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(DV) Ash: News of Neoconservative Demise are Somewhat Premature







News of Neoconservative Demise are Somewhat Premature 
by Gabriel Ash
April 4, 2006

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It’s high five time for many in the anti-war punditry. No, the war hasn’t ended. The death toll in Iraq is rising like the NASDAQ in the late nineties. But American public opinion is beginning to give in to the reality principle: not only is a majority of Americans finally realizing that this war is no good, but the finger is beginning to point clearly towards Pennsylvania Avenue with over 40% of Americans favoring impeachment (a surprising result given that the mainstream media isn’t even discussing impeachment).


While the hermetic circles around George Bush and Tony Blair are drowning in their platitudes (corners, tipping points, milestones, God, etc.) further out the sacrificial priesthood is getting cold feet. Bill Kristol blames Rumsfeld for botching it. William F. Buckley blames Iraqis for being too stupid to prosper under American tutelage. Francis Fukuyama describes his fellow travelers along with the Bush bandwagon as (gasp) “Leninists” who fail to understand that history cannot be rushed towards its inevitable end in U.S. style liberalism (but only nudged gently by “realistic Wilsonianism,” whatever that means.) Christopher Hitchens, apparently exhausted from his long engagement to liberate Kurdistan by any means necessary, is now calling for the U.S. to make peace with Iran’s nuclear ambitions. And Andrew Sullivan blames the Iraq quagmire on American narcissism (no kidding!)


Hard not to feel a sense of glee amidst all this frantic backpedaling. After all, however cheap it is to say “we told you so,” we told you so. The danger, however, is to fall for the comfortable belief that the political struggle over the war was primarily a war of ideas; as if all the antiwar camp lacked was a clinching argument, one that now, with major neocons throwing in the towel (sort of,) we have finally found. Sadly, it was never really about ideas. Behind the apparent sparring of arguments, a ruthless political war was fought over the usual fault lines -- power and money.


Forget the ideologues. Did the warmongers achieve their ends? In asking this, we should pay no attention to the blather about WMD, exporting democracy and the rest of the marketing brochures regularly churned out by the White House’s creative team. We should focus on the money. Three questions: Who among the powerful groups behind the Bush administration pushed for the war? What did they stand to gain? What did they gain?


Such questioning of the interests and motives behind the war has been done before, including by me. A growing body of evidence, and even greater body of speculation built on that evidence, has been compiled over the last three years. Based on it, here is the short answer to the first question: In connection to the war in Iraq, there are two main groupings of interests in the current White House. The upper echelon, Bush, Cheney, and Rice, is closely connected to Big Oil, and so are dozens of administration officials. [1] On the level directly below the top, the launching of the war was handled by neo-conservatives such as Wolfowitz, Feith, Libby, Bolton, and Cambone; the neocons were mostly brought to the White House by Cheney. The neo-conservative team in government was supported by a strong cast of characters on the outskirts of government, including Perle, Wurmser, Ledeen, Gaffney, and many others. The so-called neocons drew their power from two constituencies, the defense industry and the Israel Lobby. [2]


Three observations are needed to finish the picture. First, the defense industry is the dominant economic force in Washington, a position that is inherently tied to the size of the defense budget. Cheney, Bush and many other top officials have deep ties in the defense industry. [3] Second, it is a mistake to view the connection to Israel as a purely ideological affair. In so far as it is a factor in American politics, “Israel” stands for the small elite of military, business and political figures with close ties within the U.S. Third, there is a silent element in this picture: the larger part of the U.S. ruling class outside the directly involved industries. While there is no evidence I am aware of there has been a push for war outside the oil and defense industries and the Israel Lobby, it is quite improbable that the war could have be launched without at least the tacit acceptance of the broad corporate/capitalist class. [4]


Since we are talking of a picture, let’s draw one. Based on the existing state of the public record I propose the following diagram of “the standard model” of the politics of the Iraq War.




So far, I have sketched the generally accepted answer (generally accepted, of course, outside the mainstream,) to the first question. [5] The usual procedure is to follow now with the second question—the motives for the war -- and either stop there or follow with the third question -- an assessment of the results. Both questions are usually answered qualitatively, by piecing together fragments of public evidence and speculating on what it all means. However, on this occasion I would like to reverse the order of the questions and to answer the third question quantitatively.


