CAPITALISM AND WAR
professors Jonathan Nitzan and Shimshon Bichler

Global Research, November 16, 2006

The recent flurry of wars – from Afghanistan and Iraq to Gaza and Lebanon – has revived talk of imperialism, military Keynesianism and the military-industrial Complex. Capitalism, many radicals have long argued, needs war. It needs it to expand its geographical reach; it needs it to open up new markets; it needs it to access cheap raw materials; and it needs it to placate opposition at home and pacify rebellious populations abroad.1

The common perception is that war serves to boost the economy. According to this argument, military conflict – and high military spending in preparation for such conflict – generates overall growth and helps reduce unemployment. This feature of military spending turns it into an effective fiscal tool. In years of slack, the government can embark on military Keynesianism, increase its spending on weapons and pull the economy out of recession.  

Over the longer haul, military expenditures are said to undermine the peaceful, civilian outlook of liberal regimes. Spending on the military boosts the business interests of the large armament corporations, hardens the outlook of the security apparatus and emboldens the top army brass. Together, these groups become increasingly fused in an invisible, yet powerful, military-industrial Complex – a complex that gradually comes to dominate policy and pushes society toward foreign aggression and military adventurism.  

The Rise and Demise of Military Keynesianism

Theories of military Keynesianism and the military-industrial complex became popular after the Second World War, and perhaps for a good reason. The prospect of military demobilization, particularly in the United States, seemed alarming. The U.S. elite remembered vividly how soaring military spending had pulled the world out of the Great Depression, and it feared that falling military budgets would reverse this process. If that were to happen, the expectation was that business would tumble, unemployment would soar, and the legitimacy of free-market capitalism would again be called into question.

Seeking to avert this prospect, in 1950 the U.S. National Security Council drafted a top-secret document, NSC-68. The document, which was declassified only in 1977, explicitly called on the government to use higher military spending as a way of preventing such an outcome. 2  

NSC-68 marked the birth of military Keynesianism. In the decades that followed, military expenditures seem to have worked as the document envisaged. The basic process is illustrated in Figure 1. The graph shows the relationship between U.S. economic growth and the country’s military spending. The thin line plots the annual rate of economic growth against the right scale. The thick line shows the level of military spending, expressed as a share of GDP and plotted against the logarithmic left scale.3 Both series are smoothed as ten-year moving averages to emphasize their long term tendencies.  







[Figure 1. U.S. Military Spending and Economic Growth]

The data show a co-movement of the two series, particularly since the 1930s. The rise in military spending in preparation for the Second World War coincided with a massive economic boom. Military spending had risen to 43 percent of GDP by 1944 and averaged 20 percent of GDP during the 1940s. This rise was accompanied by soaring economic growth, with annual rates peaking at 18 percent in 1942 and averaging 6 percent during the 1940s (the peak levels of the early 1940s cannot be seen in the chart due to the smoothing of the series).  

After the war, military spending began to trend downward, but remained at very high levels for the next couple of decades. The adoption of military Keynesianism, along with the wars in Korea and Vietnam, helped keep military expenditures at 12 percent of GDP during the 1950s and at 10 percent during the 1960s. Economic growth during this period averaged over 4 percent – lower than in the Second World War, but rapid enough to sustain the buoyancy of American capitalism and the confidence of its capitalists.

Both big business and organized labor supported this set up. The large corporate groups saw military spending as an acceptable and even desirable form of government intervention. At the aggregate level, these expenditures helped counteract the threat of recession at home and offset the loss of civilian markets to European and Japanese competitors – yet without undermining the sanctity of private ownership and free enterprise. At the disaggregate level, many large firms received lucrative contracts from the Pentagon, handouts that even the staunchest free marketers found difficult to refuse.  

The large unions endorsed military Keynesianism for different reasons. They agreed to stay out of domestic politics and international relations, to accept high military expenditures, and to minimize strikes in order to keep the industrial peace. In return, they received job security, high wages and the promise of ever-rising standards of living.  

The consensus was aptly summarized in 1971 by President Nixon, who pronounced that "we are all Keynesians now."

But that was the peak. By the early 1970s, the Keynesian Coalition of big business and organized labor started to unravel, military Keynesianism began to wither and the welfare-warfare state commenced its long decline.  

The Globalization of Ownership

Underlying the rise and demise of military Keynesianism was an epochal reversal in the spatial nature of ownership – a U-turn from gradual de-globalization in the first half of the century to massive globalization in the second half.  

Until the 1950s, the ownership of capital, in the United States and elsewhere, was retreating into its national cocoons. The statistical footprints of the process are clear. In 1900, the ratio of foreign-held assets to world GDP reached a peak of 19 percent. But the subsequent turmoil of two world wars, depression, import substitution and capital controls have taken a heavy toll. Foreign ownership ties were broken or frozen, and the ratio of foreign-held assets to world GDP fell continuously, reaching a mere 6 percent in 1960. At the trough of the process, the accumulation of capital was conducted largely within national boundaries.  

This decline ended in the early 1970s. Capital again broke through its national envelope, and as neoliberalism and deregulation gained momentum foreign ownership started to rise. The ratio of foreign-held assets to world GDP increased exponentially, doubling every decade: it rose to 25 percent in 1980, climbed to 50 percent in 1990, and reached over 90 percent by 2000.4  

The effect on profit of this reversal has been dramatic. American-based firms now receive roughly one third of their earnings from their foreign subsidiaries, up from 5 percent in the 1950s – a six-fold increase.

