Gilad was recently here for the JZ Festival in Shanghai’s Pudong district and he also taught; I’m assuming, at the JZ school. I can imagine the experience. The JZ Festival went off without a hitch in a beautiful park in the Pudong New Zone. The JZ school is situated in the former French concession among old houses and tree lined lanes. Between the lanes, the Jazz and the skyscrapers of Pudong, it must have been an intoxicating week. But we are supposed to be dissidents and radicals and some parts of Gilad’s article are lazy and dangerous. We need perspective.

Gilad writes, “China is a financial miracle.”

I have lived in Shanghai for eight years and a large part of my life is given to the underground music scene. But before we get to the reality of that we have to address the big problem. The myth of the “economic miracle”. This is not specific to China. This is a global myth. Let us start with a reminder of the state of the global system. According to the World Bank development indicators for 2008, 80% of the world, or 5.15 billion people, live on less than ten dollars a day with 3.14 billion of those, or half the world’s population, living on less than two dollars fifty.² The top 20%, as we are all aware, is divided into the so called middle classes and the super rich.

China is a fair reflection of this global trend. The most recently touted indicator has been the internet usage stats.³ China recently approached the 300 million mark for internet users. Economic commentators foamed at the mouth and noted that was equal to the entire population of the USA. Of course, what it actually represents is the creation of a 20% middle class to go with it’s remaining billion people who are on or below the subsistence mark. Gilad also states, “It is a miracle because it somehow manages to restrain hard capitalism with a unique socially orientated system.” That is simply not true. It is purely hard capitalism. Period. There is no restraint, there is a free for all that is destroying the countryside and resulting in monthly riots across the land.⁴

In any region of the world, a system which enriches a minority of the people while plunging the rest downwards — while destroying their land rights and environment — should never be called a miracle. It should be called a disaster.

It is also dangerous to freely mix ideas of state or government with people or culture. I love to live here and my experiences on the underground rock scene and with local artists have been amazing. However, a little reading or asking around the subject will reveal that writing, music and art has a glass ceiling that is directly imposed by state censorship. For every Jazz Festival that goes on there are a slew of cancelled events.⁵ During the Olympics, the entire music scene was forcibly shut down for a month by the police.⁶ The underground is allowed to exist, as long as it doesn’t try to go public. I might also mention that no word gets published in print media without being first read by the Xinhua Agency.

I love living in China and Shanghai. The people are great and the issues I bring up are not only relevant to China. I myself don’t like ‘China Bashing’ and the countless lazy stereotypes that appear in journalism about this complex country. However, Shanghai is the glossy facade for the rest of the country and it’s our job as radicals to always keep our perspective.

1. ”Autumn in Shanghai” by Gilad Atzmon
2. ”Global Issues Poverty Facts.”
3. ”China has close to 300 million internet users AFP.”
4. ”58,000 mass incidents in China in first quarter as unrest grows to largest ever recorded.”
5. ”Modern Sky Festival 2009” from China Music Radar.
6. ”The Clampdown” from China Music Radar.

I was advised before my journey that Shanghai is not exactly a ‘cultural shock’, quite the opposite; one seems to have met Shanghai in one’s urban fantasy a long time before landing there. Shanghai is in fact the incarnation of the Western urban dream: it is an astonishing materialisation of everything the Western metropolis is claiming to be. In parts it is the embodiment of the urban imagery; it is what New York was aiming at but somehow failed to reach. In other parts, it is the ultimate urban tranquillity of a Parisian tree-lined avenue with small bars and cosy cafés. It offers everything a big city can offer in terms of culture, entertainment, business and food yet it is totally sympathetic to its visitors and inhabitants.

I was teaching jazz in China this week and performed at the Shanghai Jazz Festival, Though I was pretty busy with my students, Jazz combos, concerts and other musical commitments, I tried to absorb as much as I could. I travelled around, tried to meet local people and to grasp this miracle. I, for instance, visited the Shanghai Music Fair, probably the biggest music fair in the world.

China is now the biggest producer of Western musical instruments. And guess what, they are making some unbelievably good saxophones out there. I have tried and reviewed Chinese saxophones in the past. For some reason I was always pretty convinced that the many Chinese brands were made by one or two manufacturers. Somehow, all contemporary Chinese saxophones and clarinets follow a very similar design and they are all equally good. In the music fair I realised that I was totally wrong. There are actually many small Saxophone manufacturers and they are all very good at it. The Chinese manufacturers whom I met were actually seeking criticism. In a very modest manner they would ask for your honest opinion of their different models. They just want to make it better. They want to improve.

China is a financial miracle. It is about to surpass Japan as the world’s second largest economy. It is expected to leave America behind within the next five years and to become the world’s largest economy. China is the largest producer of most industrial and agriculture products. In spite of the ongoing Western criticism of China’s political structure and its one party system, the success of China proves that its political system and economic model maybe far more efficient than anything Western democracies can offer. Unlike the crumbling English Speaking Empire and other Western service economies, China is a productive society and it is ruled by a single “People’s Party”. Rather than copying the Western economic model and value system, China adopted some Western advantages, modified them and integrated them into its own economic model and social system.

China and Israel

In my Shanghai visit I stayed in a rather fancy Western hotel. Already on my arrival just after checking in, while attending the tourist desk, a familiar golden Menora¹ shined at me from one of the tourist brochures. I picked it up, “The Jews in Shanghai”, it said: the story of 30.000 Jews who found shelter in Shanghai between 1933 and 1941. I guess that you can no longer imagine a metropolis on this planet unless it has some relevance to the Holocaust or the Jews. Visitors to Shanghai have a lot to choose from: temples, sight seeing, shopping, new developing markets, food, Chinese folklore and ofcourse even a bit of ‘Shoa business’. I honestly believe that no one, except a few Jews, is interested in the historical role of Shanghai in the Holocaust. And yet, the brochure was there for a reason. Many Israelis and Jews are visiting Shanghai in the last two decades, as China and Shanghai are the future and the Israelis know it very well.

In the breakfast at the hotel I could hear a lot of Hebrew. They were not Israeli tourists. They were actually ‘selling and buying’. They were meeting local businessmen already at 8.00 am. But it wasn’t just business. The Israeli infiltration is noticeable on every possible level.

In the bus that picked us up to go to the festival’s stage, we found an Israeli flag hanging under the driver’s front mirror. A quick inquiry with the assistance of our English speaking stage manager revealed that the band to play before us was an Israeli Dixieland band. I may as well mention that I myself have lived in Britain for 15 years, I travel around the world with musicians from many different parts of the world and I have never seen a single musician leaving nationalist souvenirs anywhere. For Israeli artists, so it seems, leaving their Star of David is apparently a common practice.

I soon realised that I knew those Israeli Dixieland musicians, they were actually my old friends from Israel. Some of them were my teachers and mentors others had been playing in my band. Two of them were very close friends of mine at the time. Needless to say that it was very exciting to meet them after so many years. In fact they were very good at what they were doing. They could play the music and they clearly mastered the Dixieland style. On stage I heard one of my old friends telling the Chinese audience, ‘here we are, 60 years for the People’s Republic of China, 61 years for the Jewish State and all we really want is peace.’ Such a simple message, we the Jews and you the Chinese all share one simple belief.

The Israeli horn player may not have realised that a few hours earlier the People’s Republic of China voted in favor of adopting the Goldstone report at the Human Rights Council. As far as China is concerned, Israeli war crimes should be further investigated.

However, it is common knowledge that most if not all Israeli art exports are sponsored by the Israeli Foreign Ministry. Israeli artists are operating as messengers of the Zionist propaganda and Hasbara lies. It is a pretty simple concept: as the IDF drops White Phosphorous on Palestinians or starves others, Israeli artists travel the world spreading a 1960’s message of ‘Sex, Love and Peace’. Needless to say, the people around me didn’t really buy it.

Zionism, as we learn from Herzl and his too many followers, is all about tracing the bond between the Jewish national interests and world dominating powers. China is no doubt the rising power; it is in fact a rising sensation. In just one week in China I saw for myself the intensity of the Israeli activity on the ground.

As we all know, some naive peace activists around put all their cards on a possible growing rift between Israel and the USA. They forget that Israel can easily change its leagues as they did rather often in the past. Israel is always building relationships with rising powers. The Israelis have already invested some enormous energy on India and China.

A lot of China’s success story is because it is run by a very unique People’s party political system. It is a miracle because it somehow manages to restrain hard capitalism with a unique socially orientated system. It is a big question whether there is room in this system to accommodate Israel, a bourgeoisie nationalist philosophy based on racial supremacy and choseness in general.

1. Menora: a seven-branched candelabrum that is one of the oldest symbols of the Jewish people.

Widespread human and labor rights violations were revealed, including child labor; illegal below-poverty wages; few or no benefits; forced or unpaid overtime; hazardous working conditions; verbal, physical, and sexual abuses; forced pregnancy testing to be hired and while employed; excessive long working hours causing physical ailments, stress, and harm; denial of free expression, association, and collective bargaining rights; and elaborate schemes to commit fraud and deceive corporate auditors.

In April 2009, Subsidizing Sweatshops II followed to provide more evidence of a global problem. It tracked developments in four factories from the first report and four new ones in five countries on three continents producing uniforms for nine major firms in China, Honduras, the Dominican Republic, Mexico, and America.

Two cases relied on investigations by independent factory monitors. Three others used personal worker interviews conducted by “credible local unions and non-governmental organizations with expertise in labor rights.” Three more are based on SFC-conducted interviews.

In all cases, the global economic crisis materially increased worker hardships leaving them more vulnerable, in jeopardy, and unable to secure their rights. Most often, the following violations were found:

• children as young as 14 forced to work the same long hours as adults and under the same onerous conditions;
• wages so low, they only cover one-fourth to one-half of essential needs;
• workers in at least two factories not paid overtime;
• because of excessive production quotas, workers forced to skip breaks, not go to the bathroom, and work sick through grueling 12-hour or longer days;
• unhealthy work environments in stifling heat and thick fabric dust detrimental to health;
• numerous sewing machine accidents causing wounds and loss of fingers; and
• instances of severe repression against union supporters and organizers, including harassment, intimidation, firing, and blacklisting from further employment elsewhere.

The report’s findings “are corroborated by scores of academic research and industry investigations.” Human and labor rights violations are the norm, not the exception. Monitoring alone won’t change them, but perhaps public disclosure can help.

The Honduran Alamode Factory

Employing about 500 workers, it makes public employee uniforms and other apparel for Lion Apparel, Cintas Corporation, and Fechheimer Brothers Company. In 2008, the Worker Rights Consortium (WRC) reported some of the worst working conditions in the region, but months later corrective measures had been taken, thanks to exposing the situation to public scrutiny.

Alamode agreed to pay minimum wages, provide back pay, enroll all workers in the Honduran social security system to give them access to health care, paid injury leave and other benefits, and establish an injury log as required.

However, other issues remained unresolved, including:

• further improvement of health and safety issues;
• ending verbal harassment; and
• making overtime work voluntary, not mandatory.

Despite improvements, Alamode workers still earn sub-poverty wages, and full compliance with labor rights falls far short.

The Mexican Vaqueros Navarra Factory

The factory produces jeans and uniforms, including the Dickies brand. In May 2007, its workers tried to form a union but faced extreme harassment and intimidation, as reported by a labor rights monitor on the scene. It’s investigation:

found that workers had been psychologically and verbally harassed, dismissed without warning, and forced to sign resignation letters for attempting to form an independent union at the factory and that at least some workers dismissed for union activities have been blacklisted….the official reason given for workers dismissed… was ‘lack of work.’

Two months after voting to affiliate with the Garment Workers Union, employees were told the plant shut down for lack of work. Yet three buyers, Gap, Warnaco, and American Eagle, placed orders with the factory in support of their right to organize.

In July 2008, the Tehuacan Valley Human and Labor Rights Commission filed a complaint with WRC alleging that another Navarra Group factory, Confecciones Mazara, discriminated in its hiring practices. WRC investigated and found “overwhelming evidence that Confecciones Mazara engaged in unlawful discrimination against union supporters in hiring decisions, otherwise known as ‘blacklisting.’ ”

Twenty former Vaqueros Navarra workers applying for jobs were rejected. Another initially hired was fired on her first day after her former union organizing activities were discovered. In response to WRC complaints, the company refused to comply and continues its blacklisting practices.

The Dominican Republic’s Suprema Manufacturing, Wholly Owned by Propper International (PI)

It operates three plants and employs about 1,000 workers making uniforms and other apparel items. PI is one of the largest makers of US military clothing. In 2008, Suprema Manufacturing’s employees described low wages, high production quotas, unhealthy work conditions, and extreme hardships, all unaddressed by the company.

At the same time, PI distributed a threatening notice to its Puerto Rico workforce accusing the union and workforce of defamation. The same notice said that SweatFree Communities’ publications expressed “a defamatory tone toward Propper (alleging) that the Department of Defense is subsidizing companies with terrible work conditions, and safety and human rights violations.” The notice concluded saying:

“SAY NO TO THE UNION. DON’T SIGN ANOTHER CARD.”

In March 2009, Federation of Workers of Free Trade Zones (FEDOTRAZONAS) workers and volunteers and their counterparts at the National Federation of Free Trade Zone Workers (FENOTRAZONAS) conducted over two dozen interviews on behalf of SweatFree Communities (SFC). They revealed extreme poverty, exhaustion, intense pressure to meet production quotas, an unhealthy work environment, and intimidation-instilled fear against openly supporting union organizing. Even though Suprema has a certified union, only a handful of workers belong. As a result, it’s weak, unable to represent workers effectively or organize to recruit more.

Workers said to get by, they need other jobs and loans (at 10% weekly interest) to pay unexpected medical and other expenses. Their work load is so exhausting, it makes “my whole body hurt,” according to one employee. “When I leave work, I am tired and exhausted…. All I want to do is lie down, but I have my obligations.” Another machine operator said:

“The work is hard and the production quota is killing us (and earning minimum pay) isn’t enough for anything, for what’s needed at home.”

Other workers complained of health-related issues related to poor air quality, extreme heat, and fabric dust. According to workers interviewed, they can’t act individually or collectively to address issues as important as these or any others. According to one:

“In the event that we complain, normally they don’t listen to us but you have to suffer the consequences. One time I complained about the high temperatures in the factory and said it is not good for our health. And the manager said to me, ‘If you are not comfortable you can leave.”

Another worker said “we discuss problems at work amongst the other workers, but not with management because we are afraid…. If you complain too much, they fire you. So we don’t complain because we need employment….”

They also fear recrimination over union organizing or joining one. In 2000, 300 union members were fired. After reviewing the case, the Dominican Labor Department ordered 30 leaders reinstated with back pay. When they returned, management ordered workers not to speak to them or be fired. Workers today live in fear, endure harsh conditions, and put up with whatever they’re ordered to do.

New Bedford, Massachusetts-based Eagle Industries

Eagle supplies tactical gear to the Pentagon and state governments. In November 2007, it acquired a New Bedford, Massachusetts facility that made headlines in March 2007 when Immigration and Customs Enforcement (ICE) agents raided the factory, discovered sweatshop conditions, and arrested hundreds of alleged undocumented workers.

In its 2008 report, SweatFree Communities (SFC) highlighted Eagle’s failure to address abusive sweatshop conditions as well as its hostility to an ongoing union organizing campaign at the time.

In February 2009, SFC conducted in-depth interviews with eight union supporters and learned the following:

• Eagle raised its minimum wage by 50 cents an hour to an average of about $9 an hour;
• it included a week’s vacation in worker benefits bringing the total to two, including an annual July shutdown;
• a new sick day policy requires a doctor’s note, and time off remains unpaid; and
• workers expressed concerns over low pay, poor benefits, dangerous working conditions, and everyday harassment of union supporters by company managers.

Examples cited:

• machines need lots of oil; in operation, it “shoots into your eyes,” according to workers;
• excessive heat, lack of circulation, smoke and oppressive smell causes dizziness, head and stomachaches, and for some vomiting;
• forklifts go everywhere and sometimes hit people, causing injuries;
• fabrics used are so heavy and stiff, they inflict abrasions, leave fingers bent and stiff, and cause chronic pain;
• no health insurance is provided;
• without a doctor’s note, no sick days are offered and if taken are unpaid;
• workers are constantly watched and checked, even when they go to the bathroom;
• action is taken against anyone suspected of supporting a union; new hires must sign a declaration agreeing not to join one;
• pressure and harassment are constant “to produce a lot;” and
• departments are shut down and workers reassigned to divide and separate them from each other.

As a result, workers feel a union is their only hope because it “offers a contract and a negotiating table with the owner of the factory where he will have to realize the suffering we have endured working for him for so long, making money for him so he will have a good future while our future is bleak,” according to one worker.

Tijuana, Mexico’s Safariland

A division of Armor Holdings, a wholly-owned subsidiary of BAE Systems, Inc., Safariland’s 700 employees produce bulletproof vests and accessories, belts and personal accessories, and grenade and pistol holsters.

Workers told researchers that management told them in response to questioning to say everything is fine and not complain. Reality, however, concealed lives of extreme poverty, living at home with:

“No water, no electricity, and no terrace. One room made of garage doors and cardboard. The electricity we have is stolen. We buy water because there is no running water. There is no floor. The roof is made of laminate and cardboard.” Workers expressed little hope for future change, even less now in economic crisis hitting Tijuana like most everywhere.

In recent months, thousands lost jobs, and when openings exist, long lines queue up to apply. Women must take pregnancy tests, a violation of Article 3 of Mexico’s labor law requiring equal treatment of both genders. Article 26 requires worker contracts with wage guarantees, their amount, how they’re paid, working hours, breaks, vacations, and other benefits. Yet Safariland offers only temporary ones, then chooses whether or not to renew them, a violation of Article 37.

Pressure and harassment are constant to meet quotas, arrive on time, and respect supervisors. Failure is punished by suspensions without pay for one to three days.

However, Mexican Labor Law is clear, yet Safariland disobeys it. The Constitution’s Article 123 establishes an eight hour work day, including breaks. So does the Labor Law’s Article 61 and under its Article 67, double pay is required for overtime. In addition, Article 110 prohibits pay deductions for any reason, but Safariland gets around it by suspending workers.

Articles 177 and 178 let 14-16 year old minors work for up to six hours daily, including a one-hour rest after three hours, if they pass a medical examination. Workers said children worked the same hours as adults.

They also reported dangerous and unhealthy conditions, including accidents with sewing and riveting machines and material cutters, resulting in wounds and lost fingers. In addition, hazardous substances are used, including thinners, solvents, and Resistol 5,000 glue, the notorious narcotic used by Latin American street children.

Other complaints included supervisors’ indifference to worker concerns, and according to one account: “They do not listen to us, and if we complain they treat us like troublemakers.” Anyone caught supporting a union “would be fire(d) or at least consider(ed) troublemakers,” said another. “They would put us on the blacklist,” a believed widespread practice in Tijuana.

The Dickies de Honduras Factory

Located in Choloma, its 1,000 workers produce apparel under oppressive conditions. Wages are sub-poverty, and at best cover half a family of four’s basic necessities. Work days are long, 11-12 hour days, four days a week, and constant pressure to produce. According to one worker, illness is no excuse for missing work.

Union organizing is forbidden, and those caught or suspected are fired. One union leader explained how organizers are treated. In 1998, Dickies fired 80 supporters. In 2003, alleged leaders were fired, then in 2005, 280 workers got legal recognition to form a union. A month later, a Mexican Ministry of Labor representative and three union officials attempted to deliver official documents to the company. They were denied entry. The officials and others were fired, and Dickies stonewalled government summonses to answer for the action. Other firings followed, and the company refused to recognize a union, bargain collectively with it, or address employee grievances.

Workers nonetheless persisted until the current economic crisis became challenging. Claiming lack of orders and a need to cut costs, worker dismissals began in December 2008. By March 2009, 58 were gone, in all cases for supporting a union, in violation of Honduran Labor Law’s Article 96 that prohibits employers from “firing or persecuting their workers in any way because of their union affiliation.”

China’s Genford Shoes

Located in Guangdong Province, its 10,000 employees produce work, exercise, casual, and dress shoes, 80% for Ohio-based Rocky Brands. According to the company, Genford is independently audited for social compliance, but SFC research found evidence of widespread labor law violations.

Workers are constantly pressured to produce for low pay under poor conditions:

• new employees get no income for their first three days; they also must pay $4 for a physical examination, $10 for housing, and another $10 for ten days’ meals in the company cafeteria – in total, around a week’s wages;
• wages are sub-poverty;
• no rest days are allowed for an entire month during peak production periods, in violation of Article 38 of China’s Labor Law requiring at least one per week;
• children as young as 14 work the same hours as adults and are hidden when customers visit the factory; Article 28 of China’s Labor Law prohibits employing children under age 16; it also protects 16 – 18 year olds from “over-strenuous, poisonous or harmful labor or any dangerous operation” and requires employers to follow state laws regarding types of jobs, hours worked, and labor intensity for adolescents;
• excessive over time is mandatory at below the legal double hourly pay rate for daytime work on weekends;
• by law, workers can cancel their labor contracts by giving 30 days notice, but are penalized by loss of wages when they do;
• they live 12 to a room in crowded dorms of around 200 square feet with ten cold showers for 264 workers;
• pollution levels are oppressive; workers describe discharged black, foul smelling effluent into the adjacent river; and
• at the end of every work day, body searches are conducted, similar to but not full strip searches.

Genford employs a complex system of bonuses and fines to achieve output. Workers get bonuses for meeting quotas that must be maintained hourly, but no one understood how they’re calculated. They also complained that they’re hard to reach, and they’re constantly pressured to work faster for maximum production. In addition, fines are levied for arriving a few minutes late, leaving early, skipping work, or causing trouble.

It’s also not easy to quit even though Article 37 of China’s Labor Law lets workers do it by giving 30 days advance written notice or three days during their probationary periods. Employers must then fully compensate workers, but they don’t.

Frackville, Pennsylvania’s City Shirt Company

Its owner, Elbeco Inc., a producer of public employee uniforms, “was the first major uniform company to endorse SweatFree Communities’ campaign for worker rights,” and it shows in how it treats its employees.

According to one, “I am pretty much able to cover my needs. Anybody can always use more money, but I do pretty well, I can say.”

The average worker makes about $11 an hour, but some get up to $19 because the company is unionized and was able to bargain collectively for decent wages and benefits. In addition, workers have “a seat at the table with the company… affording them a sense of ownership and respect.”

City Shirt’s employees are also much older than at other factories studied, a sign of greater stability and a contented workforce staying in place, happy to be there, and for many, hoping to stay for the rest of their working lives.

Yet they worry that their jobs may not last because of factors beyond the plant’s control forcing layoffs to cut costs and stay viable. Apparel manufacturing in America is dying. In addition, the current environment is taking its toll closing factories across America, and City Shirt has had to cut one-third of its workforce in the past 18 months.

The alternative is the global sweatshop as oppressive or worse than the ones described above. The company’s employees hope to reach retirement age before their operation gets outsourced, but making it won’t be easy.

In today’s global economy, in good times and bad, worker rights are subordinated to greed and private profit, and future prospects look grim. Job losses are continuing. Wages are stagnating at best. Benefits are eroding, and job security is a thing of the past at a time governments, in alliance with business, are indifferent to protecting them. The result, more and more, is that workers are on their own to endure against very long odds. It’s all the more important for harder struggle because it’s the only way they have a chance.

Anti-Sweatshop Legislation in Congress

On January 23, 2007, S. 367: The Decent Working Conditions and Fair Competition Act was introduced in the Senate “to amend the Tariff Act of 1930 to prohibit the import, export, and sale of goods made with sweatshop labor, and for other purposes.” It was referred to committee but never passed.

On April 23, 2007, HR 1992: The Decent Working Conditions and Fair Competition Act was introduced in the House for the same purpose. It, too, was referred to committee but never passed.

Both bills were introduced in a previous congressional session and failed. They may be re-introduced later in 2009.

Sweatshop labor takes different forms, some far worse than others. On February 14, 2007, Charles Kernaghan, Executive Director of the National Labor Committee in Support of Human and Worker Right, testified about the worst kind at a Senate committee hearing on Overseas Sweatshop Abuses, Their Impact on US Workers, and the Need for Anti-Sweatshop Legislation.

Citing the December 2001 US-Jordan Free Trade Agreement, he gave examples of human trafficking and involuntary servitude abuses that followed:

• Jordan’s 114 garment factories employ over 36,000 foreign guest workers from Bangladesh, China, Sri Lanka and India;
• Bangladeshi guest workers had to borrow at exorbitant interest rates $1,000-$3,000 to pay unscrupulous manpower agencies for two-to-three year contracts to obtain work;
• they were trapped in involuntary servitude at one factory and couldn’t leave;
• they were promised benefits, then reneged on, including free food, housing, medical care, vacations, sick days, and at least one day a week off;
• on arrival in Jordan, their passports were seized;
• they were forced to work shifts of “15, 38, 48, and even 72 hours straight, often going two or three days without sleep;”
• they worked seven days a week for as little as 2 cents an hour, 98 hours a week;
• those complaining were beaten and abused;
• 28 workers shared one small 12 x 12-foot dorm with access to running water only every third day;
• legally owed back wages were never paid nor were factory owners prosecuted for human trafficking, involuntary servitude, or treating their employees abusively;
• they sewed clothing for Wal-Mart; and
• other Jordanian, Chinese and other factory workers are treated the same way; some worked under conditions so hazardous that “scores of young people (are) seriously injured, and some maimed for life.”

Kernaghan’s National Labor Committee (NLC) web site highlights the problem by saying that corporate predators “roam the world to find the cheapest and most vulnerable workers… mostly young women in Central America, Mexico, Bangladesh, China, and other poor nations, many working 12 to 14-hour days for pennies an hour.”

Corporate unaccountability is responsible for this moral crisis of our time — a dehumanized, expendable workforce ruthlessly exploited for profit. NLC believes worker rights are as inalienable as human rights and civil liberties and says “now is the time to secure them for (everyone) on the planet.”

The debate has revealed a deep division over the causes and remedies, with Anglo-Franco American (AFA) politicians, columnists and economists on one side and their Asian-German (AG) counterparts on the other. In general terms the AFA spokespeople put the blame for the crises on external factors, or more specifically they point their finger at the positive trade surpluses, dynamic export sectors and high investment rates in productive sectors and low levels of consumption in the AG countries as the cause of ”unbalances” or “disequilibrium” in the world economy.¹

In contrast, the AG countries reject this argument which speaks to prejudicial external practices. They emphasize the internal “imbalances” within the AFA countries, which has weakened their international, commercial and financial position.

In this paper, I am going to argue that both internal economic policies and external empire building strategies of the AFA countries have been the driving force for global imbalances. The structural differences between the two regions and the differences in class structure and economic configurations in each bloc precludes any easy or immediate solution. On the contrary, for the foreseeable future, the conflict between dynamic emerging export powers and the declining western bloc is likely to intensify, leading to greater trade conflicts and possible military confrontations.

The AFA charges against China’s commercial ‘imbalances’ conflates trade with the West with Beijing’s relations with the rest of the world. China has balanced trade or even trade deficits with Asian, African, Middle Eastern and Latin American countries. Moreover, the AFA countries have trade imbalances with other regions including the Middle East and Germany. Even if the AFA countries curtailed imports from China, it is most likely that other Asian countries would replace them, including Vietnam, South Korea, Taiwan, Bangladesh and India. The resulting trade deficits of the AFA would remain about the same.

The AFA countries blame China’s “undervalued” currency, and claim that Beijing authorities manipulate the exchange rate to under price exports and beat out competitors (namely producers within the AFA). Yet China’s currency has been revalued steadily upward over 20% the past five years, and yet the AFA still run a deficit, suggesting that their domestic producers have still not been able to compete with Chinese manufacturers.² More recently AFA writers have complained about low interest rates set by the Chinese government as a “subsidy” to its exporters. Yet AFA interest rates are at zero percent or even negative, to no avail. Moreover, the AFA have provided over 1.5 trillion in bailout funds and over 1.3 billion in stimulus spending – a subsidy five times greater than China’s stimulus package, without improving their trade balance. What is telling, given the sectoral allocations, of each regime’s bailout – subsidy – stimulus packages, China has fully recovered and is growing at 8% by mid 2009, while the AFA continue to wallow in negative territory and continue running up trade deficits. This points to the centrality of internal factors, namely, the economic sectors which receive the state subsidies and how they invest it and as a result how their decisions affect trade balances.

The AFA charge that China’s low cost labor, its exploitation of workers accounts for trade imbalances. Yet an increasing percentage of China’s exports are based on technological advances, not cheap labor. This is because low labor cost competitors are emerging in Asia.

The AFA complain that China over emphasizes its ‘export’ strategy at the expense of producing for the domestic market. Yet nearly half of China’s exports to the US are made by US owned multi-nationals who have invested, subcontracted and co-produced with Chinese counterparts. In other words, US internal policy, the deregulation of capital flows, has facilitated the movement of US manufactures abroad resulting in a decline of local production, an increase in imports and greater trade deficits.

Internal Causes of Trade Deficits (and Unbalanced World Economy)

The most obvious and striking correlation with the growth of AFA trade imbalances is the growth and dominance of the financial sector.³ The financialization of the AFA economies and Wall Street’s CEOs dominant role in the strategic economic positions of the state is transparent to the mass of the people and has even been acknowledged by most private economists and academics. Trade deficits increased in direct proportion to the growing political and economic power of the financial sector. In large part, this was due to the transfer of capital from manufacturing to financial services, leading to the decline of the manufacturing sector’s investments in innovations and competitive management strategies. The financial sector’s, high salaries, bonuses and quick returns attracted most of self-styled “best and the brightest”. MBA graduates multiplied while advanced engineering school graduates diminished. Advanced skilled worker training programs disappeared while low skill retail sales recruitment grew.

The problem was that financial services did not, could not replace the overseas earnings which formerly accrued to the country through manufacturing sales. Least of all in the highly regulated financial markets of China, Japan, India and the rest of Asia, where banking was subordinated to the expansion of manufacturing — namely financing industries targeted by state officials. The dominance of finance capital and the related sectors of real estate and insurance, led to a highly polarized class structure: in which billionaire and millionaire investment bankers presided at the top and an army of low paid service workers (retail employees, cleaners and sweepers, etc.) immigrant and non-union workers occupied the bottom. Presently income inequalities in the US exceed those of any other “advanced” capitalist country. The inequalities in Manhattan exceed those of Guatemala. The growing concentration of wealth is accompanied by decline of median wages over the past three decades. As a result the purchasing power of US workers is declining, thus reducing the demand for locally produced quality goods. The purchase of imported cheap textiles, shoes and other accessories results. The result was a decline in local saving and domestic investment in manufacturing leading to a decline in competitiveness. Moreover, the competition among financial lenders furthered consumer spending and greater individual indebtedness at a time when manufacturing exports were declining, starved of investments.

Most manufacturing firms transformed themselves into financial corporations, channeling investment funds in sectors not earning foreign exchange. Worst of all in pursuit of higher profits, manufacturers turned into commercial vendors, closing down plants and sub-contracting production to China and other Asian countries and importing final products into the US creating the trade imbalances. The large scale relocation of US multi-nationals abroad further exacerbated the trade imbalances.

The key role of the state in creating domestic imbalances leading to global disequilibrium is a result of the financial sector’s takeover of the state,and the deregulation of financial markets. The result was the long term promotion of an economic policy, in which the central bank (the Federal Reserve) and Treasury encouraged the growth of finance ,real estate and insurance sectors over manufacturing. The finance based strategy was justified by a large army of academics and publicists who spoke of a “post industrial”, or “service” or “information” economy as a “higher stage”, rather than a perversely unbalanced, unsustainable and unjust economy.

Financial supremacy coincided with the growing militarization of US foreign policy. Throughout the last thirty years, US overseas economic expansion was gradually eclipsed by the growing reliance on military intervention, and the build-up of military bases in hundreds of sites. As financialization weakened the productive capacity of US manufacturing exporters’ efforts to capture markets, US policymakers increased their reliance on the supremacy of military power. The channeling of billions into military spending drained resources from efforts to upgrade the competitiveness of US civilian industry and was a major factor-in its declining share of export markets. The end result of militarization was a loss of export earnings and the growth of trade deficits.