For that, we should follow the lead of the two radical economists Nitzan and Bechler and turn our gaze to the stock market. In all societies, the sport that consumes the greater part of the energies of the ruling class is the internal jockeying for positions. Capitalism is unique in creating a universal measuring rod for the rise and fall of the different “fortunes” of ruling class groupings. The word ‘fortune’ has a double meaning: one the one hand, it refers to fate, the unpredictable vicissitudes that brought one to one’s current position, and on the other hand, it is the quantified extent of one’s wealth. The transformation of the former into the latter, or more accurately, the measurement of the former by the latter, is a defining trait of capitalism. In the capital markets, fortune as capital -- market capitalization -- is the ruling class’s perception of fortune as position. [6]


We need to assess the success of three segments within the U.S. centered ruling class, the oil industry, the defense industry, and the economic and political leadership of Israel. That can be approximated through relying on common stock market indexes. We need to chose indexes for the stock market performance of each segment, compare the three among themselves, and more importantly, to the broad U.S. market. The comparison answers a simple question. Have the fortunes of each of the three groups involved in pushing for war in Iraq improved or declined since the war began? The results are visualized in the simple chart below. Clearly, all of our three groups of warmongers have done well, significantly better than the broad capitalist class. Among the three, the oil industry is the big winner, and Israel’s ruling class a close second.



The challenge is to connect the evidence of the markets to the qualitative assessment of the effects of the war in Iraq. In doing that, there is no alternative to speculation. But the stock market evidence should anchor us. We now have a solid idea of just what we are trying to understand.


The good fortunes of the defense industry are easily ascertained from Wall Street data. Over the last five years, an investment in a basket of defense industry stocks would have netted over 50% in total returns compared to less than 3% for the broad S&P. [7] The rise in the relative value of defense stocks does not merely record the good sales these companies had in the last few years. Stock market value is capital markets’ perception of future earning power. What Wall-Street is saying, in other words, is that changes that occurred in the last five years, roughly corresponding to Bush’s reign, have dramatically increased the future money making prospects of the defense industry relative to the rest of U.S. capital. [8]


Explaining the success of the defense industry is straightforward. The defense industry makes money selling weapons and other goods and services to security forces. Security related sales go up with international political instability. Sales shoot to the stars during wars, and do particularly well in protracted wars. It is undisputable that the defense industry did particularly well in recent years. Boeing, General Dynamics, Northrop-Grumman, Raytheon and hundreds of other companies are thriving thanks to Pentagon and “Homeland Security” contracts. However, the gains of the defense industry go far beyond existing sales to the U.S. government. First, the climate of national insecurity promoted by the Bush administration has been instrumental is eviscerating what little public oversight there was over defense budgets. Second, the persistent hostility of the neo-conservative White House to international bodies and treaties, including the UN, the NPT, even the WTO, etc., is also positive for future defense industry profits. By there very nature, International bodies seek to mediate and contain conflicts. However lopsided they function, their weakening promises more armed international conflicts and more arm races involving clients of the U.S. defense industry.


The defense industry was the neocons’ major backer and the expense clearly paid off: the Iraq war was, still is, a phenomenal commercial success. The defense industry took little risk by promoting its pro-war agenda. The worse that could have happened would have been a quick victory in a short war without much international fall-out. That would hardly have been a disaster for the defense industry. But the way things turned out -- the protracted and internationally disruptive war that still rages -- probably exceeded their most optimistic expectations.


It is comparatively more difficult to quantify the return on the Israel Lobby’s investment in neo-conservatism, not, as one might think, because the Israel Lobby has supposedly ideological rather than financial goals. On the contrary, I believe much of the current (left and right) analysis of the Lobby is marred precisely by the failure to treat it as a capitalist institution. The Lobby is above all an elite clique, well established in a series of institutional settings that cater to and are sustained by wealth. It should not be forgotten that AIPAC’s fundamental lobbying tool is the equivalent of investment advice -- telling their rich clients whom to shun and whom to fund. The problem is that the financial relations the Lobby is enmeshed in are more complicated and are not transparently tracked by commonly available financial data. Nevertheless, the U.S. Israel Lobby usually defines its policy goals in deference to the wishes of the ruling class of Israel. We can therefore ask how the latter group has fared. Here is the short answer: since the war in Iraq began, an investment in the one hundred largest companies quoted in Tel-Aviv would have netted close to 150% in profits, a result that is twice better than the U.S. defense industry and almost three times better than the broad U.S. market.


