between 1997 and 2004, taxpayer-subsidized U.S. corn exports increased by 413%, while Mexican corn production fell by 50% based on a 66% devaluation of Mexican corn. In the same period, U.S. soybean production increased by 159%, and Mexican soybean production decreased by 83% based on a 67% devaluation. Mexican pork production fell by 40%, corresponding to a 707% increase in U.S. exports. Pork itself is not directly subsidized, but the corn that feeds industrial pork is. It is not a coincidence that NAFTA corresponds to the most massive wave of Mexican immigration to the United States in history.

So the combination of developmental imperatives to mechanize and enclose agriculture for monocrop production, as well as agricultural dumping by the United States has created a situation where most of the rapidly urbanizing world is now dependent on U.S. grain or U.S. seeds and chemicals in order to eat. U.S. foreign policy pertaining to food has become what the late Catholic priest Ivan Illich called “a war on subsistence.” The androcentric cliché for holding power over others as ‘having them by the balls,’ might better be replaced by ‘having them by the bellies.’

Fuel-food-finance and the military

U.S. international power politics combines the neoliberal debt traps with food monopolization as an effective mechanism of indirect control over a good deal of the globe. This is not, however, sufficient to exercise the kind of total dominance the U.S. would require to halt the very real decay of U.S. power that results from various kinds of imperial over-reach. The debt system is not sustainable. The energy system upon which the current system depends is not sustainable. The material resources upon which economic expansion is based are finite. And the tolerance of others is reaching its limits.

The fallback position of any imperial power, when indirect controls are no longer effective, is direct control in the form of violence. That is one of the reasons the United States – with some of the best naturally defensible borders in the world, and an impossibly large land mass for any would-be invader – maintains a military force that is more expensive than the combined military forces of the rest of the world. Calling the War Department the Department of Defense is perhaps the most ironic example of PR-speak you might encounter The U.S. military is almost exclusively dedicated to missions of aggression abroad.

Moreover, the force component of U.S. foreign policy is not merely the uniformed services, it includes a shadowy and well-financed covert operations component that allows military actions by U.S.-directed surrogates to provide an element of plausible deniability to U.S. actions that might undermine ideological claims of commitment to principles like ‘freedom,’ ‘human rights,’ and ‘democracy.’

Neoliberal theology asserts the primacy of the private, the value of small government; but neoliberal practice has been massively underwritten by the state. The assurance of the market economy – as Karl Polanyi pointed out almost 70 years ago – requires a vast and powerful network of regulatory institutions. Without the state’s affirmative actions on behalf of the international business class, the system would collapse. Begin by thinking about how the United States maintains eleven Carrier Strike Groups, with supporting Expeditionary and Battleship Strike Groups, prowling the planet’s sea lanes at a cost of approximately $156 billion a year, primarily to ensure the flow of fossil hydrocarbons into the industrialized metropolis, and you can extrapolate from there.

The failed attempt to conquer Iraq in 2003, while it certainly involved oil, was also part of an effort to maintain a forward deployed U.S. military capable of strategic intervention far from home. The Cold War had ended, and the disposition of U.S. military forces had become obsolete. They needed to be redeployed from positions that were calculated to contain the USSR into positions that would give the United States more capacity to intervene in energy-rich Southwest Asia, to put the imperial hand on the spigots of global energy.

The goal of the Iraq invasion was permanent bases; but instead the Bush administration managed to win the Iran-Iraq war on behalf of Iran. The Obama administration has decided that the next best thing is to forward base near the Middle East and in the Asia-Pacific Theater to prepare to contain China; and the Obama administration has vastly expanded the role of the covert operations forces, as well as armed mercenaries, in its expansion of the Afghanistan War into Pakistan and increased covert operations against Iran. For myself, I believe Obama’s military moves in Southwest and South Asia will prove as disastrous as those of his predecessor.

Obama’s administration, with the leadership of the warlike Secretary of State Clinton, was instrumental in the execution and consolidation of the coup d’etat against the democratically elected president of Honduras in 2009, just as the Bush administration was in the failed coup against the democratically elected president of Venezuela in 2002, and its successful coup against the democratically elected government of Haiti in 2004. In two cases, the offending parties – President Chavez of Venezuela and President Zelaya of Honduras – were guilty of defying the Washington Consensus, that is, of opposing neoliberalism. President Aristide had merely criticized neoliberalism.