If we combine the three great internal imbalances in the AFA economics, but especially in the US, the financialization of the economy, the militarization of foreign policy and the concentration of wealth at the top, we can best understand why the US has such a huge and growing trade deficit.

China Export Driven Strategy

China’s emphasis on an export driven strategy and the resultant growing class inequalities is largely a result of the class composition of the state and its social structure. In other words internal factors are the driving force of its pursuit of trade surpluses. What is ironic is that some of the AFA critics, who rightly point to the internal ‘imbalances’ in China, overlook similar problems in the West. Namely, no mention is made of the absence of a national health plan in the US, the growth of inequalities and declining mass purchasing power – even as they point to these deficiencies in China. What Western advocates of greater social welfare in China do not discuss, is the capitalist class power, privilege and profits which hinder greater mass consumption. Least of all do they discuss the motor force for lifting working class and peasant living conditions, namely the class struggle. Instead they rely on technocratic appeals to Chinese elites for greater social spending.

The Chinese state has evolved into a powerful machine for manufacturing goods and billionaires. Today China has the highest growth, the highest rate of exploitation and the greatest class inequalities in Asia. Increasing wages to stimulate local consumption means reducing profits, anathema to all capitalists including Chinese. Increasing public spending on universal health coverage especially for the 700 million uninsured peasants and rural workers means higher taxes on the rich, including the families and colleagues of the governing elite. In contrast, producing for export markets does not require increasing domestic consumer power, on the contrary it requires lower wages.

A shift from an export-driven to a domestic market driven strategy, requires not only a ‘change in policy’ but a deep shift in class power, from the current capitalist class and its state backers to the workers and peasants. To realize large scale, long term commitments of public revenues to social services for the rural poor and higher wages for exploited workers requires sustained popular mobilizations, uprisings, strikes to secure the independent trade unions and peasant associations necessary to secure a shift in state allocations toward domestic consumption.

China’s “imbalances” are largely internal, social and political. An imbalance of social power between an all powerful capitalist state and a repressed powerless mass of workers and peasants; an imbalance in income between a super-rich banking, real estate, manufacturing export elite and a low paid working class and subsistence peasantry;an imbalance between a highly organized state linked by family, ideology and economic interests to the capitalist class and a dispersed, fragmented and isolated mass of working people.

China’s ruling class, its outward billion dollar investments in western capitalist enterprises via its sovereign wealth funds, its billion dollar investments in overseas extractive enterprises, is driven by the mass of capital accumulated that is extracted via intense levels of labor exploitation and the elimination of state funded pensions, health plans and education. China’s role as an emerging imperial power is rooted in the imbalance between global power and social welfare decay.

The fact that western capitalist writers, policymakers and their academic camp followers point to the same social imbalances in China as its domestic working class critics should not obscure a basic point. The Wall Street critics are defending the AFA financial elite against China’s export industrialists’ greater productivity; while the domestic working class critics are criticizing the capitalists and the state for their high rates of exploitation and concentration of wealth.

The key to reducing imbalances in world trade is reducing socio-economic inequalities within each region. The US requires a profound shift from a finance dominated economy to a manufacturing economy, where finance, high tech and higher education is directed to creating a competitive, productive economy based on skilled labor. The link at the top between Wall Street and the Pentagon must be replaced by a link from below between the industrial working class, low paid service workers and public sector employees and professionals.

The structural transformation of the US economy is necessary but not sufficient. If US efforts to pursue a military driven empire persist, this will divert resources away from domestic and overseas economic priorities. Military driven empires alienate trading partners, have high costs and low returns, isolate economic investors and traders from productive partnerships and are destructive of domestic and overseas civilian productive facilities.

The way out of the massive imbalances is for the US to engage in a large scale, long term domestic structural transformations – namely de-financialization and de-militarization. But the political and economic forces benefiting from the current configuration are deeply entrenched, in control of both major parties and dominate the mass media and its message. Yet, despite their profound institutional power they suffer several fatal flaws. In the first instance they have created unsustainable global imbalances, which will sooner or later lead to a collapse of the dollar and renewed and more virulent and costly financial bubbles. Secondly, the free market which is the main ideological prop of the deregulated financial power elite is totally discredited as evidenced by the single digit support and trust of Wall Street. Thirdly, military driven empire building has run its course: after nine years of war in Afghanistan the vast majority of the US public has sent a message to the political elite of both parties, the White House and Congress, that its time to shift from funding failed overseas adventures to solving the problem of 20% under and unemployed Americans (30 million), the 100 million or 33% of Americans with no or costly and inadequate health coverage. No amount of media and political pundit scapegoating of China for our own self-induced “imbalances” can divert American opinion from their direct experiences with our own internal inequalities and policy failures.

1. Martin Wolf, “Why China must do more to rebalance its economy” Financial Times, September 23, 2009, p 11. See also Financial Times, October 3, 4, 2009. p 3 and Financial Times, September 21, 2009 p 9.
2. Financial Times, October 9, 2009 p 1.
3. Gerald Davis, Managed by the Markets: How Finance Re-Shaped America (New York: Oxford University Press 2009).

Hinton’s book is a fascinating, absorbing and detailed account of land reform in a single Chinese village, Long Bow, near Changzhi in a liberated area in 1948 when land was turned over to the peasants. No less than the better known Red Star Over China, it is a classic of the revolution wrought by Mao’s Communist Party of China (CPC). The book is a very concrete, first person account. Hinton himself lived in the village of Long Bow in China at the time of land reform when the feudal estates were broken up and given to the peasants. Two of its characteristics make the book compelling. First the reader gets to know the participants, the peasants, by name and to witness their lives change forever as they take their destiny into their own hands for the first time in millennia. Second, the book begins by describing in detail what life was like before liberation. This writer is pretty much sob-resistant, but I wept several times as I read the condition of the peasants, ruthlessly exploited and degraded by the landowners in collaboration with the central government and the connivance of the Catholic “missionary” effort.

Hinton took over a thousand pages of notes and returned to the US only upon the termination of Truman’s widely despised war on Korea in 1953, which killed one million Asians and about 50,000 U.S. soldiers and contributed mightily to his defeat at the hands of Eisenhower. Hinton’s notes were promptly confiscated by customs and turned over to the notorious McCarthyite committee of Senator James Eastland. Hinton had his passport confiscated, was harassed by the FBI, blacklisted and unable to find work. He finally found land to farm which he did for a decade and a half. He finally got the release of his notes and set to work on Fanshen. No major publishing house would print it, but in 1966 Monthly Review Press, bless their Marxist souls, finally published it. In the splendid political climate of the 60s, it was a great but short lived success.

One especially stirring moment in Hinton’s account arrives when the landlords, deprived of any armed force to impose their will, take to threatening the peasants with the wrath of their ancestors. Standing before a monument to his ancestors, fearful and hesitant, one of the leading peasants finally takes a hammer to the headstone and smashes it to pieces. There is no thunderbolt from the skies, and at that moment the hold of the old exploiters was greatly weakened but not broken. The peasants remained afraid that Chiang Kai-shek’s Nationalists and their army would win and the old landlords would return; and the influence of the Catholics and their support of the old ways remained. But the peasants encouraged by the CPC cadre pushed on (Of course the threat of the displeasure of an ancestor is pretty thin gruel compared to the fire and brimstone fear that the monotheistic desert religions, Judaism, Christianity and Islam, provided to the West.) Here Mao’s words found expression in the deeds of the peasants:

“What should we not fear? We should not fear heaven. We should not fear ghosts. We should not fear the dead. We should not fear the bureaucrats. We should not fear the militarists. We should not fear the capitalists.”

Pretty good advice –then and now.

During land reform in Long Bow, there was no presence of the People’s Liberation Army, just a few CPC cadre and in this case Hinton. More often than not the cadre had to restrain the peasants from killing the landlords at once and often in fairly merciless ways – and the cadre were not always successful. Millenia of rage at the beatings, rapes, theft, death of loved ones and worst human degradation imaginable poured out at the rulers of old China in those days. But revolution is not a matter of serving tea, as Mao put it.

I recently returned from a short stay in China. Without Hinton’s book, an adequate perspective on what I saw would have been impossible. New China is impressive in many respects, but it arose on the ashes of old China and the suffering endured for millennia by the Chinese peasantry until the end of Chiang Kai-shek’s U.S. backed rule. In Hinton’s book Mao makes no appearance nor do other giants of the Chinese revolution, but we see the fruits of their work up close. Chairman Mao liked to say that to understand society one should look down, not up; and Fanshen does just that. Look down not up – pretty good advice and so little regarded on the contemporary “left” which is so much given to watching those on high.

Iran says it looks forward to the talks and promises to be forthcoming. But judging by the stance of the United States, Great Britain, France and Germany last week at the UN conferences in New York and the G20 meeting in Pittsburgh, draconian sanctions may be enacted against Iran in a few months. This would result in yet another crisis that the world doesn’t need just now.

Russia and China — which hold veto power in the Security Council that can weaken or prevent additional sanctions — have up to now resisted the Obama Administration’s drive for tough new UN punishments. President Barack Obama met separately during the week with Russian President Dmitri Medvedev and Chinese President Hu Jintao in an effort to obtain their agreement to threaten more stringent sanctions should Iran procrastinate during the talks.

The White House later suggested to the press that Medvedev may be coming around to Obama’s point of view, but this seems to be based on very skimpy evidence — a remark that “in some cases sanctions are inevitable.” Hu evidently didn’t even go that far. China opposes sanctions in principle as a means of resolving international disputes.

Moscow and Beijing do not subscribe to the negative depiction of Iran promoted by Washington, Tel Aviv, London, Paris and Bonn. They understand the situation to be far more complex than the U.S. and its allies publicly acknowledge.

The Iran question suddenly took center stage Sept. 25 during a week of hectic political activity. The White house set up a hastily arranged and theatrically produced press conference at the start of the G20 meeting in order to detonate a political bombshell intended to destroy Tehran’s contention that it is only interested in nuclear power, not nuclear weapons.

The conference opened with Obama standing at the microphone with French President Nicholas Sarkozy and British Prime Minister Gordon Brown positioned solemnly to his left and right. It was explained that German Chancellor Angela Merkel would have joined the trio but was delayed.

Obama then declared that Iran had for several years been secretly building an underground plant in mountainous terrain to manufacture nuclear fuel near the city of Qom about 100 miles from Tehran, in addition to the plant and facilities in Natanz already known to the world. He suggested the new plant was intended to produce weapons without the world’s knowledge, though that was not proven.

Obama then charged that “Iran’s decision to build yet another nuclear facility without notifying the IAEA [International Atomic Energy Agency] represents a direct challenge to the basic compact at the center of the non-proliferation regime … Iran is breaking rules that all nations must follow … and threatening the stability and security of the region and the world.” Refusal to “come clean,” he said, “is going to lead to confrontation.”

Sarkozy and Brown followed Obama and seemed to go even further than the American leader in denouncing Iran, explicitly demanding harder sanctions. Said Brown: “The level of deception by the Iranian government, and the scale of what we believe is the breach of international commitments, will shock and anger the entire international community.”

The New York Times reported that “after months of talking about the need for engagement, Mr. Obama appears to have made a leap toward viewing tough new sanctions against Iran as an inevitability … American officials said that they expected the announcement to make it easier to build a case for international sanctions.”

The majority of House and Senate members have long been critical of Iran’s government and the new allegations have only fanned the flames of their hostility. Right wing Florida Rep. Ileana Ros-Lehtinen, the leading Republican on the House Foreign Affairs Committee, declared: “The U.S. and other countries must immediately impose crippling sanctions on the Iranian regime, including cutting off Iran’s imports of gasoline. The world cannot stand by and watch the nightmare of a nuclear-armed Iran become reality.” Massachusetts Democrat John Kerry, chair of the Senate Foreign Relations Committee, stated “now is the time to supplement engagement with more robust international sanctions.”

As intended, the hyped disclosure created headlines around the world. It probably convinced many Americans, already primed to detest Iran, that Tehran is building nuclear bombs to obliterate the U.S. and Israel. This is not an unlikely conclusion for many people to accept after 30 years of Washington’s incessant campaign to demonize the government that overthrew and replaced America’s puppet, the dreaded Shah of Iran. The U.S. broke diplomatic relations with Iran after this act of lèse majesté and the subsequent “hostage crisis,” and has nourished a grudge to this day.

If push does come to shove with Iran it is important to remember how effortless it was to hoodwink the majority of American politicians and the masses of people into backing a completely unnecessary war against Iraq. As in the buildup to the unjust invasion of Iraq, today’s U.S. corporate mass media is playing its principal part to perfection — uncritically echoing government distortions about the danger of Iran’s nonexistent nuclear weapons. The Iran situation is different, but yet similar in terms of mass public manipulation and the possibility of a future confrontation getting out of hand.

Can this be, once again, a situation of high-stakes geopolitics where things are rarely as they seem? We think so. Let’s look at the immediate charge against Iran, based on the “revelations” of the last week, then take on the bigger picture in Parts 2 and 3.

The “shocking” news may have been delivered with a sense of surprise and high urgency, but U.S. intelligence agencies, joined by their counterparts in some allied countries, were aware since 2006 that Iran was constructing a second uranium processing plant that still remains under construction and is not operational. According to a Sept. 26 article circulated by the McClatchy newspaper group quoting a U.S. intelligence official, “There was dialogue with allies from a very early point.”

Bush Administration Director of National Intelligence Mike McConnel first informed Obama about the facility soon after he won election. He has been kept up to date since then. Before going public with the information last week, the president saw to it that several other governments were told in advance, as was the IAEA and others.

Washington officials claimed Iran became aware “in late spring” that the U.S. was spying on the “secret” facility. They said Iran then informed the International Atomic Energy Agency Sept. 21 about the existence of its project, implying Tehran did so because its cover was blown. In a statement Sept. 24 the IAEA acknowledged that Tehran had informed them that a “pilot fuel enrichment plant is under construction in the country,” and that it “also understands from Iran that no nuclear material has been introduced into the facility.”

Iran insisted to the Vienna-based IAEA and the world that the enrichment plant under construction is designed only for fueling nuclear power installations. Soon after Obama’s G20 speech, Iran’s Atomic Energy Organization declared the new “semi-industrial enrichment fuel facility” was “within the framework of International Atomic Energy Agency’s regulations.” Press reports said “The head of Iran’s nuclear program suggested UN inspectors would be allowed to visit the site.” The invitation was extended before Washington’s demand that it do so.

A quite unruffled Iranian President Mahmoud Ahmadinejad appeared at a press conference in New York after Obama’s disclosures. He seemed to regard the American president’s allegations, and the staged manner in which they were delivered, not only the making of a mountain out of a molehill but an act of bad faith just before the talks are to begin, suggesting non-threateningly that Obama will come to regret his confrontational demeanor.

Ahmadinejad told the press that the plant in question wouldn’t be operational for 18 more months and that it did not violate the Nuclear Non-Proliferation Treaty (NPT). He went further and said nuclear weapons “are against humanity [and] they are inhumane,” comments in keeping with his recent calls for eliminating all nuclear weapons. The Iranian leader also said that Iran informed the IAEA about the plant only a few days ago instead of when ground was broken because construction had reached the stage where it should be reported, not because it found out that a U.S. spy agency was watching.

What are we to make of this? First it must be understood there is a dispute over the IAEA’s safeguard provisions governing the Nuclear Non-Proliferation Treaty.

Iran considers itself to be in total compliance with the NPT, and this appears to be true. Inter-Press Service reporter Jim Lobe wrote Sept. 25 that “Under the basic Safeguards Agreement of the Nuclear Non-Proliferation Treaty of which Iran is a signatory, member states are required to declare their nuclear facilities and designs at least 180 days before introducing nuclear materials there.”

According to an article in the Sept. 26 New York Times by Neil MacFarquhar, “Tehran’s stance hinges on different interpretations of the agency’s regulations, said Graham Allison, the director of Harvard University’s Belfer Center and an Iran nuclear expert.

“For two decades, the agency required Iran to report only when nuclear material [for uranium enrichment] was introduced to a facility. By 2003 it rescinded that, in line with the guidelines for most [but not all] countries, demanding reporting when construction began, Mr. Allison said. But the agency never declared Iran out of compliance when Tehran claimed the old agreement was still in place.”

In talking to the press after Obama’s speech, Ahmadinejad said that the new facility would be completed in 18 months, so under Iran’s understanding of its responsibilities, the notification was a year in advance. The U.S. maintains that Iran informed the IAEA when it learned U.S. spy agencies had become aware of the plant, but if that were so, why did Tehran wait three months before contacting the nuclear agency? Had they acted out of fear of being exposed as non-compliant wouldn’t they have contacted IAEA immediately?

“What we did was completely legal, according to the law,” the Iranian president said. “We have informed the agency, the agency will come and take a look and produce a report and it’s nothing new.” According to the Associated Press Tehran’s notice to the IAEA specified that the enrichment level would be up to 5%, suitable only for peaceful purposes. Weapons-grade material is more than 90% enriched.”

The AP also noted that the IAEA now “says Iran is obliged to make such a notification when it begins design of such facilities” and that “a government cannot unilaterally abandon such an agreement.” This is confusing, of course. But since Iran was never designated as non-compliant and was allowed to proceed under the previous rules for years after it registered its rejection of the new terms, the thunderous criticism emanating from the U.S., Britain and France appears to have no serious merit.

In Mumbai, Hillary Clinton first had a meeting with a selective group of Indian business executives. Later she stayed at Taj Mahal Palace & Tower, one of the two hotels that had been attacked by terrorists in November 2008. At a news conference she subtly brought India’s 11/26 and US’ 9/11 together: “Just as India supported America on 9/11, these events are seared in our memory….”² The reason for this, probably, was to direct Indian public’s attention to the common perpetrator: Islamic extremism. In her op-ed in The Times of India, Clinton clearly made her point. She mentioned about security: “Our countries have experienced searing terrorist attacks. We both seek a more secure world for our citizens,” and therefore, “We should intensify our defense and law enforcement cooperation to that end.” In the same breath she identified the common enemy as the extremism that Pakistan is confronting.¹

The two events – Clinton’s meeting with Indian business executives and her stay at Taj hotel – are steeped in a powerful, but unfortunate, symbolism, as 11/26 is linked with 9/11.

US’ 9/11 and Weapons’ Trade

On September 11, 2001 there was a significant shift in security trend. For the first time since the British burned down Washington in 1814, US experienced death and destruction on its land through an enemy attack.³ Till then death and destruction have always been suffered on foreign lands. George W. Bush, then President of the US, in his State of the Union address on January 28, 2003 recognized this: “In two years, America has gone from a sense of invulnerability to an awareness of peril.” This challenge to its hegemony and attack on its land, instead of leading to introspection of its foreign policy and actions on foreign lands, resulted in the US’ “war on terror.” US failed to acknowledge that the terrorist attack on its land was a blowback. In an interview on the Mike Malloy radio show, former FBI translator Sibel Edmonds said that the US maintained “intimate relations” with Osama Bin Laden and Taliban “all the way until that day of September 11.”⁴ The goals of American “statesmen” using these “intimate relations” with al-Qaida included control of Central Asia’s vast energy supplies and new markets for US military-industrial complex.⁴

Recently in a very rare acknowledgement by Hillary Clinton, she confessed that the US’ present enemy in Afghanistan and Pakistan was once its friend. To a question of the Congressman Adam Shciff in a Subcommittee of the House of Appropriations Committee on April 23, 2009, Clinton explained how the militancy was linked to the US-backed proxy war against the Soviets in Afghanistan:

Let’s remember here…the people we are fighting today we funded them twenty years ago…and we did it because we were locked in a struggle with the Soviet Union. They invaded Afghanistan…and we did not want to see them control Central Asia and we went to work…and it was President Reagan in partnership with Congress led by Democrats who said you know what it sounds like a pretty good idea…let’s deal with the ISI and the Pakistan military and let’s go recruit these mujahedeen…let them come from Saudi Arabia and other countries, importing their Wahabi brand of Islam so that we can go beat the Soviet Union…they (the Soviets) retreated…they lost billions of dollars and it led to the collapse of the Soviet Union. So there is a very strong argument which is…it wasn’t a bad investment in terms of Soviet Union but let’s be careful with what we sow…because we will harvest.⁵

Therefore, the early foundations of al-Qaida were built, mainly, on relationships and weaponry that came from the billions of dollars in US support for the Afghan mujahedeen during the war to expel Soviet forces from that country. The US has long relied on weapons supplies and sales to prop up allies or enhance collective defense arrangements. According to the report titled “Conventional Arms Transfers to Developing Nations,”: “For decades, during the height of the Cold War, providing conventional weapons to friendly states was an instrument of foreign policy utilized by the United States and its allies.”⁶

The US Cold War foreign policy of supplying weapons to maintain strategic relationship continued even after 9/11. In fact, the US’ response to the terror attacks was that it was more willing than ever to sell or supply high technology weapons to countries that have pledged assistance in the global war on terror, regardless of their past behavior or current status. Under the guise of the global war on terror, George W. Bush fast-tracked weapon sales, released countries from arms embargoes, and pumped more money into foreign military aid. US sanctions were lifted on Armenia, Azerbaijan, India, Pakistan, Tajikistan, and Yugoslavia. These countries have been identified as key allies in the global war on terror.⁷

US-India Relationship

After initial confidence building measures, on January 12, 2004 US and India signed an agreement called the “Next Steps in Strategic Partnership” (NSSP) with the aim of implementing a shared vision to expand cooperation, deepening the ties of commerce and friendship between the two nations, and increasing stability in Asia and beyond. This “strategic partnership” has grown into “global partnership” with the ratification of the US-India Agreement for Cooperation on Peaceful Uses of Nuclear Energy in July 2005. Bush signed the Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 (or “Hyde Act”) into law in December 2006 (P.L. 109-401).⁸ Commenting on the nuclear deal Nicholas Burns, then Under Secretary of State, said that it was “positive for United States national security interest because it will help us cement our strategic partnership with India, which is very important for our global interests.”⁸

In October 10, 2008 Condoleezza Rice, then US Secretary of State, and Pranab Mukherjee, then External Affairs Minister of India, signed the nuclear deal after three years of negotiations. Called the 123 Agreement after a section in the U.S. Atomic Energy Act, the pact allowed India to buy vital nuclear fuel and technology from American companies.

Right from the beginning corporate interests led by the nuclear industry and arms makers in the US lobbied for the nuclear deal. They saw the possibilities for nuclear trade, weapons sales, and selling spare parts and other services to India.⁹ According to the Washington Post, American companies saw a vast market in India for nuclear reactors and conventional weapons, after having been largely frozen out of that market for decades.¹⁰ The US-India Business Council hired the high-powered firm of Patton Boggs to work on Congress, and the Indian government a powerful US lobbying firm, Barbour Griffith & Rogers LLC, for which Robert Blackwill — US ambassador to India from 2001 to 2003 — is president, as well as the law firm of Venable LLP. The Confederation of Indian Industry and the India-American Friendship Council were also involved.

US politicians, both Democrats and Republicans, overwhelmingly supported the US-India nuclear deal. Because they either have investments in or received financial contributions from the arms industry.

US’ Interests in the Deal

US has acknowledged India’s growing global economic, political, and geo-strategic clout. So it wanted to court India through US-India nuclear deal to further its global interests.

1. To Contain China

US perceives China to be the larger threat to its hegemony. According to the 2008 annual report to Congress from the Office of the Secretary of Defense on the Military Power of the People’s Republic of China, “China’s expanding and improving military capabilities are changing East Asian military balances; improvements in China’s strategic capabilities have implications beyond the Asia-Pacific region.”¹¹ US sees India as a new emerging power of the 21st century, one that can be an ally of the United States and help it balance and contain the rise of China. India also directly faces the Chinese military along a four thousand kilometer northern border.

There has been some speculation regarding US’ intention to create an Asian NATO. During the Cold War era, US forged the Southeast Asia Treaty Organization (SEATO) comprising of pro-western countries such as Pakistan, Philippines, Thailand, Australia and New Zealand as well as France and UK. However, this organization was dissolved in 1977.¹² The speculation about US’ intention to forge Asian NATO has been substantiated with the proposals of some American politicians such as Rudolph Giuliani and John McCain. Giuliani proposed that India, Japan, Singapore, Israel and Australia should be included in NATO. Whereas McCain suggested the establishment of US-led League of Democracies. Trabanco opines that McCain’s proposal was a euphemism for the inclusion of nonEuropean US allies in a global military coalition.¹² The reason for this seems to be the rise of China as an economic power. The US National Intelligence Council called it “the unprecedented transfer of wealth from west to east.”¹²

In order to contain China’s power and to preserve its control over strategic sea routes, US strategists have acknowledged the strategically significant geographic location of India. This could be the reason why US has forged an alliance with India in maritime cooperation.

Therefore, the US’ willingness to make nuclear deal with India is perceived, by some, to gain latter’s strategic and geopolitical loyalty.¹² “(It) would buttress (India’s) potential utility as a hedge against a rising China, encourage it to pursue economic and strategic policies aligned with U.S. interests, and shape its choices in regard to global energy stability….” said Tellis.¹³

   1. To Involve India in the “Reconstruction” of Afghanistan

There is also a talk about US’ intention to involve India in Afghan “reconstruction” and ask for Indian troops.¹¹ India, in the past, refused to send its troops to Iraq. However, the US-India “global partnership” might give the US leverage over India. As the relationship deepens, it would be difficult for India to reject US’ request for its partnership in the “reconstruction” of Afghanistan, which includes alignment of Indian troops with the NATO troops under the leadership of US.

During her three day visit to India, Hillary Clinton, US Secretary of State, mentioned about security cooperation: “Our countries have experienced searing terrorist attacks. We both seek a more secure world for our citizens,” and therefore, “We should intensify our defense and law enforcement cooperation to that end.” And this cooperation is against the extremism that Pakistan is tackling at present.

The US strategy seems to be to draw India (as a “partner”) into “Afghan trap”, as it did Russia (its enemy). Admitting that an American operation to infiltrate Afghanistan was launched long before Soviet invasion of Afghanistan, Zbigniew Brzezenski boasted, “We actually did provide some support to the Mijahedeen before (Soviet) invasion.”¹⁴ “We did not push the Russians into invading, but we knowingly increased the probability that they would,” Brzezenski bragged. “That secret operation was an excellent idea. The effect was to draw the Russians into the Afghan trap.”¹⁵

   2. Market for US Military-Industrial Complex

The US-India nuclear deal not only links India more closely to US and its global interests, but also boosts US trade in a profitable sector, nuclear industry. It also creates market for US conventional weapons. Till now Russia is the largest supplier of weapons to India (second is Israel). US expects that the nuclear deal will change this scenario.

India is a huge market for weapons sales. In 2005 it was the largest buyer of arms in the developing world with purchases of $5.4 billion. US’ intention to profit from this market is evidenced by recent visits to India by US officials, including Robert Gates, the Defence Secretary, in February 2008 to strengthen military ties and promote weapons sales. Lt. Gen. V.K. Kapoor, a defence analyst, said, “Other than obvious commercial interests, the US is keen to invest militarily in India….”¹⁶ At DefExpo 2008 in New Delhi in February 2008 at which major US weapons companies were well represented, William Cohen, former US Defence Secretary under Bill Clinton, declared, “The promise of deeper US-India defence co-operation is now a reality, with collaborations and joint ventures between US and India firms already under way.”¹⁶ India is projected to spend more than $30 billion by 2012 as the country seeks to modernize its military. By 2022 spending is expected to reach $80 billion.

The US-India nuclear deal has opened a huge market for the US weapons industry. For US weapons companies foreign sales mean the biggest bucks. Also, sales are often accompanied by lucrative deals for accessories, spare parts, and eventual upgrades. There is growing evidence that weapons sales are more about money for the US military-industrial complex and other major military economies. According to the congressional report “Conventional Arms Transfers to Developing Nations,”: “Where before the principal motivation for arms sales by foreign suppliers might have been to support a foreign policy objective, today that motivation may be based as much on economic considerations as those of foreign policy or national security policy.”⁶

Weapons Deals during Hillary Clinton’s Visit to India

The burgeoning “global partnership” between US and India is gradually laying bare its contents. India has dramatically increased its defence budget up over 34% alone this year. Hillary Clinton’s visit to India in July 2009 resulted in defence, space and nuclear power agreements. It is the payoff resulting from the US-India nuclear deal.

On July 20, 2009 an accord, known as an end use monitoring agreement, between India and US has been reached in New Delhi to clear the way for the sale of US weapons to India. “We have agreed on the end-use monitoring arrangement which would refer to…Indian procurement of US defence technology and equipment,” said S.M. Krishna, Indian External Affairs Minister, in a joint news conference with Clinton. India is now holding a tender for the order of 126 multi-purpose lightweight fighters for the Air Force. US company Lockheed Martin stands as the front runner to sell F-16. The other three bidders are companies from Russia, France and Sweden. According to the tender terms, a winner should launch licensed production of its aircraft in India. The Indian-assembled F-16 would be a lot cheaper than its equivalent put together in the US or Europe. There is qualified labor in India, and labor costs are low. For the first time in history the US is making such an offer to a country that is neither a NATO member state nor has it Americans troops deployed on its territory.

Hillary Clinton said that India has also approved two sites for the construction of two US nuclear reactors. She said, “I am also pleased that Prime Minister Singh told me that sites for two nuclear parks for US companies have been approved by the government.” That means, it provides about $10 billion business for the US nuclear reactor builders such as General Electric Company and Westinghouse Electric Company, a subsidiary of Japan’s Toshiba Corporation. However, what is not clear is whether India has agreed to the US’ demand for legal immunity to its companies, if there is an accident.

India has already bought $2.1 billion worth of anti-submarine planes from Boeing earlier this year, the largest US arms transfer to India to date.¹⁷ Arms deals between India and US will pull the military of the two countries together and foster interoperability.¹¹

At a May 2009 Defense Writers Group convened by the Center for Media and Security, to the question “whether the Obama administration will follow the general policy of supporting (weapons) exports?” and “do you anticipate any change in terms of where US arms will be sold?” Undersecretary of Defense for Policy Michele Flournoy responded, “We don’t have a sort of arms sale policy as much as more a sense of commitment to building partner capacity.”⁷ Vice Admiral Jeffrey Wieringa, the head of the Pentagon agency that administers weapons exports, was more candid: “We sell stuff to build relationships.”⁷

Not surprisingly, Loren Thompson of the Lexington Institute, a consultant to Lockheed Martin, said, “Weapons could be the single biggest U.S. export item over the next 10 years.”¹⁷ Increased weapons sales will certainly help the US Military-Industrial Complex weather the current economic crisis.

Conclusion

Not surprisingly, in the “global partnership” between US and India, the people who are missing are the poor of both the countries. In the op-ed in The Times of India Hillary Clinton, former Wal-Mart Board Director, made no mention of India’s poor. According to the World Bank poverty line of $1.25 (Rs. 56.13) per day, the number of poor in India during 2004-2005 was 456 million, that is, 41.6% of the population. The official figure of number of poor in the US in 2007 was 37.3 millions.¹⁸ However, Katherine Newman, professor of Sociology and Public Affairs at Princeton University, says that apart from 37.3 million poor, there are over 50 million Americans, who belong to what she calls “the missing class”. In her book The Missing Class: Portraits of the Near Poor in America, co-authored with Victor Tan Chen, she says that the Americans who belong to “the missing class” are those who are living on the edge — one sudden illness, one pink slip (i.e., loss of job), one divorce away from free fall.¹⁹

The impact of arms trade between US and India has on the lack of economic development among the poor in both the countries, as more and more resources are directed into production and acquisition of new deadly weapons. “We’ve put this money down a black hole of so-called security,” says David Krieger, President of the California-based Nuclear Age Peace Foundation. “In a more just and humane society, that money would be spent on health care, housing and the alleviation of poverty.”²⁰

Therefore, the single most pressing “security” issue of the 21st century will be assuring the essentials of a healthy, dignified life for the millions of people in India and US, who are left out of the global economy. Poverty continues to be the main human rights issue in both the countries.