Is it meaningful? Politically and economically, Israel is capitalist oasis. Among developed economies Israel is second only to the U.S. in income inequality, capital concentration and the interweaving of money and politics. A handful of families with deep political ties own much of Israel’s wealth. [9] The Israeli stock market is therefore a highly meaningful gauge for the way Israel’s leadership perceives its future prospects. Admittedly, Israel’s stock market reflects a broad array of concerns and expectations. It is impossible to strictly isolate the effects of the war in Iraq. Nevertheless, geopolitical risk is usually a major factor affecting prices, especially in a small country in a politically unstable area. We can say with some confidence that Israel’s elites’ self-assessment of risks and prospects has improved markedly over the period covered by the war in Iraq. [10]


What did Israel expect from the war in Iraq and what did it get? There is some evidence that at least some neocons imagined a peaceful Iraq ruled by Ahmed Chalabi signing a peace treaty with Israel and rebuilding the Kirkuk-Haifa oil pipeline. [11] Was that a reasonable expectation? Did the neocons actually believe there was the slightest chance of that happening? It is difficult to say. On the one hand, given all that we know today -- indeed, knew already before the war -- this was a true pipedream. But one should never overestimate people. The leading neocon and war architect Douglas Feith was described by Gen. Tommy Franks as "the f---ing stupidest guy on the face of the earth.” Likewise, one cannot read the famous “Clean Break” document. [12] authored by Perle, Feith and other neocon eminences, without gagging at the ignorance of the writers.


On the other hand, one should never underestimate people either. Perhaps the reasoning put forth by the authors was empty rhetoric. Far more important are the specific goals the “Clean Break” document advocated: breaking away from the internationally sanctioned “land for peace” framework of Oslo, tightening relations with the U.S. based on “shared values,” destabilizing Syria, and overthrowing Saddam Hussein. In the last three years each and every one of these goals have been successfully if incompletely advanced. The Iraq War removed Saddam Hussein from power; his was the last Arab regime that openly challenged Israel. The Bush White House is in the process of destabilizing Syria, the other Arab regime that hasn’t been fully reconciled to U.S. domination. The war has put the U.S. eyeball to eyeball against the strongest challenge to Israel’s regional ambitions, Iran. During the same period, Israel was able not only to crush the Palestinian Intifada while world attention centered on Iraq, but also to impose on the world a de facto renunciation of the principles of U.N.S.C. 242 and Oslo. Finally, the U.S.’s “war on terror” embraces Israel as a natural ally in a broad cultural clash of civilizations. Mission Accomplished!


What could be the worst outcomes for Israel from the Iraq War? Some suggest that a fragmented and failed state in Iraq would eventually threaten Israel more than Saddam Hussein’s regime. That could happen, in the sense that anything could happen. But such concerns are hard to reconcile with Israel’s strategic record. Israel has often welcomed and exacerbated internal strife among its neighbors. In its first decade it sought to destabilize both Egypt and Jordan with military raids. Later on, it successfully destabilized Lebanon and contributed to turning it into a failed state divided between warring communities. In the last few years Israel has successfully destabilized the Fatah dominated PA in the Occupied Territories, and is currently engaged in promoting anarchy against the rule of Hamas. If Israel’s leaders welcome anarchy less than twenty miles away from Tel-Aviv, can one believe they would lose sleep over anarchy in faraway Iraq? It is far more likely that a failed state and/or civil war in Iraq is and always was an acceptable if not actively welcome prospect. Civil war in Iraq is also an opportunity to further weaken Arab nationalism by helping the Kurds, similar to the way Israel used the Phalangists in Lebanon. [13]


The failure of the U.S. plans in Iraq does pose some challenges to Israel. The most important one is the gains Iran made as a result of the fall of Saddam. However, it is noteworthy that the Israel Lobby responds to this challenge -- without a doubt in consultation with Israeli leaders -- with pressuring the Bush administration to adopt a more aggressive and confrontational posture against Iran. [14] That is not the attitude of a lobby chastened by blowback from the failure of the war in Iraq. On the contrary, it shows a lobby that seeks to replicate in the Iranian case the very model that led to success in Iraq.