This reversal in the global pattern of ownership fundamentally altered the power structure and institutions of capitalism. With capital bought and sold on a world scale and profits increasingly earned outside the country, capital accumulation became less and less reliant on domestic sales. With less emphasis on local activity, Keynesian policies grew out of fashion. And with Keynesianism on the decline, the business-labor accord started to unravel.  

The welfare state, previously seen as a bulwark against communism, became a burden. Labor was no longer likely to revolt – particularly with jobs being shipped to "emerging markets" and with union membership on the decline. Furthermore, capitalists were no longer fearful of recession. On the contrary, they often encouraged it as a means of disciplining workers, reducing wages and reversing the hard-won social gains of working people.  

The warfare state was also coming under pressure. The turning point was the collapse of Soviet Bloc. With only one superpower remaining, large military budgets were now difficult to justify. In the 1990s, military spending around the world took a nose dive, falling by as much as one-thrid from their all time peak in the late 1980s. As Figure 1 shows, expenditures on armaments in the United States, the world’s largest spender, dropped to an average of 4.5 percent of GDP in the first half of the 2000s, down from 7 percent in the 1980s.  

The New Wars

The demise of the welfare-warfare state opened the door for the new rhetoric of neo-liberalism. Proponents of free markets hailed the new regime for its peaceful tendencies. Its detractors agreed – but only partly. On the one hand, they concurred that neoliberalism, in its quest to secure free trade and open capital flow, tries to establish political stability and international peace. On the other hand, they faulted neoliberalism for its invisible violence, inflicted through hyper exploitation, mass poverty, rising inequality, economic uncertainty and human insecurity.  

Both the adherents and the critics, therefore, were surprised by the sudden bellicosity of the early twenty-first century. Old theories of imperialism and militarism were quickly dusted off and tucked onto neoliberalism. Instead of productivity miracles and No Logo, analysts started to talk about "new imperialism" and "neoliberal wars."

For the most part, though, these hybrid theories are misleading. The new conflicts of the twenty-first century – the "infinite wars," the "clashes of civilization," the "new crusades" – are fundamentally different from the "mass wars" and statist military conflicts that characterized capitalism from the nineteenth century until the end of the Cold War. The main difference lies not so much in the military nature of the conflicts, as in the broader role that war plays in capitalism.  

To begin with, in a world open for business there is no need to physically conquer new territory – not for raw materials and not for additional markets (note that Iraqi oil production has nearly ceased since its conquest in 2003, while its market for foreign imports, negligible to begin with, has contracted).  

The same goes for military spending: with the share of foreign profits soaring, there is no longer a business imperative for high military expenditures. While U.S. military budgets have risen marginally in the wake of the new wars – from 3.9 percent of GDP at the end of Clinton’s presidency to 4.7 percent presently – this is an increase whose effect on aggregate demand is insignificant by historical standards.  

The U.S. attacks of the 2000s also make little military sense. Countries with proven nuclear capabilities, such as Pakistan and North Korea, have been left alone, while others that presented no real danger – specifically Afghanistan and Iraq – were invaded, occupied and now tie down much of the U.S. standing army, with no end in sight.  

Finally, the televised war footing and constant talk about terrorism may have frightened the Western population. But unlike the success of nationalist-liberal ideologies during the two world wars and the Cold War that followed, the new rhetoric of infinite war hasn’t made the masses fall for neoliberal capitalism.

The wars of the 2000s are indeed new. And they are new, at least in part, because capitalism itself has changed.

The New Order of Capital

The central change concerns the underlying nature of capital, a transformation that began in the late nineteenth century but became evident only recently.

Existing theories, anchored in the reality of the early nineteenth century, continue to examine capital from the "material" perspective of consumption and production. Neoclassical economists anchor their analysis in utility, while classical Marxists base it on labor time. In contrast to these approaches, we suggest that, under modern conditions, capital can no longer be viewed as a "material" entity. As we see it, capital represents neither neoclassical utility nor Marxist abstract labor, but rather power – the power of its owners to shape the process of social reproduction as a whole.

Based on a power understanding of capital, we argue, first, that the analysis of capitalism should focus not on capital "in general" and many capitals "in competition," but specifically on the dominant capital groups at the centre of the political economy. Second, we claim that accumulation should be understood not absolutely, but differentially – that is, in reference to the ability of dominant capital to "beat the average" and increase its relative power.5

The implications of this power perspective are far reaching. For our purpose here, they suggest:

1. That over time, corporate mergers, rather than economic growth, become the main engine of differential accumulation (breadth); and

2. That under certain circumstances, dominant capital can benefit greatly from inflation and stagflation (depth).

In our research we found that, over the past century, global accumulation indeed oscillated between these two regimes of merger and stagflation. The most recent phase, which lasted through much of the late 1980s and 1990s, was clearly one of breadth. In that period, dominant capital benefited greatly from the opening up to corporate takeover of the former Soviet Union and other "emerging markets," as well as from the collapse of the welfare state and the massive privatization of government services.  

This breadth cycle, with its emphasis on neoliberalism, deregulation, sound finance and disinflation, came to a close at the turn of the new millennium. The financial crisis that began in Asia and later spread to the core markets, the crumbling of the "new economy" and its scandalous accounting practices, and talk of global terrorism and the infinite war to defeat it, have together made capital movement look less tempting and mergers far less promising. Furthermore, two decades of neoliberalism have weakened pricing power, raising the specter of price and debt deflation for the first time since the Great Depression.