What needs to be done is, try and reduce the drive for production and acquisition of more and more weapons systems, so that resources may be used for education, healthcare, and to fight against poverty.

1. Hillary Rodham Clinton, “Encourage Pakistan as It Confronts Extremism,” in The Times of India (July 17, 2009).
2. Mark Landler, “Seeking Business Allies, Clinton Connects with India’s Billionaires,” in New York Times (July 18, 2009).
   
3. Chomsky, Noam, “September 11th and Its Aftermath: Where is the World Heading?” Public Lecture at the Music Academy, Chennai (Madras), India (November 10, 2001).
4. Lukery, “Bombshell: Bin Laden Worked for US until 9/11: Sibel Edmonds on the Mike Malloy Radio Show,” in Global Research (August 1, 2009).
5. Anwar Iqbal, “US Created Taliban and Abandoned Pakistan: Clinton,” in Dawn.Com (April 25, 2009) and see Youtube.
6. Bryan Bender, “US Is Top Purveyor on Weapons Sales List Shipments Grow to Unstable Areas,” in worldproutassembly.org (November 13, 2006).
7. Frida Berrigan, “Weapons: Our No#1 Export?” in Foreign Policy In Focus (July 1, 2009).
8. Michael F. Martin and K. Alan Kronstadt, CRS Report for Congress: India-U.S. Economic and Trade Relations, August 31, 2007.
9. Andrew Lichterman and M.V. Ramana, “Rushing into the Wrong Future: The U.S.-India Nuclear Deal, Energy and Security,” in Dissident Voice.org (September 20, 2008).
10. Steven Mufson, “New Energy on India: Companies and Lobbyists Throw Support behind U.S. Participation in the Countries Nuclear Sector,” in Washington Post (July 18, 2006).
11. William R. Hawkins, “Bush’s Legacy in India,” in FrontPageMagazine.com (November 24, 2008).
12. Jose Miguel Alonso Trabanco, “Is an ‘Asian NATO’ Really on the US Agenda?” in Global Research (January 28, 2009).
13. Siddharth Varadarajan, “The Truth behind the Indo-U.S. Nuclear Deal,” in Global Research (July 29, 2005).
14. Noor Ali, “US-UN Conspiracy against the People of Afghanistan,” in Online Center for Afghan Studies (February 21, 1998).
15. J.W. Smith, “Simultaneously Suppressing the World’s Break for Freedom,” in Economic Democracy: The Political Struggle for the 21st Century, ed. by M.E. Sharpe (New York: Armonk, 2000). Nafeez Mosaddeq Ahmed, “Afghanistan, the Taliban and the United States: The Role of Human Rights in Western Foreign Policy.”
16. “India and US Defence Ties Grow Stronger,” in india-defence.com (June 25, 2008).
17. “Weapons Makers Look Overseas as DoD Cuts Back,” in USAToday (June 13, 2009).
18. ”Poverty in the United States, 2007.”
19. Katherine S. Newman and Victor Tan Chen, The Missing Class: Portraits of the Near Poor in America (Boston, MA: Beacon Press, 2007).
20. Craig Kielburger and Marc Kielburger, “Invest in People, Not Weapons,” in Toronto Star (March 24, 2008).

The workers were likely justified in their calculations of job cuts. From the point of view of American experience it just seems like common sense to worry that a capital enterprise is going to eventually fire half or more of its workers. Why would privatization behave any differently in China than it does here?

There are exceptions of course. Jim Cramer recently introduced his television audience to the CEO of USA steel producer Nucor who has cut capacity in half without laying-off any workers. At Nucor workers have been kept on payroll, but hours have been drastically cut. Nucor is a remarkable exception to the rule of private capital.

Shifting our point of view to Chinese workers, we can read statements by Communist Party officials exhorting the people to imitate methods of efficiency that are studied by every B-School MBA: mergers, capacity cuts, new “efficiencies” of technology. Now that the Communist Party has primed the pump of capital development, there are certain objective laws that must be obeyed.

I don’t recall reading where a Communist Party official called for layoffs outright, but anyone who has studied Capital Volume One can figure out what results from mergers, downsizing, and technology upgrades. Marx snidely called the beneficiaries “free workers” which is exactly what the workers of Tonghua steel decided not to be.

In the USA we have some rules about layoffs and shutdowns which require some employers to give proper notice in the form of time or money. Despite these rules, a half million workers per month are being “set free.” In many cases the employers express genuine regret as they appeal to objective laws of sustainable business plans.

On both sides of the Pacific, capital is undergoing development in ways that workers well understand. The Tonghua steel workers simply did the math.

What appears to be missing on both sides of the Pacific is some sort of regulation of the labor market such that jobs lost at one site are correlated in real time to jobs created at another. Or to put the question more carefully, when capital development in one place subtracts a labor cost, what coordinates the addition of an equal labor cost somewhere else?

We are hearing so much these days about the heroic expansion of monetary and sovereign balance sheets. Where is the heroic balance sheet for labor costs, whether in America or the People’s Republic?

Taking a cue from the logic of cap and trade, such a balance sheet for labor might be called catch and trade. Get a license to carry capital only if you take out an obligation to return a portion of labor costs. This is only fair, since capital is no good to anyone without the jobs that will be needed to employ it. You just promise to pay for those jobs so long as your capital permit shall last. If your business plan later calls for capital development to eliminate jobs, then you either keep paying the labor costs you agreed to earlier or you trade that labor cost off to some other capital carrier.

This system would not necessarily transfer the worker, but it would seek to keep the total labor costs of the capital-carrying marketplace at a level that would enable workers to enter a robust labor market at any time.

As it stands in conception so far, a catch and trade system would be indifferent to whether an employer is private or not. What difference does it make to a worker whether the capital that he brings to life is financed by private or sovereign credit?

In the crisis we face today, it is still an open question whether capital will be better managed by capitalists or communists. At the Tonghua Steel plant, the question was not academic. 25,000 precious jobs were at stake. The Chinese steel workers were saying something important for all of us. They were saying that employment should be taken much more seriously by the folks who would carry capital around these days. They saw a jobless recovery in their future and they said hell no.

The same general logic applies to credit and debt. Our current crisis of labor and capital in the USA was produced by a wealth implosion that followed from certain objective laws of credit. Individuals and corporations helped to overheat the credit structure from below, happily assisted by financiers whose business it should have been to more responsibly coordinate the total credit picture.

In many cases, the debt load is still sustainable and credit scores are good. But many other individuals and corporations got caught “under water.” I don’t think of all the victims as a foolish class. There was a zeit-geist which had so many people thinking that they were part of a system that could keep going. What was more difficult to see, although it was pointed out plenty of times, was how the sum of our actions added up to a toxic level of credit and debt.

The helpful thing about cap-and-trade logic is that it recognizes some system-wide quantity that is a matter of public concern and provides some real-time market pressure on that basis. A cap on system-wide credit might have helped to keep development sustainable.

From China the daily news brings us a headline that expresses the collective fear of labor markets around the globe. Joblessness is not the road to recovery. How else can we say it loud and clear?

Last week’s riots in Urumqi, resulting in 180 deaths, recall similar protests in Tibet last year, though only 19 people were killed there. Both Uighur and Tibetan exiles demonstrated during the Chinese Olympics, to little effect. Both regions, remote from the heart of Han China, were taken over under the communists, and are important strategically and as storehouses of mineral wealth to feed the new capitalist China’s voracious appetite. They remind us that old-fashion colonialism is alive and well. Neither the Uighurs nor the Tibetans have any hope of independence, but they rightly would like the Han to be less greedy and invasive.

Like Tibet, it is the flood of Han immigrants and the wholesale destruction of the local culture that is the problem. The massive recent influx of Han Chinese, who now make up more than 50 per cent of the population (70 per cent in the major cities Urumqi and Kashgar), has reduced Uighurs to a minority in their homeland, ominously called “Xinjiang” (New Frontier) in Chinese. The use of “Eastern Turkistan”, the traditional name for this region, is outlawed, along with the blue star-crescent Uighur flag. Ethnic Han Chinese dominate nearly all big businesses in the region. All Uighurs must study Chinese, and very few Uighurs can dream of going to university.

Like the Kurds, they have no official state, only a hollow autonomous region, along with large diaspora communities in Kazakhstan, Kyrgyzstan, Uzbekistan and the West. They number 8-10 million worldwide. There are Uighur neighbourhoods in Beijing and Shanghai. Their history is the story of an obscure nomadic tribe from the Altai Mountains rising to challenge the Chinese empire, founding their own in the 8th century, which stretched from the Caspian Sea to Manchuria. Because of their strategic location on the Silk Road, they thrived on trade. They came under Han sovereignty only in the 17th century, but after numerous revolts expelled Qing officials in 1864 and founded an independent Kashgaria kingdom, recognised by the Ottoman Empire, Russia and Great Britain, which even had a mission in the capital, Kashgar. As usual British support depended on its imperial schemes and when the Chinese attacked in 1876, fearing Tsarist expansion, Great Britain supported the Manchu invasion forces. The Brits (excuse me, the Manchus) “won” and East Turkestan became Xinjiang.

The Soviets established the Revolutionary Uighur Union in 1921, but dissolved the organisation in 1926 when Stalin abandoned dreams of world revolution. Undeterred, Uighur independence activists staged several uprisings, briefly in 1933 and then in 1944. In 1949, East Turkestan’s revolutionaries agreed to form a confederacy within Mao’s People’s Republic of China; however, on the way to Beijing to negotiate the terms, the Chinese plane crash, killing all the leaders. The Chinese army immediately invaded what is now Xinjiang Uighur Autonomous Region. As with the Tibetans a decade later, East Turkestan Republic loyalists went into exile.

Uprisings occurred through the 1990s, supported by exiles in the West and Western governments, who are happy to use disgruntled expatriates from countries such as Iraq, Iran, China and Russia as geopolitical pawns, promoting unrest and calling for independence. The World Uighur Congress (WUC), based in Munich, and the Uighur American Association work hand-in-glove with the US government-funded National Endowment for Democracy.

The Uighurs and Tibetans have old and unique cultures which the Chinese would do well to respect and nurture within greater China. But supporting the independence struggle is part of a cynical geopolitical chess game, and merely worsens the Uighurs’ plight. We are reminded of Britain’s scheming there in the 19th century. If Britain had stood by the Uighurs then, there would probably be an Uighuristan today.

Instead, the destruction of Urumqi and the Old City in Kashgar continue. The latter will soon be a theme park where Uighurs will dress up and sell Han tourists plastic souvenirs. Classic colonialism.

However, Chinese colonialism — Veni, vidi, vici — pales in comparison to the US/ British variant in nearby Afghanistan — We came, destroy, and murder in the name of freedom. It is galling for Western media to take such delight in exposing China’s dirty linen, as it slavishly hails US neo-imperial ventures in Iraq and Afghanistan. As Uighurs riot, US drones massacre hundreds of innocent Afghans and Pakistanis, and Obama sends thousands more troops to Afghanistan in a mission that makes China’s arrogant encroachment on Eastern Turkistan look like an act of selfless generosity.

With huge new bases in Afghanistan and 90,000 troops, the death toll on both sides is skyrocketing as Afghans prepare to “elect” the hated — by both Afghans and Americans — Hamid Karzai on 20 August. The new US strategy is designed to reduce civilian casualties, according to General Stanley McChrystal, the new commander of NATO forces in the country, though “a price worth paying”, he assures us.

But civilian deaths are increasing. 22 Afghans were killed in the central Ghazni province in an air strike last week. And crime knows no borders, as 59 “militants” were killed just last week in neighbouring South Waziristan by US drones, just days after a US missile strike there killed 16. The airstrikes are said to be aimed at militants, but Pakistani media say only one in six have target Taliban insurgents in the country. More than five hundred Pakistanis — most of them civilians — have been killed over the past year in the US drone strikes. In any case, the terms civilian and militant are meaningless, as most so-called militants are local boys fighting the infidel invader, as they have every right to do. It would be more accurate to call them resistance heroes or martyrs. Their deaths are just as criminal as the deaths of little girls and women.

McChrystal’s boys are also dropping like flies with his new strategy. There were 82 Taliban attacks in June, compared with 24 in June 2007, killing 23 troops. On one day — 6 July, seven American troops were killed, the highest casualty rate recorded since the invasion. British fatalities since 2001 reached 184 last week when eight British soldiers were killed in 24 hours, surpassing the new US record. This compares to the 179 British deaths during the six-year military campaign in Iraq.

There are a few voices of sanity, if retired and hence powerless. Drones are described by retired British lawmaker Lord Bingham as “so cruel as to be beyond the pale of human tolerance” and should be outlawed along with cluster bombs and landmines. But current Western “leadership” stands firmly behind the Bush wars. Despite whatever good intentions Obama may harbour, the slaughter is in fact accelerating under him.

What unites China and the US these days, is how they justify their respective crimes by blaming them on Al-Qaeda and Osama bin Laden, a bogeyman that was created by the US itself during its earlier anti-communist phase, and who many commentators argue is still an extension of US covert operations. Uighur “terrorists” at Guantanamo were finally released, but China insists they are devotees of this bin Laden and wants them back.

Both the support of secessionists and the creation of the likes of bin Laden are examples of the infiltration of the enemy to subvert it from within — an age-old tactic. And bin Laden is not the only terrorist accused of being in league with the West. The Pakistani Taliban leader Mehsud’s ex-comrade Qari Zainuddin, critical of Mehsud’s policy of blowing up mosques and schools, accused Mehsud of being an American and Mossad agent. “These people are working against Islam,” he said last week, shortly before he was assassinated. Where does Mehsud get his sophisticated arms?

Afghanistan’s unending torment is very useful to the US, bringing Europe and Russia into line, as Obama’s triumphal summit in Moscow revealed. Initially after 2001, all of Central Asia and Russia were in thrall to America’s “Operation Enduring Freedom” though there have been snags. Under Obama, things are back on track. Now even isolationist Turkmenistan has agreed to allow US military to use its airbases. With its new lease to the US of Manas airport, Kyrgyzstan is back on board the US gravy train to Afghanistan.

Is all this part of a new Great Game, this time directed not against Russia, but even using Russia as part of a long-term strategy to contain the rising powerhouse China? The Chinese point the finger for the recent unrest at the WUC, Washington-based Rebiya Kadeer and the spread of rumours over the internet to incite and coordinate riots. President George W Bush lauded Kadeer more than once as an “apostle of freedom”. Whatever its claims to be supporting the cause of freedom etc, the US clearly assists the expatriates to foment unrest and destabilise China. This was and is being openly done in the case of Iraq and Iran. It most certainly will backfire for the poor Uighurs, who can only expect more repression. Any sincere attempt to help preserve Uighur culture and civil rights — in particular the destruction of the Old City of Kashgar — should be carried out through, say, UNESCO, not covertly to incite civil war. The best scenario for an easing of the Uighurs’ plight of course would be if the US operated on a policy of promoting peace and of not threatening and intriguing against other nations. Alas.

Perhaps the Chinese and Russians are tolerating US meddling in Central Asia in line with the age-old strategy of playing off your enemies against each other — in this case, the Americans and the Taliban. This strategy was used by the US in the 1930s, building up both the fascists and communists to fight each other in Europe. Recall Truman’s famous quip: “If we see that Germany is winning we ought to help Russia and if Russia is winning we ought to help Germany and that way let them kill as many as possible, although I don’t want to see Hitler victorious under any circumstances.” It can just as well be used against the Americans today.

China’s Entry into the World Trade Organization (W.T.O.)

In 2001 China entered the World Trade Organization (WTO). Their enrollment into the WTO has allowed a multitude of transnational corporations to set up shop within the provincial cities of China, moving 300 million people out of poverty, a substantial number indeed; but China’s total population is approximately 1,321,851,888 as of July 2007 – that is 1/5 of the world’s total population. In fact, an equal proportion of 300 million Chinese denizens are subjected to abject poverty while a little over 700 million more endure abysmal working conditions and subdued living conditions.

China’s augmented trade relations have only strengthened the proliferation of transnational corporations (TNCs), rather than advancing the quality of life for its citizens. Wal-Mart (the world’s largest retailer) has fifty percent of its suppliers located in China, purchasing $18 billion worth of Chinese products annually, and by 2006 there were already fifty Wal-Marts within the country.¹ Additionally, Wal-Mart is far from the paragon of social and environmental responsibility. Wal-Mart is culpable for worker exploitation through unfair working conditions and improper salaries and pay (Chinese garment workers make less than twenty cents per day), as well as expunging natural resources for their low-cost products, all in the name of expedience and efficiency.

China’s economy has been able to skyrocket on account of bulldozing transnationals looking to expand and sprawl forth, and they have finally been granted such privileges under the aegis of the World Trade Organization. China has granted U.S. investments significant tax breaks and markdowns on land prices in return for a plethora of private enterprises with the hope to continue to boost China’s economy upwards. It’s a clever cycle of supply and demand: TNCs need cheaper production costs and more land for development; China demands more private business for its growth; and the Western consumer demands the products (the U.S. is the primary market for China’s exports and China is the 4th largest market for U.S. exports).

As it stood in ‘07, China’s trade with Japan had eclipsed U.S. trade with Japan, and in 2004 China had supplanted the U.S. as South Korea’s largest trading partner. China’s gross domestic product (GDP) had sprouted from less than five percent in 1980 to nearly 16 percent in 2007, landing one slot away from attaining global economic supremacy, the U.S. still being number one. Also, China’s exports have jumped from $150 billion in 1996 to approximately $1 trillion in 2006.² The final outcome? China is side by side with Japan as the world’s largest foreign retainers of U.S. debt, and combined the two accounts for 47 percent of more than $2 trillion total.

Ostensibly, it would appear that the U.S. is the global economic supremacist; but in all honesty, China has quite the stranglehold on the U.S. with its holdings of over $1 trillion of U.S. debt. And how does Japan’s economy really hold up? According to economist at the Economics and Management School, Beijing University of Aeronautics and Astronautics, Han Deqiang, “Japan’s debt in proportion to GDP is the highest in the world, roughly 130 percent, and its rate of growth has been somewhere near zero.”³ No wonder Japan’s economy is foundering so hard right now. China’s stature may be grander than once thought, but without a doubt, China’s economic growth is contingent upon foreign trade. However, it is clear none of this is sustainable.

As China’s economy grows, the nation is demanding the use of more fossil fuels to power its infrastructure as well as an increase in privately owned vehicles. More land is needed to make room for supporting industry and business, and according to Han Deqiang “When Wal-Mart goes to Gweiyang or Beijing, say, they knock out, in an instant, four or five department stores,”³ directly conducing to job loss.

Although China manufactures more than half of the world’s electronics and low-cost products, at what expense does the natural environment we live in have to pay? And in the name of expedience and modernity, how far will China continue to foment negligent economic growth? Despite ostensible reports of progress, China is projected to follow a path that will make them the world’s leading greenhouse-gas emitter by 2020– this is just one of the myriad environmental repercussions due to China’s economic expansion that will undoubtedly fare ill for the entire global population if continued.

It is obvious that China has adopted similar methods the U.S. has implemented to further private enterprise, industry development, and economic growth. But as we have learned time and again here in the states, the GDP may go up while the quality of life goes down, e.g. private investors have cashed in on insurance claims immediately after hurricane Katrina; meanwhile, the nation’s GDP can go up while thousands of families are left homeless and a city remains in shambles. Another example is urban sprawl – a condition in which the nation’s GDP swells upward at the expense of environmental degradation and community disengagement: for every dollar spent at a corporate retailer 15 cents is automatically reinvested back into the community, whereas every dollar spent at an independent local retailer 45 cents is automatically reinvested back into the community.⁴ Another stifling fact: in 2000, lucrative sales for the top 200 corporations were eighteen times the combined income of the more than 1.2 billion people living in abject poverty.⁵ So much for “democratic” Free trade.

China’s Current Environmental Dilemma

To raise consumption of energy and materials throughout the world to Western levels, given current population projections, would require the resources of four planet Earths by the year 2100. To do so with the one world we have would so severely compromise the biosphere that the Earth would be unrecognizable.
– Wade Davis

Although China does not constitute the entire world’s population, China does harbor one fifth. At the current rate of energy consumption and product manufacturing, developing China has already made its countryside unrecognizable. The country is home to sixteen of the world’s twenty greatest polluted cities, and approximately 14,000 new cars emerge on China’s roads every day resulting in more than 52,700 miles of developing highways throughout the country.⁶ The rate that China is moving toward fostering a private-car based economy is alarmingly high, contributing to global carbon emissions and global warming. Without mutability in China’s current stride of development, China is expected to emit more CO2 than North America and Japan combined by 2025, a frightening fact that attenuates the efforts to curb CO2 emissions dramatically within the next couple of years. Moreover, according to GeoHive (an online data base), China claims chief rank in the world arena for coal production (38.37 percent), providing roughly 70 percent of China’s energy – a climb from 309.9 million tons of coal burned annually in 1981 to 1,107.7 million tons by the year 2005; 2006 saw a total of 2.4 billion tons – more than the U.S., Japan, and the U.K. combined.

Furthermore, four of the most polluted cities reside in the coal-rich province of Shanxi. Ninety percent of China’s sulfur dioxide (SO2) emissions and fifty percent of its particulate emissions are a consequence of coal consumption. The U.S. only reaches half of China’s numbers pertaining to coal production and consumption, and already faces dire consequences e.g. significant loss of watershed alongside loss of plant and animal species, flood, drought, abysmal health conditions, and poverty to name but a handful. So how bad does China have it? According to China’s State Environmental Protection Agency (SEPA), air pollution is culpable for 400,000 premature deaths annually alongside extinctive damage to myriad ecosystems harboring unique forms of life,⁷ e.g. the endangered panda.

Since the 1950s, China has lost 36,000 square miles (the size of Indiana) to desertification, and the Gobi Desert maintains an annual growth rate of 1,900 square miles. Although China retains the 4th largest freshwater resources in the world, they are quickly drying up and/or are rapidly being tainted by the agricultural sector, urban development and growth, as well as mismanaged irrigation and more. It is estimated from one report procured by the government-run Xinhua News Agency that “aquifers in ninety percent of Chinese cities are polluted” and that “more than 75 percent of the river water flowing through China’s urban areas is considered unsuitable for drinking or fishing” and as a result “nearly 700 million people drink water contaminated with animal and human waste.”⁶

Due to China’s despoiling of its watershed, many of China’s cities are sinking; Shanghai and Tianjin have already sunk more than six feet over the past fifteen years. The Yangtze River, which begins in Tibet and flows into Shanghai, receives 40 percent of China’s sewage, of which 80 percent is untreated. The Yellow River, which affords water to more than 150 million people (15 percent of China’s agricultural land), is regarded as “unsafe to drink” and ten percent is considered sewage.⁶

The World Wildlife Fund reports that China “is now the largest polluter of the Pacific Ocean” and that “more than 80 percent of the Eastern China Sea (one of the world’s largest fisheries) is now rated unsuitable for fishing.” There is almost no river from China that flows into the seas clean.

In 2006, the provincial industry of Guangdong and Fujian dumped nearly 8.3 billion tons of sewage into the ocean without treatment. The Bohai Sea, which is expected to be barren and infecund within 12 years, receives approximately 2.8 billion tons of “contaminated” water each year.⁷ As industry grows along the coastline, tons of pollutants taint the waters; SEPA estimates that half of China’s offshore seawater has been “poisoned.” A report from Chinadaily.com states that “last year [2006] there were over 80 incidents of algae blooms in the shallow waters off China’s coast, leading to direct economic losses of nearly 8.6 million U.S. dollars.” Algae blooms, also known as “red tides”, are massive blooms of algae teeming with hazardous levels of toxins and have been on the rise throughout China’s ocean shoals.⁷ Not only are red tides perhaps an augury of economic loss on the horizon, but are also harbingers of death and toxicity for the myriad plant and animal species that are indigenous to the coastal waters and vital to sea-life.

As production increases in China so does the economy, but it is explicitly realizable that the current growth rate does not sustain a natural environment that offers such imperative resources for an industrial nation’s economy – talk about irony. It’s apparent that industrial civilization is just not sustainable.

It has been estimated that for every pound of electronics, 8,000 pounds of resources are used along the way for the manufacturing processes and assembly. According to the latter statement, China’s colorable achievement of being one of the world’s largest producers of energy efficient lights and windows, as well as solar cells, really translates as acute resource extraction and land/air/water pollution. Somewhere along the line, someone has to blow the whistle. Somewhere along the line, China must adopt a less formidable economic model to espouse to, one that is much more sustainable with respect to the natural environment. Please China – stop following in the West’s footsteps.

How will the world’s environment stand against China’s economy?

One should be aware at this point that China, influenced heavily by western capitalism, champions unprecedented industrial growth. With an increasing push for more privately owned vehicles, a larger infrastructure, and heightened product manufacturing, China will sit comfortably as the world principle emitter of green-house gases, carbon, particulate emissions and then some. In 2004, “China installed as much new electricity generating capacity, mostly fossil fueled, as the entire electricity output of the U.K.”⁸ Such prodigious development has been a hallmark of China’s growth as well as an environmental hazard elsewhere.

A consequence of China’s booming coal industry, acid rain precipitates on at least 14 percent of its own country as well as on Japan and South Korea – damaging crops, woodland, and water ecosystems.⁹ To make matters worse, as a result of China’s gorging coal industry, 25-40 percent of all mercury emissions in the world come from China – a statistic that will steadily climb if China’s economic gait is not tapered. As for the U.S., the EPA cited a model showing that China contributes close to 30 percent of background sulfate particulate matter in the Western U.S. and is responsible for one percent of all particulate matter in L.A.¹⁰

There is no red light in sight for China’s transnational-fueled economy. It is near impossible to expect growth to slow down enough before China reaches emissions levels that are predicted to throw the planet’s biosphere into an unrecognizable state. Meanwhile, a 2007 report issued from the Netherlands Environmental Assessment Agency stated that China has already outdistanced the U.S. as the world’s largest contributor of CO2 emissions. Gerhard Berz, chief of Munich Re’s geoscience research group also stated, “The effects of China’s decisions will be felt worldwide. Within the foreseeable future, the global trend may well lead to extreme climate conditions the likes of which have not yet been experienced by man.”⁹

Without curtailing emissions drastically within the next couple of years, global warming won’t only be irreversible but amplified, and the melting of the planet’s ice will continue to increase at faster rates. Rapidity in glacial meltdown will result in higher sea levels and stronger hurricanes, undulating coastal cities globally. Currently, the Association of British Insurers claims that up to 1.2 million properties are in harm’s way within Britain’s inland floodplain, and that insurance claims stemming from weather damage has exceeded $3 billion some years and may emerge as the leading agent of property damage in the country.⁹ Nevertheless, that money must benefit someone (i.e. insurance companies), giving a boost to GDP somewhere, but knockin’ a blow to the quality of life for the inhabitants of the affected areas.

Desertification is also on the rise. Although China is losing much of its countryside to the Gobi Desert each year, Africa is getting hit hard and will fare worse if the global economy picks back up. Projections show that by 2025, two thirds of arable land in Africa will be swallowed up by desertification resulting in population displacement, not due to Africa’s own emissions, but directly on account of the industrialized/developing countries.

Chinese multinational corporations have spread their wings as well, maximizing their occupation in Africa, Latin America, and Southeast Asia, in search of resources to further fuel China’s economy, and are ravishing their regions in the process. China’s timber imports have more than tripled over the last ten years, and China’s demand for lumber will most likely increase by 33 percent in the following five years – China is the largest importer in the world of illegally logged timber, 50 percent of its lumber imports stem from illegal operations.⁶

At what costs will China, as an emerging economy, continue its rapacious extraction of resources before they decide enough is enough? Clearly, exhausting its own resources didn’t give any forethought to slow down. And with the precipitous rise of myriad private enterprises stockpiling remunerative gains as the result of climate-change induced disasters, who will have a voice loud enough for the world to hear and acknowledge: slow down!

Alongside desert sprawl and watershed depletion there will be a decline in food and crop yields. So far, record world prices for almost all staple foods have led to an 18 percent food cost inflation in China; and according to the U.N. Environmental Program, the planet’s water, land, air, plants, animals and fish stocks are in “inexorable decline.”¹¹

Constant perturbations to ecosystems will eventually trigger a response on a scale unimaginable, considering the tightly woven interrelations life’s complex natural communities have with each other. To approach species endangerment, land degradation, water/air pollution, as well as industrial growth at the expense of the surrounding environments without dire and heartfelt concern to halt economic exigency, is suicide.

(Un)Fixing the mistakes

Over the last 25 years, the World Bank has lent more than $34 billion dollars to China, a quarter of it allocated for transport infrastructure and fighting pollution. In 2001, the World Bank invested millions of dollars in a project to remove dangerous shoals along the Xiangjiang River in Hunan Province, creating a deeper 157 km channel to improve vessel efficiency and “significantly increase environment-friendly energy generation in the region” that will be “saving environmental pollution and cutting the incidence of energy outages.”⁹ Despite financial efforts to fix the environmental damage done by China’s economy, rearranging nature in the name of economic efficiency is disastrous as well as crazed and doltish – the efforts will only further exhaust a quagmire into bedlam. One might as well advocate MTR (mountain top removal) as “environmentally-friendly” based on a criterion of its efficiency. At last, China has culminated over 4,000 km of inland waterways as navigable – hooray! Right? The results are: desiccated and poisoned watersheds, and cities sinking inch by inch, as if the earth that grounds them was imbibing them.

Perhaps the benefit of free trade (that sounds evil) can be found with Europe’s Registration, Evaluation & Authorization of Chemicals (REACH), a set of chemical regulation standards that has set a new benchmark in the product-manufacturing arena, one that purports to show how chemicals are controlled and how “production decisions around the world will be made from now on.” In an article written in October of 2007 for Harper’s Magazine, Mark Schapiro writes:

The Chinese Ministry of Commerce had REACH translated into Mandarin within days of its passage. European consultants also traveled to China to show industry and government officials there what exporters will have to do to abide by the chemical regulations. The Europeans were willing to aid their competitors in China, with whom they have a significant trade deficit, because just about anything made in Chinese factories can end up in the hands of Europeans.¹²

Still, REACH has only aspired to some, despite its advancement. The U.S. is nefarious for its history of antagonism toward environmental and human-rights programs, in fear of new standards encumbering U.S GDP. The U.S. also waged campaigns under the Bush administration to subvert REACH’s influence in the many regions of Eastern Europe.¹² And if it weren’t for China’s acquiescence to cheap-cost production, pragmatism in efficiency, and western influence in the first place, perhaps there wouldn’t be such a loud cry of concern over the product safety of imported goods from China.

REACH does not address the concerns of crop depletion, or widespread desertification; nor does it lower emissions or troubleshoot and prepare for a rampant exodus that may potentially follow coastal city flooding or the breaking up of villages and communities. Cramming billions of dollars into China’s infrastructure through modernization programs will not ameliorate conditions either, but will only further shock the country’s morale with confusion. Alongside a diminishing countryside deprived of potable water, ushering China into modernity hastily, while simultaneously condemning them for their dereliction, is a paradoxical investment that will further cultivate and foment social unrest.

As for current climate-change policy, even if China was never exempt from the Kyoto Protocol there is question as to whether it would have made a speck of a difference. Japan, the purveyor of the treaty meant to unite the world through addressing climate change, has done only that: addressed the world of climate change, nothing more. In fact, Japan’s emissions have increased since the onset of the protocol. The protocol, which was enacted in 1997 and had called for a 6 percent decrease from 1990 emissions levels, has not achieved any progress. Japan’s emissions have risen 13 percent, and the U.S. (the largest contributor of greenhouse gases) has remained exempt (along with India and China). Any emission cuts that have been achieved have been cancelled out by China’s emissions alone.¹³

Listening to Reason

World renown scientist and father of the Gaia hypothesis, James Lovelock disclosed to Rolling Stone online that “Our future is like that of the passengers on a small pleasure boat sailing quietly above the Niagara Falls, not knowing that the engines are about to fail.”

