The Secret Tales of a Super-Power
When Bertrand Russell, the most avid materialistic philosopher of the last century, visited the United States of America for the first time, he immediately fell in love with it. His heart went out describing the mouth-watering developments of the country. In contrast to the dim lighted British cities, with its dying industries, roads with gaping holes, main street structures hiding their ugliness behind canvas shades, downtown buildings drooping down from age, and the heavy Gothic mist that hung in the air, the American cities were humming with industries that produced the latest in everything, eight-lane roads bursting with shiny cars of the most exquisite design, newly constructed glass clad buildings that peeped into the clouds, markets filled with latest technological products, signs of innovation visible through every shop window and symbols of an unprecedented prosperity spread all over. He was stunned by the development, modernity and innovation.
But, although a philosopher, he never took the question of ‘why’ to any great depth, babyishly attributing the development and progress to liberalism, science, technology, innovation and, of course, American genius.
Many have now begun to look seriously into the question of the ‘why’ ignored by Bertie. One of them is Walden Bellow, a professor of sociology and public administration. He presents his findings in a book called Dilemmas of Domination, the Unmaking of the American Empire, (Metropolitan Books, New York, 2005).
Cool and collected, forceful but unemotional, armed with information, data and statistics drawn from the original sources, he opens the black boxes of finance and economy, world trade and banking, financial treaties and protocols, imperialism and democracy, USA/ EU unity and rivalry, policies of World Bank and IMF, conflicts between North and South, manipulations and arm twisting, to reveal the financial reasons (apart from others, not discussed) that helped the United States achieve the superpower status, and the policies and ideologies that are dismantling it now.
To get a glimpse of the author’s mind, and the courage in stating his opinions, we may at the start quote him, from an article that he wrote immediately after the implosion of the two Trade Center buildings on 9/11, and included in this book:
“The assault on the World Trade Center was unpardonable, but it is important not to lose perspective, especially a historical one…. The scale and consequence of the September 11 attack are massive indeed, but this is not the worst act of mass terrorism in U.S. history, as some U.S. media are wont to claim. The over 3000 lives lost are irreplaceable, but one must not forget that the atomic raids on Hiroshima and Nagasaki killed 210,000 people, most of them civilians, most perishing instantaneously. One may object that you can’t com the September 11 attack to the nuclear bombings since, after all, Hiroshima and Nagasaki were targets in a war. But why not, since the purpose of the nuclear bombings was not mainly to destroy military or infrastructure targets, but to terrorize and destroy the civilian population?” (p.2)
The above at the beginning of the book sets the tone and direction. The writer is no parrot of the West, is not buttering his bread, but rather is an honest professor analyzing facts and speaking out the truth. Obviously, he immediately loses audience with the West and its mainstream scoundrel media. (We have taken the word from a recent article of a Western writer).
The author proceeds to explore how the US, especially since the end of colonialism, torpedoed many developmental activity in the non-Western countries, damaging their agriculture, collapsing manufacturing activity, restricting intellectual quest, bringing down the currencies, hurting the GDP, causing serious damage to the economies, leading to rise in unemployment, heightened inflation, fall in exports, rise in imports, and, ultimately enriching its own economy (some share went, like the left-over of the lion shared by the jackals, to other Western economies). He explains how the industries and agriculture of the non-Western countries (he calls them the countries of the South), were choked systematically, through trade agreements forced on them by GATT, WTO, World Bank, IMF etc. that were filled with clauses that once signed, (quite often under duress), assured that either the countries of the South complied, or ran the risk of further destruction of their economies, leading to mass protests ending with the loss of political power by the parties that had signed those agreements. For decades the trapping, manipulating, hoodwinking and blackmailing worked to the American advantage, while they spread poverty, stagnation, and general chaos in the countries of the South.
So, if there was all round development in the U.S. it was the blood and sweat of the masses of the underdeveloped countries forced to cough out dollars to the Western controlled IMF, World Bank, other financial institutions, and supply cheap goods and services to their markets, which were the responsible factors.
Quite opposite to the promises of growth made to the Third World countries, their engines of growth were actually sent into reverse drive. The recipes of development handed over to them proved to be only cosmetic, but rather proved to be essentially anti-developmental ideas that undid what those countries had gained in past decades. To quote the author:
“According to (Angus) Maddison (of OECD) … the annual rate of growth of real global GDP fell from 4.9 percent in what is now regarded as the golden age of the post-World War II system, 1950-73, to 3 percent. The United Nations, confirming this trend, said that world GDP grew at an annual rate of 5.4 percent in the1960s, 4.1 percent in the 1970s, 3 percent in the 1980s, and 2.3 in the 1990s.” (p. 79)
It should be obvious that the bulk of the losses mentioned above were experienced by the Third World countries, whose GDP was far less than the global average, and gains went largely to the American economy whose GDP was far above the global average.
Poor Russel was neither educated enough in economy, nor had any idea of how the wealth of the third world was being sucked out for the development of the land he admired.