Faced with these predicaments, capitalists generally and dominant capitalists particularly began yearning for a little dose of "healthy" inflation both to avert debt deflation and to kick-start differential accumulation. As it turned out, the solution for their predicament – intended or otherwise – was a new ‘energy conflict’ in the Middle East (that is, a conflict related directly or indirectly to oil). Over the past thirty-five years, these conflicts have been the prime mover of oil prices, and oil prices have provided the spark for broad-based inflation. It was a turnkey mechanism for triggering inflation, and it was read to use.  

In this sense, military conflict has come to assume a new, roundabout role in the accumulation process. Until the 1950s and 1960s, the main impact of military conflict worked through large military budgets which directly boosted aggregate demand and overall profits, as well as the income of the leading military contractors. But with the re-globalization of ownership and the on-setting of détente, military budgets started to contract. Initially, they fell relatively, as a share of GDP, but since the late 1980s, they also began to drop absolutely, in constant dollar terms. Although these expenditures still nourish the military contractors, their direct effect on capital accumulation has diminished significantly.  

However, military conflict as such hasn’t lost its appeal; it still has a big impact on accumulation. The novelty is that the impact now works mostly indirectly, through inflation, relative prices and redistribution.  

Energy Conflicts and Differential Profits

The key beneficiaries of this new, indirect link are the large oil companies. The geographic centre of this process is the Middle East. After the Vietnam War, the Middle East has become the hot spot of global conflict, with obvious corollaries for the price of oil. The relationship between these conflicts and the differential profits of the oil companies, however, has received little or no attention.  

The reason for this neglect is not difficult to see. Most analyses of Middle-East conflict and oil are situated in the disciplinary intersection of "international relations" and "international economics." Their basic reasoning boils down to a statist struggle over raw materials. On the one hand, there are the industrialized countries that need cheap oil in order to sustain their growth and expanded reproduction. On the other hand there are the countries of the Middle East, organized through OPEC, whose intention is to extract from the process as much rent as they can. This broad conflict is complicated by various factors: inter-state rivalry – for example between the United States and the Soviet Union (previously) and Europe and Asia (presently); religious and ethnic hostilities in the Middle East itself; or the interests of various sectors and capitalist fractions in the industrialized countries.  



In this polemic of high politics and resource economics, few have bothered to break through the aggregate front, fewer have done empirical work, and almost no one has dealt with the question of how exactly accumulation by the oil companies fits into the picture. Figure 2 offers a glimpse into what is missing from the story. The chart shows the history of differential accumulation by the "Petro-Core" of leading oil companies – specifically, BP, Chevron, Exxon, Mobil, Royal-Dutch/Shell and Texaco.6  



[Figure 2. Leading Oil Companies: Differential Profits]

Each bar in the figure measures the difference between the rate of return on equity of these companies and the average rate of return on equity of the Fortune 500 benchmark (with the result expressed as a percent of the Fortune 500 average). The grey bars show years of differential accumulation; that is, years in which the leading oil companies beat the average with a higher rate of return. The black bars show periods of differential decumulation; that is, years in which the leading oil companies trailed the average. For reasons that will become apparent in a moment, these latter periods signal "danger" in the Middle East . Finally, the explosion signs show "energy conflicts" – namely, conflicts that were related, directly or indirectly, to oil.7 The figure exhibits three related patterns, all remarkable in their persistence:  

First, every energy conflict in the Middle East was preceded by a danger zone, in which the oil companies suffered differential decumulation.
Second, every energy conflict was followed by a period during which the oil companies beat the average.
And, third, with only one exception in 1996-1997, the oil companies never managed to beat the average without an Energy Conflict first taking place.8
Furthermore, this pattern fits into the larger processes of breadth and depth. The figure points to three distinct periods, each characterized by a different regime of differential accumulation, and each led by a different faction within dominant capital.

During the depth era of the 1970s and early 1980s, differential accumulation was fuelled by stagflation and driven by conflict. The leading faction within dominant capital was the Weapondollar-Petrodollar Coalition of large armament and oil firms. In this context, the oil companies managed to beat the average comfortably, with only occasional setbacks which were quickly corrected by Middle East conflicts.  

During the breadth period of the late 1980s and 1990s, merger replaced inflation as the main engine of differential accumulation. The oil and armament companies lost their primacy to a "new economy" coalition led by civilian high-tech companies. Neoliberal rhetoric replaced the lingo of welfare-warfare state, conflicts in the Middle East grew fewer and farther between, and the oil companies commonly trailed the average.

Events over the past few years suggest that this second period may have come to an end, with the ebbing of the merger boom and the return to primacy of the Weaponodollar-Petrodollar Coalition. The latter coalition, whose fortunes had dwindled since the stagflationary bonanza of the 1970s and early 1980s, has come back with a vengeance. Having helped re-install the Bush family in the White House, the coalition started looking for new enemies and was only too happy to exploit the opportunity offered by the "new Pearl Harbor" of September 11.9

The argument and statistical patterns presented here were first articulated in the late 1980s, further developed in the mid-1990s, and most recently updated in 2006.10  However, the last few observations in Figure 2 are new, and they suggest a quantitative departure from past patterns. Until the late 1990s, the differential performance of the oil companies oscillated between 50 percent above or below the Fortune 500. Recently, though, the scale changed. During the period of 2000-2005, the world’s four leading oil companies earned $338 billion in net profit – one-third of a trillion –representing an average rate of return of 20 percent, nearly twice the Fortune 500’s.  