It should be taken with much consideration when those who have studied the planet’s ecosystems and environments for the past thirty years with diligence and ardor; and those who have examined the biosphere and atmosphere closely, postulating over the negative effects of industry and capitalism with earnest concern for the planet, have been saying all these years to slow down. It shouldn’t be taken lightly when projections point toward a steep decline of the current global economy and life, as we know it. For decades, many intellectuals specific to their fields of study in the natural sciences have cautioned the industrial world to be wary of material consumption; that there are limits to resources, as well as a holding capacity to the planet; and that unlimited economic and industrial growth is not sustainable for the future generations of people. According to statistics, data, and reports, not enough people have taken heed to this advice over the years and consumption has continued to mount.

America and other Western countries set a precedent at the dawn of industry, that with the sleight of rhetoric and cunning depraved indifference toward nature, an economy can grow large and fast; that GDP can climb parallel to poverty coupled with a decline in the quality of life (as shown with an increasing lower class that is engulfing the middle class, disproportioned by an exclusive upper class, predominant in modern society); and that somehow, someway, the voices of intelligent concern are quieted as to not interfere with the agendas of the developing nations.

China, a sovereign power perhaps as formidable as the sovereign entity of capitalism itself, is on the rise. Like any other country, China has the inherent right to strive for excellence, but if it is in the name of modern civilization, perhaps a path less traveled should have been taken, one that did not follow in the footsteps of the West, one that could have led by example.

1. Jiang Jingjing, “Wal-Mart’s China Inventory to Hit US$18b This Year.” China Business Weekly, 29 Nov. 2004.
2. Jason T. Shaplen and James Laney. “Washington’s Eastern Sunset: The Decline of U.S. Power in Northeast Asia.” Foreign Affairs, Nov./Dec. 2007. pp. 82-97.
3. Stephen Philion. “The Social Costs of Neoliberalism in China, Interview with Economist Han Deqiang.” Dollars and Cents. Jul./Aug. 2007. pp. 22-35.
4. Paul Demko. “Mass Consumption.” City Pages, Vol. 27. Issue 1353. 8 Nov. 2006
5. David C. Korten. “Better Than Money.” Yes! Magazine, Fall 2007. pp. 37-41.
6. Elizabeth C. Economy. “The Great Leap Backward? The Costs of China’s Environmental Crisis.” Foreign Affairs, Sep./Oct. 2007. pp. 38-59.
7. Clifford Coonan. “China’s Boom is Killing Sea That Gives It Life, Warn Scientists.” Independent News and Media Limited. 10 Mar. 2006
8. Hamish McRae. “The Kyoto Protocol Can Help Address Global Warming.” Global Warming. Ed. Cynthia A. Bailey. Opposing Viewpoints. Detroit: Greenhaven Press, 2006. Opposing Viewpoints Resource Center. Thomson Gale. Hartness Library System.
9. Thomas Land. “Helping China’s Pollution With Waterways.” Contemporary Review. 279. 1630 Nov 2001: 291.4. Opposing Viewpoints Resource Center. Thomson Gale. Hartness Library System.
10. James F. Hoge Jr. ‘Editor’s Notes.’ Foreign Affairs. Nov./Dec. 2007. p. 214.
11. John Vidal. “Global Food Crisis Looms As Climate Change and Fuel Shortages Bite.” The Guardian. 3 Nov. 2007.
12. Mark Schapiro. “Toxic Inaction; Why Poisonous, Unregulated Chemicals End Up In Our Blood.” Harper’s Magazine. Oct. 2007. pp.78-83.
13. Alan Zarembo. “Kyoto’s Failure Haunts New U.N. Talks.” Los Angeles Times; Science and Medicine. 3 Dec. 2007.

US tactics and strategy toward the region becomes relevant, only if we take account of the recent historical, economic and political changes in Latin America and the evolving political alignments.

A realistic assessment of US policy by necessity must go beyond policy pronouncements and Washington’s ‘projection of power’ to an analysis of its existing capabilities and the resources available to implement Obama’s agenda for Latin America. In evaluating Washington’s policy, the key is to analyze its coherence and feasibility in light of its political diagnosis of Latin America. This provides a basis for determining the compatibility or conflict of interests between the two regions. A basic question arises: How do the Obama regime’s policies, objectives, and available resources square with the development needs of different Latin American countries in a time of deepening world depression?

To answer that question, requires we examine the recent policies and political alignments in Latin America. It would be utterly foolish to over or underestimate the degree of US “hegemony” or Latin American “autonomy,” especially in light of major shifts in power relations over the past two decades, and continuing today.

Latin America’s relations with the US are decisively influenced by internal events, including class conflicts, which determine the correlation of political forces, as well as external events such as US intervention and outward expansion, and world market conditions. The shifts in Latin America’s political-economic relations can be divided into distinct periods, which provide an overview of the relative degree of hegemony and autonomy with regard to the US empire.

The Changing Contours of US-Latin American Relations: 1990-2009

Any “general overview” of US-Latin American relations is subject to exceptions and variations in particular country experiences, even as it highlight ‘dominant trends’ in the region.

The first two decades from 1980-2000 establish certain parameters for recent policies particularly the conflicts and divergences of interests.

The period from 1980-1999 was defined for Washington and Wall Street as the ‘Golden Age’ in US-Latin American relations. The regimes accepted and promoted US hegemony, following the precise terms of the IMF, the Washington Consensus and a US centered model of capital accumulation.

This included the lifting of trade barriers, the privatization of public enterprises (including banks, oil wells, mines, factories and telecoms) and their subsequent denationalization or transfer to US and European multinational corporations (MNCs).

The US and EU took over these public enterprises at exceptionally favorable prices and terms, which led to the massive transfer of profits, interest and ‘rent’ payments to the MNCs and provided them with extensive leverage over the entire financial/credit-system and access to local savings in the Latin American countries.

On the political level, the incumbent regimes embraced and promoted the US sponsored free market ideology known as “neo-liberalism” and backed US diplomatic and political intervention in the region as well as overseas.

The plunder of public treasuries and private savings by the MNCs and the resulting concentration of wealth and political power polarized society and precipitated major political economic crises. This led to popular upheavals throughout most of the region during the period from 2000-2004. Latin America witnessed the ousting of several US client regimes, serious widespread questioning of the free market ideology and a growing potential for radical structural changes.

As a consequence of the new correlation of forces, US political power declined and its influence was largely confined to political and economic elites at the margins of governance and under political siege from mobilized movements and disaffected electorates.

The ‘third period’ reflected ‘hybrid regimes’, which spoke to the populist demands and critiques of ‘neo-liberalism’ (empire-centered economic structures and policies) without actually reversing any of the unpopular structural/property legacies imposed by the earlier client regimes. The rise and consolidation of a wide range of highly differentiated ‘center-left regimes’ benefited from world economic conditions, especially high commodity prices, which facilitated social welfare programs and economic recovery as well as the relative ‘decline’ of US political power. This decline was intensified by the US involvement in a series of prolonged wars in the Middle East and South Asia and its ‘global war on terror’.

The ‘third period’ featured an increase in the relative autonomy of Latin America aided by huge windfall profits from exceptional prices and expanding markets in Asia, and from the regional political-economic initiatives of Venezuela’s Chavez government.

The end of the primary commodity boom and the emergence of a world-wide depression mark the beginning of the fourth period. Two contradictory phenomena impacted on US-Latin American relations. Because the US was the epicenter of the world economic crisis and its financial and investment institutions turned insolvent, finance and investment fled or were repatriated, weakening the US presence in Latin America and its economic leverage in a region with huge foreign reserves. Secondly, the over-extension of US military forces in other regions (Middle East/Asia/Eastern Europe) lessened its capacity for military intervention in Latin America. While developments in the world-economic and military situation opened opportunities to exercise greater Latin American autonomy, the decline of export markets, the drying up of credit markets and foreign capital inflows exposed the vulnerability of the ‘center-left’ regimes with their dependency on ‘export strategies’. The contradictory features of the ‘fourth period’ shaped the framework for contemporary US-Latin American relations and define some of the key issues facing Latin American rulers and the Obama regime.

Rising Militarism, Financial Protectionism and Declining Trade

The policies of the Obama regime toward Latin America are negatively framed by its three top policy priorities. The Obama regime’s foreign policy builds and expands the military-driven empire building of his predecessors. Contrary to the hopes and expectations of many of his progressive and leftist advocates of peace, Obama has staffed his regime with committed militarists, Zionists and Cold Warriors.

The major difference between Obama and Bush’s policy is the diplomatic language, which accompanies empire building and the scope and depth of military activity. Obama has adopted a rhetoric of ‘reconciliation,’ ‘negotiation’ and ‘change’ as opposed to Bush’s overtly bellicose rhetoric of confrontation, even as Obama has accelerated and extended military activities beyond the Bush regime.

A systematic analysis of the Obama regime’s policies reveals the overriding emphasis on projecting military power as the main instrument for sustaining the empire throughout the world.

South Asia

The Obama regime has increased US military forces in Afghanistan by over 40% — by 21,000 troops added to the current 38,000 — and increased financing for doubling the size of the Afghan mercenary army and police to over 200,000. Washington has extended the field of warfare in Pakistan, escalated its bombing attacks in the Swat Valley on a daily basis and increased cross-border commando operations. The Obama regime has formally extended the US war-zone deeper into Pakistan territory and extended its reach into Pakistan intelligence institutions.

Despite Obama’s intense pressure on the European Union and its allies and clients around the world, few countries have pledged combat forces in support of Obama’s military strategy. Just as during the Bush era, Obama unilaterally pronounces a major military escalation and then expects his allies to follow. The Obama military and intelligence apparatus has moved even more intrusively into Pakistani institutions with the clear intent to purge nationalist officers and select officials who will more aggressively repress the communities, organizations and leaders opposed to US intervention in Pakistan, Afghanistan and the Middle East.

Iraq

The contrast between Obama’s diplomatic rhetoric of military withdrawal and military escalation is most blatant in the case of Iraq. The Obama regime has extended the time frame of US military occupation and increased funding for permanent military bases and related infrastructure. His military strategy envisions a massive mercenary Iraqi army and police force to control the population and repress any nationalist resistance. Obama will double the number of Iraqi mercenaries spread throughout the country under the Pentagon’s command.

Iran

The most striking policy adopted by the Obama regime toward Iran is his adding new and even harsher sanctions to the existing economic embargo. Obama continues to threaten Iran with a pre-emptive military assault in line with the contingency war plans developed by top Pentagon officials held over from the Bush regime. In pursuit of this saber-rattling posture, Obama appointed two of the most bellicose Israeli-American ideologues, includng Dennis Ross, as chief emissary to Iran and Stuart Levey to the Treasury in charge of imposing economic sanctions. Washington is making a major diplomatic effort to isolate Iran, through negotiations with Syria, Russia and China. In the face of these ‘facts on the ground’ Obama’s public rhetoric about offering Iran a ‘new policy,’ is blatant propaganda stunt. The massive US air and naval armada off the coast of Iran continues to threaten Teheran with a blockade or even massive air and naval strikes. The Obama regime continues to fund and train terrorist groups to infiltrate Iran from their bases in Iraq and Pakistan and to attack Iranian government facilities and officials. Israeli military threats to strike Iran are made more probable with the Obama regime’s transfer of new military technology, including the most advanced anti-missile system and ‘bunker-buster’ bombs designed to destroy underground Iranian government facilities.

Palestine/South Lebanon/Syria

The Obama regime’s military policy is clearly evidenced in its unconditional backing of Israel’s murderous military assault on Gaza, its selective assassination of Palestinian activists in the West Bank and its threats against Hezbollah.

The Obama regime, together with both houses of Congress, has backed every Israeli act of war– including its brutal economic blockade of Gaza and the systematic eviction of Palestinian residents in occupied East Jerusalem and the West Bank. The Obama administration is deeply infested with prominent pro-Israel Zionists at all levels precluding any change in Washington’s robust military ties even with the far right militarist Netanyahu-Lieberman regime.

East Africa

Obama’s regime continues to pursue a confrontational policy toward Muslim Sudan by funding the armed separatists in South Darfur and by a recently reported air attack on a Sudanese military convoy. In the face of its failed military intervention in Somalia by its Ethiopian proxy, Washington has opted for a new Somali client coalition backed by African mercenaries from Uganda.

Russia/Eastern Europe

Under Obama, the provocative military encirclement of Russia continues via the recruitment of new client NATO ‘members’ among the former Soviet Republics and the building of bases on the very frontiers of Russia. Obama combines a double discourse of diplomatic conciliation while building new military bases, missile sites and advanced radar stations from Poland southward toward Ukraine and Georgia. Washington’s ‘diplomatic overtures’ to Russia are driven by its logistical needs in Iraq, Afghanistan and Pakistan and especially its war preparations toward Iran. The Obama regime is demanding that Russia provide logistical support for the US/NATO Afghan-Pakistan war and occupation while demanding Russia cancel its sale of advanced missiles as well as its nuclear power plant contract agreement with Iran in exchange for US ‘good will’…

China

Although the Obama regime is acutely aware of its dependence on China’s continued financing of the US economic deficits, it has nevertheless engaged in a high risk naval confrontation in China’s off shore economic zones. Recent Pentagon reports on Chinese military preparedness are laced with lurid Cold War rhetoric designed to inflate China’s ‘threat’ to US dominance in Asia and its ‘lack of transparency’. Once again, the Obama regime presents the double discourse of friendly diplomacy and aggressive militarist policies.

China faces a US military encirclement along an arc of US bases from Afghanistan, Pakistan, Japan, to South Korea, as well as a new military doctrine labeling China a ‘threat’ to be ‘contained’ in Asia.

Obama’s Latin American Policy

To decipher the real content of the Obama regime’s policy to Latin America one needs to look at the foreign policy priorities, the allocations of financial resources and public policy commitments and ignore its inconsequential diplomatic rhetoric. The first major pronouncement, in line with its global military policies, was to militarize the US-Mexican frontier, allocating nearly one-half billion dollars in military and related aid to the right wing Calderon regime. The entire focus of White House policy toward the Mexican and Colombian regimes over the problem of narcotics and narco-violence is the military ignoring its socio-economic structural roots:

Millions of young Mexican peasant and small farmers driven into bankruptcy, unemployment and poverty by the North American Free Trade Agreement NAFTA), created a large pool of recruits for the narco traffickers.

The expulsion of hundreds of thousands of Mexican immigrant workers from the US and the new militarized borders has closed off a major escape for Mexican peasants fleeing destitution and crime. In contrast to the formation of the European Union, which provided tens or billions to the less competitive countries, like Spain, Greece, Portugal and Poland, entering the European Union, the US has provided Mexico with no compensatory funds to upgrade its productive competitiveness and provide needed employment for its people.

The highly militarized Colombian regime, notorious for its violation of human rights, is currently the biggest recipient of US military aid in Latin America. Under Plan Colombia, the US financed counter-insurgency program, Bogota has received over 5 billion dollars, the most advanced military technology and thousands of American military advisers and sub-contracted mercenaries. The Obama’s support for the right-wing Colombian regime is his response to the emergence of democratically elected populist and radical governments in Ecuador and Venezuela.

Obama’s policies toward Latin America are driven by his extension of the military defense/priorities of the Bush Administration, including the economic embargo of Cuba and its virulent hostility toward Venezuelan nationalism. There are no new economic initiatives. Beyond the rhetorical support for free trade, Obama upholds past quotas and tariffs on more competitive imports from Brazil, even adding new protectionist measures against Mexican trucks and truck drivers.

Obama’s relentless pursuit of military-driven empire building while in the midst of an ongoing and deepening domestic economic depression forms the basis for understanding Washington’s contemporary relation with Latin America today. His regime’s military approach to Latin America is reflected in his inability or unwillingness to allocate economic resources and underscores his concern to sustain two major US clients, Colombia and Mexico through military aid programs. Obama’s limited interest and sparse commitment of economic resources to Latin America reflects the very low foreign policy priority it has in the current White House. Latin America is a fifth level priority after the US domestic economic depression, the Middle East and South Asian wars, coordinating economic policies with the European Union and formulating economic strategies and military relations with Russia and China. With these priorities, the Obama regime has little time, interest, or programmatic offerings to help Latin America cope with the onset of the economic recession.

At the most basic level the Obama regime is following a three-fold strategy of (1) retaining support from rightist regimes (Colombia, Mexico and Peru); (2) increasing influence on ‘centrist regimes’ (Brazil, Argentina, Chile, Uruguay and Paraguay); and (3) isolating and weakening leftists and populist governments (Cuba, Venezuela, Ecuador, Bolivia and Nicaragua).

What is most striking about the supposedly “progressive” Obama regime’s policy for Latin America are the continuities with the previous reactionary Bush administration in almost all strategic areas. These include:

   1. Latin America’s very low priority in US global policy;
   2. The US emphasis on military (“security”) drug enforcement collaboration over any long term socio-economic poverty alleviation and drug addiction treatment programs;
   3. Its close collaboration with the most rightwing regimes in the region (Mexico and Colombia);
   4. The continuation of the US economic embargo of Cuba, despite the loss of its last two Latin American backers;
   5. Obama’s double discourse of talking free markets while practicing protectionism;
   6. The US financing and strengthening the role of the IMF as an instrument of imperial expansion;
   7. The US policy of driving a wedge between ‘centrist regimes’ (Lula in Brazil, Fernandez in Argentina, Vasquez in Uruguay and Bachelet in Chile) and ‘left and center-left nationalist regimes’, (Chavez in Venezuela, Morales in Bolivia, Correa in Ecuador and Ortega in Nicaragua) and
   8. Its support for separatist regional elites’ actions to destabilize center-left governments operating from their traditional far right-wing bases in Sta Cruz (Bolivia), Guayaqul (Ecuador) and Maracaibo (Venezuela).

In other words the Obama regime has embraced overall the strategic agenda of the Bush Administration essentially intact, while making several secondary changes having to do with adaptations based on the decline of US power. In addition, Obama has facilitated a few major negative changes, which go further than the Bush administration in harming Latin America’s financial and trading position. While reiterating the anachronistic demands for Cuba to convert to capitalism (dubbed a “democratic transition”) as a condition for ending the US embargo, Obama has slightly eased travel restrictions for US-based Cuban families to visit relatives in Cuba and send them money. The State Department relies less on confrontational diplomatic language and has made overt gestures to centrist regimes, including White House meetings with Lula Da Silva (March 2009) and Vice President Biden’s attendance at a meeting with centrist Presidents (March 27-28, 2009) in Chile. Obama’s resort to “soft power”, which is not backed by any new economic initiatives and which continues the basic policies of his predecessor has not gained him new allies.

However, there is one set of ‘changes’ resulting directly and indirectly from the US depression and Obama’s gigantic deficit financing, which has a very negative impact on Latin America’s economic recovery. The Obama regime is absorbing most of the Hemisphere’s credit to aid the financial bailout. This policy makes it difficult for Latin American exporters to finance their sales. Moreover, the Obama regime’s demands on the financial sector to expand their capital reserves and to direct their lending to the American domestic market has led banks to repatriate capital from their Latin American subsidiaries at the expense of Latin American borrowers — extending and deepening the recession in Latin America.

The Obama regime’s diplomatic and linguistic changes and affirmation of free trade have little substance: the White House continues the double discourse of talking up “free trade” while introducing a new and more virulent financial protectionism. In addition to the twenty billion dollar subsidies to agricultural exporters, the Democrats have pushed the “Buy American” provisions in Federal procurement policy and multi billion dollar subsidies to the auto industry.

Latin America faces a rising tide of US protectionism as the Obama regime reacts to the domestic economic depression by forcing Latin America to seek new trading partners, to protect their internal markets and to seek new sources for trade and credit.

Latin America Faces the World Crisis

Throughout Latin America, the economic depression is wrecking havoc on the economy, the labor market, trade, credit and investment. All the major countries in the region are headed toward negative growth, and experiencing double digit unemployment, rising levels of poverty and mass protests. In Brazil in late March and early April, a coalition of trade unions, urban social movements and the rural landless workers movement convoked large scale demonstrations — including participation from the union confederation, CUT, which is usually allied with Lula’s Workers Party.

Unemployment rates in Brazil have risen sharply, exceeding 10%, as massive lay-offs hit the auto and other metallurgical industries. In Argentina, Colombia, Peru and Ecuador, strikes and protests have begun to spread in protest over rising unemployment, the increase of bankruptcies among exporters facing world-wide decline in demand and unable to secure financing.

The more industrialized Latin American countries, whose economies are more integrated into world markets and have followed an export growth strategy, are the ones most adversely affected by the world depression. This includes Brazil, Argentina, Colombia and Mexico. In addition, countries dependent on overseas remittances and tourism, like Ecuador, the Central American and Caribbean countries and even Mexico, with their ‘open’ economies, are badly hit by world recession.

While the US financial collapse did not have a major and immediate impact on Latin America- largely because the earlier financial crashes in Argentina, Mexico, Ecuador and Chile led their governments to impose limits on speculation — the indirect results of the US crash, especially with regard to the credit freeze and the decline of world trade, has brought down productive sectors across the board. By mid-2009, manufacturing, mining, services and agriculture, in the private and public sector were firmly in the grip of a recession.

The vulnerability of Latin America to the world crises is a direct result of the structure of production and the development strategies adopted the region. Following the ‘neo-liberal’ or empire-centered ‘restructuring’ of the economies which took place between the mid-1970s through the 1990s, the economic profile of Latin America was characterized by a weak state sector due to privatization of all key productive sectors. The de-nationalization of strategic financial, credit, trading and mining sectors increased vulnerability as did the highly concentrated income and property ownership held mainly by small foreign and domestic elite. These characteristics were further exacerbated by the primary commodity boom between early 2003 until the middle of 2008. The regimes’ further shift toward an export strategy relying on primary products set the stage for a crash. As a result of its economic structure Latin America was extremely vulnerable to the decision taken by US and EU policy makers in charge of key economic sectors. De-nationalization denied the state the necessary levers to meet the crisis by reversing the direction of the economy.

Structural changes imposed by the IMF/World Bank and its domestic ‘neo-liberal’ ruling class partners ‘opened’ the countries to the full blast of the world depression while dismantling the very state institutions which could have protected the economy or at least avoided the worst effects of the crisis.

Privatization led to the concentration of income, lessened local demand and heightened dependence on export markets while depriving the state of levers to control investment and savings, which could counteract the decline of overseas inflows of capital and the collapse of its overseas markets.

Denationalization facilitated the outflow of capital especially in the financial sector, deepened the credit crises and adversely affected the balance of payments. Foreign ownership made Latin American countries subject to strategic economic decisions made by overseas economic elites looking at the costs and benefits to their economic empires. For example, in Brazil the closing of US-owned auto factories and the mass firings of workers are based on ‘global market’ cost calculations, totally divorced from the needs of the Brazilian labor market.

The ‘export strategy’ was dependent on the state subsidizing the expansion of agro-business plantations producing staples for export markets. This came at the expense of small farmers, landless peasants and rural workers, weakening the domestic market as an alternative to a collapsing overseas markets, increasing dependence on food imports and undermining food security.

Export strategies depend on holding down labor costs, wages and salaries, thus weakening domestic demand and making employment dependent on the fluctuations of overseas demand. Specialized production in a vast complex international division of labor is central to the multinational corporation. This has dramatically reduced the national diversification of industry and integral manufacturing where all components of a product are produced within a single geographic region. Under the current division of labor, a Brazilian manufacturer of car brakes is totally dependent on external demand determined by the MNC. The strategic disadvantages of this ‘specialization’ in a global capitalist chain of production have become strikingly evident in this depression.

Despite these deep structural weaknesses, inherited from previous regimes, the current center-left regimes in Latin American have not moved toward any structural changes to decrease their economic vulnerabilities, with the partial exception of Chavez’s Venezuela.

The March 2009 summit of self-styled ‘third way’ regimes (plus the Obama-Biden and British Labor governments) met in Santiago, Chile where they studiously avoided even mentioning the flawed internal structures which have brought on the economic crises and promise to deepen it.

The consensus proposals of the “third way” regimes repeated anachronistic appeals for greater capital flows divorced from reality of the current crises. They called on the US, EU and Japan to resurrect collapsing markets and to promote trade. Specifically the Santiago meeting called for increased funding for the Inter American Development Bank (IDB, BID in Spanish), and encouraged the G20 leaders to promote stimulus packages and to pledge against protectionism. They called on Latin American regimes to increase spending and liquidity, to lower interest rates and to prop up, financial institutions and promote exporters.

The center-left regimes meeting in Santiago made no mention of plans to increase domestic demand through intervention in the labor market by preventing industrialists from firing workers. They did not mention increasing the minimum wage. They avoided any discussion on increasing demand in the rural areas through income generating agrarian reforms. They did not consider establishing publicly funded import substitution industrialization, which could generate employment for workers dismissed from export sectors.

In the face of rising food prices, no provisions were proposed to subsidize low income families, the unemployed, children and pensioners on fixed income. The center-left regimes’ proposals demonstrated high structural rigidity and their incapacity to break with failed strategies tied to the powerful agro-mineral export ruling class. Instead their proposals reaffirm their dependence on the ‘expansionary’ stimulus programs of the ruling classes in the US and Europe. Their repeated calls for ‘free trade’ and appeals to avoid ‘protectionism’ fell on deaf ears as all the imperial countries follow a dual policy of promoting free trade for their dynamic overseas multinationals and protectionism for their financial and troubled manufacturing sectors at home.

While eschewing any structural domestic changes that would favor unemployed workers, peasants, public employees and small businesses, they persist in following policies favoring the bankers, export elites and multi-national corporations. The main economic focus of Latin America’s center-left regimes is not internal reform; it is the pursuit of new overseas markets and investors.

In early April, Latin American leaders and their business elite met with their Arab counterparts in Qatar to expand investments and trade through joint ventures. Similar missions to China, Russia and Japan have led to investments almost exclusively in capital intensive extractive industries (petroleum and minerals) and mechanized export agriculture. Inter-regional trade via MERCOSUR has been highly asymmetrical as evidenced by Argentina’s $4 billion dollar trade deficit with Brazil. The center-left is structurally incapable of recognizing that the world depression has in large part undermined the ‘export strategy’; that the elites cannot overcome their internal contradictions and class constraints by ‘exporting’ their way to economic recovery. The search for new markets and investors in Asia and Middle East may provide a limited boost to the export enclaves but they will have little or no impact on the industry, service and related sectors, which employ the mass of workers and employees. Moreover, the Middle East and Asian countries are in serious crises as trade (both imports and exports), manufacturing and employment decline. Moreover, China has opted for a vast economic stimulus plan based on increasing domestic demand. Asia can provide Latin American regimes with little relief from the crises.

The one country absent from the Santiago meeting of the center-left regimes was Venezuela, in part because President Chavez has pursued an alternative economic strategy to the world depression.

Chavez strategy includes the nationalization of key economic sectors like and oil and gas, which increases state revenue; protection of strategic social sectors/food processing and distribution sectors; and the expansion of agrarian reform to increase local production of food. The government has a program of subsidized food prices, a 20% increase in the minimum wage to cushion the effects of inflation and public spending on labor intensive infrastructure projects which has resulted in a drop in unemployment with the creation of 280,000 new jobs in Jan-Feb 2009.

Chavez is pursuing a radical Keynesian program, which depends on large scale public investments to expand the domestic market and social subsidies targeting a large swath of the lower classes. His state investment policy relies on the ‘cooperation’ of the still-dominant private sector, especially finance, construction, agro-mining and manufacturing, either via financial incentives and state contracts or through threats of intervention or nationalization.

Chavez’ domestic structural reforms are complemented by his promotion of regional political-economic pacts, like PETROCARIBE and ALBA, with Bolivia, Cuba, Nicaragua and several Caribbean and Central American states. He is counting on the growing financial and investment agreements with China, Middle East, especially Iran, and Russia, particularly in joint ventures in the petroleum and mining sectors.

While Chavez’ strategy represents a clear break with and alternative to the center-left ‘export-elite’ centered approach, it still confronts a series of serious contradictions. Venezuela is over-dependent on a single export (petroleum) for 75% of its foreign exchange earnings and a single market (the US). Secondly it is rapidly depleting its foreign reserves. Thirdly, its efforts to promote regional integration have not prospered as the principle countries in Latin America look toward the G20 for salvation. State intervention and nationalization have increased national leverage over the economy but has not confronted the mal-distribution of income, property and power. As a result, a wave of worker/employee strikes in education, mining, smelting and manufacturing have hit the economy.

Equally serious a 30% rate of inflation has eroded buying power for those with fixed incomes and salaries undermining recent increases in the minimum wage. Increases in the price of foodstuffs, over 90% of which are imported, adversely affects the balance of payments. The immediate future could pose a threat to the social stability of the Venezuela.

Latin America and the Deepening Depression

The participation of several major Latin American countries in the G20 meeting in London, April 2, 2009, and the subsequent agreements reveal the political bankruptcy of the current political leadership. The declaration of a major new “stimulus” package was belied by the fact that most of the funds cited ($1.1 trillion dollars) were already allocated before the meeting and would have no effect. The actual amount of ‘new money’ was only a “fraction” ($250 billion dollars) and mostly geared to rescuing the financial sector.

The G20 solemn agreement to oppose protectionist legislation was belied by an OECD report that 17 of the 20 countries have recently adopted measures protecting local industries and restricting overseas financing. The biggest winner at the G20 was the IMF, which was promised an additional $500 billion dollars to provide credit lines and financing. Given the US-EU dominance of the IMF and given its past history of imposing restrictive conditions favoring the imperial countries, the strengthening of the IMF poses a major obstacle to any progressive Latin American recovery. The high expectations of Latin America’s center/left and rightist regimes that G20 would provide a meaningful stimulus were dashed.

On the left, Fidel Castro and like-minded allies in Latin America cite China as an alternative market and investment partner. Yet China’s overseas investments are almost always directed to the extractive export sectors (minerals, petrol) and, to a lesser degree, agriculture. As a result, Chinese investment in Latin America has created few jobs while favoring sectors that pollute the environment. Latin America’s export profile with China is reduced to a primary goods monoculture, highly vulnerable to the fluctuations of world prices. Moreover, China’s trade agreements with Latin America include the import of Chinese manufactured good produced by non-union, super-exploited workers which undermines any recovery of Latin America’s manufacturing sector.

Latin American leaders, who look to China to pull them out of the depression, are committed to a neo-colonial style recovery based on a raw material export model. Likewise, the turn to Russia as a new market and stimulus is a highly dubious proposition, given Russia’s petrol-gas dependent economy, its lack of competitive industries and above all its deepening depression with an economic decline of over 7% for 2009.

The Latin American leaders’ search for a new stimulus package from the US and EU or new trade alternatives with China and Russia are desperate efforts to save the failing elite export model. The idea promoted by Brazil that since the imperial countries caused the world depression, they should provide the solution, is a non-sequitor, especially in light of their incapacity to stimulate their own economies. The US promotion of the IMF is directed toward undermining any progressive Latin American policies and independent regimes, and not helping them recover from the crisis.

Conclusion

Because of the Obama regime’s profound and costly commitment to military-driven empire building and the multi- trillion dollar refinancing of its banking sector (while backing credit-financing protectionism), Latin America’s ruling classes cannot expect any “stimulus package” from US.

The deep political divisions between the US and Latin America (and between the classes within Latin America), divergent national and class strategies preclude any ‘regional strategy’. Even among the left nationalist regimes, apart from some limited complementary initiatives among the ALBA countries, no regional plan exists. In this regard it is a serious mistake to write or speak about a “Latin American” problem, or initiative. What we can observe today is a generalized breakdown of the export-driven model and divergent social responses, between income protecting policies of Venezuela and export subsidy policies of Brazil, Argentina and Chile, Peru and Colombia. Throughout the recession, these center-left regimes have demonstrated a high degree of structural rigidity, making no effort to deepen and expand the domestic market and public investment, let alone nationalize bankrupt enterprises. The crisis highlights the process of de-globalization and the increasing importance of the nation state.

