On Friday, the Labor Department announced that the US economy lost 240,000 jobs in October, and revised the number of jobs lost in September from an initially reported 159,000 to 284,000, in addition to revising the number jobs lost in August from initially reported 73,000 to 127,000. Accordingly, it is quite reasonable to suspect that the total number of jobs lost in October is in excess of 350,000. Both GM and Ford are hemorraghing cash, and an anticipated merger of GM and Chrysler may result in the loss of 200,000 jobs. The federal deficit is now over 10 trillion dollars and growing as the bailout is implemented.

Accordingly, as the euphoria over his decisive victory fades, the contours of the challenge facing Obama are coming sharply into focus. A country experiencing one of the most severe economic downturns in its history simultaneously finds itself militarily overextended around the world. It is tempting to construe them, as most liberals do, as the consequences of the policy failures of the Bush presidency. Bush, like LBJ, pursued utopian policies in both the domestic and foreign policy spheres, acting as if American resources to achieve its goals were unlimited.

Domestically, as Robin Blackburn observed, Bush substituted the promiscuous extension of credit for governmental expenditure as a means of constructing his own Great Society:

The Bush administration’s vision of the ‘ownership society’ somehow latched onto codicils of Johnson’s ‘Great Society’ to encourage the poor to take on housing debt at the pinnacle of a property bubble. The quality of the arrangements made for poorer mortgagees was manifestly inadequate—they had no insurance provision—and also avoided the real problem, which is the true extent of poverty in the United States and the folly of imagining that it can be banished by waving the magic wand of debt creation.

Internationally, an even more grandiose Bush went far beyond the messianic anti-communism of LBJ in Southeast Asia and launched a self-described global war on terror that has resulted in two open ended wars in the Middle East and the prospect of a third. The US military budget is currently about one trillion dollars, and nearly equals the military spending of all other countries in the world. It constitutes about 8% to 9% of US gross domestic product.

It is therefore tempting to blame Bush for a deindustrialized, bankrupt domestic economy and military entanglements that have spun out of control, but such a personalized analysis obscures the real nature of the problem. In her concise book, Empire of Capital, Ellen Meiksins Wood describes the current capitalist order, one that aspires that impose itself upon the entire world, as one that requires the US to maintain and deploy the most expensive and most technologically advanced military ever created. It is essential, in her view, for the US to preserve unquestioned military supremacy as a means of effectively arbitrating disputes between competing nation states, all of whom accept the necessity of this supremacy.

Of course, there are ancillary features associated with this order, such as the use of the US military to intimidate what the US rather theatrically defines as rogue states, and the need to periodically display the frightening destructive capability of the military to discourage any country that might be inclined to resist the softer aspects of US coercion as exercised through social and financial institutions like the United Nations, the World Bank and the International Monetary Fund, that, while important, should not distract us from recognizing the fundamental problem at hand.

The US is broke, and, as already recognized by Giovanni Arrighi in 2005, it has failed in this endeavor to impose neoliberal capitalist values upon the world. Soft power, as exercised by US dominance within global institutions, such as the ones already mentioned, along with the financial clout of banking firms like Goldman Sachs, Morgan Stanley and Citicorp, has been curtailed by a financial crisis that has grown into the first global recession since the 1970s. Hard power, in the form of the US military, has been degraded by the conflicts in Iraq and Afghanistan.

Hence, Obama finds himself taking office when the principle around which his campaign was organized, his intention to marry neoliberalism with multiculturalism, is no longer relevant. Walter Benn Michaels has enunciated this principle most precisely:

This is also why the real (albeit very partial) victories over racism and sexism represented by the Clinton and Obama campaigns are not victories over neoliberalism but victories for neoliberalism: victories for a commitment to justice that has no argument with inequality as long as its beneficiaries are as racially and sexually diverse as its victims. That is the meaning of phrases like the ‘glass ceiling’ and of every statistic showing how women make less than men or African-Americans less than whites. It is not that the statistics are false; it is that making these markers the privileged object of grievance entails thinking that, if only more women could crash through the glass ceiling and earn the kind of money rich men make, or if only blacks were as well paid as whites, America would be closer to a just society.