The Primacy of Prices

The link that connects Middle East conflicts and differential profitability is the price of oil. This link is illustrated in Figure 3. The thick line in the chart shows the percent share of all listed oil companies in global corporate profit. The thin line shows the "relative" price of crude oil, computed by dividing the dollar price per barrel by the U.S. consumer price index, and lagged one year (reported corporate earnings represent the moving sum of the past four quarters; the full impact on profit of a change in the price of oil therefore is felt only after a year ).









[Figure 3. Oil Prices and the Global Distribution of Profits]

The correlation between the two series is extremely tight.11 This statistical fact points to the immense importance that prices have come to play in the process of accumulation. In this particular chart, the tight correlation makes much of the media discussion and learned analyses of the oil arena redundant. In order to know the reported differential profits of the oil companies a year from now, you don’t need to speculate about peak oil, about rising demand from China, or about the coming heat waves in Europe. This type of guesswork, although interesting for other purposes, is unnecessary here. The only thing you need to know is the current price of oil.  

To illustrate: the official data are not yet in, but we already know that, over the past twelve months, the price of oil averaged roughly $65 in 2002 dollars. The correlation in the chart suggests that, a year from now, the reported global profit share of the oil companies will hover around 15 percent.  

Now, let’s backtrack and examine the history presented in Figure 3. The data show that, during the oil crisis of the 1970s and early 1980s, the cost of crude petroleum shot through the roof. In 1979 a barrel of oil cost over $90 in today’s prices. During those happy stagflationary times, the oil companies pocketed nearly 20 percent of all global profits. But as differential accumulation moved into breadth and mergers picked up, inflation fell and oil prices dropped even faster. The oil companies’ global share of profit collapsed, reaching a mere 3 percent by the end of Clinton’s presidency.

The reversal came with the new millennium and the Bush presidency. With the 2001 invasion of Afghanistan, the Middle East entered a protracted period of war, oil prices have risen to $65-75, and the share of the oil companies in global profit – although not yet at historical highs – is moving higher and higher.

How big are the gains of the oil companies? During the five-year period from August 2001 to July 2006, the average net income of the global oil sector amounted to $108 billion per annum. This figure compares with an annual profit of only $34 billion in the year from August 1999 to July 2000 – a jump of $75 billion if we round the numbers.

How much did it cost to generate this jump in profits? For argument’s sake, let’s assume that since 2000 the entire increase in the price of oil – and therefore the whole increase in oil profits – was due to the new Energy Conflicts in the Middle East. Assume further that so far the U.S. government has spent on its Afghanistan-Iraq operation the annual equivalent of 1 percent of its GDP – roughly $100 billion a year.  

These assumptions, although simplistic and inaccurate, indicate the overall magnitudes involved: the war costs $100 billion a year and it generates an extra $75 billion in annual oil profits. In other words, for every $1 the U.S. government spends on the wars, the owners of the oil companies earn an additional ¢75 in net profit.

Clearly, such phenomenal cost-benefit ratios can be generated only indirectly. And that is perhaps one of the important features of the new wars: a fairly modest increase in military spending brings about massive changes in prices and distribution – changes that go beyond the immediate arena of the conflict, and whose magnitude can match and even exceed the military budget itself.

Sweet Inflation

As noted earlier, the new wars came as the long breadth phase of differential accumulation was winding down. The immediate beneficiaries were the arms contractors and the oil companies of the Weapondollar-Petrodollar Coalition. But gradually, as global differential accumulation shifted from breadth to depth, the gains spread to dominant capital as a whole.

Figure 4 vividly illustrates this process for the United States. The thin line in the graph plots the rate of inflation, measured as the annual rate of change of the consumer price index. The thick line is a ratio between profits and wages. It measures the ratio of the earnings per share of the S&P 500 (the largest publicly traded corporations listed in the United States, which could be taken as a proxy for dominant capital) to the hourly wage rate in manufacturing.  





  

[Figure 4. U.S. Inflation, Profits and Wages]

Movements in this latter ratio indicate redistribution. When the index rises, it means that the profits of dominant capital rise faster (or fall more slowly) than the wage rate. When the index falls it suggests an opposite process – namely, that the profits of dominant capital fall faster (or rise more slowly) than wages.  

As the chart shows, in late 2000, inflation started falling, and in 2002 it reached 1 percent – a postwar low. The decline was accompanied by a massive drop in the ratio of profit to wages, which fell by 55 percent from its 2000 peak. In the wake of these developments, the Federal Reserve Board Chairman, Alan Greenspan, warned of an "unwelcome substantial fall in inflation," and was encouraged by leading financiers to "go for higher inflation."12

These deflationary warnings came in April 2003, after the U.S. had already invaded Iraq. Our own view at the time was rather different. In January 2003, just before the invasion, we wrote:

". . . if oil prices continue to rise, inflation will most likely follow, the spectre of deflation will be removed and the large companies could sound a big sigh of relief. For these companies there would also be an icing on the cake. Inflation usually works to redistribute income from labour to capital and from small firms to larger ones. It will therefore make the leading companies better off relatively, if not absolutely."13  

And indeed, Greenspan didn’t have to work too hard. The new wars have done the job for him. The neo-conservatives sent their army to the Middle East, the price of oil soared, and inflation – although hesitant at first – eventually started to follow.  

The distributional consequences weren’t lost on investors and workers. While wages remained flat, profits – particularly those earned by dominant capital – surged. As a result, the ratio of profit to wages climbed rapidly – rising 250 percent since 2001 and sending the overall share of profit in GDP to its highest level since data began to be collated in 1929.  