The deepening economic crisis adversely affects incumbent regimes, whether they are center-left or right, and strengthens their opposition. In Argentina the right and far-right have dominated the streets, with a growing power base in the ‘interior’ among the Argentine agrarian elite and the middle class in Buenos Aires. The progressive trade union, CTA, which has organized strikes and protests, is not connected with any new left alternative political organization.

Brazil has witnessed similar protests by social movements and trade unions against rising unemployment of over 10% and the decline in export-oriented industries. But the principle political beneficiary of the declining popularity of Lula’s self-styled “Worker’s Party” is the Right.

In contrast, the center-left will benefit where rightist regimes are currently in power — namely Mexico, Colombia and Peru. But as is the case elsewhere, the mass movements lack an organized political response to a collapsing capitalism.

Moreover neither Cuba nor Venezuela offers a ‘model’ for the rest of Latin America. The former is highly dependent on a vulnerable tourist economy while the latter is a petrol economy. Given the systemic collapse of capitalism, these countries will need to move beyond ‘piecemeal reforms’ (such as Chavez food subsidies) and piecemeal nationalizations and toward the socialization of the financial, trade and manufacturing sectors.

Mass protests, general strikes, and other forms of social unrest are beginning to manifest themselves throughout the continent. No doubt the US will intensify its support for rightist movements in opposition and its existing rightist clients in power. US ‘hegemony’ over the Latin American elite is still strong even as it is virtually non-existent among the mass organizations in civil society. Given the overall militarist-protectionist posture of the Obama regime, we can expect intervention in the form of covert operations as class struggle escalates and moves toward a socialist transformation.

In attendance for the first time were top US and NATO officials, including US Deputy Assistant Secretary for South and Central Asian Affairs Patrick Moon and NATO Deputy Secretary General Martin Howard, as well as UN Secretary General Ban Ki-moon and Secretary General of the Organization for Security and Cooperation in Europe Mark Perrin de Brichambaut. Among the 36 countries participating were representatives from the G8, the European Union and the Organization of the Islamic Conference. The unanimously adopted Joint Action Plan underlined the SCO’s importance “for practical interaction between Afghanistan and its neighboring states in combating terrorism, drug trafficking and organized crime.”

The Moscow Declaration upstaged the UN Conference on Afghanistan held four days later, coming down hard on Pakistan with a call for more effective means to combat terrorism, including denying sanctuaries to the resistance. Coming just over a month after Kyrgyzstan announced the closing of the US airbase on its territory, the conference reiterated the SCO’s position that it is opposed to the expansion of US military interests in Central Asia, but is willing to expand cooperation with the US and NATO in Afghanistan, short of sending troops. Interestingly, Obama announced a shift in US policy emphasis on the same day as the SCO summit, promising greater consultation with Afghanistan ’s neighbours.

It also declared support for the efforts of the Karzai government, which is openly criticized as weak and corrupt by US officials. Russia’s Deputy Foreign Minister Alexei Borodavkin warned against creating a power vacuum in Afghanistan in the run-up to the presidential elections later this year. Russia also came out against negotiating with the Taliban.

The Russians believe that Afghan drug trafficking is the most serious threat to the security of Russia and Central Asia. Russia’s anti-drug chief Viktor Ivanov last week called the coalition’s anti-drug policy a fiasco, nothing that opium production in Afghanistan had soared since the deployment of US and NATO troops in the country. Afghan narcotics, he said, kill 30,000 people in Russia every year, twice as many as the Soviet Union lost during its decade-long military intervention in Afghanistan. The Action Plan calls for joint SCO-Afghan operations in combating drug trafficking and organized crime, including training of drug agencies, combating laundering of drug money and improving border controls.

The Plan reads like a roadmap for bringing Afghanistan into the SCO fold, a move which India’s envoy approved of. The idea of Afghanistan joining the SCO would clearly be anathema to the US, however, and Obama’s proposal to create a NATO-dominated Contact Group with Afghanistan is clearly a way to contain the growing influence of the SCO. But with NATO allies reluctant to back Obama’s surge strategy, major concessions will have to be made, affecting virtually all US foreign policy.

Russia has approved rail transit of non-military supplies to Afghanistan, and suggested this could include military cargo as well, though such approval is surely conditional on US actions affecting Russia, primarily its plans for missile bases in Eastern Europe and its campaign against Iran. Russian analyst Alexander Lukin says cooperation with the SCO offers the US and NATO an acceptable format to bring Iran into the dialogue. Iran’s Deputy Foreign Minister Mehdi Akhundzadeh sat across the table from the US envoy at the Moscow Conference.

Iran is a dilemma for the SCO. Just as Georgia is being put on hold in NATO, Iran’s application to join the SCO was put off again. “The admission of new members to the SCO should strengthen the organization, but not cause new problems,” SCO Secretary General Bolat Nurgaliyev said last month. Full membership would provide Tehran with a mutual assistance guarantee similar to that provided NATO members. Just as NATO’s expansion plans brought the world perilously close to war last summer over Georgia, so would a US-Israeli attack on Iran if it were a full member. This will be addressed at the next SCO summit, which will be held in Yekaterinburg, Russia, in June.

In 2003, Iran indicated to the Bush administration that it was no friend of the Taliban and was willing to cooperate in stabilizing the situation in Afghanistan, but its overtures were spurned and the invasion of Iraq put paid to any such plans. The hysterical campaign against Iran since has only made the US/NATO occupation of Afghanistan harder — there are reports that Iran may even be burying the hatchet with the Taliban. But its enthusiasm for the SCO and continued support from China and Russia in its standoff with the West make this possibility unlikely.

Iran is also suffering from the exploding drug trafficking from Afghanistan that the US invasion facilitated, plus a surge of Afghan refugees. Russia in no doubt delighted with the Iranian police chief Esmaeel Ahmadi-Moghadam’s announcement last week that Iran was ready to train Afghan police. The Germans have botched this and the Iranians could hardly do worse. If the US were serious about containing the huge heroin problem it created, it would take their offer seriously.

But Obama will be unlikely to capture this moment, given his timidity so far in dealing with the mess he was bequeathed. He needs to build a new coalition and endgame strategy that would avoid the humiliation the US suffered in Vietnam, and fast. There are many adjustments to be made — nixing the Bush-Brzezinski strategy of surrounding Russia with NATO members for starters. And winding down the campaign against Iran, which will include reining in Israel. US policymakers who want to reverse the reckless saber-rattling of the Bush years can actually take solace in the rise of the SCO, which was founded in 2001 and whose growing prominence is a direct result of the Bush years. With the collapse of the Soviet Union and NATO’s self-proclaimed status as world policeman in the past two decades, Russia and China were more or less forced to form their own “NATO”. After all, nature abhors a vacuum.

Ironically, as the attempt to surround Russia sputters, it is Afghanistan that is now surrounded by SCO members and observers, notably Iran, anxious to contain drug trafficking. In this context, US-Israel threats to attack Iran are more and more like the boy who cried “Wolf!” The Bush Afghanistan/Iran policies in shambles and there is little indication so far that much is being done to improve the situation.

Can NATO and the SCO become allies in Afghanistan, or are they fated to be enemies? Council for Foreign Relations analyst Evan Feigenbaum, until recently the State Department’s deputy assistant secretary for South and Central Asia, says the SCO conference “offers an opportunity for the US to try to turn what are ostensibly common interests [in Afghanistan] into complementary polices,” but he’s not optimistic. He pointed to the SCO call in 2005 for a timeline for a US withdrawal from military bases in Central Asia, which “attracted a lot of notoriety,” and asks just what the SCO could actually do in Afghanistan. Good question. How can Chinese and Russian support save the totally discredited Karzai regime? How would their “help” be greeted by Afghans? Clearly some accommodation with, if not total surrender to the Taliban is the dead end the US has reached, and SCO involvement can change this.

Feigenbaum makes another telling observation: “We really don’t understand what the SCO is … Is it a security group? Is it a trade bloc? Is it a group of non-democratic countries that have created a kind of safe zone where the US and Europeans don’t talk to them about human rights and democracy?” Indeed, there is little uniting the suspicious and uneasy SCO members other than fear and perhaps loathing of the US and Taliban, and a desire to staunch the drug smuggling which the US is failing so spectacularly to deal with. If NATO were to disband or at least retract its claws, the SCO might well collapse. Expanding it to include, say, Iran, let alone Pakistan and India, would paralyze it.

The most likely cooperation would be in containing the drug flow, if the US is indeed serious about this and not part of the problem, as some analysts — in the first place Russian — contend. The prospects of establishing a stable, popular political regime opposed to the Taliban is a fantasy apparently shared by both NATO and the SCO. But Russia and China are hardly going to have more success in destroying the Taliban than the US. Any attempt by either Russia or China to contribute to the slaughter now taking place will only backfire among their own restive Muslim minorities, which all SCO members have.

It appears that Russia genuinely wants the US to succeed in bringing Afghanistan to heel. Russia’s Ambassador to NATO Dmitri Rogozin said recently, “We want to prevent the virus of extremism from crossing the borders of Afghanistan and take over other states in the region such as Pakistan. If NATO failed, it would be Russia and her partners that would have to fight against the extremists in Afghanistan.” Rogozin proposes using the NATO-Russia Council to establish a security order stretching “from Vancouver to Vladivostok. Perhaps NATO could develop into PATO, a Pacific-Atlantic alliance.”

Whether this is merely Rogozin being flippant is not clear. Surely such an organization belongs as part of the UN, which is perhaps what he meant. In any case, Rogozin is back on the warpath, or rather the peacepath, calling NATO’s month-long war games in Georgia scheduled for 7 May a “provocation” and calling for them to be canceled. If they go ahead, Russia will “take appropriate measures”, one of which already has been taken with the cancellation of a meeting of Russian and NATO general staff commanders this week. There are lots more aces up the Russian sleeve, including SCO and Afghan ones. If Obama persists in Bush-era belligerence, it will only make resolving the many problems he faces all the more difficult.

Even if he can keep the SCO onside, it is no life jacket for NATO in Afghanistan. The best the two “security” organizations can do is to let it go its own way, “containing” it until it recovers from the trauma of all the “help” it has been force-fed over the past three decades.

Many economists assure us the current recession will begin to subside by 2010, but the paradigm from which they conceptualize reality is incomplete, ignoring costs externalized by markets, such as the encroaching effects of habitat destruction. The fledgling and contagious social unrest at hand must be quickly organized, attitudinized and mobilized, for existing environmental, geopolitical and financial upheavals threaten the survival of many. Firstly, the outlook for food yields in 2009 is dismal: Many analysts have warned of a 20 to 40 percent drop in agricultural production, depending on the harshness and duration of the current global drought. Two years ago, however, Science published predictions of “permanent drought by 2050 throughout the Southwest” of the United States, and forecast levels of aridity akin to the Dust Bowl of the 1930’s that would envelope swaths of land from Kansas to California. The Hadley Center in the UK reported in November 2006,

“Extreme drought is likely to increase from under 3% of the globe today to 30% by 2100 —areas affected by severe drought could see a five-fold increase from 8% to 40%.”

This, of course, is a recipe for widespread desertification. The NOAA foresees drought of considerable duress—“ largely irreversible for 1,000 years”—and identifies the following key regions as facing, insofar as our contemporary purviews are considered, permanent Dust Bowls: (Romm )

• U.S. Southwest
• Southeast Asia
• Eastern South America
• Southern Europe
• Southern Africa
• Northern Africa
• Western Australia

Countries yielding two thirds of the world’s agricultural output are on the precipice of serious climatatic discontinuities reminiscent of the Global Climate Optimum of the 900 to 1300 variety. Food prices will soar, and, in poor countries where food is scarce, millions will starve. One thing we have to fall back on is our natural humanity, —not just our braininess and know how, but also the fact that the collective wet dream that constitutes our social reality skews how many of us can actually live now and in the future. Simply put, by ditching the wet dream and downsizing, we significantly better our plight. There are plenty of atavistics (those who are like, so last dark ages) among us, like Dianne Feinstein, who said that it is Californians “god-given right to water their lawns and gardens.” Southern Californian Scott Thill offers, in an article published by AlterNet, a new definition of the front lawn: “Gorgeously tended middle fingers to reality, which, like death and taxes always, has a way of winning in the end.”

The California drought is anticipated to be the worst in modern times. Already thousands of acres of crops are fallow, with no sign of slowing. Furthermore, the Northern Sierra snowpack for this past winter turned out to be 51% lighter than usual. According to the Los Angeles Times, the state is nearly out of water, leaving it with prayers of rain and a dwindling Northern California supply. Los Angeles has already begun allocation of water, which, as Scott Thill points out, means water to the rich (north) and away from the poor (south). He then portends evacuations and realignments, “by 2100, you will not recognize it.” East of southern California, 18 percent of Texas is burdened by severe drought.

In some countries historical relief efforts have been undertaken. The Chinese government has allocated 86.7 billion yuan (roughly $12.69 billion) to affected regions, and, moreover, lent a helping hand to its western colleagues during the financial crisis, but also to nature itself. Officials in Beijing blasted silver iodide into clouds over northern China to create precipitation as a means of alleviating the most severe drought experienced by the region in half a century. King your fingers crossed (or maybe not, there’’s no telling with these things!), as China produces 18% of the world’s grain each year.

Australia has been in the midst of an unremitting dry spell since 2004, as 41% of the country’s agriculture suffers the worst drought in the 117 years of record-keeping. Rivers have stopped flowing, lakes are being eradicated by toxicity, and farmers have left their land.

Shall we proceed? Argentina’’s worst drought in half a century has turned that country’s verdant landscapes to dust. The country has declared emergency. Soy plants are scorched by the sun and Argentina’’s food production is set to go down a minimum of 50 percent or greater. 2008’’s wheat yield was 16.3 million metric tons, whereas 2009′’s is projected to be merely 8.7 metric tons.

Africa faces food shortages due to lack of rainfall. Half the agricultural soil has lost nutrients necessary to grow plant. The Middle East and Central Asia, to boot, are suffering from contemporary nadir droughts and food grain production is at the lowest levels in decades. A major shortage of planting seed for the 2010 crop is expected.

Stocks of foodstuff are dangerously low worldwide. Agricultural commodities must rise in price so as to obviate even larger food shortages and famine. Wheat, corn, soybeans, etc. must become expensive enough so that every available acre is harvested with the best possible fertilizers. With food prices steady, production will continue to fall and millions would starve.

A spike in food price is likely to spark competitive currency appreciation in 2009. Foreign exchange reserves exist for this. Central banks the globe over would lower domestic food prices by either directly selling off their reserves to appreciate their currency or buying grain from the market. Appreciating a currency is the fastest way to control food inflation. The more valuable a currency the more monopolistic a nation over global resources —so, for example, an overvalued dollar enables the US to consume 25% of the world’s oil, despite only having 4% of the world’s population. Were China to sell off its US reserves, its population of over one billion would then suck up the world’s food supply. Prices soar around the world.

This process, however, would most likely not end up in the impoverishment of nation states per se, though almost certainly the disintegration of the modern middle class, already long past its youthful heyday. The American Dream has been repeatedly resuscitated over the last thirty years through portfolio insurance, Long-Term Capital Management, the internet, the housing market, and now the looters have taken to the streets—oh, excuse me; I mean to their theoretical electronic world—and pillaged the landscape.

Social unrest and soaring food prices go hand in hand, from sea to shining sea. Countries, so as to avoid revolutionary reform from the bottom up, would have no choice but to appreciate their currencies in order to cheapen food imports. China holds the best deck, and so then would sell off more of its reserves. The world’s reserve currency, the dollar, floats into precarious waters. As a fiat currency, the US dollar is, by its very nature, worthless. Trillions of US holdings could be liquidated in favor of food.

“”We will rebuild, we will recover, and the United States of America will emerge stronger.” (President Barack Obama, State of the Union Address 24 Feb 2009)

In Washington, talk of bailouts and relief are framed in the realm of economics and economics only, with no considerable deliberation of our species ecological outlook. The budget proposal is sold as a demand oriented New Deal-esque expansionary program, with health, education, renewable energy, investment infrastructure and transportation at its forefront. The hope is to stimulate employment, boost social programs and to revive the real economy. Michel Chossudovsky reports in a recent article published by Global Research, that —– surprise, surprise— — the “stimulus package” is the most substantial diverging of public spending ever, and serves the interests of Wall Street, in particular, the finance, oil and defense cartel. This in and of itself should cause social unrest, and certainly makes more likely the potential evaporation of the middle class.

The 2010 fiscal year, which begins on October 1st, will represent an increase in spending of 32%. The nucleus of the proposal inflates defense and the Middle East War funds, the Wall Street bank “bailouts that never end,” so-called by the New York Times, and interest on a debt that exceeds ten-fold the world’’s GDP. The bailout— financed, in part, by the recipients themselves, the creditors, which, as understood by the Treasury and the banks in the first place, meant the FED enjoyed sweeping authority over how the money was to be spent from the onset of this collapse—continues under the new proposed budget. Unlike Keynesian style deficits, this piling on of debt through the proposed budget would not stimulate investment and consumer demand; there will be no expansion of production and employment, for the giveaway of tax dollars to the financial oligarchs is no more than a monumental concentration of wealth and centralization of world banking power.

Washington places defense spending at $739.5 billion, though some estimates assert aggregate defense and military related spending at more than $1 trillion. The total of both bailouts—, Obama’s $750 billion piled on top of Bush’s $700 billion dollar bailout, —is 1.45 trillion dollars paid for by the Treasury. Virtually all federal government revenues would be expended to finance the bank handouts: 1.45 trillion, the war; $739 billion, and interest payments on public debt; $164 billion. And then the well is dry. There are no funds available for the social programs encapsulated in the stimulus package. Therefore, programs for healthcare and education will most likely be sold to private enterprise to fund the bankrupt state. Education is not the only state asset that is at risk of being privatized: Public infrastructure, urban services, highways, national parks, etc. are all at risk. The worsening fiscal collapse coalesces in the privatization of the state, tilling the land for a much more lucrative market in governance and social control.

Many economists hypothesize that the Obama administration is employing Zimbabwe School of Economics policies, where by hyperinflation is produced through the incessant printing of money, resulting in that currency’s fall to zero. Currently, we are seeing the simultaneous devaluation of the currency and the purchase of the world’’s commodities by corporations, government assets included; a process that will presumably leave the rest of us with toilet paper.

So, that leaves us with a raped resource base and a new system of globalized neo-feudalism. In 1800, —around the time of the Industrial Revolution—, there were 969,000,000 humans on earth. That leaves more than five billion redundant individuals whose lives were made possible by fossil fuels and abundance of water. A ubiquitous and enduring reorientation of human cognition is the key to survival: in short, reprioritization. This problem is of the utmost importance. A change of consciousness would result in a change in mass behavior. This starts at the obvious level: short-showers, low-flow everything, no lawns, total conservation and the reorientation of the economy based on renewable resources and sustenance. We must then work on disbelieving in our governments and the moribund banking system.

An all-pervasive insurgency, attacking multi-laterally the global industrial grid oligarchy, with broad but explicit aims— among which a new harmony with the natural world is foremost— must, before all else, work towards dismantling tyrannical corporations. Computers and electricity are the lifeblood of civilizations. Coordinated attacks against the electric grid, financial markets, and destroyers of the environment could be wildly successful, but could only be so as part of a talented and colossal movement with army-like discipline. Specialization comes in handy. The average American city has food for about half a month, which means economies will need know-how to localize and quick.

Another option would be to create companies of our own to challenge the global giants. Max Keiser, host of the Oracle on the BBC, has championed the idea of creating huge syndicates of boycotters against companies such as Coca-Cola and Exxon/Mobil. The money saved would be diverted to the world’s top activism organizations. The biggest take-home lesson when it comes to boycotts is this: the consumer wields enormous power. You’’ve been told it before and it’’s true. Boycotts of certain market elements such as the Fed Cartel (Citibank, JP Morgan Chase, Bank of America), in which we move our money, refinance with another bank, sell our stock or quit our jobs, is a major step in the right direction.

Your television lies. Propagandistic news networks like CNN, NBC, ABC, Fox, etc are the only companies from whom Americans get their daily dose of news. The panoply of diverse news websites on the internet forms the most active resistance community around; further privatization and censoring of the internet must be actively challenged. The corporate attitudinized mass media dangles carrots in front of the consumer’s face from the confines of a hallucinatory feedback loop. Awash in an onslaught of terroristic American-style boulevard journalism, dimension is hard to find. The axioms with which the corporate-owned media frame reality are so far off base that it can be taxing for many of us to find the right ripostes while discussing our world with Nationalists. A good example is the recent slandering of Michel Phelps, caught toking with a relatively impressive piece of glass. The pro-marijuana movement has failed utterly, —though they are indeed going up against a billion dollar smear campaign— to gain traction with this simple notion: That had Michel Phelps not indulged in marijuana, his record breaking Olympic performance would have been inconceivable. There are many doctors who have championed the medical benefits of marijuana, some going so far as to suggest THC promotes brain cell growth.

Don’t join the military, for the US government and mercenaries view soldiers as cannon fodder or expendable assets; one in four soldiers in the US is homeless.

Wine-making vats are an excellent habitat for a multitude of micro-organisms. By fermenting the juice of crushed fruit, the organisms explode at first before depleting the once abundant nutrients needed for survival. They eventually die from the accrual of alcohol and carbon dioxide they themselves produced. We choke just the same on our industrial discharge, especially in agglomerations such as Southern California and BosWash on the eastern seaboard. By making our communities self-sustainable with clean energy such as solar, wind, geothermal, and magnetic— forever replacing the obsolete 80-year long enterprise known as the combustible engine—, we make ourselves and our families less dependent on the broken state-enterprise apparatus. Not to mention less toxic.

It’s important to remember, there’’s always the future. We must keep our humanity; —it’s much too late in the ballgame to be weighed down by our razor-thin ideologies, be they Marxism, Capitalism, Christianity, Islam, Nudism, Obamaism, Indie Rockism, Hyphy, Fuck the’ policeism, or what have you. Understanding, compassion, and altruism are the chords deep within our souls, and once struck it is clear that they are the essence of humanity.

Allow me to introduce you to a peculiar form of denial called anosognosia, the condition in which a person suffering from a disability due to brain injury appears unaware or denies the existence of the malady. This ailment applies to radical changes in one’s life, affecting the newly blind or paralyzed. Indeed, Woodrow Wilson, 28th President of the United States, suffered from anosognosia after a stroke on October 2, 1919. After the bloodletting of “the war to end all wars” subsided, Wilson’’s first priority was the establishment of the League of Nations, which he believed would help ensure world peace. With the help of those by his side, Wilson ignored the seriousness of his stroke, and continued to look forward to more campaigning in favor of the League, and even the possibility of a third term. Wilson was no more than wool gathering with such hopes in light of his incapacity.

The industrialized world’s superego is suffering from a terminal form of anosognosia: We have all gone insane. That we find solace in proclamations from economists that the current financial crisis will subside in a year’’s time, while momentarily watching the corporate nanny state’s complete submission to corporate rule, is further evidence of our aloofness. Our capacity for widespread social reform is great if only we exercise our power. Malcom X expressed his belief that one day there would be a clash between the rich and poor of the world, and, in all likelihood—, details of how it may or may not play out aside—, we are headed towards such a clash. So, before we starve between a stream and a berry bush, now is the time for us to reconsider our goals and desires. Next week is the sixth anniversary of the war in Iraq. I suggest we all consider penciling it into our day planners.

Xinjiang will always keep up the intensity of its crackdown on ethnic separatist forces and deal them devastating blows without showing any mercy.

— Wang Lequan, Chinese Communist Party Xinjiang Secretary, quoted by China News Agency, January 14, 2003

China is guilty of fierce repression of religious expression, and intolerance of any expression of discontent.

– Rebiya Kadeer, Uighur rights activist, writing for the Washington Post.

The 2008 Olympics held in Beijing helped bring into the limelight the plight of ethnic minorities in China, subject to ‘gross human rights violations’, according to Amnesty International. This said, however, there was a clear duality in the international perception and approach to the two issues of ethnic persecution in China: the Tibetans and the Muslim Uighurs of the Xinjiang region in the North-West. While the Tibet issue received international attention, building up pressure on the Chinese government, the ethnic unrest in Xinjiang remained eclipsed and went quite unnoticed, even to the extent that Al Jazeera TV had to call it ‘China’s Other Tibet’* in order to garner public attention. This international inattention and apathy makes sense in the context of the War on Terror, considering the fact that China’s diplomacy has successfully managed to present the Uighurs’ struggle as ‘terrorism’. Regardless of the international attitude towards it, facts on the ground seem to support what Uighur human rights activist Rebiya Kadeer stated in an interview to Kate Mc Geown of BBC, “I believe the Uighurs are the most persecuted people in the world.”

Amnesty International reports on March 17, 2005: “Since the late 1980s, the Chinese government’s policies and other factors have generated growing ethnic discontent in the Xinjiang Uighur Autonomous Region. Thousands of people there have been victims of gross human rights violations, including arbitrary detention, unfair political trials, torture and summary executions. These violations are suffered primarily by members of the Uighur community and occur amidst growing ethnic unrest fuelled by unemployment, discrimination and restrictions on religious and cultural freedoms. The situation has led some people living in the Xingiang Uighur Autonomous Region to favour independence from China. Crackdowns in the region have intensified since 9/11, with authorities designating supporters of independence as ’separatists’ and ‘terrorists’. Muslim Uighurs have been the main targets of Chinese authorities. Authorities have closed down mosques, detained Islamic clergy and severely curtailed freedom of expression and association.”

The holding of the Olympics in Beijing was used as a justification of a hard-hitting crackdown in Urumqi and other sensitive areas in Xinjiang. Uighurs have been jailed for reading newspapers sympathetic to the cause of independence. Others have been detained merely for listening to Radio Free Asia, an American-sonsored English-language station. Even the most peaceful Uighur activists, if they practise Islam in a way that the authorities deem inappropriate, risk arrest and torture. China regularly dubs Uighur historians, poets and writers “intellectual terrorists” and sends them to jail. In June 2003 Abdulghani Memetemin, a teacher and journalist, was sentenced to nine years in jail for “providing state secrets for an organisation outside the country”. What he had actually done was help the East Turkestan Information Centre (an NGO based in Germany and run by exiled Uighurs), with its work by sending it news reports and transcripts of speeches by Chinese officials. In 2005, Nurmemet Yasin, a young intellectual, was sentenced to a decade in prison for writing an allegory comparing the Uighurs’ predicament with that of a pigeon in a cage.¹

Amnesty International has documented that, since 2001, “tens of thousands of people are reported to have been detained for investigation in the region, and hundreds, possibly thousands, have been charged or sentenced under the Criminal Law; many Uighurs are believed to have been sentenced to death and executed for alleged “separatist” or “terrorist” offences.” AI has further reported that once imprisoned, detainees are subjected to types of torture from cigarette-burns on the skin to submersion in raw sewage. Prisoners have had toenails extracted by pliers, been attacked by dogs and burned with electric batons, even cattle prods.¹

Those held and routinely tortured usually have flimsy charges against them. Human Rights groups say many of those arrested ‘may have done little more than merely practice their religion or defend their culture’, says M J Gohel, a terrorism specialist at the Asia Pacific Foundation in London.² The joint report ‘Devastating Blows’ by Human Rights Watch and Human Rights in China reveals that more than half the detainees in Xinjiang’s labour camps are there for having engaged in ‘illegal religious activity.’ Sharon Hom, the Executive Director of Human Rights in China says ‘Religious regulation in Xinjiang is so pervasive that it creates a legal net that can catch just anyone the authorities want to target.’³

Rebiya Kadeer was a successful Uighur entrepreneur who founded a trading company in Xinjiang and rose to a position of prominence. Her company helped train Muslim Uighurs and give them employment opportunities. She and her husband became spokespersons for the rights of the Uighurs, and used their international connections to further the cause. In 1999, Kadeer was arrested as she entered a hotel to deliver a speech on human rights, and sentenced to eight years in prison on the charge of ‘providing secret information to foreigners’, which happened to be some news clippings about human rights abuse in Xinjiang she wanted to pass on to her husband in the United States. These ’secret’ documents, however, were from newspapers that were publicly available. Human rights groups globally campaigned for Kadeer, and her sentence was shortened. She was released in 2005 and today champions the Uighurs struggle as an advocate of their rights in USA. In a June 2005 interview with Kate Mc Geown of BBC, Kadeer says, “Since I came out of jail I have never stopped fighting for the freedom of my people. In prison I witnessed personally the torture and persecution of many Uighurs who were totally innocent of the crimes they were said to have committed. I wasn’t allowed to get a lawyer… My struggle is peaceful. I focus on human rights. China has used 9/11 as an excuse to crack down. It is easy for the government to say the Uighurs are terrorists, because they are Muslims. Many Uighurs have been falsely persecuted for this.”

While the unrest in Xinjiang is decades old, China always looked at it as a sort of ‘national embarrassment’, deflecting international attention and keeping mum. M J Gohel of the Asia Pacific Foundation says “China has been shy about the whole problem. It has now come out of the closet.” The ‘coming out of the closet’ comes as a policy change in the wake of the War on Terror, which provides the Chinese government with an opportune moment to gather international support. This it is doing by presenting the unrest in Xinjiang as terrorism, fomenting a link with terrorism elsewhere around the globe which the United States has committed itself to fight. Both Human Rights Watch and Human Rights in China accuse China of ‘opportunistically using the post 9/11 environment to make the outrageous claim that individuals disseminating peaceful religious and cultural messages in Xinjiang are terrorists who have simply changed tactics.’⁴

The international connection is easy to establish as Xnjiang enjoys deep ethnic, religious and cultural ties with neighbouring states including Afghanistan, Pakistan and Uzbekistan. China has utilized this natural connection to the hilt. The government claims foreign nationals are in the region. At a press conference, Xinjiang Party Secretary Wang Lequan warned that the province was “under attack… In Xinjiang, the separatists, religious extremists and violent terrorists are all around us_ they’re very active.”⁵ Post 9/11, China has busied itself with convincing the world that there is indeed a direct link between the US-led War on Terrorism and China’s indigenous fight against separatists in Xinjiang. With Islam as the mainstream religion in Xinjiang, the ‘common link’ is easy to establish.

The common link has enabled China not only to seek international approval for its counter-terrorism methods but also to demand support and assistance for the same. China has already named more than 10 groups who it claims are supporting separatist ‘terrorism’ in the region, and all of which are based abroad. These include, besides the already banned East Turkestan Islamic Movement, the East Turkestan Liberation Organisation, the World Uighur Youth Congress and the East Turkestan Information Centre. The last two groups are based in Germany, and have been operating peacefully and legally since years.² Mike Dillon, Xinjiang expert at the University of Durham says, “Whether the other groups on the list even exist is open to doubt. And whether groups demanding independence have links abroad is open to doubt.”² Dru C. Gladney, President of the Pacific Basin Institute agrees: “The ETIM has no truly effective links with Al Qaeda, at least not any more, and is most probably defunct by now, as far as we know.” Like several others, Andrew Nathan of Columbia University believes China is by far exaggerating the danger separatism in Xinjiang really poses.⁶ Uighur activist Rebiya Kadeer emphatically states, “I vehemently deny that our struggle is connected to Al Qaeda. I believe history will show we were never terrorists. My people will win.”⁷

The fruits of China’s diplomatic labours are manifested by international unconcern and apathy towards the issue. The United States, usually bitterly critical of human rights abuse in China, has apparently agreed to maintain strategic silence over the issue. When compared with international censure over Tibet, the duality of standards becomes only too clear. One reason for this is that the Uighurs lack effective, dynamic leadership that can advocate their cause internationally. They do not have the Nobel Laureate ‘Dalai Lama’ that Tibet has. The other reason that goes deeper, is the connection China has been able to establish with global terrorism, which makes world public opinion apathetic. The connection, sadly, is fomented conveniently because Uighurs share their religion with other separatist groups around the world that are branded ‘terrorists’. International propaganda against Islam churned for politically expedient reasons in the context of the War on Terror demonizes Muslim populations struggling for rights. It takes away sympathy and concern over rampant human rights abuse, making criminals of us all.