Many in Israel warn of the deteriorating perception of Israel in Western public opinion as a result of the war in Iraq and Israel’s role in inflaming Muslim rage. Such deterioration in public opinion is undeniable. Furthermore, Israel’s economy is heavily dependent on international trade and investment, and would suffer badly if it were subjected to systematic pressure of the kind used against South African Apartheid. The Tel-Aviv stock market, however, doesn’t seem to be terribly concerned with such a possibility. While Israel’s economy was affected by the escalating conflict with the Palestinians, the threat of negative repercussions has apparently receded, not increased, in the last three years. Of course, capitalists may be completely wrong and a global sanctions campaign just around the corner. The stock market cannot predict the future. It does tell us however with unique honesty what the ruling classes believe: they are doing well and have significantly increased their global power and influence in recent years.


Let’s now turn our attention to oil. As far as I know, there is no direct link between neo-conservative ideologues and the big oil companies, yet the oil industry is so far the biggest winner. Moreover, oil companies’ executives did not share the full neo-conservative dreams. The neocons that took over “nation building” in Iraq were keen on creating, in Naomi Klein’s words, “a free market utopia.” [15] For the last thirty years, however, the business model of Big Oil is based on collusion with state oil companies, not on free competition. Free competition in commodities tends to depress prices and profits. The OPEC oil cartel’s very purpose is to maintain price levels, and thereby protect their own profits as well as the profits of the oil companies. Nevertheless, U.S. oil companies were major supporters of the Bush administration, which in return has shown great concern for their welfare. Bush’s aggressive foreign policy in Iraq and elsewhere was supposed to remove the threat of oil development in the Middle East and South East Asia falling to French, Chinese and Russian companies. At the same time, war and destabilization would drive prices (and profits) up. A double whammy. [16]


Since the U.S. invaded Iraq, the price of oil doubled and oil companies profits soared. More interesting is what the stock market reflects about the oil industries future prospects. In the last three years, a basket of oil stocks returned 127%, or 78% above the S&P 500. For the full Bush period, oil stocks beat the S&P 500 by over 100%. Clearly, market participants are not terribly worried about a free market in Iraqi oil any time soon. While the price of oil is up, the neocon plans for transforming Iraq into Milton Friedman’s Disneyland have fallen flat on their faces. According to the digging of journalist Greg Palast, the man who put the kibosh on the neocon plans was none other than their patron Dick Cheney, with help from oil executives and James Baker’s law firm. [17]


The usual explanations for the failure of the occupation are the incompetence of the Pentagon and the Bremer led CPA, the lack of adequate forces and the lack of peacekeeping skills in the U.S. military, and the difficulty of the task under the best of circumstances. All explanations are valid. The White House showed a lot of incompetence. The resources committed were never adequate, and the task was such that even had the administration done everything right, failure could still be the result. [18]


But when one considers the different segments of the ruling class behind Bush’s war, an alternative picture emerges. Those aspects of the neoconservative agenda that were crucial and agreed upon concerns of powerful constituencies were carried out quite successfully. Those include among others the destabilization of the Middle East, the invasion of Iraq and Afghanistan, the toppling of Saddam, the tightening of relations with Israel, the ditching of the Oslo framework, the weakening of the NPT and the U.N. But a tug of war emerged when the different war constituencies pulled in different directions. The success of the neocons was cut at the point where their goals went against the consensus that was acceptable to all the war backers.


The conclusion is unpleasant but unavoidable. Notwithstanding their newfound penchant for meae culpae, neo-conservatives led a revolution in U.S. foreign policy that delivered the goods that mattered to the people who mattered. For the constituencies behind the war in Iraq, failure was indeed not an option, for the simple reason that they took no risk. That many neocons today admit “failure” does not reflect the real payoff of the war. Some neocons were useful idiots; others were cynical collaborators. It matters little who was which. Theirs is a job well done. The discrediting of the neocons and their cheerleaders, even their complete purging from any position of influence, would not undo the sour but enduring fruit of their labor.