The huge distributional impact of a small increase in inflation is symptomatic of the new order. During the welfare-warfare state, inflation usually involved a wage-price spiral that worked to limit the differential increases in profits. For instance, a 4 percent increase in prices typically would be accompanied by a rise in wages – say, of 3 percent. A result, the markup ratio of sales to wages would increase by 1 percent, generating a relatively modest rise in profits. The situation now is very different.

Workers in the United Stares are locked in global competition with workers in China, India and other ‘emerging markets,’ which means that wages do not rise –and sometimes even fall – in the midst of price inflation. In this context, a 4 percent inflation translates to a 4 percent increase in the markup and to a far larger increase in profits.  

All in all, then, the new wars are definitely cheap. For a minimal cost, they stir up inflation and generate large increases in profits. But cheap wars have another side to them. They are hard to win.  

Cheap Wars

The idea of a mass, "voluntary" army was born out of the French Revolution. The new soldiers turned out to be cheaper and more loyal than mercenaries, and they fought well. However, the masses needed to be educated so that they could read the newspapers and follow the propaganda – hence the birth of compulsory "elementary" schooling. Later on, the proles started to demand additional perks. They wanted culture, insurance, pensions and veteran benefits. In the 1910s, the elites cheated them. They sent the masses to be butchered by the millions in the trenches of World War I, and then abandoned those who returned as veterans. This experience raised the ante. In the early 1940s, the citizens-soldiers had to be offered a whole welfare state, so that they would be willing to get butchered, again, in the Second World War. What initially looked like "soldiers for free" turned out to be a rather expensive way of fighting wars.  

The last expensive war was Vietnam. With neoliberal globalization replacing the welfare-warfare state, there was no longer a need for mass armies with high overhead. Instead, the capitalists started to invest in "smart weapons" that could be operated by high-school dropouts and cause plenty of damage. They abandoned the draft in favor of purely professional armies – partly governmental, partly private.

A similar process has taken place in Israel. During the 1970s, in the hay days of the Israeli welfare-warfare economy, military spending amounted to 25 percent of GDP, the draft included most Jewish citizens (excluding the ultra-orthodox), and the government spent heavily on social services.  

But with the breadth regime of the late 1980s and 1990s, Israeli capitalists became decreasingly dependent on the war economy. Israel began its reconciliation with its neighboring Arab states, and the military was both reduced and transformed. Military spending dropped to 6 percent of GDP, and many military activities were privatized. The duration of military service has been shortened, and fewer get drafted. In parallel, the welfare state has been progressively dismantled, with education, public health care and other social services consistently eroding. Hundreds of thousands of guest workers have been brought in, and the labor unions have been reduced to token institutions.  

The consequences of this process are illustrated in Figure 5. The chart contrasts the average monthly wage rate with the Tel Aviv stock price index (both expressed in constant prices and rebased for comparison purposes, with January 1980=100).  





[Figure 5. Capitalists Against Workers]

The figure shows that, until the early 1990s, the fortunes of workers and capitalists moved more or less in tandem. But with the onslaught of the breadth regime, their roads parted. During the 1990s and early 2000s, wages have hardly increased, while capital gains have risen to the stratosphere.  

Israeli reservists, who are now being called to fight in the unfolding war, probably have not seen this graph, but the reality behind it is certainly familiar to them. They know about deteriorating social services, about job insecurity, about overly expensive housing, about the loss of open spaces. They know that getting wounded in a war is a bad deal that yields meager compensation. Most importantly, they know that the elite that sends them to fight doesn’t really care about them.

These sentiments are quite explicit and appear regularly in the press. The following is a typical report of the difficulties faced by reserve soldiers:

"Defense Minister Amir Peretz has refused to use a law allowing IDF reservists called up for service recently to enjoy an exemption on fines and interest associated with debts they incur during their call-up period. The reservists are furious after discovering they are still required to pay the fines and interest even though they were unable to issue payments on time because they were called up. 'The reservists are forgotten, the way they always forget us,' said one of the reservists organization’s leaders, Alex Minkovsky. 'We're calling on the social-minded Defense Minister Amir Peretz to wake up and do something. We’re flooded by inquiries of reservists who are suffering crises on a daily basis.'"14

Dominant capital has no such complaints. As it turns out, a day before Defense Minister Peretz refused to heed the reservists’ plea, his government privatized the country’s oil refineries for $800 million. In an interview, the winning bidder, Tzadik Bino, sounded almost embarrassed:

"The state should not have privatized the refineries, and neither should it have privatized El-Al [the national airline], Bezeq [the national phone company] and Magen David Adom [the emergency medical service]. . . . The next stage would be to privatize the IDF. . . . We are still fighting for our existence, and it doesn’t pay to transfer strategic assets to private hands."15  

The old warfare-welfare state was dominated by charismatic figure heads, "leaders" such as Churchill, de Gaulle and Ben Gurion who seemed removed from any "particular" interests. By contrast, the neoliberal state tends to be populated by retainers – many of them corrupt and criminal – like Bush, Chirac, Berlusconi, Sharon, Netanyahu and Olmert, who don’t even try to hide their true loyalties.

The capitalist elite, which is served by and sustains these politicians, no longer bears a clear national attachment. Many of Israel’s largest companies are owned by foreign investors and multinational companies. Similarly, most of Israel’s large owners – from the Recannatis, to Fishman to Khan – have become global investors. Israel for them is merely one of many assets in a diversified world portfolio. Unlike during the 1970s, when they had all their eggs in the same Israeli basket, now they don’t need to worry too much about what happens in the country. Their local holdings represent only a fraction of their investments, and they are highly vendible.