Nicholas Bequelin is pessimistic about future prospects for a peaceful resolution for the oppressed Uighurs due to international unconcern: “There is absolutely no international pressure to change policy in Xinjiang now. So why would China make any changes?”⁶

1. Fahad Ansari, “Plight of the Uighurs“, IslamicAwakening.com, September 9, 2008.
2. Quoted by Tim Luard, “China’s Changing Views of Terrorism“, BBC News Online, December 15, 2003.
3. “China ‘Crushing Muslim Uighurs‘”, BBC News Online, April 12, 2005.
4. “Devastating Blows“, Human Rights Watch, April 2005.
5. Quentin Sommerville, “China’s Grip on Xinjiang Muslims“, BBC News Online, November 29, 2005.
6. Quoted by Preeti Bhattacharji, ‘Uighurs and Chinas Xinjiang Region’ Council on Foreign Relations, September 29, 2008.
7. Rebiya Kadeer in an interview by Kate Mc Geown in June 2005.

The Chicago Board Options Exchange Volatility Index, “the Fear Index,” surged to 79.13 on Friday, the highest in its 18-year history. The massive blow-off in stocks is mainly the result of ongoing deleveraging among the hedge funds which are dumping shares in at a record pace to cover the dwindling value of their asset base. According to the New York Times: “Hedge funds lost an estimated $180 billion during the last three months and some are near collapse. Investors are demanding their money back, and Wall Street is bracing for a shake-out in the $1.7 trillion industry.” If a large fund, like Citadel, goes down, it will create a black hole in the financial system, similar to the loss of Lehman Bros. and, once again, the US Treasury will have to come to the rescue by providing a multi-billion dollar taxpayer bailout.

The dislocations caused by the unwinding of the hedge funds creates the possibility that US markets will have to be closed while assets are dumped on the market. New York University Professor Nouriel Roubini summed it up like this:

“Policy makers may soon be forced to close financial markets as the panic selling accelerates.

Indeed, we have now reached a point where fundamentals and long term valuation considerations do not matter any more for financial markets. There is a free fall as most investors are rapidly deleveraging and we are on the verge of a capitulation collapse. What matters now is only flows — rather than stocks and fundamentals – and flows are unidirectional as everyone is selling and no one is buying as trying to buy equities is like catching a falling knife. There are no buyers in these dysfunctional markets, only sellers and panic is the ugly state of this destabilizing game.
“We have reached the scary point where the dysfunctional behavior of financial markets has destructive effects on the financial system and — much worse — on the real economies. So it is time to think about more radical policy actions and government interventions.”(Nouriel Roubini’s Global EconoMonitor)

The stock market rout has triggered gigantic swings in the currency markets, too. The dollar has surged 16 percent against the euro in a matter of weeks while every other currency in the world has steadily lost ground, excluding the yen. The sudden fall in commodities and the unwinding of dollar-based bets in foreign capitals has bolstered the dollar and made US Treasuries the preferred “flight to safety” investment.

The volatility is causing problems everywhere, particularly where foreign companies must pay back loans in dollars which have risen steeply in relation to their own currencies. Emerging “commodities based” markets are getting clobbered. The stronger dollar also threatens to make it harder on US exports which have been the one economic bright spot in recent months. If present trends continue, then foreign governments will have to allocate more of their reserves to prop up their own currencies which will make it even more difficult for the US to fund its current account deficit as well as the Treasury’s expanding balance sheet. In other words, these violent and unprecedented currency swings foreshadow a funding crisis looming just ahead as credit is drained from the financial system and capital becomes even scarcer. For now the dollar is flying high, but the future is looking grimmer by the day.

The financial crisis is wringing credit from the system and pushing prices downward across the board. No asset class has been spared, including gold which posted its biggest one week loss in 28 years and has plummeted from $1,040 in March to $734 at Friday’s market close.

Oil has also been hammered by speculative bets made by the hedge funds which are now forced to sell their positions to cover downgrades on their mortgage-backed assets. The erratic movement in oil prices makes it possible to see the real destructive power of the unregulated market, particularly the opaque buying and selling by the hedge funds. In just 14 months oil went from $70 to $145 and back to $67 again on Friday. Wall Street speculators drove up prices with money they borrowed from the investment banks and delivered a knockout blow to the US consumer. The Fed played a critical role in this “gaming the system” by providing the low interest credit that created burgeoning profits for the investment class and falling living standards for everyone else.

Now that the currency bubble has popped, its effects are being felt worldwide. Countries that benefited from the high commodities prices are now getting slammed everywhere from Russia to the Persian Gulf. Ethanol producers are facing bankruptcy if things do not turnaround in the next 12 months. As the Wall Street Journal notes:

The tragedy of the second bubble is that it has left the economy in a weaker position to ride out the housing slump and credit panic. The American consumer has been whipsawed with $4 dollar gas and food inflation, while entire industries have been put on the edge of bankruptcy. Detroit’s auto makers have spent the last year taking down their truck and SUV assembly lines while gearing up to make hybrids and electric cars, even as their cash flow has been ravaged. Their new investments are based on the expectation that oil will stay high permanently, but will the market for hybrids exist if oil is $50 a barrel?

As Congress plumbs the causes of our current mess, the main one is hiding in plain sight: Reckless monetary policy that did so much to create the credit mania and then compounded the felony with a commodity bubble and run on the dollar whose damage is now becoming apparent.

The effects of low interest rates and credit contagion are not limited to “bottom line” considerations. As Marketwatch’s Thomas Kostigen points out, monetary policy can be a death sentence for poor people across the planet who are invariably its biggest victims:

The harsh reality of the economic fallout isn’t that Joe the plumber can’t buy his business or that people’s retirement funds are being lost or that unemployment is rising; the harsh reality is that people will die.

Already, since food prices began to rise 100 million more people have been pushed into poverty, according to the World Bank, with as many as two billion on the verge of disaster. Almost half the world’s population, let’s remember, live on less than $2.50 per day. Millions die annually of hunger and starvation, and more than a billion do not have access to fresh water.

These numbers are poised to rise dramatically with population growth, dwindling natural resources and higher consumer prices across all goods and services. So as the stock market tumbles and the world economy falters, it’s important to remember that it’s more than financial losses we are talking about, it’s the loss of life.

And increasingly it isn’t just people in far-off places around the world who are succumbing to such extreme hardships. Note this: Job losses in the state of Indiana have caused the child poverty rate there to spike 29 per cent since 2000. The wealth gap in the United States and around the world is at record levels — and it has serious consequences.

The Organization for Economic Cooperation and Development reported this week that the gap between the rich and the poor is getting bigger around the world, and that the U.S. is experiencing the biggest dichotomy.
We are experiencing the largest wealth gap in history. Further erosion of the economic floor will only send more people plunging into destitution.

This is why it’s so important to fix the economic crisis — now.

We’re all linked.

The Bush administration has called for an economic summit to be held by the 20 largest economies sometime after the presidential elections. US and EU officials are hoping to stitch together another Bretton Woods wherein control of the global economic system was delivered to those same nations. It’s likely, however, that the outcome will turn out considerably different than anticipated. Already, under China’s leadership, 12 Asian nations have agreed to set up an 80-billion-dollar fund to protect their economies from currency-runs, capital flight or other financial disruptions. China has the world’s largest reserves at $1.9 trillion followed by Japan at more than $1 trillion. Clearly the two richest nations will set the agenda and play a central role in deciding how best to deal with the global recession.

The November summit in Washington could produce some unwelcome surprises which were hinted at by Thailand’s Deputy Prime Minister, Olarn Chaipravat, who told Bloomberg News:

“The message of this initiative is for China to consider whether or not China would open up its banking system and allow the strongest currency in the world, which is the Chinese yuan, to be the rightful and anointed convertible currency of the world.”

Surely, the present financial malaise which has its roots in Wall Street and at the Federal Reserve, has demonstrated that the dollar must be replaced as the world’s “reserve currency” and that America must be deposed as the de facto steward of the global economic system. Leadership implies responsibility and the US must be held to account for its failings. It’s time for a change.

INTRODUCTION

World war or world peace is the blunt choice that will face either Barack Obama or John McCain when one of them is elected president of the United States on Tuesday, November 4, 2008.

For a major eruption of violence to be averted, the new president must deal positively with the reappearance of Russia on the world stage, the emergence of China as an economic force, and the aspirations of all the nations on earth for a decent and secure way of life.

Making matters much more dangerous are the ongoing financial crisis, along with what appears to be the start of a worldwide economic recession of as yet undetermined depth and duration.

It is Europe, not the U.S., from which proposals are emerging for a transformative approach to the most compelling issues. But will it be enough?

THE DISASTROUS PRESIDENCY OF GEORGE W. BUSH

In December 2000, at the time the U.S. Supreme Court was intervening in the disputed vote count in Florida to name Republican George W. Bush president over Democrat Al Gore, the stock market began to crash. The “dot.com” bubble, based largely on foreign investment in internet companies and technology stocks, deflated. By the time Bush was inaugurated in January 2001, signs of a recession were appearing.

This did not prevent the Bush administration from initiating a $450 billion tax cut for the upper income brackets that Congress approved in March 2001. A similar cut was subsequently enacted in May 2003.

On September 11, 2001, the World Trade Center’s Twin Towers in New York City were attacked by airplanes flying into them, followed that morning by an air attack on the Pentagon in Washington, D.C.

Terrorists from Al Qaeda, an organization of Islamic extremists associated with the Afghan mujaheddin, and a Saudi figure, Osama bin Laden, alleged to be their leader, were blamed. The wealthy bin Laden family had close ties to the U.S. and the Bush family.

Within a few weeks, the Bush administration pulled a battle plan from the shelves of the Pentagon and invaded Afghanistan. The object was to wrest control of that nation from the Taliban, supposedly Al Qaeda collaborators. A new U.S. Asian land war had begun.

In March 2003, the Bush administration added to the Afghan action the second invasion of Iraq in the past thirteen years, following the “Shock and Awe” aerial attack. The assaults on Afghanistan and Iraq, with torture of prisoners, use of depleted uranium weapons, and killing of civilians, was methodical and brutal.

Americans who had opposed the Vietnam War in the 1960s and 70s were appalled at how history was repeating itself. The public was subjected to a relentless barrage of pro-war propaganda by square-jawed military talking heads

Behind the scenes were the international financial and oil interests who stood to benefit from the removal of Iraqi president Saddam Hussein as an independent actor in the Middle East. Financiers like David Rockefeller, who had founded the Trilateral Commission and was one of the “internationalist” leaders of what had come to be called the “New World Order,” tended to remain in the shadows, but their presence was palpable.

Rockefeller had reportedly expressed his world view in a statement at a 1991 meeting of the Bilderberg Group:

“The supra-national sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.”

With respect to most of the U.S. military actions after World War II, especially the ones after Ronald Reagan was elected president in 1980, an argument could be made that the internationalists were using the U.S. military as their personal global police force.

Even so, the Neocons—“new conservatives”—who had rushed to the forefront after September 11, 2001, working chiefly through Secretary of Defense Donald Rumsfeld and Vice-President Richard Cheney, seemed to be a more radical element than the officials who had been in charge during the Clinton years, when the U.S. and NATO went to war against Serbia. Many of the Neocons were Jewish, with strong ties to Israel.

In 1997 the Neocons had created the Project for a New American Century, which advocated a new invasion of Iraq, and published a statement that positive change might result from a “catalyzing event—a new Pearl Harbor.” Later this was interpreted as possibly having foreshadowed the 9/11 attacks.

President George W. Bush justified the Iraq invasion by claiming that the regime of Saddam Hussein possessed weapons of mass destruction. Later this claim proved to be a lie.

To many the attack was a simple act of aggression. Kofi Annan, Secretary General of the U.N. said of the invasion on September 16, 2004, “I have indicated it was not in conformity with the U.N. charter. From our point of view, from the charter point of view, it was illegal.” The U.S. paid no attention to Annan’s misgivings.

The U.S. attack on Iraq was not without controversy, even among the international elite. According to Daniel Estulin, writing in his breakthrough book, The Bildergerg Group, the Europeans at the 2001 Bilderberg Conference summoned Donald Rumsfeld and blasted him for prematurely planning an attack on Iraq that year. But by 2003, says Estulin, they were prepared to endorse it. Still, the U.S. had far less active support from other nations than with the 1991 invasion of Iraq under George W. Bush’s father.

WARS ARE NOT CHEAP

Starting in 2001, the Bush administration had increased the frequency of White House meetings with Alan Greenspan, chairman of the Federal Reserve, who lowered interest rates by 550 basis points from January 2001 to June 2003. This succeeded in floating the U.S. economy through injecting a huge amount of cash into what came to be called the “housing bubble.”

It’s consumer spending that keeps the U.S. economy running, but ever since the 1980s, when we began to export so many of our manufacturing jobs, family income had stagnated. It has been established by researchers, and documented as well by Daniel Estulin, that at a certain point the financial elite made the momentous decision that the U.S. would be de-industrialized. According to one account, this decision had been a topic of discussion in meetings in China, after Nixon’s visit there in 1972, that were held among David Rockefeller, Secretary of State Henry Kissinger, and Chinese Premier Chou En-Lai.

When Rockefeller and Columbia University professor Zbigniew Brzezinski—later President Jimmy Carter’s national security adviser—formed the Trilateral Commission in 1973, the plan to turn the U.S. into a financial/service economy instead of the world’s greatest industrial democracy seemed to become a key objective. How well this program succeeded is shown by statistics from the website Economy in Crisis:

· From 1978 to July 2008, more than 16,613 U.S. companies were sold to foreign corporations.

· The steel, publishing, textile, machine tool, automobile, and electronics industries declined sharply.

· By 2006 American manufacturers suffered a twenty-two percent structural cost disadvantage compared to overseas competitors through taxes, health and pension benefits, litigation, regulation, and unequal environment protection.

· In 2006, $1 in $4 of US consumption on manufactured goods went immediately and directly to imports.

· In 2007 China alone exported over $321 billion in goods to the United States compared to the $62 billion in goods we exported to them. The U.S. trade deficit, estimated to exceed $800 billion in 2008, is costing $1.5 million per minute in remittance to foreign companies.

· Three million high-paying manufacturing jobs were lost between 2000 and 2005 alone. The U.S. lost 63 thousand jobs just in February of 2008.

· Foreign manufacturers operating in the U.S. accounted for over twenty percent of our exports and manufacturing assets, and a large percentage of our employment in 2006.

· As of December, 2007, the U.S owed fifty-three percent of its debt to foreign countries and other international interests. This is 25.5 percent of our total national deficit, and we finance nearly 100 percent of all new borrowings from foreign interests. Our competitors are now our bankers.

· High-paying goods-producing industries have lost net employment over the past twenty-seven years, while lower paying non-tradable services-providing employment has doubled.

· In 2004, China and India graduated a combined 950,000 engineers versus 70,000 in the U.S. The United States ranks near the bottom of science/math proficiency

Beginning around 1991-92, with cheap credit now flowing from the Federal Reserve System, home prices soared. The money from new mortgages and home equity loans became a virtual “cash cow” for families strapped for cash.

The federal government had already been taking steps during the 1990s to ease mortgage credit so that more families could purchase homes. But after 2001, many more loans were based on fraudulent mortgage applications, where brokers exaggerated borrower incomes. ABC News later reported that during this period risk analysts at Washington Mutual, one of the nation’s largest banks, were told to ignore high risk loans because lending had to be maximized. Those who objected were disciplined or fired.

On Wall Street, banks that wrote mortgages began to offload them by packaging them into mortgage-backed securities that were sold around the world as bonds to banks and investors. Risk analysts at the leading credit-rating agencies, such as Standard and Poor’s, Moody’s, and Fitch, gave their highest ratings to mortgage-backed securities whose risks were later acknowledged to be grossly underestimated.

Also, mortgage companies, with Alan Greenspan’s endorsement, began to offer more Adjustable Rate Mortgages (ARMs), loans that would reset at higher rates in future years. Mortgage brokers fed the growing bubble by telling people they should buy now, because housing prices would keep going up and they could resell at a profit before their ARMs escalated.

As a result of the bubble, large amounts of money began to flow into the economy, not only from mortgages and home equity loans, but also from capital gains on the resale of inflating property. Meanwhile, in the world of investment securities, the Securities and Exchange Commission reduced the amount of their own capital investors were required to bring to the table, resulting in a large increase in bank leveraging of speculative trading. This fed additional bubbles in the equity, hedge fund, derivatives, and commodities markets. The SEC also eliminated most of its Office of Risk Management through budget cuts.

According to an April 2008 Washington Post article by New York governor Elliot Spitzer, state attorneys-general who wanted to investigate allegations of mortgage fraud were blocked from doing so by the Office of the Comptroller of the Currency within the U.S. Treasury Department. There was no federal agency charged with regulating mortgage fraud to take up the slack. Spitzer made these charges just before he was forced to resign from office over a sex scandal disclosed by a leak of FBI investigative documents.

Thus it appeared that a major part of U.S. economic growth was tainted by outright criminality, with collusion from the highest levels of the U.S. government, the Federal Reserve System, and the financial industry. But the housing and investment bubbles generated enough economic activity and tax revenues through 2006 to allow the Bush war policy to be implemented.

George W. Bush was reelected in 2004 at the height of the bubbles. By 2005, the housing bubble alone was accounting for half of all U.S. growth and yielding substantial tax revenues to all levels of government. Still, the Bush administration was running huge budget deficits from expenditures on the increasingly-expensive wars in Afghanistan and Iraq.

Congress approved funding for the Afghan and Iraqi wars even after the Democratic Party regained majority control in the 2006 elections. The funding also allowed for the start of construction in Baghdad of the world’s largest U.S. embassy, as well as permanent military bases in Iraq.

During this time, an internal battle raged between the U.S. State Department, which wanted to implement a plan to rebuild Iraq’s civilian infrastructure, and the Defense Department, which was mainly interested in military occupation. Defense won out.

L. Paul Bremer, former U.S. foreign service officer and managing director of Kissinger and Associates, was named occupation director. But the Iraqi economy and physical infrastructure were shattered. Two to three million Iraqi civilians were killed, injured, or driven into exile.

The housing bubble began to collapse when the Federal Reserve raised interest rates by 425 basis points from June 2003 to June 2006. In January 2006, Ben Bernanke replaced Alan Greenspan as Fed chairman. Greenspan had been chairman for nineteen years during which the largest financial bubbles in world history were created.

This sequence of events led some to contend that the Federal Reserve had both deliberately created the housing bubble, then deliberately destroyed it. Hundreds of millions of people around the world, including U.S. homeowners and foreign investors, ultimately were trapped in the Greenspan/Bernanke pincers.

By 2007, the federal government’s debt was over $9 trillion and reached $10.3 trillion by October 2008. It was now obvious that a serious economic downturn lay ahead. By 2007, signs of a recession loomed, as homeowners who had signed up for “subprime” and ARM mortgages began to default.

By 2008 the number of home foreclosures would exceed four million. The mortgage-based bonds sold through Wall Street brokerage houses to U.S. and foreign investors, began to prove worthless. They had proliferated around the world as virtual time-bombs in investment portfolios.

By August 2008, foreign investors, such as the Bank of China, were becoming increasingly involved in the crisis. Reuters ran a story that Chinese banks planned to stop investing in U.S. markets, which the Chinese government denied, but the threat remained.

If the Chinese and other Asian exporting and petroleum-rich nations pull out, the days of “dollar hegemony,” where the dollar constitutes the world’s reserve currency, providing almost unlimited funding for the U.S. commercial and military empire, will be over.

THE BUSH ADMINISTRATION HITS A WALL

By the first presidential primary elections of 2008 in Iowa and New Hampshire, the campaign to select the next president of the United States was underway. The eight-year George W. Bush presidency would be ending within a year.

By now the Bush years seemed to exemplify the most grievously wrong-headed aspects of U.S. foreign and domestic policy since the election of Ronald Reagan in 1980. The 2008 election will mark the end of an era, though no one knows for sure what will come next.

What has to be questioned are an economy that has been downgraded from one based on industry to a service economy structured around finance, an aggressive military policy with U.S. forces engaged around the world, and trade and fiscal deficits as far as the eye can see.

With all this going on, the Bush White House has brought the world’s most powerful nation to a point of crisis, possibly even to the brink of catastrophe.

In retrospect it can be seen that U.S. military occupation of the Middle East, focusing on Iraq and involving extensive collaboration with Israel, was an extension of the century-long attempt by the Anglo-Americans to control the region’s fossil fuel resources.

But the nation of Iraq and its people had been crushed in the meantime. Even if the U.S. were to withdraw combat forces at some time in the future, the permanent military bases it plans to leave behind will be islands in a sea of hostility. Today even these bases are in jeopardy, as Iraq’s elected government pressures the U.S. to commit to a complete withdrawal by 2011.

Iran has clearly been strengthened by U.S. action to destroy Sunni power in Iraq and has been emboldened by the successes of Hamas in Palestine and Hezbollah in Lebanon in standing up to the Israelis. U.S. intentions to attack Iran have evoked strong opposition among Europeans and can be seen to have enhanced the influence of Russia and China, since Iran is now an observing member of the Shanghai Cooperative Organization.

After initial successes in Afghanistan, U.S. forces have become bogged down in protecting the capital of Kabul, where President Hamid Karzai rules under virtual siege, while the Taliban have come back to contest control of the countryside. The U.S. has resorted to bombing sorties which often kill civilians and has begun to escalate the war by sending raiding parties into neighboring Pakistan.

After the 1991 collapse of the Soviet Union, the U.S., acting through NATO, moved aggressively to extend its influence into the former Soviet republics and surround Russia with nations friendly to the West. The former Soviet Union and Soviet satellite states that joined NATO were Estonia, Latvia, Lithuania, the Czech Republic and Slovakia (formerly part of Czechoslovakia), Bulgaria, and Romania.

The European members of NATO have not yet agreed to extend invitations to the Ukraine and Georgia after those nations expressed interest following establishment of pro-Western governments, though a communiqué after the 2008 NATO summit in Bucharest indicated membership would be forthcoming.

But the NATO façade may have cracked, as shown by a recent trip by German Chancellor Angela Merkel to St. Petersburg for meetings with Russian President Dmitri Medvedev.

According to a report by George Friedman:

The central question on the table was Germany’s position on NATO expansion, particularly with regard to Ukraine and Georgia. Merkel made it clear at a joint press conference that Germany would oppose NATO membership for both of these countries, and that it would even oppose placing the countries on the path to membership. Since NATO operates on the basis of consensus, any member nation can effectively block any candidate from NATO membership. The fact that Merkel and Germany have chosen this path is of great significance. Merkel acted in full knowledge of the U.S. view on the matter and is prepared to resist any American pressure that might follow.¹

Also by 2008 the U.S. was losing influence with the former Soviet republics of Central Asia—Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—which had joined with Russia and China in the SCO. In central and south Asia, as well as Africa, nations have been unwilling to act as hosts for new U.S. military bases.

The U.S. had been losing ground in Central Asia and elsewhere even before Georgia invaded its former province of South Ossetia on August 8, 2008.

The invasion of South Ossetia by Georgia’s forces, armed and trained by the U.S. and Israel, was crushed so decisively by the Russians as to be a major embarrassment to the Bush administration. According to Georgian president Mikheil Saakashvili’s former defense minister Irakly Okruashvili, Saakashvili carried out the attack despite warnings from the U.S. that they could not come to his aid militarily.²

Okruashvili faulted the U.S. for not being sufficiently critical of Saaksashvili in the months leading up to the attack. From this report it is unclear whether the U.S., while trying to keep Georgia in its orbit as a pathway for natural gas pipelines, was trying to goad Russia into a major military confrontation, though such a scenario seemed possible. Of course the U.S. media and politicians blamed only Russia for the conflict.

In Latin America, the Hugo Chavez regime in Venezuela has begun to forge an alliance with Russia, even to the point of announcing a plan for joint naval maneuvers in the Caribbean. Chavez is also acting as an inspiration to populist movements elsewhere in South America, including those in Bolivia and Ecuador.

Announcements by Vladimir Putin, now the Russian prime minister, that Russia is opposed to a unipolar world were reminiscent of the 1970s, when President Richard Nixon and Russian General Secretary Leonid Brehznev met as equals to forge the policy of détente. Putin created a sensation on February 10, 2007, at the 43rd Munich Conference on Security Policy, when he said:

“What is a uni-polar world? No matter how we beautify this term, it means one single center of power, one single center of force, and one single master.”

Speaking of the U.S., Putin said:

The United States has overstepped its borders in all spheres—economic, political and humanitarian—and has imposed itself on other states.…Local and regional wars did not get fewer, the number of people who died did not get less but increased. We see no kind of restraint – a hyper-inflated use of force.…[The U.S.] has gone from one conflict to another without achieving a fully-fledged solution to any of them.

Putin clearly has rejected the one-world aspirations of the Western financial elite which acts through U.S. military power. After the Georgian crisis, Dmitry Medvedev, Putin’s successor as president, reiterated:

The world must be multipolar. Single polarity is unacceptable. Russia cannot accept a world order in which any decisions will be made by a sole nation, even such a serious one as the United States. Such a world order will be unstable and fraught with conflicts.

Where did the European Union (EU) fit in after the Georgia debacle? Clearly the Europeans were not passive spectators to a U.S.-Russian standoff. European leaders moved quickly to negotiate a cease-fire in Georgia followed by withdrawal of Russian troops.

The more the EU acts as a bloc, the more it seems that a new nationalist entity has come into existence, complete with its own Euro-based currency. The European population wants peace, prosperity, justice, and to be left alone. They particularly do not want to be dragged into America’s wars. The EU has also taken the lead economically with a 2007 GDP of $16.8 trillion vs. $13.8 for the U.S. (IMF figures)

In the Middle East times are changing too. Israel, for instance, seems to be in social crisis. Though Jews are both leaving Israel and moving in, the population is stable but small. Of a population of 7.3 million, 5.5 million are Jewish Israelis. A substantial minority of non-Jews are imported laborers.

But Israel has a poorly-formed middle class. The gap in Israel between rich and poor is growing, as in the U.S., often with only minimum wage jobs available, even to military veterans. Also, common lands in the kibbutzim are being privatized, and residents reportedly are tending to withdraw from peripheral areas to settle around Tel Aviv for safety from strife with the Palestinians.³

Some Israeli politicians say that Iran, with its supposed nuclear ambitions, poses an “existential threat” to the nation. But there are reports that the U.S. has told Israel they will not be permitted to attack Iran on their own.

ECONOMIC COLLAPSE

If the Bush administration is being challenged in the foreign policy arena, in the area of macroeconomics it may have been checkmated.

As stated previously, the financial crisis deepened in the late summer of 2008 when China and the other nations of the world that had been floating the U.S. fiscal and trade deficits by their purchase of public and private securities became alarmed. This was in reaction to Wall Street’s issuance of the huge amount of “toxic” debt from mortgage-backed securities that were now collapsing in value as the housing bubble imploded.

Analyst William Engdahl has stated that the financial meltdown was secretly planned in order to weaken the European banking system. Engdahl wrote:

“As one senior European banker put it to me in private discussion, ‘There is an all-out war going on between the United States and the EU to define the future face of European banking.’”

The start of the recession and the decline of purchasing power by consumers who can no longer borrow quantities of money also means that the U.S. will cease as the customer of last resort whose purchases conveniently float the world economy. The Japanese, sitting on billions of U.S. dollars in their bank accounts, are reportedly furious that U.S. consumers might no longer support the abundant lifestyle of the world’s richest nation.

The dollar is so shaky that some nations are reducing their dollar reserves and turning to other currencies. Talk has been rampant about a worldwide shift to a multi-currency regime, possibly including the Euro, the Yuan, the Yen, and even the Ruble. In March 2007 the Governor of China’s Central Bank Zhou Xiaochuan announced:

“China will diversify its $1 trillion foreign exchange reserves, the largest in the world, across different currencies and investment instruments, including in emerging markets.”

The U.S. Council on Foreign Relations is supporting the movement to a multiple currency regime in its journal, Foreign Affairs. Though the federal government denies any concrete plans, the so-called Amero has been mentioned as the currency of a hypothetical North American Union made up of the U.S., Canada, and Mexico.

Meanwhile, the Bush administration, led by Secretary of the Treasury Henry M. Paulson, working in league with Federal Reserve Chairman Ben Bernanke, has begun to introduce gigantic amounts of publicly-backed credit to rescue the exploding financial system.

As recently as 2006, the U.S. financial industry earned over $500 billion in profits—an astronomical sum. Some hedge fund managers were earning $1 billion a year. Now Wall Street is a disaster scene, with financial firms losing over 200,000 jobs in a year and major investment banks going bankrupt.

Also, the two quasi-governmental mortgage guarantee agencies, Fannie Mae and Freddie Mac, have failed. Despite their lavishing $175 million in the last decade on buying influence from Congress, the government has fired their executives and is taking the two agencies over in a conservatorship. The government also took over insurance giant AIG.

When, on September 23, 2008, Henry Paulson asked for $700 billion dollars to purchase bad debt from U.S. and foreign banks without any oversight or guarantee of success, Congress revolted, with the House of Representatives rejecting the proposal in an initial vote. They did so because their constituents were enraged with the terms proposed by the Bush administration for a gigantic giveaway of taxpayers’ money.⁴

U.S. taxpayers could now be finding themselves on the hook for possibly trillions of dollars of debt liabilities due to Wall Street mismanagement and fraud. Both the Securities and Exchange Commission and the Federal Bureau of Investigation have begun belated criminal investigations. Americans on “Main Street” and their representatives in Congress remain horrified.

Some say the capitalist era is over. The financiers and stock brokers have run rampant in the 2000s under President George W. Bush. They’ve been called, only half-jokingly, “The Masters of the Universe.”

But their excesses have been encouraged by the Bush administration, the Federal Reserve, and the government’s regulatory agencies, which have combined to facilitate an explosion of leveraged speculation in the housing, hedge, equity, commodity, and derivative markets. More shocks undoubtedly lie ahead.

By September 2008, as the bubbles were starting to blow up, the greatest financial crisis since the Great Depression was underway. Despite initial opposition, Congress caved in to pressure from Bush and the bank lobbyists and approved a revised version of Paulson’s plan. According to reports, including a statement on the floor of the House of Representatives by Rep. Brad Sherman (D-CA), members of Congress were threatened with a declaration of martial law to keep public order if the measure failed.

The Treasury Department has started to float new bond issues to raise money to buy the bad mortgage debt, not only from U.S. banks but from foreign investors as well. Meanwhile the stock market is continuing to decline and by October 10 had lost almost forty percent of its value in a year. Over $8 trillion in wealth had vanished from U.S. markets, including the retirement savings and dividend income of tens of millions of people. On October 24, the Dow Jones closed at 8,378.95 vs. 14,198.1 on October 11, 2007.

At the same time, rising prices of oil, food, and other commodities have begun to produce another era of global stagflation, similar to the 1970s, though oil prices have fallen recently. Still, the U.S. financial collapse is resulting in the onset of a worldwide recession that most commentators, including economists at the IMF, said could only get worse—possibly much worse.

Has the New World Order proved to be a parasite that killed its host? Maybe in the U.S. it has. By early October 2008, millions of Americans had been crushed by debt and were losing their homes to foreclosure, tent cities of the homeless were springing up, unemployment claims were soaring, and factory orders were plummeting.

The credit crisis is combining with shortage of consumer purchasing power to cause commerce to shut down at a time when stores should be increasing inventory for the Christmas season. Most of the major chain stores are closing unprofitable retail outlets, throwing thousands of employees out of work.

With the financial system crashing it was only a month from the presidential election, when it would be up to the next president—either Barack Obama or John McCain—to deal with these calamities. Other than a small “stimulus” tax rebate in the spring of 2008, nothing had been done by the Bush administration to rebuild the weakened U.S. producing economy or help the rank and file consumer.