It is the increasing gap between rich and poor that constitutes the inequality, and rearranging the race and gender of those who succeed leaves that gap untouched. In actually existing neoliberalism, blacks and women are still disproportionately represented both in the bottom quintile—too many—and in the top quintile—too few—of American incomes. In the neoliberal utopia that the Obama campaign embodies, blacks would be 13.2 per cent of the (numerous) poor and 13.2 per cent of the (far fewer) rich; women would be 50.3 per cent of both. For neoliberals, what makes this a utopia is that discrimination would play no role in administering the inequality; what makes the utopia neoliberal is that the inequality would remain intact.

FDR is, naturally, the optimistic scenario, one that invokes that American positivism that the country can overcome any crisis. There are, however, gloomier ones. For example, that old anti-semitic Communist, Vladimir Zhironovksy, has apparently described Obama as an American Gorbachev, a figure that, in his view, will destroy the country through his naive efforts to reform it. While the notion that Obama will destroy the country is over the top, there is some merit to what Zhironovsky says.

Gorbachev initially tried to revitalize Soviet society through mild reforms that did not imperil the Communist monopoly of power. As each successive reform effort failed, he was forced to adopt more and more aggressive policies that reached higher and higher into the leadership. Radicals found such efforts inadequate, and moved into open opposition, while conservatives eventually sought to remove him from office. He was never able to reinvigorate the moribund Soviet economy and the apparat, having masterfully aligned themselves with nationalist forces in the provinces, compelled the dissolution of the USSR in 1991. By the time he recognized this threat, he no longer possessed the capability of forcibly preventing it.

Obama is likely to follow a similar trajectory initially, but with different, unpredictable outcomes. His economic policies are awowedly neoliberal, and, if he persists with them, as is likely, he will fail. In order to move forward, he must bring resources home for economic development by downsizing the US military, but, instead, he has said that he will increase defense spending to provide for an additional 90,000 troops in addition to his commitment to send more troops to Afghanistan. An escalation of the conflict in Afghanistan and Pakistan could entrap Obama, rendering it impossible for him to dedicate any meaningful resources to domestic renewal. Such proposals are consistent with the voracious appetite for military activity associated with the global reach of American capitalism as described by Wood, but the country cannot support it.

What will Obama do then? The American left believes that he will embrace a socially progressive program, and there are at least some indications that his advisors are considering a substantial public works program. Even if they implement such a program, which remains to be seen, it is doubtful that they will eliminate subsidies to the financial sector and reduce the US military presence around the world. So, for now, we can look forward to a meek version of the sort of guns and butter that pushed the US economy into the dark days of stagflation in the 1970s.

Facing economic collapse, Gorbachev, to his credit, withdrew the Red Army from Eastern Europe. Will Obama withdraw US troops from South Korea, Germany, and even Iraq and Afghanistan, to jump start an American recovery? It seems unlikely. He looks too cautious for such a daring move. If forced to choose between aligning himself with the elite, as he has always done, and suppressing social unrest, or bending to the will of popular movements from below, and bravely transforming the power relationships within society, he would probably, unlike Gorbachev, choose the former. Furthermore, he would have to consciously implement policies that would abandon the US imperial role as the arbiter of global capitalism. In short, he would have to consciously bring down the curtain on the American empire.

No doubt, his supporters feel differently. They should, however, ponder a number of things. First, Clinton and Bush have expanded the power of the government over private individuals through surveillance, police action and incarceration. Will Obama consciously refuse to use it if challenged from the left? If so, he would be the first President to do so. Second, while the mass movement created by Obama is celebrated, and rightly so, there is a sinister side to it. Obama has a large group of people that he can call upon to not only agitate on his behalf, but, potentially, in difficult times, to intimidate those who oppose him.

Obama’s personality, especially his cautiousness, makes such conduct hard to imagine, although we should not underestimate what political figures are capable of doing when pressed to the wall. In the 1970s, capital interests responded to a global crisis of similar severity by embracing neoliberal policies that rendered the lives of workers more transient and insecure, policies ultimately adopted by both Republicans and Democrats. If capital determines that a merciless regime of subproletarianization of the workforce is required, including recourse to extreme methods of suppression, why should we feel confident that Obama will resist? Obama has skillfully fused his political skills with new technologies to excite millions, but it remains to be seen whether his efforts will ultimately be empowering, alienating, or even a more refined method of social control.

Israel has decided to halt all sales of military equipment to Georgia because of objections from Russia, which is locked in a feud with its tiny Caucasus neighbor, defense officials said Tuesday.