A recent quote from the financial section of the daily Ha’aretz, written in the midst of the fighting in Lebanon and Gaza, indicates the extent to which foreign asset diversification has been accepted as natural by "ordinary" investors:  

"Over and above the 'regular' risks of emerging markets such as China, Brazil or Russia, Israel has a continuous security risk. . . . This risk cannot be ignored even in peace time. The global diversification of investment therefore is not a privilege. It is a necessity. . . . It means that, in the interest of reducing risk, Israeli investors have to permanently allocate a fixed proportion of their assets to investment overseas. How much is 'enough'? Until recently, the convention was 25 percent, but perhaps the share of foreign assets should be raised to 50 percent. Our bodies have to stay here. But why should our savings suffer the same fate?"16  

Under these circumstances, it is little wonder that the Israeli "war machine" has lost much of its military edge. The incentive to fight for “one’s country” when that country is so socially fractured is much reduced – particularly when confronted with socially embedded and highly motivated religious militias.  

And so the cheap wars linger, death and destruction mount, and the profits continue to accumulate.


Jonathan Nitzan teaches political economy at York University in Toronto. Shimshon Bichler teaches political economy at colleges and universities in Israel. Most of their publications are freely available from The Bichler & Nitzan Archives.


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Endnotes

1. Not all radical thinkers share this view. Some argue, to the contrary, that war and militarization, although embedded in and often caused by the capitalist reality, are harmful to capitalism and undermine its vitality.  

2. United States, National Security Council, NSC 68: United States Objectives and Programs for National Security. A Report to the President Pursuant to the President’s Directive of
January 31, 1950. Top Secret. Washington DC, 1950.

3. A logarithmic scale has the effect of amplifying the size on the chart of smaller values and compressing the size of larger ones. This transformation is useful when there are very big jumps in the data – such as during the 1940s – jumps that would otherwise make the variations of smaller values look too miniscule to discern on the chart.

4. Data on the ratio of foreign assets to GDP are from Maurice Obstfeld and Alan M. Taylor, Global Capital Markets: Integration, Crisis and Growth (Cambridge: Cambridge University Press, 2004), pp. 52-53, Table 2-1.

5. These issues are articulated in Jonathan Nitzan and Shimshon Bichler, "Dominant Capital and the New Wars," Journal of World Systems Research, 2004, Vol. 10, No. 2, pp. 255-327.

6. Due to mergers, the data in Figure 2 pertain to British Petroleum until 1997 and to BP-Amoco since 1998; to Chevron and Texaco until 1999 and to Chevron-Texaco since 2000; to Exxon and Mobil until 1998 and to ExxonMobil from 1999; and to Royal-Dutch/Shell throughout.

7. The conflicts include the 1967 Arab-Israeli conflict; the 1973 Arab-Israeli conflict; the 1979 Israeli invasion of Lebanon; the 1979 Iranian Revolution; the 1979 Soviet invasion of Afghanistan; the 1980 beginning of the Iraq-Iran War; the 1990/1 first Gulf War; the 2000 beginning of the second Intifada; the 2001 Coalition invasion of Afghanistan; and the 2003 Coalition invasion of Iraq (whose publicized preparation began in 2002).

8. Although there was no "official" conflict in 1996-7, there was plenty of violence, including an Iraqi invasion of Kurdish areas and U.S. cruise missile attacks.

9. In 2003, as the Iraq war unfolded, we wrote the following text:

"Our own view is that Middle East conflicts were integral to the power processes of global accumulation. . . . In the process, [the Weapondollar-Petrodollar] coalition had become increasingly fused with its ‘parent’ governments on the one hand and its OPEC ‘hosts’ on the other, leading to a growing ‘capital-state symbiosis’ between them. Whether or not there was ‘conspiracy’ here, and what the precise nature of such a ‘conspiracy’ was, remains an open question. Unfortunately, these types of issues are not the usual staple of primetime television. Occasionally, however, the truth does come to light, albeit with a little delay. . . . Perhaps in due course someone will publish the secret ‘Exxon Papers’ or a declassified ‘NSC Report on Energy and War in the Middle East,’ thereby opening a window into the back-room story of Energy Conflicts in the region" ("Dominant Capital and the New Wars," Journal of World Systems Research, 2004, Vol. 10, No. 2, p. 313).

As it turned out, the relevant documents surfaced rather quickly. Less than a year after the publication of our paper, Greg Palast uncovered the existence of two secret – and rather different – plans for the future of Iraq’s oil. The 2003 U.S. invasion of Iraq, Palast argued, reflected the conflicting strategies of two opposing factions. The first, vocal faction, led by the neo-cons and the Pentagon, planned to privatize Iraqi oil, flood the market and undermine OPEC. The other faction, led by the large oil companies and elements within the State Department, shared none of these fantasies. It let the neo-cons finish the job of conquering Iraq, and then sent its representatives to take control of the country’s oil production. In the end, there was no privatization, no flooding of the market and no undermining of OPEC – an organization of which the United States, as the ruler of Iraq, was now a de-facto member. See Greg Palast, "Secret US Plans for Iraq’s Oil," BBC News, March 17, 2005; Greg Palast, Armed Madhouse (New York: Dutton, 2006).

10. Jonathan Nitzan and Shimshon Bichler, "New Imperialism or New Capitalism?" Review, 2006, Vol. XXIX, No. 1, pp. 1-86.

11. The correlation coefficient between the two monthly series measures 0.80 (out of 1) for the period since January 1974, and 0.92 for the period since January 1979.