Whose fault was it? David Rockefeller had clearly been the leader during past decades of the “intellectual elite and world bankers” who would replace the old-fashioned nation-state and whose legacy the U.S. was now reaping. Rockefeller had been quoted as saying at the United Nations on September 23, 1994:

“This present window of opportunity, during which a truly peaceful and interdependent world order might be built, will not be open for too long. We are on the verge of a global transformation. All we need is the right major crisis and the nations will accept the New World Order.”⁵

Intended or not, the “major crisis” had arrived.

Rockefeller may have been a kind of “Emperor of the West,” but he is now 93 years old. Yet he has successors who are now running things. Henry Paulson is the most visible. Also prominent are the heads of the largest banks who are being featured regularly in news reports, such as Jamie Dimon, CEO of the banking colossus J.P. Morgan Chase.

Washington Mutual Bank had run short on ready cash during the credit crisis, so Dimon’s bank was able to acquire its $307 billion in assets for only $1.9 billion. Commentators said it was a “fire sale.”

William Engdahl writes:

The Paulson plan is now clearly part of a project to create three colossal global financial giants—Citigroup, JP MorganChase and, of course, Paulson’s own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the U.S. taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead.

THE 2008 ELECTION

When the financial crisis struck during the week of September 22, it was only six weeks before the presidential election. Democrat Barack Obama shot up in the polls, because voters perceived him as more likely than Republican John McCain to deal effectively with the situation.

Obama, with a Kenyan father and a white American mother, was the first African-American to run for the presidency of the U.S. on a major party ticket. To many it was a shock that Obama had defeated such a formidable opponent as Hillary Clinton, wife of former president Bill Clinton, in the Democratic primaries.

Now Obama was the beneficiary of the bad economic news. In American politics, Democrats, with their New Deal heritage and the semi-prosperity under Clinton in the 1990s, are viewed as being more in touch with the economic problems of ordinary citizens. Also, the Democrats’ income policies have generally favored the working and middle classes more than the rich, and Obama was promising to repeal the Bush tax cuts that benefited mainly the upper brackets.

Further, the incumbent party—in this case the Republicans—is more likely to be viewed as responsible for the current economic situation, good or bad, and McCain had consistently allied himself during his long Senate career with the financial deregulation dating from the Reagan years that was now proving disastrous.

McCain had just finished saying in a speech, “The fundamentals of our economy are strong,” but on Wednesday, September 24, he changed his tune. Now, he said, he was suspending his campaign and would return to Washington, D.C., to help solve the crisis. The Democrats howled with derision at this seeming act of political hypocrisy which showed, they said, how desperate McCain had become to maintain credibility.

Clearly the campaign had now changed—or had it? Until the financial crisis, both Obama and McCain had been extremely cautious in putting forth proposals, trying more to avoid saying anything the media could criticize than to suggest fundamental economic changes. Also, Obama’s presidential campaign had received huge contributions from Wall Street.

Both men had been presenting themselves as populists, the friends of the middle class. McCain emphasized tax reduction and limitations on government spending as means of economic growth. Obama spoke in favor of job creation, including five million new jobs from “green energy”—solar and wind power, etc. He also promised to cut taxes for those earning less than $250,000 a year.

But neither had been convincing as signs of an economic recession began to accelerate. Obama’s five million new jobs, for instance, were an intention, not a plan. But they were obviously needed. The financial emergency hit after job losses of 60,000 for August were announced.

Nor did either offer many specifics or explain how they could implement new federal programs in the face of the gigantic budget deficits being projected. CNN news commentator Lou Dobbs blasted them for delivering “poll-driven sound bytes” and failing “to even mention real economic issues,” like the overseas outsourcing of jobs.

Washington Post columnist David Broder accused the pair of “running from reality.” Broder added:

“The frustration that is growing stems from their mutual reluctance to talk candidly about the situation one of them will inherit. If either of them has a clue what to do to help stabilize this tottering economy, he is keeping it to himself.”

What was most clear about events was that the deregulation of the financial system that began in the 1980s now could be seen to have wrecked the U.S. economy. But neither Obama nor McCain proposed regulatory changes or sought in any way to challenge the machinations of the financial titans.

THE CANDIDATES TAKE NOTICE OF THE DEEPENING CRISIS

Housing and home ownership are among the key issues. During the housing bubble, the prices of homes inflated to two or three times their previous value. Now these prices have been collapsing, though homeowners still have to make payments in excess of what the homes were now worth. Critics have pointed out that the Wall Street bailout plan both Obama and McCain voted for was intended to keep home prices high, even if families have trouble making their mortgage payments and continue to lose their homes to foreclosure.

And mortgage payments are going up due to rising interest costs and the resetting of adjustable rate mortgages. On October 8, with the stock market still in free fall, the Federal Reserve cut interest rates for the banking system, but the rise in mortgage interest rates for consumers continued. It will be difficult for the Federal Reserve to cut rates further because this weakens the dollar and makes investments in the U.S. economy less attractive for China, Japan, and other foreign dollar holders.

Up to this point there has been scant mention of the fact that there had been no increase in the level of investment in the U.S. producing economy in thirty-five years. It is also a fact that with the rising level of unemployment and continued decline in the manufacturing job base, U.S. consumer purchasing power has caved in. And despite the financial bailouts, there is still no new economic engine to lead a recovery.

During the week of October 6, Obama continued to surge in the polls. Both McCain and his vice-presidential candidate, Alaska governor Sarah Palin, had performed poorly in the televised debates, and the projections of state-by-state counts in the electoral college showed Obama approaching enough votes to ensure victory. The election was now only a month away.

At this point the McCain campaign decided to “go negative” in criticizing Obama on “character issues,” with an unnamed “high-ranking campaign official” making the incredible admission to the New York Post that “if the campaign focused on the economy we would lose.” McCain’s team had already announced they were halting their campaigning in Michigan, perhaps the industrial state hit hardest by the economic downturn.

On the evening of Monday, October 13, Obama tried to seize the initiative through a major address in Toledo, Ohio, on a new economic recovery plan which included the following provisions:

• A tax credit of $3,000 per job for companies adding jobs in the U.S.
• Elimination of capital gains taxes on investments in small and start-up businesses.
• $25 billion of federal money for infrastructure projects.
• Tax cuts for workers, middle-class employees, and senior citizens.
• Extension of unemployment benefits.
• Penalty-free hardship withdrawals from retirement accounts.
• Allowing bankruptcy judges to modify mortgage terms for distressed consumers.
• A ninety-day foreclosure moratorium for financial institutions that participated in the congressional bailout plan.

But there was a glitch. Despite the variety of provisions and the obvious voter appeal, the plan would only provide a $50 billion stimulus to the economy, less than $175 per capita. The amount would be dwarfed by the estimated total of $1.5 trillion the federal government had committed to between March 16 and October 3 to rescue the financial system.

The rescue included financial institution bailouts and takeovers, costs due to bank failures, new mortgage insurance, and tax breaks added to the bailout bill. This largesse would have to be paid for by yet more government borrowing, with an unprecedented $1 trillion deficit looming for fiscal year 2009.

Obama made a serious misrepresentation about the nature of the additional deficit by claiming that the government’s $700 billion outlay in purchasing bad bank debt would be paid back when the loans the debt was based on were redeemed. But the reason the debt was bad in the first place was that it came from mortgages that homeowners were expected to default on. Not even the power of the federal government was going to squeeze blood from this turnip.

In Obama’s wake came a host of progressive commentators offering their own stimulus proposals to be financed by government debt as though it would be as easy as turning on a garden hose. An example was the $300-$400 billion plan put forth by Rutgers University professor Eileen Appelbaum who, like Obama, never mentioned the possibility of increasing overall tax revenues or curbing military spending as funding sources.

The day after Obama put forth his plan, McCain said he would offer $52 billion in tax cuts but no stimulus spending. He had campaigned against congressional “earmarks,” which were a type of budget appropriation for infrastructure projects proposed by representatives for their home districts. McCain viewed federal infrastructure spending as “pork,” making it a taboo which he could not break at this late stage of the game.

The day McCain made his proposal, the government announced that $250 billion of the Wall Street bailout would be used for the Department of the Treasury to buy shares in the nation’s largest banks. This followed similar action announced for British banks by Prime Minister Gordon Brown. The measure would restore some of the bank capitalization lost through loan defaults. U.S. banks would now be partially nationalized.

A few days later, the Federal Reserve announced it would take over a critical function of the commercial banking industry by using its emergency powers to fund day-to-day operations of U.S. businesses through the discount window of the Federal Reserve Bank of New York.

In spite of all this, the Federal Reserve, the IMF, and every commentator writing on the subject was still predicting a long and deep recession for both the U.S. and world economies. Around the world stock markets continued to fall.

Meanwhile, in foreign affairs, there has been a subtle movement among the U.S. establishment over the last three years away from Israel. Former president Jimmy Carter’s book, Palestine: Peace Not Apartheid, was a milestone. Also, Obama’s vice-presidential candidate Joe Biden reportedly told Israel they would have to live with a nuclear Iran.

The candidates made the required nods in the direction of Israel as a valued ally, but none spent much valuable air time on the topic. Jewish voters typically voted with the Democratic Party and were not seeing any reason to switch.

Obama still had a credibility problem, except it was with progressive voters.

In running after having served in the U.S. Senate for only four years, Obama had come out of nowhere to capture the imagination of younger and highly-educated voters sick of Bush’s wars. But far from being the peace candidate he seemed to be early in his election bid, now when he said he had opposed the Iraq War from the start, he clarified his position to mean that he only opposed it because the U.S. should have been focusing its military efforts more on Afghanistan and Pakistan.

He talked about “taking out Osama bin Laden,” referring to the 9/11 attacks seven years ago. But bin Laden hadn’t reliably been seen or heard from for years, and some doubt he is even still alive.

Obama also said, in accepting the Democratic Party nomination for president in Denver on August 28, that he would “truly stand up for Georgia” and “curb Russian aggression.” Later Obama called Russia’s actions “evil.” Biden referred in his acceptance speech to “Russia’s challenge to the free and democratic country of Georgia.” Obviously, these aggressive positions, based on falsehoods, could trigger a U.S.-Russian confrontation if pushed to their logical extremes.

McCain has been serving in Washington, D.C., in the House or the Senate, since 1983. He is a former Vietnam prisoner of war and the son and grandson of Navy admirals. He graduated from the U.S. Naval Academy in 1958 with a dismal ranking of 894 out of 899.

McCain is the favored candidate of the military-industrial complex and, with Alaska governor Sarah Palin as nominee for vice-president, the religious right-wing. He is also the one who would likely ensure continued record-setting oil company profits.

While Obama called for an oil windfall profits tax that could yield $15 billion a year in new federal revenue, McCain’s proposals “would deliver a $3.8 billion tax cut to the five largest American oil companies,” according to the Center for American Progress Action Fund. $1.2 billion of the cut would go to Exxon-Mobil, largely associated with the Rockefeller family.

McCain had tried to appeal to the Christian fundamentalist constituency by picking Sarah Palin as his vice-presidential running mate, though no candidate for that office ever had less experience at the national level. She said that the Iraq War was “God’s task,” while British Petroleum reportedly was a sponsor for her inauguration.

Many thoughtful people, including conservative commentator George Will, have been dissconcerted at the prospect of a McCain/Palin presidency. Will, with his typical patrician understatement, said McCain’s reaction to the economic crisis was “un-presidential” and “made some of us fearful.”

McCain also has a reputation for a bad temper and making snap judgments. The selection of Sarah Palin seemed like an example of the latter. McCain is the oldest presidential candidate in history and not of the best health. People have been looking at Sarah Palin in light of the terrifying prospects that such a seemingly clueless person could occupy the White House if McCain died in office.

If Obama had been in danger of losing the progressive wing of the Democratic Party by his unwillingness to separate himself sufficiently from the Bush administration’s militant foreign policy, events were still in his favor. By early October, with the highly unpopular bailout having been approved and the stock market continuing to sink, Obama remained calm in the televised debates and in campaign speeches.

For an outdoor speech in St. Louis, Obama drew 100,000 spectators. He has begun to look like a president-in-waiting, while McCain seems increasingly the man time has passed by.

But the next president could be faced with momentous decisions if he cares to make them. Events since the late 1970s showed how much the philosophy in U.S. ruling circles had moved away from President Richard Nixon’s concept of a multilateral world based on a balance of power to one of world conquest by an international order headed by the global financiers and enforced by a militant U.S. government.

Therefore it is difficult for many observers to be hopeful about seeing the U.S. take its place among a peaceful family of nations. Both candidates promised “change.” But would they change anything that really made a difference? Or would they just follow orders?

As the campaign entered its final month, it was Obama’s to lose. Still, many people believed that the real reason George W. Bush had won the 2000 and 2004 elections was due to campaign fraud in Florida and Ohio respectively and feared that something similar could happen in 2008.

Would the Republicans steal what was arguably one of the most important presidential elections in U.S. history? The New York Times reported on October 9:

“Tens of thousands of eligible voters in at least six swing states have been removed from the rolls or have been blocked from registering in ways that appear to violate federal law.”

The Obama campaign was even calling for appointment of a federal special prosecutor to investigate allegations of illegalities. As Obama continued to rise in the polls and McCain fell further behind, some said that if McCain did win the election, it could be done only through dishonest means.

If the Republicans do steal the election and elect McCain/Palin, a coalition of progressive activists led by David Swanson has pledged to take action. Swanson wrote:

If your television declares John McCain the president elect on the evening of November 4th, your television will be lying. You should immediately pick up your pre-packed bags and head straight to the White House in Washington, D.C., which we will surround and shut down until this attempt at a third illegitimate presidency is reversed.⁶

Then there were those who suspected that the 9/11 terrorist attacks had been carried out by elements within the Bush administration—or that they looked the other way and “allowed” the attacks to happen—and were afraid the Republicans would do something similar to arouse the fears of voters while McCain was staggering to apparent defeat.

Rumors that such an event was planned have been swirling for over a year. Such speculation, along with the fears about election fraud, shows just how much eight years of Bush and Vice-President Richard Cheney has alienated the public and how little the president and his party are trusted.

EUROPE WEIGHS IN

But no matter whether Obama or McCain is elected, the U.S. is part of a larger world where its credibility is in the gutter and where economic weakness has begun to remove its power of choice.

It has already been noted that it was foreign creditors, especially China, that appeared to be threatening to pull the plug on the U.S. government’s incessant borrowing which may have been the trigger that forced Henry Paulson to admit a crisis had hit by going to Congress for the financial rescue package.

Then with the election only two weeks away, it became clear that Europe had something different in mind than letting the U.S. return to its old ways of what might be called “Wild West” economics. After all, for several decades, U.S. politicians and businessmen had run all over the globe grabbing whatever they desired in order to support the world’s most wasteful and resource-intensive lifestyle.

At the same time as the U.S. was trying to shore up its failing—and flailing—financial industry, the nations of the EU have been taking actions to protect themselves. Except that the EU was focusing more on assuring solvency by increasing government control rather than the mindless “free-market” cash bailouts that Paulson and Bernanke were engineering. When in mid-October the Europeans weighed in, the U.S. stock market staged a single-day rally, with a gain of over 900 points in the Dow-Jones Industrial Average.

Over the past few years the sense has been building that the Europeans were becoming alarmed at the threat which U.S. misrule was posing to the world on a number of fronts, including 1) the breakdown of the world’s largest economy triggered by gross irresponsibility on the part of both the U.S. public and private sectors; 2) the overly-aggressive and failing U.S. military posture in the Middle East; and 3) U.S. refusal to address overriding international issues like resource conservation and global warming.

On October 18, the Canadian Globe and Mail reported on a recent meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The report said, “Nothing would be truly fixed, they believed, until there was a new world financial system in place, a new economic watchdog supervising the world’s economies.”

British Prime Minister Gordon Brown had written as much in a memo to the French and German leaders. The Globe and Mail report continued:

Europe had reached a consensus, at least superficially, on a solution that had not been attempted in sixty-four years: a major global meeting that would attempt to redesign the world-finance system. It was an acknowledgment, at a high level, that with the current crisis, the entire postwar economic system may have come to an end…. By Tuesday morning, the Americans were on board, at least as far as attending the proposed meeting — expected to be held in New York shortly after the November 4 presidential election. [Canadian] Prime Minister Stephen Harper, fresh from his re-election, said Friday he also supports holding the meeting. All the G8 industrialized nations have agreed to attend, at least on paper, and it is expected that China, Brazil and India will take part. While there’s no consensus on what the new financial order should be and there are signs of deeply divergent views, these countries appear at least willing to talk about a new international order at a meeting the three European leaders are calling Bretton Woods II, after the 1944 meeting that started it all.

The day before the Globe and Mail report, an article by Brown appeared in the Washington Post, where he wrote:

This is a defining moment for the world economy. We are living through the first financial crisis of this new global age. And the decisions we make will affect us over not just the next few weeks but for years to come. The global problems we face require global solutions.

Brown added that, “The next stage is to rebuild our fractured international financial system” and mentioned that the purpose was to “root out the irresponsible and often undisclosed lending at the heart of our problems.”

Perhaps what Brown has in mind was to act on behalf of Europe in rescuing the Western financial system from the excesses of those in the U.S. who have wrecked it. Brown concluded diplomatically:

“There are no Britain-only or Europe-only or America-only solutions to today’s problems. We are all in this together, and we can only resolve this crisis together. Over the past week, we have shown that with political will it is possible to agree on a global multibillion-dollar package to recapitalize our banks across many continents. In the next few weeks, we need to show the same resolve and spirit of cooperation to create the rules for our new global economy. If we do this, 2008 will be remembered not just as a year of financial crisis but as the year we started to build the world anew.”

The Globe and Mail article provided additional detail on the topics the summit would cover:

The document that Mr. Brown first made public on Wednesday morning …proposes a set of organizations — a ‘new international financial architecture for the global age’— that will monitor risks in the financial system and provide an early-warning system; determine global standards of regulation; supervise international corporations in their cross-border activities, protect markets from excessive activities of speculators; stamp out major conflicts of interest and set standards for pay and bonuses; internationalize accounting standards, and provide transparency in complex financial transactions.

Over the weekend, Sarkozy and European Commission President José Manuel Barroso met with President Bush at the presidential Camp David retreat in Maryland where they announced “a series of summits on addressing the challenges facing the global economy,” starting with one in the United States “soon after the U.S. elections.”

But Sarkozy sounded much more aggressive than Bush or other U.S. officials had been in curbing reckless “free-market” abuses. He told the press:

The president of the United States is right in saying that protectionism and closing one’s borders is a catastrophe. He is right to say that it would be wrong, catastrophic, to challenge the foundations of market economics. But we cannot continue along the same lines because the same problems will trigger the same disasters.

Sarkozy mentioned several areas where he might want to negotiate new regulations exceeding what the U.S. and Britain were looking for, including more stringent regulation of international banks, hedge funds, and credit-rating companies. According to press reports, he also said that world leaders should reconsider the rules governing offshore tax havens such as the Cayman Islands.

Sarkozy has also been reported as saying, “We want a new world to come out of this. We want to set up the basis for a capitalism of entrepreneurs, not speculators.” Another topic Sarkozy and other European leaders have mentioned is restoring the system of fixed currency exchange rates that the U.S. abandoned in 1972, an action which introduced an era of worldwide currency anarchy. He said that fixed, but flexible, exchange rates “should definitely be on the table.”⁷

Regarding any potential conflict with the U.S. over the upcoming summits, Sarkozy said after a meeting in Europe: “Europe wants it. Europe demands it. Europe will get it.”⁸

Finally, on October 23, the White House announced that President Bush would host the first summit on November 15 in Washington, D.C. The Washington Post reported that:

Sarkozy, British Prime Minister Gordon Brown, and others have signaled a desired to go much further in regulating markets than Bush seems inclined to do. Brown said yesterday that he wants greater cross-border oversight of banks and other financial firms, while Sarkozy called for much stricter government supervision of financial markets.

By now attendance had been expanded to include the entire G-20 which represents two-thirds of the world’s population. The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union.

Finally, at a meeting hosted by the Chinese on October 25 in Shanghai, Chinese Prime Minister Wen Jiabao confirmed the need for far-reaching measures. With Japanese Prime Minister Taro Aso, German Chancellor Merkel and French President Sarkozy in attendance, the attendees issued a statement which said they recognized “the need to improve the supervision and regulation of all financial actors, in particular their accountability” and agreed “to undertake effective and comprehensive reform of the international monetary and financial systems.”

Prior to this meeting, said Reuters:

The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

The era of American unilateralism is clearly on the verge of ending, but are we seeing the same configuration of nations that run the Trilateral Commission and the Bilderberg Group taking advantage of the crisis to further the New World Order agenda of total domination of the world by Western international finance?

And is this why smaller nations such as Iceland are seeing their currencies under attack from unknown sources? Other nations with shaky currencies are Poland, Hungary, Ukraine, Serbia, the Baltic states, Kazakhstan, Indonesia, South Korea, Argentina, Russia, Pakistan, and Brazil. Is someone trying to stampede these nations into seeking shelter under an umbrella belonging exclusively to the big Western banks?

And will such measures simply bind every nation on earth more stringently to the worldwide debt-based monetary system that has failed so spectacularly? Are we in fact seeing the stage now being set for the complete and final triumph of the global reign of usury?

And if the U.S. financial system is completely controlled by whatever supranational infrastructure is devised, will it then be subjected to the same type of neoliberal regime of austerity and privatization the IMF imposes on the nations it dominates? Will the “Washington Consensus” turn and devour its originator?

In a 1998 paper, World Bank analysts stated, “Crises are a window of opportunity.” (Dr. Richard Werner, Gang8 Yahoo Group) So was the financial crisis engineered at this stage of the U.S. political process to create what could be a global financial coup d’etat before the next president takes office?
Or is there a more benign interpretation of events? Is the older, wiser, and more mature civilization of Europe riding to rescue a world the U.S. has brought to the brink of destruction?

Whether it’s Obama or McCain who is elected president on November 4, that person will sit in attendance at the planned summits with the rest of the world presenting its case for change. Of course change there has to be. The U.S. owes the world a mountain of debt, as well as redress for its lawlessness.

Also, the possibility of a federal government debt default in 2009 is looming for a nation that has never been in such a precarious financial position. The days of the Wild West are indeed over. But what will come next?

WHAT SHOULD THE NEXT PRESIDENT DO TO FACE THE CRISIS?

Senior White House correspondent Helen Thomas said of Bush, “He is the worst president in all of American history.” The public shares Thomas’s view. By mid-October 2008, ninety percent of those polled said the nation was headed in the wrong direction.

Former President Jimmy Carter said something similar in the area of foreign policy: “I think, as far as the adverse impact on the nation around the world, this administration has been the worst in history.”

One thing is certain: the legacy left by President George W. Bush is indeed a kind of Armageddon. The challenges that will face the next U.S. president are almost beyond comprehension. They include war vs. peace and the ability of the world economy to function.

But with so many changes in the world, shouldn’t we have not just an economic “summit,” but a general framework for peace that would end hostilities in Afghanistan, Iraq, and the Eastern Mediterranean?

With respect to Russia, China, India and even the EU, the new president will doubtless be expected to embrace the politics of multilateralism in order to maintain a balance of power among the nations of the world. But shouldn’t a strong voice also be given to the nations of the Islamic region, as well as Africa, Latin America, and Australia/New Zealand?

By now it is abundantly clear that global finance capitalism cannot replace the nation-state. It should be just as clear that only a world of functional and prosperous nations can create an effective international federation as contemplated by the U.N. charter.

The Europeans seem to have an inkling of this, but will the world arrive at stability if Western bank-run finance is seen as the only viable economic system? How about a broader approach to prosperity that would help the people of every nation on earth, not just those who live off lending and interest? Is our planet condemned to the misrule of various forms of “trickle-down” economics forever?

The organization that should be the most concerned is the U.N., but where is the U.N. today? Obviously it is nearly dead as a positive and active force in the world. In a farewell address preceding his 2006 retirement as secretary-general, Kofi Annan discussed three major problems of “an unjust world economy, world disorder, and widespread contempt for human rights and the rule of law,” which “have not been resolved, but have sharpened” during his service.

This disintegration has taken place during the George W. Bush presidency. In a December 11 speech, Annan asked for the U.S. to return to President Harry Truman’s multilateralist foreign policy and to follow Truman’s belief that “the responsibility of the great states is to serve and not dominate the peoples of the world.”

Anther matter the new president should deal with is to get control of the U.S. military-intelligence network. He must reverse the Neocon takeover of the State Department engineered by Secretary of State Condoleezza Rice and halt the militarization of U.S. embassies resulting from escalation of the number of military staff assigned from the Department of Defense.

Another major question is whether the danger of U.S. government bankruptcy will result in reduced military expenditures. But will the war-mongers surrender the enormous portion of the U.S. government budget they are accustomed to consuming?

While the furor over the financial meltdown was raging in October, Congress quietly passed a staggering $611 billion defense authorization on top of $189.3 billion in “supplemental” funding for the Iraqi and Afghan wars. The Pentagon says its budget will increase by $450 billion over the next five years.

Both Obama and McCain voted to approve the defense authorization bill. Among the projects they funded was a truck-mounted microwave crowd-control weapon being developed by Raytheon for 2010 deployment.

To be used to control civilian demonstrators, each weapon will cost $5 million. Wouldn’t it be reasonable to ask the next president to explain why he thinks this weapon is needed?

Under another program the Defense Department will pay contractors a staggering $300 million “to produce news stories, entertainment programs, and public service advertisements for the Iraqi media in an effort to ‘engage and inspire’ the local population to support U.S. objectives and the Iraqi government,” according to a letter from Senator Jim Webb (D-VA) to defense secretary Robert Gates. This is enough money to pay 6,000 employees $50,000 per year. Maybe Obama and McCain should explain why they voted to approve this outrageous expenditure.

Neither is NATO expecting a benign outcome to the world crisis. Author Michael Collon reported in an article on “What Will the U.S. Foreign Policy be Tomorrow?”:

In January 2008, five former NATO generals presented a preparatory document for the NATO summit meeting at Bucharest. Their proposals reflect a terrifying possibility. And what gives weight to their document is that, up until recently, all of them held very high positions. General John Shalikashvili was U.S. Chief of Staff and Commander in Chief of NATO in Europe, General Klaus Naumann ran the German army and was president of the military committee of NATO in Europe, General Henk van den Breemen was Dutch Chief of Staff and Admiral Jacques Lanxade held the same post in France, while Lord Inge ran the General Staff and was also Chief of the Defence Staff of Great Britain.⁹

Collon described the document in a section entitled, “Five NATO Generals Prepare a World Government.” The document stated, “What the Western allies expect is the pro-active defense of their societies and their way of life maintained over the long term.” It continued, “The objectives of our strategy are to preserve the peace, our values, economic liberalism, and stability.”

“Economic liberalism” means market-oriented global finance capitalism under the control of the Western banking system.

The document also identified enemies, the chief one being China:

China is in a situation to wreak great harm on the US and the world economies, based on its enormous reserves in dollars….China is in a position to use finance to impose itself on Africa and acquire the capacity to utilize it on a much greater scale—if it so decides.

This statement by the general is mind-boggling. Hasn’t it been U.S. government policies that resulted in these dollars being paid to China? And isn’t the West talking out of both sides of its mouth in planning a world economic summit that includes China, while contemplating war against that nation?

Indeed, the rise and fall of the U.S. bubble economy cannot be understood unless the role of China is taken into account. This role is increasingly problematic in light of statements such as one made recently by Shi Jianxun, a professor at Shanghai’s Tongji University:

“The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar’s hegemony to plunder the world’s wealth.”¹⁰

Whatever agreements U.S. bankers and politicians may once have made with China for them to take over our manufacturing while we lived off financial profits have grievously backfired. Solving this conflict with China peacefully may be the next president’s greatest challenge. But decisions to the contrary may already have been made, with the president’s job being merely to carry them out.

FACING THE ECONOMIC CRISIS

Assuming that peace may yet prevail, we may hope that in facing the economic crisis, the next president will go beyond working with other nations in attempting to fix the financial system. No financial fixes will change the fact that a severe economic repression has arrived and that the producing economy of the U.S. and other nations have begun to spiral downward.

The possibility exists of enormous human suffering. In fact the suffering has already started, with bankers filing court actions that have led to uniformed policemen or even SWAT teams evicting large numbers of innocent people, often elderly, from their homes around the country. With the stock market crash, tens off millions of people are losing their hard-earned savings and retirement nest eggs.

The downward path to further human suffering is being prepared by mass media propagandists like the Washington Post’s Robert Samuelson, who argues that the hard times mean we must slash programs for the elderly and poor like Social Security, Medicare, and Medicaid. In an October 22 article Samuelson wrote:

I wish everyone a pleasurable retirement. But we need to overhaul our government retirement programs for the common good and not just the good of the elderly. We have already waited so long that there’s no way to do this without being unfair to someone — overburdening the young or withdrawing promised benefits from older Americans. The present financial crisis, by reducing retirement savings, has made a hard job even harder. Still, these federal programs began as safety nets for the needy; now they’ve become subsidies for living long, regardless of need.

“Subsidies for living long”? With columnists for prestigious newspapers advocating policies that border on genocide, it’s time to talk about real solutions.

The first thing to realize is that the money raised through taxes and borrowing from the future, which the politicians have thrown at their wars and financial bailouts, exists as real economic purchasing power. This means that it can be used for other purposes—for purposes that directly benefit the people of the nation who work for a living, send their children to school, and want to save for their old age.

The key to having money available for beneficial social purposes, rather than war and profits from lending, is that it should be issued directly by the government, not lent through the banking system which uses public debt as collateral.

The Democrats mention investment in U.S. infrastructure, though they do not provide details about how to pay for it except through more government deficit spending funneled through the Federal Reserve System. But what if we left the banks out of it for a change?

What would really help repair the damage to the collapsing U.S. domestic economy would be an uncompromising program of interest-free lending and grants for infrastructure development and an effort at restoring the nation’s manufacturing base, along with decent, well-paying jobs. Such a program would constitute a “New Deal for the 21st Century,” as spoken of by 2008 presidential candidate Dennis Kucinich (D-OH). Kucinich has introduced legislation for zero-interest infrastructure lending in the last two sessions of Congress.

The economic recovery program proposed by Barack Obama may be a step in the right direction, but the $25 billion infrastructure provision is pathetically small. Obama should be listening to Congressman Kucinich as much as to his own advisers and Wall Street campaign contributors.

Recently Kucinich released a sixteen-point plan that included infrastructure development, as well as implementation of the American Monetary Institute’s American Monetary Act, the most progressive piece of monetary reform legislation in U.S. history. It’s in the area of monetary reform that Obama could have the greatest impact, though there’s no indication it has crossed his mind.

One feature of the American Monetary Act is nationalization of the Federal Reserve, as was done with the Bank of England in 1946. The act would also provide for direct government expenditures for public purposes as took place in the 19th century with the Civil War Greenbacks. The Greenbacks helped fuel the U.S. economy until the early 20th century. Contrary to bankers’ propaganda, they were non-inflationary. By comparison, under the Federal Reserve System, the dollar has lost ninety-five percent of its value, most of this loss taking place since 1965.

An area of economic recovery that has been ignored is the disappearance in the U.S. of family farming. During the Great Depression, a majority of Americans still lived on farms, so at least could grow food in times of trouble.

Today, the dominance of agribusiness, inflated land prices, the high cost of credit, “free trade,” and NAFTA have taken away that ability. A nation that cannot feed itself locally is playing with fire. Who can say that famine could not arise even in developed nations during a general economic collapse?

DIVIDEND ECONOMICS

The one economic measure that has made a positive difference in 2008 was the federal government’s issuance to taxpayers of a tax rebate averaging $600 per recipient. The stimulus measure demonstrates how easy it is to spend money directly into the economy if the politicians want to do so.