The amphibian

More than strategic interests drive the reliance on military operations. In the United States, the Department of Defense has become a substitute export market for US industries. The reason the taxpayers are not bailing out Lockheed Martin, Northrup Grumman, Boeing, General Dynamics, Raytheon, KBR, L3 Communications, SAIC, Dyncorp, Hewlett-Packard, and a host of other major American corporations, including General Electric, Motorola, Goodrich, and Westinghouse, is that the margin of earnings that ensure their continued viability as for-profit enterprises comes from DOD contracts. If war spending were ended tomorrow, the U.S. would experience a dramatic loss of jobs across a wide spectrum of Congressional districts that have hitched to the DOD pork wagon.

American foreign policy is amphibious. It operates through both the wet depths of public institutions and the dry lands of private institutions, and it has an integrated public-private perception management apparatus.  One of the key advantages of the public-private partnership is that foreign policy is insulated from accountability to those below those institutions on the social hierarchy. The boundaries are blurred, via contracts and memoranda of understanding, between the U.S. public sector – with its administrative apparatus, and its military and intelligence establishment with their vast budgets – and the private sector, composed of publicly funded “non-governmental organizations,” think tanks, foundations, and an army of horizontally-integrated perception managers.

Those perception managers use mass media as a conformity-producing web of influence that reaches right into the living rooms of a U.S. culture that has 2.24 television sets per household, running an average of six hours and 47 minutes a day, 2,476 hours a year. To appreciate the latent power of television, realize that the average college class has a student in tow for three hours a week, approximately 45 hours for an entire course, excluding out-of-classroom study.

The limits of public discourse are established de facto by a media that operates on the same liberal market principles as the people who own them and exercise overarching within the government and in those sectors sometimes called civil society. The media, the governing apparatus, and civil society are in fact three faces of the same dominant interests in the same epoch.

Freedom plural

In saying this, I am obliged to clear up a common misunderstanding of what this means and what I mean to say. It is easy to jump from the very general outline I have presented of three aspects of US foreign policy – finance, food, and force – to the conclusion that I mean to say, or that these facts tend to support the idea that, there is a conscious group of the conspiring powerful who direct the world. On the contrary, I want to emphasize that this system has evolved through a series of contingencies, and that its stability is maintained precisely because it is what some systems theorists call self-organized. It’s most powerful actors are in many ways as constrained, or more constrained, by neo-neo-liberalism – or whatever you choose to call this particular period – than most of us are. President Obama is far less free, for example, to say the kinds of things I can say here as a semi-retired grandfather.

I, on the other hand, do not have the legal power to send US troops to war, or to call them home.

We each play our parts, and while some conspiracies have always been part of the terrain of politics, they are generally reactive, and far less determinative of large-scale outcomes than, say, changes in the built environment, demographic shifts, or institutional inertia. Many of the most pivotal events in history emerge unexpectedly from long-standing trends that have gone unnoticed or ignored until they reach a breaking point – the 2008 housing bubble crash being a good recent example.

Conspiracy or self-organization?

Remember, in our saga about the birth of neoliberalism, there was no straight line, but a confluence of events and contingent decisions: French buying US gold, Nixon dropping the gold standard, the Egyptian war for the Sinai, the American decision to airlift TOW missiles to the Israelis, the decision of Arab oil producers to embargo oil to the US, the U.S. balance of payments deficit, Nixon drops fixed currency exchange rates, rising oil prices creating petrodollars, the petrodollar tsunami being converted into opportunistic development loans, the Mexican threat of default, and so it goes. These were not plots, but actions and reactions, each producing a number of unintended or unanticipated consequences, which stimulated new actions and reactions.

The belief in a conspiratorial view of history seems to me to be a psychological reaction to the fear of chaos. If the world is not as one would like it, at least a conspiratorial view of history suggests that history as a process is still subject to human control, and that once we wrest control from the unjust conspirators, the world can be made right again.

This unpredictability, this sense of instability that compels some of us to reach for order in chaos with a history of conspiracy, ironically, has been produced by the current political milieu, one wherein neoliberalism has disembedded economies from local control and re-embedded them in national and transnational institutions, and those institutions are themselves now experiencing a loss of control in the face of unanticipated changes.