12. Alan Greenspan, "Testimony of Chairman Alan Greenspan Before the Joint Economic Committee," U.S. Congress, May 6, 2003; Bill Dudley and Paul McCulley, "Greenspan Must Go For Higher Inflation," Financial Times, April 23, 2003, pp. 17.

13. Jonathan Nitzan and Shimshon Bichler, "It's All About Oil," News From Within, Vol. XIX, No. 1, January 2003, p. 11.

14. Tani Goldstein, "Reservists Want Peretz to Okay Perks," Ynet, August 1, 2006.

15. Tani Goldstein, "Bino to Ynet: 'There Was No Need to Privatize the Refineries.'" Hebrew, Ynet, August 1, 2006.

16. Ami Ginsburg, "What Did We Learn From the First Two Weeks of the Second Lebanon War?" Hebrew, Ha'aretz, July 28, 2006.

CENTURY OF WAR- ANGLO-AMERICAN OIL POLITICS AND THE NEW WORLD ORDER

Pluto Press


'This is the only accurate account I have seen of what really happened with the price of oil in 1973. I strongly recommend reading it.'

Sheikh Zaki Yamani, former Oil Minister of Saudi Arabia

'I recommend this book to all who wish to know how the world is really run, what are the systems behind the sub-systems we perceive in the daily media, and what are the antecedents of the present global political dilemmas.'

Dr Frederick Wills, former Foreign Minister, Guyana

'For those truly interested about how the world economy functions, this book will be greatly useful. The book treats especially well the political goals of Britain, a thread in modern history all too often overlooked.'

Stephen J. Lewis, economist, City of London

'... one of the most readable books I have ever seen. It will shock people, but it is needed. William Engdahl has found a common thread that ties hundreds of events which, at first glance, appear to be unassociated.'

Leon D. Richardson, Far East Financial columnist, industrialist, advisory board, Sloan School of Management, Massachussetts Institute of Technology


Already a bestseller in Europe, this book is a gripping account of the murky world of the international oil industry and its role in world politics. / Scandals about oil are familiar to most of us. From George W. Bush's election victory to the wars in Iraq and Afghanistan, US politics and oil enjoy a controversially close relationship. The US economy relies upon the cheap and unlimited supply of this single fuel.

William Engdahl takes the reader through a history of the oil industry's grip on the world economy. His revelations are startling. Moving from the post-World War I period up to the present day, he shows how oil is -- and has always been -- the motivating factor in international policy and conflicts.

Shedding light on the 1970s oil shocks and the grand strategy of Washington after the end of the Cold War, Engdahl presents a convincing case that geopolitics and oil were behind the collapse of the Soviet Union, the breakup of Yugoslavia, the rise and fall of the Taliban. He reveals evidence to show that the US and UK decision to go to war in Iraq was not simply an issue of corporate greed. It was a strategic move to control the world economy for the following half century or more.

Contents

Foreword
1. The Three Pillars of the British Empire
2. The Lines are Drawn: Germany and the Geopolitics of the Great War
3. A Global Fight for Control of Petroleum Begins
4. Oil Becomes the Weapon, the Near East the Battleground
5. Combined & Conflicting Goals: U.S. rivals Britain
6. The Anglo-Americans Close Ranks
7. Oil and a New World Order of Bretton Woods
8. A Sterling Crisis and the Adenauer-de Gaulle Threat
9. Running the world economy in reverse: Who made the 1970's oil shocks?
10. Europe, Japan and a response to the oil shock
11. Imposing the New World Order
12. From Evil Empire to the Axis of Evil
13. A new millennium for oil geopolitics
Appendices
Index of names

THE DEMONIZATION OF MUSLIMS AND THE BATTLE FOR OIL

Michel Chossudovsky
http://www.globalresearch.ca/index.php?c...cleId=4347


Throughout history, "wars of religion" have served to obscure the economic and strategic interests behind the conquest and invasion of foreign lands. "Wars of religion" were invariably fought with a view to securing control over trading routes and natural resources.

The Crusades extending from the 11th to the 14th Century are often presented by historians as "a continuous series of military-religious expeditions made by European Christians in the hope of wresting the Holy Land from the infidel Turks." The objective of the Crusades, however, had little to do with religion. The Crusades largely consisted, through military action, in challenging the dominion of the Muslim merchant societies, which controlled the Eastern trade routes.

The "Just War" supported the Crusades. War was waged with the support of the Catholic Church, acting as an instrument of religious propaganda and indoctrination, which was used in the enlistment throughout Europe of thousands of peasants, serfs and urban vagabonds.

America's Crusade in Central Asia and the Middle East

In the eyes of public opinion, possessing a "just cause" for waging war is central. A war is said to be Just if it is waged on moral, religious or ethical grounds.

America's Crusade in Central Asia and the Middle East is no exception. The "war on terrorism" purports to defend the American Homeland and protect the "civilized world". It is upheld as a "war of religion", a "clash of civilizations", when in fact the main objective of this war is to secure control and corporate ownership over the region's extensive oil wealth, while also imposing under the helm of the IMF and the World Bank (now under the leadership of Paul Wolfowitz), the privatization of State enterprises and the transfer of the countries' economic assets into the hands of foreign capital. .

The Just War theory upholds war as a "humanitarian operation". It serves to camouflage the real objectives of the military operation, while providing a moral and principled image to the invaders. In its contemporary version, it calls for military intervention on ethical and moral grounds against "rogue states" and "Islamic terrorists", which are threatening the Homeland.

Possessing a "just cause" for waging war is central to the Bush administration's justification for invading and occupying both Afghanistan and Iraq.