Along these lines, the new president could institute ongoing cash stipends to citizens similar to the Alaska Permanent Fund. This year the Alaska state government made a payment to each resident of $3,269 from resource revenues. The American Monetary Act also contains a dividend provision, as does the platform for the Green Party.

But $3,269 is not enough. An annual citizens’ dividend of $1,000 per month has been proposed by Washington, D.C., analyst Stephen Shafarman, in his new book, Peaceful, Positive Revolution (Tendril Press, 2008).

A similar program leading to an annual basic income guarantee has been enacted by Brazil and was used in modified form by Argentina to recover from its economic collapse of 1999-2002. Shafarman is part of the U.S. Basic Income Guarantee Network, which has ties to its European counterpart, the Basic Income European Network (BIEN). For the author’s own description of a dividend-based economic model, see “An Emergency Program of Monetary Reform for the United States,” Global Research.

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A citizens’ dividend could work wonders in rebuilding the economy from the bottom up, including small business and local agriculture. To assure that dividends are spent for necessities, they could be issued as tax-free food, fuel, and housing vouchers from a government recovery account not dependent on taxation or borrowing. Rather the backing for the vouchers would be the productive potential of the economy.

This way, new economic production could be generated without bank loans. The vouchers, when spent, could be funneled into a network of community savings banks that would re-lend the money locally. (Richard C. Cook, “How to Save the U.S. Economy: The Cook Plan,” Global Research.)

By taking such steps to restore economic vitality, the U.S. might eventually overcome the delusion spawned by the New World Order and clung to by all the leaders of the Western nations that financial wealth has meaning apart from a nation’s producing economy. In continuing to maintain the fictitious belief in finance-based wealth without a robust producing economy to support it, the nations of the West have wandered down a cul-de-sac.

In 1896, William Jennings Bryan spoke at the Democratic National Convention, saying to the bankers and their tyrannical gold standard, “You shall not crucify mankind on a cross of gold.” Today mankind is being crucified on a banker’s promissory note.

Real wealth is created by human labor and ingenuity applied to the resources of the earth using energy that derives from nature. It is not created by bank loans. Credit has a role, but it should be treated as a public utility, like water, electricity, and clean air.¹¹

Today a new economic science is needed. Such a science would build on such historical movements as Distributism and Social Credit, both developed by British thinkers in the early 20th century and current as viable economic schools of thought in Canada, New Zealand, Great Britain, Australia, and elsewhere.

Distributism posits an alternative to both capitalism and socialism by arguing that the best economic system is one that provides ownership and autonomy to the maximum number of people. When the Social Credit concept of regular dividend payments as a means of monetizing future production potential is introduced as well, an entirely new monetary basis for economic democracy emerges.

A revolution in economics is needed. The future of the world is now at stake, particularly because it is obvious that the U.S.’s status as the world’s superpower is coming to an end. People know something is drastically wrong with a nation that relies more than any other on “market economics,” yet has the world’s largest prison population, a declining standard of living, decreasing life expectancy, an epidemic of drug and alcohol addiction, overwhelming debt, and so much domestic violence.

This is what turning over the nation to the financial elite has done. Will the next stage be an economic depression where millions more become homeless and people actually starve? If so, it all started when, in 1913, the financiers took over through the Federal Reserve System and created a monetary system based on usury, debt-based currency, and bank leveraging of speculation, combined with crony capitalism and criminal disregard of all legal and commonsense standards.

The politicians profited from this system which has now failed. The financiers and their enablers in the White House and Congress have driven a once-great nation off a cliff. Will the European solution of collective action to shore up the world’s debt-based monetary system make a difference? Or will it just lead to a new era of international financial looting, forced population reduction, and a more sophisticated police state than anything we have seen yet?

ECONOMICS OF THE SPIRIT

Maybe a New World Order really is needed. If so, shouldn’t it be one with a genuine spiritual basis leading to economic justice, not just a modification of the system we have today? Such a system based on economic justice was affirmed in a message to the author by an Australian author, Omna Last, who wrote:

But what if there was a truly representative world government…I do not mean a coercive world government imposing itself on the peoples of the world, but one that operated exactly as you suggest an American government should operate in helping to fulfill the potential in the lives of Americans? A government that provided free no-interest economic dividends to every nation of the world community? If the money was embezzled, used for corrupt purposes, or helped to destroy the world’s eco-system further, then that country would receive no free dividends for a period in the future.

In an article posted on his website on October 26, Omna Last wrote:

Earth is a temple. The money-changers have taken over the temple…. It is time to remove the money-changers from their positions as priests of the new religion of money…. Governments all over the world should be run by people in tune with their divine selves – their conscience, in tune with God, not in love with money and its power, but in love with the moral laws of the Universe.

Those with eyes to see knew the present crisis was coming long ago. That vision now has spread to more people. What is increasingly clear is that positive change, as opposed to the change that is just a drift to disaster, will only happen when people who love freedom demand it, work for it, and sacrifice for it. Will the next president of the United States facilitate such change or stand in its way?

1. George Friedman, “The Russian Resurgence,” www.Stratfor.com, September 18, 2008.
2. Brian Rohan, “Saakashvili “Planned S. Ossetia Invasion”: Ex-Minister,” Reuters, September 14, 2008.
3. Ian S. Lustick, “Abandoning the Iron Wall: ‘Israel and the Middle Eastern Muck’,” Middle East Policy, Vo. XV, No. 3, Fall 2008.
4. Richard C. Cook, “Mortgage Fraud: The Paulson Bailout Plan,” Global Research, September 23, 2008.
5. Berit Kjos, “The U.N. Plan for Global Migration,” News with Views, 2006.
6. David Swanson, “A McCain Win Will be Theft: Resistance Planned,” Global Research, October 20, 2008.
7. Bloomberg.com, October 6, 2008.
8. Christian Science Monitor, October 20, 2008.
9. Information Clearing House, October 12, 2008.
10. “U.S. Has Plundered World Wealth With Dollar,” Reuters, October 24, 2008.
11. Richard C. Cook, “Credit as a Public Utility: The Key to Monetary Reform,” Global Research.

None of this should really be surprising. During his time at Goldman Sachs, Paulson made millions of dollars for his firm in China, with commensurate rewards for himself.

In 2006, Goldman Sachs bought into China’s largest bank, the Industrial and Commercial Bank of China, for $2.58, one of a number of such deals cut with Chinese state entities, as neoconservative hawks were quick to note. According to knowledgeable people, its profit of $3.9 billion was the biggest ever for the firm since its founding in 1869.

Goldman also bought a stake in Tokyo’s Sumitomo Mitsui Financial Group, the third largest financial group in Japan in 2003 ($1.26 billion), in return for which, Sumitomo Mitsui loaned billions to Goldman Sachs for its investment-grade clients. Both that and the ICBC deal were financed with Goldman’s own money and with investments by its partners, institutions and wealthy clients.

What’s more, Goldman earned more fees than any other of its global competitors in China, being the only foreign securities firm allowed to both trade stocks for brokerage clients and arrange share sales for companies. (Wonder why Paulson acts so high-handedly? Goldman is notorious for such conflicts.)

Knowing that Goldman is the source of a bunch of the credit default swaps now clogging up global finances, we can safely surmise that its Asian clients are now suffering the same toxic shock afflicting its American and European clients.

A Wall Street legend for paranoia and secrecy, The Firm didn’t let on for a while how badly it too had been hit. That front fell apart this fall when its stock price swooned, along with those of other financial firms. Recently, the New York Times reported exactly how much Goldman stood to lose from contracts with insurance giant, AIG. If AIG had gone under, Goldman would have lost $20 billion.

The Times also reported, apparently as revelation, that Lloyd Blankfein, current CEO of Goldman, attended weekend meetings with AIG, Paulson, and others before the AIG rescue was put through. (Amazing. Powerful corrupt financiers cut backroom deals with each other and twist arms in powerful corrupt DC. Who would have thought? Of course, in the alternative press we were aware of Goldman’s less than Boy Scout past much before the Times lost its innocence, but better late than never.)

Now we can guess why it was necessary to convert Goldman so quickly into a commercial bank. With access to customer deposits, the bank would be able to replenish its capital in short order.
Does Paulson profit personally? Reportedly, he sold his own shares in Goldman before being sworn in as Treasury Secretary in June 2006. Still, the meetings between Blankfein, AIG, Treasury, and the Federal Reserve sound like the worst kind of cronyism, given AIG’s subsequent rescue. And they’re not the only problem.

1) The amendment of reserve requirements (in Section 128, in both the original and amended versions of the Paulson plan) is another:

Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking ‘October 1, 2011’ and inserting ‘October 1, 2008.’

As Pam Martens points out, this amendment would allow banks to hold zero reserves for transactions, a very enticing prospect for an investment bank in such dire need of capital it had to reinvent itself as a deposit-taking retail bank. And this would go through before the election, before the political scene was altered drastically.

2) The bailout of the financial sector, especially Goldman Sachs, is now a matter of keen interest to a large number of wealthy and influential foreigners — both individuals and private and state-run banks. Paulson’s long-standing ties with these foreign entities, as well as with leading financial entities all over the world, in and of itself constitutes a powerful conflict-of-interest and opens up the question of foreign influence on one of the most powerful offices in our government. (For instance, since June 2006, more than 100 ICBC executives have attended courses at Goldman’s New York training center, where tutors include Gerald Corrigan, former president of the Federal Reserve Bank of New York, who teaches a course on risk management (of all things). ICBC’s board includes Christopher Cole, Goldman’s chairman of investment banking. One of its directors is former Goldman President John Thornton.)

When the American state has interests it declares at odds with those of the Chinese state in a number of areas, for example in Africa (where Goldman has a 20% stake in Africa’s largest bank, Standard Bank); when servicemen and women are fighting and dying, ostensibly to protect those interests; when we are threatening other countries with bombing in defense of those interests; shouldn’t the appearance of foreign entities influencing the Treasury Secretary and Federal Reserve policy be treated seriously and transparently?

3) If Goldman went down, ICBC would be severely hit. And so would ICBC’s clients and other investors in ICBC. But it looks like Mr. Paulson would take a big loss too. According to press reports, Mr. Paulson netted a stake reported to be $25 million in the ICBC deal, a stake he and Goldman, as well as investors in Goldman’s private equity funds, are prohibited from selling for three years. A hit to Goldman would hit ICBC (and who knows what else). And a hit to ICBC would hit Paulson’s pocket.

Did Mr. Paulson sell this ICBC stake before he took office or didn’t he? It would be in the national interest to require him to make a public disclosure before this bill is passed.

And then he should resign.

A Los Angeles Times editorial observed last month that China had persuaded world leaders to attend the Olympic Games “despite their misgivings about Beijing’s horrific human rights record both domestically and abroad”. The horror, the editors noted, could not be entirely suppressed:

“What planners in Beijing miscalculated is that no matter how well you teach performers to smile, the strain behind the lips is still detectable.”

Needless to say, no mainstream British or American journalist referred to the host nation’s “horrific human rights record” at the time of the US Games in Atlanta in 1996, or of the Los Angeles Games in 1984. And of course no media outlet has discussed “misgivings” about the awarding of the 2012 Games to Britain. But why on earth would they? Historian Mark Curtis explains:

Since 1945, rather than occasionally deviating from the promotion of peace, democracy, human rights and economic development in the Third World, British (and US) foreign policy has been systematically opposed to them, whether the Conservatives or Labour (or Republicans or Democrats) have been in power. This has had grave consequences for those on the receiving end of Western policies abroad.¹

A Guardian leader in July described how “western leaders rightly remain uneasy about giving their imprimatur to a [Chinese] regime which jails dissidents, persecutes religious groups, backs Burma and bankrolls Darfur.”²

On the other hand, the Guardian leader writers might have felt uneasy about giving their imprimatur to “western leaders” who are the destroyers of Baghdad, Fallujah and Mosul, and who have promoted chaos and terror in Afghanistan, Haiti, Serbia and Somalia, among many other places.

An Independent leader naturally shared the Guardian’s view:

“The outside world will have a crucial role to play in the coming years. Engagement will produce much better results than isolation. But at the same time, the developed world must guard against soft-pedalling sensitive issues such as the treatment of Tibet, or Beijing’s sponsorship of vile regimes in Africa.”³

It is taken for granted that “the developed world” is the great hope for human rights. Again, comparable Independent editorials did not appear ahead of the Atlanta and Los Angeles Games condemning Washington’s “sponsorship of vile regimes”.

Everything in the media starts from the assumption that ’We mean well,’ and from the unspoken, indeed unthought, assumption that this claim need never be questioned. This isn’t just a matter of choice — career success depends on it. Senior journalists like the BBC’s Huw Edwards have to be willing to make the Soviet-style claim that British troops are in Afghanistan “to try to help in the country’s rebuilding programme.”⁴

Respecting Sovereignty

One tragicomic consequence of this self-imposed simple-mindedness is the inability of the mainstream media to make sense of last month’s war in Georgia. Journalists kept a straight face as they communicated George Bush’s demand that “Russia’s government must respect Georgia’s territorial integrity and sovereignty.” Few felt inclined to mention the small matter of Bush’s own invasion of sovereign Iraq, or the US-driven separation of Kosovo from sovereign Serbia.

Gordon Brown, proud ’liberator’ of Iraq, or what remains of it, somehow avoided choking on his own hypocrisy as he insisted: “when Russia has a grievance over an issue such as South Ossetia, it should act multilaterally by consent rather than unilaterally by force.”

Occasional mentions have been made of the fact that the largest pipeline between the Black Sea and the Caspian oil fields and Europe is the 1.2 million barrels a day BP Baku-Tbilisi-Ceyhan (BTC) line that passes through Georgia and parts of Abkhazia, and which happens to be the only pipeline not under Russian control. The Christian Science Monitor recently described the politics of the pipeline:

The $4 billion BTC pipeline, managed by and 30 percent owned by British Petroleum, was routed through Georgia to avoid sending Caspian oil through Iran, Afghanistan and Pakistan, or Russia. A 10-mile pipeline could have connected Caspian oil to the well-developed Iranian pipeline system.

In 2000, Bill Clinton described the pipeline as “the most important achievement at the end of the twentieth century.”

Securing this “achievement” has involved intense US efforts to manipulate Georgian political and military elites. The US and France are the main suppliers of Georgia’s military, but the prime US ally, Israel, has also supplied some $200 million worth of equipment since 2000. This has included remotely piloted drones, rockets, night-vision equipment, electronic systems, and training by former senior Israeli officers.

To be sure, media hints that oil might help explain American and Israeli involvement have far exceeded mentions of the even more embarrassing reasons behind the British and American attack on Iraq in 2003, when the subject of oil was completely off the news agenda. Patrick Collinson wrote in the Guardian of the Georgian crisis:

“It’s a superpower confrontation in a region criss-crossed with oil pipelines vital to the west.”⁵

An article in the Observer last month was titled: “Europe’s energy source lies in the shadow of Russia’s anger: Behind the tanks in Ossetia are key oil and gas pipelines.”⁶

In the Times, Richard Beeston wrote a piece headed: “Oil supplies and Kremlin’s relations with the West at stake.” (Beeston, The Times, August 9, 2008)

The media have presented the West as innocently seeking to protect its energy supplies from an erratic Russian predator — we just want to keep our economies running. Perhaps the insatiably greedy Western interests that have wrecked havoc across the world in the post-1945 period are busy elsewhere.

In the Guardian, Jeremy Leggett wrote:

The Kremlin has a strategy to control a vast slab of the world economy via oil and gas. Dmitry Medvedev, lest we forget, used to run Gazprom. The Georgia crisis, if not a planned piece in the strategy, certainly fits.⁷

Recall, by contrast, the almost complete media taboo on identifying oil as a factor in the US-UK invasion of Iraq. We can imagine a companion piece by Leggett from, say, 2002:

“The White House has a strategy to control a vast slab of the world economy via oil and gas. George W. Bush, lest we forget, was the founder of Arbusto Oil, and chairman and CEO of energy company Spectrum 7. The Iraq crisis, if not a planned piece in the strategy, certainly fits.”

In the real world, Johann Hari wrote of Iraq in the Independent in 2003:

“Blair went into this with the best of intentions. It is just silly to claim that Blair cooked up all these arguments to justify a grab for oil, or a straight-forward imperialist project.”⁸

A year earlier, David Aaronovitch manufactured the required sneer:

Over in the New Statesman, John Pilger cranks out, as though Xeroxing on an old machine, piece after repetitive piece telling us that it’s all about oil and money and greed and imperialism.⁹

“The UK, meanwhile,” Leggett added sagely in his actual article, “has no energy strategy”. Certainly not in Iraq, where, in late June, Iraqi oil minister Mohamad Sharastani announced that contracts had been drawn up between the Maliki government and five major Western oil companies to develop some of the largest fields in Iraq. Edward Herman takes up the wretched tale:

No competitive bidding was allowed, and the terms announced were very poor by existing international contract standards. The contracts were written with the help of ‘a group of American advisers led by a small State department team.’ This was all in conformity with the Declaration of Principles of November 26, 2007, whereby the ‘sovereign country’ of Iraq would use ‘especially American investments’ in its attempt to recover from the effects of the American aggression. The contracts have not yet been signed, and the internal protests are loud, but clearly the fig leaf of WMD and democracy has been stripped away as an ‘enduring’ occupation and a systematic looting of Iraq’s oil are arranged under a non-democratic tool of the occupation.¹⁰

The BBC’s World Affairs Correspondent, Paul Reynolds, found no difficulty this week in recognising the realpolitik in Russian policy:

In some ways, we are going back to the century before last, with a nationalistic Russia very much looking out for its own interests, but open to co-operation with the outside world on issues where it is willing to be flexible.¹¹

By contrast, Reynolds wrote in 2006:

The third anniversary of the invasion of Iraq prompts some melancholy thoughts about how it was supposed to be — and how it has turned out.

By now, according to the plan, Iraq should have emerged into a peaceful, stable representative democracy, an example to dictatorships and authoritarian regimes across the Middle East.¹²

Russia’s plan is to look out for ‘number one’; the US-UK plan was to spread peace, love and understanding to Iraq and the region. Not a trace of recognition was allowed that the Iraq invasion was fundamentally about American profit and power, and certainly not the welfare of the Iraqi people, about whom, traditionally, US policymakers have not given a damn.

Mostly the level of analysis of last month’s conflict has been pitifully thin, as in this comment from Bronwen Maddox in the Times:

“Why now? The main reason is Georgia’s desire to throw in its lot with Nato, the US’s enthusiastic support for that, and Russia’s passionate opposition.”¹³

It simply isn’t done for corporate journalism to expose the true goals of Western corporate titans and their militant state allies. The preferred realm of discourse is restricted to nonsense about “security”, “democracy” and other “humanitarian” goals.

Favouring Georgia

Britain isn’t afflicted with a state-controlled media system, although one would hardly know it from press performance. Typically, a country identified as ‘nice’ by the British government is also ‘nice’ for our ‘free press’. The same is true of governments labelled ‘nasty’. The media have therefore presented the Georgia/South Ossetia conflict as the result of irrational Russian bullying. Max Hastings emphasised in the Guardian that, “The Russians yearn for respect, in the same fashion as any inner-city street kid with a knife.”

In a rare example of independent thought in the Guardian, Peter Wilby noted the consistent bias:

“Russia’s behaviour, newspapers implied, was in a quite different category from Georgia’s. In the Sunday Times, Russian tanks went ‘rampaging’ in South Ossetia, while Georgian tanks merely ‘moved‘. If Georgian forces had bombarded civilians, it was ‘reprehensible’, the Telegraph allowed. Russia, however, was ‘offending every canon of international behaviour’.”¹⁴

Wilby added:

“Georgia’s actions in South Ossetia went largely unexamined, and it was hard to find, from press accounts, what refugees from the province were fleeing from.”

Indeed, an August 19 ITV News report explained the tragic results of the fighting for the people of Georgia. But as in so much reporting, no mention was made of the initial Georgian attack or the consequences for the people of South Ossetia. In fact, Georgian forces had bombed the South Ossetian capital, Tskhinvali, for 72 hours. An August 20 article in the Times reported how a “makeshift operating table lay under a weak lightbulb in the corridor of a dank basement that smelt strongly of excrement.” Dina Zhakarova, a doctor in South Ossetia, commented:

“This is where we had to try to save people’s lives. The whole place was a sea of blood while the Georgians were bombing our hospital.”

Dr Zhakarova described how staff had treated more than 250 people underground after the Georgian Army’s assault, adding:

“All the staff gave blood for the patients because there were so many wounded. The Georgians knew very well that this was a hospital, so how could they say that we are their fellow citizens when they were firing rockets at us? It’s nonsense.”

Such commentary has been vanishingly rare.

The bias is clear, but the deeper point is far more interesting — the entrenched propaganda function of the mainstream media renders it incapable of making sense of events in Georgia and South Ossetia. References to Russian self-interest are allowed, and to Western concerns about energy security. But on the real reasons why people were killing and dying, on how Western state violence consistently supports Western corporate greed, journalists have had next to nothing to say. In a world where rational understanding conflicts with the ’ideals’ of propaganda, “news” is often little more than noise.

1. Curtis, The Ambiguities of Power, Zed Books, 1995, p.3
2. Leader, ‘Beijing Olympics: Faster, higher – but freer?,’ The Guardian, July 12, 2008.
3. Leader, ‘China must not let its brief democratic light go out,’ The Independent, August 2, 2008.
4. Edwards, BBC 1, News at Ten, July 28, 2008.
5. Collinson, ‘Money: Sell oil, buy banks?: Crude prices are falling and commodities are plummeting,’ The Guardian, August 16, 2008.
6. Alex Brett, The Observer, August 17, 2008.
7. Leggett ‘Beware the bear trap: Britain, like most of Europe, is at risk of being the target of Russia’s energy export weaponry,’ The Guardian, August 30, 2008
8. Hari, ‘What Monica Lewinsky Was For Clinton The Hutton Inquiry Is For Tony Blair,’ The Independent, August 27, 2003.
9. Aaronovitch, ‘You couldn’t be sure what anyone would end up saying,’ The Independent, September 10, 2002.
10. Herman, ‘Further Nuggets From the Nuthouse: The Law of Conservation of the Level of Violence,’ Z Magazine, September 2008.
11. Reynolds, ‘New Russian world order: the five principles,’ September 1, 2008.
12. Reynolds, ‘Iraq three years on: A bleak tale,’ March 17, 2006.
13. Maddox, ’Simmering dispute could turn Russia against the West,’ The Times, August 6, 2008.
14. Wilby, ‘Georgia has won the PR war,’ The Guardian, August 18, 2008

Yes, you read that right. Bush. Liberal. Same sentence.

At the new U.S. embassy in Beijing on the opening day of the Olympics, he said, “All people should have the freedom to say what they think.” Without even blinking, he also told the world, while directing his comments at the Chinese, “We strongly believe societies which allow the free expression of ideas tend to be the most prosperous and the most peaceful.”

The day before, in Tibet, he boldly said, “America stands in firm opposition to China’s detention of political dissidents and human rights advocates and religious activists.” He said he was speaking out “for a free press, freedom of assembly, and labor rights, not to antagonize China’s leaders but because trusting its people with greater freedom is the only way for China to develop its full potential.”

There was only one problem with the President’s comments. His actions the past seven years have proven he doesn’t believe what his speech writers have told him to say.

In Charleston, W. Va., at a Bush speech on July 4, 2004, non-violent protestors were handcuffed and arrested.

In Pittsburgh, a retired steelworker was arrested for carrying a sign. In Michigan, it was a student. In Hamilton, N.J., it was the mother of a soldier killed in Iraq who asked the wrong question of Laura Bush.

Almost 2,000 peaceful protestors at the 2004 Republican convention in New York City were arrested and subjected to what can only be called “primitive” prison conditions for several days — until the courts threw out almost all of the arrest warrants.

As Texas governor, Bush had ordered peaceful protesters away from the governor’s mansion. As president, he directed there be zones as much as a half-mile from any Presidential cavalcade or speech for anyone protesting his policies. For those who refuse to enter into these remote and generally obscure “free-speech zones, police arrest them for trespassing or disorderly conduct, and then detain them until the President or Vice-President is out of the area and the media leave.

When challenged, law enforcement officials claim the separation is for security reasons. Persons carrying pro-administration signs are allowed to be in the line of sight to the President and Vice-President. Anyone wishing to harm the President needs only to carry a sign praising the President or not to carry one at all. By creating a protest zone hundreds of yards away, the Bush-Cheney Administration’s actions are designed not so much to protect the President as to give the political illusion of the President’s “popularity.” The media, especially the television media, focus upon the President and crowds that are carefully selected and deftly manipulated to show enthusiastic support of Bush and his policies. Because they believe the “story” is with the President, they usually ignore dissenters, especially if they’re away from the President. It gives a false picture, yet is politically clever.

Under the PATRIOT Act, Americans’ rights of privacy, including their reading habits, could be scrutinized by the FBI. Protestors — even peaceful ones — can be charged with terrorism. Dissenters are often denied the right to fly on commercial airlines. In Bush’s target have been Greenpeace and the Quakers. Like China’s leaders, America’s leaders say these restrictive measures only exist to protect the nation.

Americans are right to condemn China for its totalitarian suppression of dissent, the manipulation of free expression, and for building three “Protest Pens” in Beijing to keep protestors away from an international sporting event. Americans should also have condemned the “protest pens” at the Salt Lake City Olympics in 2002. More important, Americans should have spent the past seven years condemning the Bush-Cheney Administration for systematic violations of six Constitutional amendments, including the First Amendment guarantees of free expression.

Much of the mass media uncritically echoes the views of the economic China bashers on these matters. But the business press, which is more inclined to level with its readers because their money is involved, is more nuanced on the question of jobs, the trade deficit, and the value of China’s currency.¹

US-China trade is taking place within an economic construct championed and enforced by the United States through the World Trade Organization. China thus plays by American rules, or it would not be allowed in the game.

The rules are based on neoliberal globalization, the contemporary modus operandi of American corporate capitalism and its bodyguard, the US government. Neoliberalism prefers a free trade orientation, deregulation of markets, privatization, and government noninterference. Globalization facilitates the current unprecedented internationalization of business. This is not to say Washington practices what it preaches about neoliberalism: it is quite interventionist on behalf of big business and protective of its trade when thought necessary.

Corporate and financial wealth in the US has one overriding objective: the acquisition of more wealth. Reducing the cost of labor is a key means of increasing profits. Many years ago, owners of factories in New England closed shop and moved to the poorer, non-union South. In the current era, corporate leaders are moving throughout world to take advantage of the lower wages paid in the post-colonial economies of developing Asia, Latin America and Africa. This window of opportunity will not last forever because workers in time are going to demand increasingly better compensation.

American multinationals operate in many such countries in quest of higher profits, and threaten to move elsewhere if wages rise. The largest number have been investing, building production facilities, and subcontracting to thousands of factories in China for over 20 years, all with Washington’s encouragement and understanding that a byproduct of this policy would be an increase in the trade deficit. The move to China, and the great profits that the corporations earn there, was considered worth the higher deficit. As Foreign Affairs magazine commented in 2002:

“U.S. multinational corporations are using China as an export platform in the face of unrelenting global competition. An increasing percentage of the products these affiliates export from China is destined for the U.S. market. These goods count as Chinese exports to the United States — even though they are shipped by US-owned entities — and they contribute to the ever-widening American trade deficit. European and Japanese multinationals are following a similar strategy of manufacturing in China for export, further adding to America’s import bill from that country. Together, the delivery of U.S. goods through affiliates and the increasing use of the mainland as an export base by the world’s leading multinational corporations could inhibit any significant improvement in the American trade deficit with China.”

And of course it has. Last year, the total U.S. trade deficit was $738.6 billion, a 9% decline from 2006 due to the weaker dollar (which increases demand for lower-priced American exports) and slowing economy. Some U.S. politicians convey the impression that China causes the entire deficit but about $400 billion of the 2007 total was because of ever increasing oil imports. By comparison, America’s petroleum import bill was only $48 billion a decade ago. China accounted for $256.3 billion of the U.S. trade deficit in 2007.

At least 30% the “Made in China” goods exported from that country to the U.S. actually is produced by subsidiaries of American multinational companies — and this accounts for a considerable portion of the deficit. (If American companies stayed in the U.S., and paid a decent wage, there wouldn’t be a big China deficit, and many jobs would have remained back home, but corporate profits would be smaller.) Another chunk of the China deficit is from imports of goods manufactured by subsidiaries of corporations from other advanced capitalist economies.

These U.S. and foreign corporations make the big bucks. American consumers of modest income tend to get cheaper prices from items imported from China, in many cases to partially compensate for lower wages or joblessness. China benefits, but gets the blame in Congress and from some unions for “stealing” American jobs and causing the deficit. The China bashers act as though our country’s runaway corporations and a complicit Washington are innocent bystanders, and that it was not in the ingrained nature of capitalism to put profits before the needs of the people.

The anti-Beijing coterie suggests China doesn’t buy American goods, but Commerce Secretary Carlos Gutierrez recently called China America’s “fastest growing market for U.S. exports.” China would import more, but the de-industrializing U.S. now produces far fewer goods than yesteryear, and many of them made in America are simply not competitive. Look at how the mighty U.S. auto industry deflated its own tires. In addition, a range of costly high technology items that Chinese buyers want to purchase are withheld for “national security” reasons.

China’s critics attribute some of the deficit to Beijing’s undervalued currency, the yuan. According to Ramapo College (NJ) Professor Behzad Yaghmaian in early May: “Conceding to American pressures, China relinquished its decade-long policy of pegging the yuan to the dollar in July 2005. The yuan rose by more than 5% in the first year, 12% by the end of 2007, and 14.13% by March 2008. Meanwhile, the trade deficit with China continued to swell by more than 15 percent.”

The U.S. wants China to increasingly strengthen the yuan, but Beijing responds that it must proceed gradually lest its own economy stumble. The stronger the yuan, the tighter the profit margins for a multitude of small and medium export-oriented Chinese companies, causing reductions in wages and layoffs at a time when the Communist Party is already concerned about worker protests.

On June 5, the PRC Customs Administration reported that for the first time in five years “China’s trade surplus is likely to shrink in 2008.” It fell 7.9% in the first four months of this year against a similar period in 2007. One of the factors was a “clear acceleration” in the value of the yuan against the dollar, plus increased global protectionism and a reduction in exports to the U.S. due to the apparent recession. The agency also forecast China’s “imports will keep picking up speed. This will result in a reversal of the swift growth in the trade surplus and in the trade imbalances.” In the wake of the American financial downturn, the European Union has now become China’s largest export market.

A significant problem behind the trade deficit is that the U.S. is simply spending much more money on imports than it has in the bank, and its trading partners (China and Japan mainly) have been lending Washington great sums of money for deficit financing. Much of America’s consumer and government spending is based on debt as well, and it is one of the symptoms of our country’s decline.

As far as jobs and wages for American workers are concerned, big business for the last few decades, has been carrying out a campaign to eviscerate the labor movement, to deprive workers of the fruits of increased productivity, to lower wages and benefits, and to oppose government intervention on the side of the working class/lower middle class and the poor. Shifting jobs overseas and turning the screw ever tighter on American workers at home is what’s causing job loss, not China.

As Business Week wrote a few years ago, “One reason politicians are whipping themselves into a frenzy over China is because it’s an easy way to explain the constant din of layoff announcements that show little sign of slowing.”

Much of America’s industrial base that has not gone abroad for superprofits has failed to keep up with the foreign competition (except in the production and export of weapons of war, where the U.S. is without peer). As progressive writer James Petras wrote a couple of years ago, “China bashing is merely a response to the loss of competitiveness. Nationalist demagogy in a declining global power is a compensatory mechanism.”

Contrary to many of the arguments seeking to blame China for some of the problems afflicting the U.S. economy and American workers, we think such difficulties were generated within our country’s capitalist system itself, compounded by the policies of neoliberalism and corporate globalization.

1. Although there are many more recent pieces on the question of job loss and the trade deficit, we think Business Week’s article of Oct. 2, 2003 — “Is the Job Drain China’s Fault?” — touches lots of bases and holds up quite well.