Structural adjustment programs have become political lightning rods that are igniting mass unrest around the world. Green Revolution agriculture has spawned megacities that are entropic black holes, teeming with desperation and crime. The U.S. military, long considered the guarantor of last instance for the world order, has proven to be both the least cost effective institution on the planet and a perennial source of new resistance and unintended outcomes. In Iraq and Afghanistan, the myth of U.S. military invincibility was shattered; and the costs of the Southwest Asia wars have bled the U.S. Treasury white. Offshoring of U.S. industry and the political empowerment of all Street rentiers was accomplished through foreign policy, has transformed much of the U.S. domestic population not merely into wage workers, but debt slaves.

We get structurally adjusted

There is a bumper sticker that sums it up: “I owe, I owe, so off to work I go.”

Consumer debt in the United States is above $2.4 trillion. In 2010, consumer indebtedness amounted to $7,800 for every man, woman, and child in the United States. Thirty-three percent of that debt is in revolving credit, that plastic you carry in your pockets. The rest is in mortgages, student loans, automobile loans, and other non-revolving credit schemes. You students collectively owe $556 billion dollars. Good luck with that.

US household leverage, the ratio of debt to disposable income, was 55% in 1960. By 1985, that number was 65%. Today, household debt is 133% of household disposable income.

Yet when the crisis of fictional value created by Wall Street came home to roost, trillions in bailout money were awarded to Wall Street, while Main Street was left holding its debts. Wall Street, according to the experts who work the Wall Street-Washington nexus, was “too big to fail.” Generations into the future are now saddled with paying for these bailouts. We are being structurally adjusted, which has always been a euphemism for privatizing the gains and socializing the losses.

2007 and the shift

If you want to understand the thinking of Secretary Clinton, you first need to understand that she is a hard-core neoliberal. In the past, the amphibian alliance of rentiers, government, and the professional commentariat have insulated her and her colleagues from Wall Street to Washington from any substantive challenge, in large part by simultaneously placing limits on public discourse and foreclosing any electoral remedies through campaign contributions and limiting ballot access.

The emergence of the Occupy movement was a warning that this establishment did not heed; but it was one expression of the inevitable discontent arising from the continued loss of economic security in the wake of the 2007 crash, which will cost taxpayers more than $10 trillion dollars in bailout money for the very people whose profligacy caused it. While the band played on at CNN and MSNBC and NPR, this seething anger grew - invisible to those who had grown so accustomed to control, so insulated, and so self-referential. They began believing their own bullshit and failed to notice this magma-buildup of resentment among us unwashed.

Suddenly, both political parties are being challenged from within. The Republican establishment doesn't want Donald Trump; and the Democratic Leadership Council is terrified of Bernie Sanders. The supporters of Sanders are showing that the US is finally losing its fear of the word 'socialism'; while Trump supporters - just as insecure and angry as the rest of us - are united by their authoritarianism and xenophobia. The promise of the Sanders candidacy is not Sanders himself, but the shift in consciousness that is expressed by the campaign.

From the preceding analysis/synthesis, one can see where global movements such as Jubilee debt forgiveness, opposition to US military bases abroad, and (especially) food sovereignty movements, are on point, given the actual structure of neoliberalism right now. While Sanders himself is still deluded by his own American exceptionalism (and several egregious foreign policy positions), a Sanders presidency, followed by the post-election mobilization of the Sanders movement, and followed again by a similar movement to change the composition of Congress, could - over several years - improve the condition of Americans and at the same time give the movements abroad some breathing room.

At the very least, we can see the accelerated demise of the two-party lock in the US, which Sanders himself has decried, and possibly a movement for real campaign finance restrictions as well as far greater ballot access.

We need not belabor the danger of a Trump presidency, which is more likely to occur in these strange times if Clinton is the Democratic nominee. Clinton herself is firmly in the mainstream of the neoliberal consensus that can be apprehended through the connections between finance, food, and force.

6 comments:

  1. Stan: Thanks for this clear outline of the _emergence_ of the neoliberal empire. Helps get me out of my mindset around conspiratorial powers-that-be. I also appreciate your support of Sanders' campaign as a marker for changing awareness, with full acknowledgement of Bernie Sanders' significant political weaknesses.

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  2. Stan, I'm a huge fan. I have been since the 'Invasion of Iraq' speech you gave back in 2007. Please look into getting a YouTube channel, and start a vlog. Your message is a one of a kind, and I think your ideas would spread a bit faster. Thank you for everything that you do! ☮

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  3. Hi Stan, I lost your email when the army closed my .mil account. greghmurry@gmail.com

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