The officials said the freeze was partially intended to give Israel leverage with Moscow in its attempts to persuade Russia not to ship arms and equipment to Iran. They spoke on condition of anonymity as Israel does not officially publish details of its arms sales.

Russia has repeatedly refused to comment on reports its is selling S-300 air defense missiles to Iran.

Among items Israel has been selling to Tbilisi are pilotless drone aircraft. Russian fighters shot one down in May, according to UN observers.

Other types of weaponry include the following:

… Israel has also been supplying Georgia with infantry weapons and electronics for artillery systems, and has helped upgrade Soviet-designed Su-25 ground attack jets assembled in Georgia, according to Koba Liklikadze, an independent military expert based in Tbilisi. Former Israeli generals also serve as advisers to the Georgian military.

Interesting. Israeli arms sales to Georgia are purportedly halted, and the Georgians invade South Ossetia in less than a week. There are also reports today that the Georgians have shot down Russian aircraft, which brings this story from April to the top of the queue:

Russia asked Israel last week whether it had supplied Unmanned Aerial Vehicles (UAVs) to Georgia, for it to use in military operations against secessionists from Abkhazia.

An Israeli security source confirmed that the UAVs being used by Georgia are manufactured by Israeli firm Elbit. A diplomatic source in Jerusalem said that the Russians did not have proof of this, however, and that the request for clarifications was based on suspicions. He added that Israel does not sell any attack weapons to countries that border with Russia and only sells them defensive equipment.

Georgia accused Russia of using a MiG-29 to shoot down one of its UAVs over Abkhazia and produced a video to back up its claim. The video was shot by the UAV seconds before it was shot down, and it shows a MiG-29. Georgia’s president said he spoke with Russian President Vladimir Putin and demanded an end to the “unjustified aggression against Georgia’s sovereign territory.”

Of course, the subject that keeps intruding into this saga is Iran. Is the Georgian invasion of South Ossetia meant to pressure the Russians into severing economic and military ties with the Iranians? The Israelis supposedly halted arms sales to Georgia in an effort to persuade the Russians to refuse to supply Iran with a new air defense system. Did that effort fail, or was it merely a pretense before the launching of the Georgian invasion?

Perhaps, the invasion has also been prompted by competition between the US, Russia and Europe over access to natural reserves in the Caucasus. Along these lines, consider this July 30th article by former Indian diplomat M K Bhadrakumar:

From the details coming out of Ashgabat in Turkmenistan and Moscow over the weekend, it is apparent that the great game over Caspian energy has taken a dramatic turn. In the geopolitics of energy security, nothing like this has happened before. The United States has suffered a huge defeat in the race for Caspian gas. The question now is how much longer Washington could afford to keep Iran out of the energy market.

Gazprom, Russia’s energy leviathan, signed two major agreements in Ashgabat on Friday outlining a new scheme for purchase of Turkmen gas. The first one elaborates the price formation principles that will be guiding the Russian gas purchase from Turkmenistan during the next 20-year period. The second agreement is a unique one, making Gazprom the donor for local Turkmen energy projects. In essence, the two agreements ensure that Russia will keep control over Turkmen gas exports.

The consequences for the US are reportedly significant:

Until fairly recently Moscow was sensitive about the European Union’s opposition to the idea of a gas cartel. (Washington has openly warned that it would legislate against countries that lined up behind a gas cartel). But high gas prices have weakened the European Union’s negotiating position.

The agreements with Turkmenistan further consolidate Russia’s control of Central Asia’s gas exports. Gazprom recently offered to buy all of Azerbaijan’s gas at European prices. (Medvedev visited Baku on July 3-4.) Baku will study with keen interest the agreements signed in Ashgabat on Friday. The overall implications of these Russian moves are very serious for the US and EU campaign to get the Nabucco gas pipeline project going.

Nabucco, which would run from Turkey to Austria via Bulgaria, Rumania and Hungary, was hoping to tap Turkmen gas by linking Turkmenistan and Azerbaijan via a pipeline across the Caspian Sea that would be connected to the pipeline networks through the Caucasus to Turkey already existing, such as the Baku-Tbilisi-Ceyhan pipeline.