We could perhaps briefly deal with a few specific cases here.
The case of Argentina is a good one for illustration. It is also a tragic example of what happens to a country that takes the IMF and U.S. Treasury advices seriously. On their advice, it brought down the trade barriers, liberalized foreign investments, launched a privatization program which involved the sale of some 400 state enterprises that jointly accounted for 7% of the national product. Such enterprises as airlines, oil companies, steel, insurance, telecommunications, postal services and petrochemical companies were privatized, along with the adoption of a currency board (roughly meaning abandoning the peso for the dollar) – all steps endorsed by the IMF as a result of which steps 70% of the private banks became foreign-controlled, the peso’s value appreciated, and Argentine goods became uncompetitive both locally as well as in foreign markets. Argentina was forced to borrow, and the more it borrowed, the higher the interest rate it had to pay. By 2002, the GDP declined to 16.3%, unemployment shot up to 21.5%, and 53% lived below the poverty level. Thanks to conditions laid down by IMF and advice of the U.S. Treasury, once the most prosperous nation in Latin America, Argentina was “near the bottom in terms of per capita income, below Peru and parts of Central America.”
Mexico’s case could be cited in brief. When it comes to siphoning out money from one economy into another, indebting a country to the point of bankruptcy, choking its exports and increasing its imports of goods and capital, Mexico is a classic example of crisis after crisis brought on by international lenders: USA, IMF, World Bank and their subsidiary financial institutions.
By 1980 the Third World governments had been tricked into massive borrowing from various Western financial institutions. The total of 400 billion dollars that had been given away to the Third World and East European countries left them $700 billion in debt. Led by Mexico in 1982, which defaulted on quarterly payment over its $100 billion debt, other countries, Brazil, Argentina, Venezuela, the Philippines, and many other debtors fell into the same hole and declared insolvency. In the eighties the Latin American countries were jointly paying an annual interest of $60 billion to the foreign banks, quite a chunk of which went to the US. Between 1982 and 1992, nearly $220 billion were squeezed out of the Third World as debt services.
If American budget was in trillions, there were apparently some sources which were bringing in hard cash.
The IMF (where the U.S. has veto power) and World Bank (on which EU has its hold) virtually took over the finance of Mexico, removing the government as a mediator between the domestic private sector and foreign capital as a result of which the government lost control of the foreign funds coming into the county. But, craftily, the IMF had much earlier got the governments into signing the clause that they, the governments, would be the ultimate guarantor for the private-sector borrowings. Yet, despite that weak financial situation of Mexico, foreign capital was dumped into the country to the tune of about $70 billion. Most of the money was directed as investment into what is known as serving the “purpose of extracting financial rent.” The World Bank and its subsidiaries played the major role. “The Capital Group, a money management giant based in Los Angeles, that ran this fund, did very well, with total returns to investors of 20% in 1987, 42% in 1988, and 94% in 1989.” (p. 110) The investors in this case were the “finance renters.” Meanwhile, by 1993 Mexico was led to remove all restraints on foreign capital movement. As a result, its exports became less competitive in international markets, but, because of flush of currency within the country, imports shot up, leading to current account deficit of 8.5% of the GDP by 1994. The Mexican GDP declined 4.5% in 1990 to 3.6% in 1991, to 2.2% in 1992, to 0.4% in 1993. The economic hit-men were having a field-day.
The IMF and American financial institutions came out with “bailout” schemes, pouring in some 50 billion dollars,
and the cumulative result was that Mexico went into recession, unemployment grew high, a significant fall in real wages occurred and the common man became poorer. But the U.S. – which managed the bailout fund in Mexico through its Exchange Stabilization Fund (ESF), a US government facility – ended with $1.4 billion interest fund, and the ESF making a profit of $580 million.
It was the same story of success in South Korea, Thailand, Indonesia, Philippines, Malaysia, and many other countries. The script was the same: privatization (of the telecommunication, transport, airlines, power industries, banks), allowing inflow of foreign capital, liberalization of economy, pegging the local currency to the dollar, speculative investments, etc. Consequently, between 1996 and 1997, the Bank of Thailand lost $38.7 billion dollars of the foreign-exchange (Forex) reserves and, ultimately, when the Thai currency (bhat) had to be de-pegged from the dollar, it lost 50% of the value within few months – while, through and through, the country was faithfully following the fiscal policies laid down by the US controlled IMF, EU controlled World Bank, and other Western financial institutions. The author notes:
“Even as evidence of policy failure mounted, the [bailout] Fund barely blinked, delivering the same medicine to each ailing nation that showed up on its (IMF) doorsteps. Over 1 million people in Thailand, and 22 million people in Indonesia sank below the poverty line in a few week’s time, not even the IMF could deny the devastating results of its policy.” (p. 121)…
But that was not all. The damage was serious and the wounds inflicted were deep. As the author wrote:
“In Thailand, local authorities agreed to remove all limitations to foreign ownership of Thai financial firms, accelerate the privatization of state enterprises, and revise bankruptcy laws along lines demanded by foreign creditors. As the U.S. trade representative, Charlene Barshefsky told Congress, the Thai government’s ‘commitments to restructure public energy, transportation, utilities, and communications – which will enhance market-driven competition and deregulation – [are expected] to create new business opportunities for U.S. firms.’” (p. 121-122).