Gabriel Ash is an activist and writer who writes because the pen is sometimes mightier than the sword and sometimes not. He welcomes comments at: g.a.evildoer@gmail.com

Other Articles by Gabriel Ash

* Bravo Abbas! Bravo Hamas!
* Rev. Jackson -- Pissing on the Graves of Civil Rights Heroes
* Imagine All the People, Living Like Mindless Lambs
* Mourning in America
* Oh!-sama
* Diagnosing Benny Morris
When at a Loss, Escalate

* Dear Ayatollah
* Settlements: A User’s Guide
* A Victory for Israeli Democracy
* Don’t Get Mad, Get Going!
* Pink Delusions


[1] See, for example, Wayne Madsen, “Afghanistan, the Taliban and the Bush Oil Team.”

[2] Thankfully, a significant amount of research about the economic and political backgrounds of the neocons was published in The Nation, most importantly, Jason Vest’s seminal “The Men from JINSA and CSP.”

[3] See here for the latest mini-scandal.

[4] Why this acceptance? That’s an important question that we’ll just have to skip for now. But the general answer seems to be that they were paid off. While not doing as well as the backers of the Iraq war, the general U.S. corporate ruling class did grow in power in the last few years.

[5] While being outside the mainstream is no guarantee of being right, being in it is a virtual guarantee of being wrong. The “mainstream” is those opinions directly shaped by the center of social power in accordance with its interests.

[6] Market value is in common capitalist lingo the present value, discounted for risk, of all future cash flows. Capitalists earn cash flows due to the exercise of various forms of social power. Market capitalization therefore represents the common assessment by market participants of the relatively successful or unsuccessful positioning of a grouping of capitalist power relative to other groupings. This insight, on which I base the following analysis (which is by no mean complete), is found in Nitzan and Bichler’s stimulating rethinking of the concept of capital in their “The Global Political Economy of Israel.

[7] Sources for market data include: for industry averages, http://morningstar.com, for the broad market, http://finance.yahoo.com, and for Israel, http://marketwatch.com and the Tel Aviv Stock Exchange’s annual reports.

[8] For the sake of rigor I should have looked at changes in market capitalization rather than stock prices, because prices can also reflect unrelated changes in the number of outstanding shares. However, changes in prices give us a quick and dirty approximation and historical price data is easier to access.

[9] According to a recent study by the Israeli business journal Globes, just 18 families “own 32% or NIS 198 billion of the total income of the top 500 companies in Israel. Their aggregate revenue is the equivalent of 77% of the state budget (NIS 256 billion) and approximately 50% of the business GDP." Cited in “Concentration of Israeli Wealth.”

[10] Another common measure of market perception of growth prospects and risk is the P/E, or the price earning multiple. The P/E of the TA-100 stock index is now slightly over 20 (compared to a P/E of 16 for the Tel Aviv stock exchange in 2000), suggesting little to no discounting of risk relative to the U.S. stock market.

[11] See for example, Anton La Guardia “Iraq-Israel oil pipeline 'to reopen', The Telegraph, June 21, 2003; and Thomas R. Stauffer, “Pipeline or Pipe Dream? The Kirkuk-Haifa Scheme, Washington Report on Middle East Affairs, March 2004.

[12] For the document, see here; also see Juan Cole’s critique, and my own modest effort.

[13] See, for example, Seymour Hersh on Israel and the Kurds in the New Yorker. Also note this example of a particularly rabid Zionist now extolling the virtues of civil war in Iraq.
[14] See, for example, Yitzhak Benhorin, “AIPAC slams Bush's Iran policy,” Ynetnews.com, December 25, 2005.
[15] Naomi Klein, “Baghdad Year Zero,” Harpers, September 2004.
[16] Before the war, many in the antiwar camp, myself included, believed the Bush White House was taken by the neocons’ deluded dreams of destroying OPEC and flooding the oil markets with cheap Iraqi oil. Nevertheless, there is clear evidence that oil was foremost in the White House concerns early on, see for example, Dan Morgan and David B. Ottaway “In Iraqi War Scenario, Oil Is Key Issue,” Washington Post, September 15, 2002; and Neil Mckay, “Official: US oil at the heart of Iraq crisis,” Sunday Herald, October 6, 2002.
[17] Greg Palast, “Baghdad Coup D’Etat for Big Oil,” April 10, 2005.
[18] Ariana Eunjung Cha, “In Iraq, the Job Opportunity of a Lifetime,” Washington Post, May 23, 2004.