But with access denied to Turkmen gas, Nabucco’s viability becomes doubtful. And, without Nabucco, the entire US strategy of reducing Europe’s dependence on Russian energy supplies makes no sense. Therefore, Washington is faced with Hobson’s choice. Friday’s agreements in Ashgabat mean that Nabucco’s realization will now critically depend on gas supplies from the Middle East – Iran, in particular. Turkey is pursuing the idea of Iran supplying gas to Europe and has offered to mediate in the US-Iran standoff.

The geopolitics of energy makes strange bedfellows. Russia will be watching with anxiety the Turkish-Iranian-US tango. An understanding with Iran on gas pricing, production and market-sharing is vital for the success of Russia’s overall gas export strategy. But Tehran visualizes the Nabucco as its passport for integration with Europe. Again, Russia’s control of Turkmen gas cannot be to Tehran’s liking. Tehran had keenly pursed with Ashgabat the idea of evacuation of Turkmen gas to the world market via Iranian territory.

Curiouser and curiouser. The thread that emerges from Bhadrakumar’s analysis, however, is the urgency for the US (and the Israelis) to act quickly to disrupt Russia’s ability to bring natural gas from Turkmenistan to the European market. Otherwise, the US will be forced, to the great dismay of Israel, to broker a deal with Iran so as obtain access to Iranian natural gas to break the Russian monopoly.

Hence, we now see a Georgian invasion of South Ossetia about a week after the Russian announcement of its natural gas agreements with Turkmenistan. The invasion of South Ossetia may well be a strong signal that the US prefers confrontation with the Russians over negotiating a new commercial relationship with the Iranians. In other words, it suggests that the US still sees war as the ultimate solution of its disagreements with them.

The invasion also suggests that the US is incapable of choosing an ally in the region, and persists in the hope that it can economically and militarily dominate both the Russians and the Iranians, and through them, just about every country in Central Asia. Such arrogance is likely to be ruinous for all involved. A dirty adventure, indeed.

(Hat tip to Big Bopper for pointing out the Israeli connection.)

Georgia invades South Ossetia:

Georgia launched a major military offensive Friday to retake the breakaway province of South Ossetia, prompting Moscow to send tanks into the region in a furious response that threatens to engulf Georgia, a staunch U.S. ally, and Russia in all-out war.

Hundreds were reported dead in the worst outbreak of hostilities since the province won defacto independence in a war against Georgia that ended in 1992. Witnesses said the South Ossetian capital of Tskhinvali was devastated.

“I saw bodies lying on the streets, around ruined buildings, in cars,” said Lyudmila Ostayeva, 50, who had fled with her family to Dzhava, a village near the border with Russia. “It’s impossible to count them now. There is hardly a single building left undamaged.”

And the Russians respond:

The Russian Defense Ministry said Friday afternoon that it would protect Russian citizens in the territory and Russian peacekeepers who came under fire in Tskhinvali.

“The Georgian leadership has unleashed a dirty adventure,” the ministry said in a statement, posted on its Web site. “The blood shed in South Ossetia will remain on the conscience of these people and their entourage. We will not allow anyone to do harm to our peacekeepers and citizens of the Russian Federation.”

But are Georgians solely responsible for this dirty adventure? One wonders, especially in light of this passage from the Associated Press article, a fact conveniently omitted from New York Times coverage:

More than 1,000 U.S. Marines and soldiers were at the base last month to teach combat skills to Georgian troops. Georgia has about 2,000 troops in Iraq, making it the third-largest contributor to coalition forces after the U.S. and Britain.

The White House on Friday urged Russia and Georgia to peacefully resolve their dispute over South Ossetia.

“We urge restraint on all sides — that violence would be curtailed and that direct dialogue could ensue in order to help resolve their differences,” White House spokeswoman Dana Perino told reporters.

Curiously, the US is not capable of condemning a Georgian invasion and Guernica like air attack upon Tskhinvali, but then, that would be expecting a lot after US Marines just got done training Georgian forces. Instead, the White House just urges restraint, which is what it usually does when an ally has launched an attack and the other side moves to defend itself.

The Russians have been angry for quite awhile about proposals to admit Georgia into NATO. Now, Georgian troops have attacked South Ossetia after having been trained by the US. The Russians no doubt believe, with good reason, that the US greenlighted the invasion. If I were Georgian, I’d be very concerned, because it is probable that the Russians are about to teach them a terrible lesson about the consequences of hubris.