So, business opportunities were being created for U.U. firms, with the liquidation of the economies of the Third World countries.
The case of Indonesia was no different. The country entered into various trade agreements, without the awareness of how the rules will apply when the economy did not yield the results that were written in bold letters in the propositions presented by the Western promoters of the agreements. With reference to WTO for instance, the developing countries had a marginal role in the negotiations that led to its establishment. But, even though the Third World had little or no say in designing the provisions of the treaty, it was yet bound to every of its clauses because, under WTO rules, the countries were party to all the negotiated elements as a single package.
Indonesia was made to accept liberalization, free trade, foreign investments, de-control of the banks, privatization of key sectors, elimination of tax, tariff, etc. But one hurtful clause, not realized earlier, was that it should eliminate credit privileges the government provided to the up and coming national car and aircraft projects. That clause let it to the termination of the projects. The IMF program sought broad reform of Indonesian trade and investment policy,
“like the aircraft project, monopolies and domestic trade restrictive practices, that stifle competition by access for foreign goods and services. The national car project and the plan to set up a passenger jet aircraft industry had elicited the strong disapproval of Detroit and Boeing respectively.” (p. 122)
Events showed that the IMF was closely associated with the United States and that its staff worked in close cooperation with the U.S. Treasury in designing the most controversial, in fact, hurtful, features of the IMF’s fund programs in Asia. Consequently, except for Malaysia, where its Prime Minister Mahathir Mohammad defied the IMF by imposing capital controls, the rest of the Asian tigers were transformed into sheep. Not surprisingly, when Japan proposed an Asian Monetary Fund (AMF), with a capital of $100 billion, to help the local governments in times of crisis, the U.S. and IMF torpedoed the idea the way they torpedoed the Indonesian aircraft industry (which had already brought out a prototype passenger jetliner into the market). When Indonesia tried to revive its automobile industry in 1997, the U.S. and the European Union threatened to haul it before the WTO dispute-settlement body. Jakarta had to halt its program.
Similarly, while the WTO spoke of opening up of the markets of the Third World as well as the advanced countries, promising that bi-lateral trade would improve the countries in South and spread wealth better, it did not speak of subsidies to its own products, especially, in the agricultural sector; so that, by providing governmental subsidies to its own agricultural products, USA and EU were able to export freely, causing huge losses to the agricultural sector of the developing countries.
The U.S. experiment with China was a sort of exception. The joke goes around that a man attempting to force medicine into his stomach-troubled horse had the bad experience of the horse blowing first. Exactly this has been USA’s experience with China. The Chinese and Americans opened their markets for each other’s goods, but the Chinese blew their products into the US market before the Americans could. The American trade deficit now runs in trillions of dollars in favor of the Chinese. But others were not as ingenious. In India, for instance, while the farmers were committing suicide in the hundreds, the local markets were stuffed to spill with US fruits, chicken, meat, and other dairy products, and India perpetually remains in trade deficit, every year importing billions worth of goods more than exporting.
To sum up, if there was innovation that Bertrand Russell saw, it was in the binding clauses that allowed for manipulations to the advantage of the Americans, and if there was ingenuity that he saw, it was in forcing the poor countries into agreements that ostensibly promised development, but in actual fact, went to fatten the American purse. And, as the author notes:
“…the price paid by the affected countries was not just their people’s suffering. They were forced to yield large tracts of their sovereign authority over their own economies. Chalmers Johnson has argued that a good case can be made that Washington’s opportunistic behavior during the Asian financial crisis reflected the fact that, ‘having defeated fascists and the communists, the U.S. now sought to defeat its last remaining rivals for global dominance: the nations of East Asia that had used the conditions of the Cold War to enrich themselves.’” (p. 121)
That was the American ingenuity at work that struck Bertrand Russell as the reward of materialism, and helped him deepen his faith in atheism, liberalism, freedom and democracy.
It was after decades, and losses on a variety of fronts that the deceptions played on them that the underdeveloped countries realized the truth of things. WTO has been a clever fraud. Says the author:
“Two realizations gradually dawned on developing countries. One was that the emergence of the WTO served not so much to promote global trade as to further the interests of the U.S. corporations seeking new markets world-wide. The other was that the WTO was an antidevelopment organization.” (p. 139)
Bertrand Russell then, having been a Westerner, might not turn in his grave. But we know that if the U.S. is a superpower today, it is not merely because of certain fortuitous factors and events, it was also because peoples of the Third World were starving to provide the finance for their innovative activities and technological developments.