Taught in US military academies, a modern-day version of the "Just War" theory has been embodied into US military doctrine. The "war on terrorism" and the notion of "preemption" are predicated on the right to "self defense." They define "when it is permissible to wage war": jus ad bellum.

Jus ad bellum serves to build a consensus within the Armed Forces command structures. It also serves to convince the troops that the enemy is "evil" and that they are fighting for a "just cause". More generally, the Just War theory in its modern day version is an integral part of war propaganda and media disinformation, applied to gain public support for a war agenda.

The Battle for Oil. Demonization of the Enemy

War builds a humanitarian agenda. Throughout history, vilification of the enemy has been applied time and again. The Crusades consisted in demonizing the Turks as infidels and heretics, with a view to justifying military action.

Demonization serves geopolitical and economic objectives. Likewise, the campaign against "Islamic terrorism" (which is supported covertly by US intelligence) supports the conquest of oil wealth. The term "Islamo-fascism," serves to degrade the policies, institutions, values and social fabric of Muslim countries, while also upholding the tenets of "Western democracy" and the "free market" as the only alternative for these countries.

The US led war in the broader Middle East Central Asian region consists in gaining control over more than sixty percent of the world's reserves of oil and natural gas. The Anglo-American oil giants also seek to gain control over oil and gas pipeline routes out of the region. (See table and maps below).

Muslim countries including Saudi Arabia, Iraq, Iran, Kuwait, the United Arab Emirates, Qatar, Yemen, Libya, Nigeria, Algeria, Kazakhstan, Azerbaijan, Malaysia, Indonesia, Brunei, possess between 66.2 and 75.9 percent of total oil reserves, depending on the source and methodology of the estimate. (See table below).

In contrast, the United States of America has barely 2 percent of total oil reserves. Western countries including its major oil producers ( Canada, the US, Norway, the UK, Denmark and Australia) control approximately 4 percent of total oil reserves. (In the alternative estimate of the Oil and Gas Journal which includes Canada's oil sands, this percentage would be of the the order of 16.5%. See table below).

The largest share of the World's oil reserves lies in a region extending (North) from the tip of Yemen to the Caspian sea basin and (East) from the Eastern Mediterranean coastline to the Persian Gulf. This broader Middle East- Central Asian region, which is the theater of the US-led "war on terrorism" encompasses according to the estimates of World Oil, more than sixty percent of the World's oil reserves. (See table below).

Iraq has five times more oil than the United States.

Muslim countries possess at least 16 times more oil than the Western countries.

The major non-Muslim oil reserve countries are Venezuela, Russia, Mexico, China and Brazil. (See table)

Demonization is applied to an enemy, which possesses three quarters of the world's oil reserves. "Axis of evil", "rogue States", "failed nations", "Islamic terrorists": demonization and vilification are the ideological pillars of America's "war on terror". They serve as a casus belli for waging the battle for oil.

The Battle for Oil requires the demonization of those who possess the oil. The enemy is characterized as evil, with a view to justifying military action including the mass killing of civilians. The Middle East Central Asian region is heavily militarized. (See map). The oil fields are encircled: NATO war ships stationed in the Eastern Mediterranean (as part of a UN "peace keeping" operation), US Carrier Strike Groups and Destroyer Squadrons in the Persian Gulf and the Arabian deployed as part of the "war on terrorism".



USS Enterprise Strike Group

The ultimate objective, combining military action, covert intelligence operations and war propaganda, is to break down the national fabric and transform sovereign countries into open economic territories, where natural resources can be plundered and confiscated under "free market" supervision. This control also extends to strategic oil and gas pipeline corridors (e.g. Afghanistan).

Demonization is a PSYOP, used to sway public opinion and build a consensus in favor of war. Psychological warfare is directly sponsored by the Pentagon and the US intelligence apparatus. It is not limited to assassinating or executing the rulers of Muslim countries, it extends to entire populations. It also targets Muslims in Western Europe and North America. It purports to break national consciousness and the ability to resist the invader. It denigrates Islam. It creates social divisions. It is intended to divide national societies and ultimately trigger "civil war". While it creates an environment which facilitates the outright appropriation of the countries' resources, at the same time, it potentially backlashes, creates a new national consciousness, develops inter-ethnic solidarity, brings people together in confronting the invaders.

It is worth noting that the triggering of sectarian divisions and "civil wars" is contemplated in the process of redrawing of the map of the Middle East, where countries are slated to be broken up and transformed into territories. The map of the New Middle East, although not official, has been used by the US National War Academy. It was recently published in the Armed Forces Journal (June 2006). In this map, nation states are broken up, international borders are redefined along sectarian-ethnic lines, broadly in accordance with the interests of the Anglo-American oil giants (See Map below). The map has also been used in a training program at NATO's Defense College for senior military officers.

MAP OF THE NEW MIDDLE EAST


Map: click to enlarge

Note: The following map was prepared by Lieutenant-Colonel Ralph Peters. It was published in the Armed Forces Journal in June 2006, Peters is a retired colonel of the U.S. National War Academy. (Map Copyright Lieutenant-Colonel Ralph Peters 2006).

The Oil Lies in Muslim Lands

The oil lies in Muslim lands. Vilification of the enemy is part and parcel of Eurasia energy geopolitics. It is a direct function of the geographic distribution of the World's oil and gas reserves. If the oil were in countries occupied predominantly by Buddhists or Hindus, one would expect that US foreign policy would be directed against Buddhists and Hindus, who would also be the object of vilification..

In the Middle East war theater, Iran and Syria, which are part of the "axis of evil", are the next targets according to official US statements.

US sponsored "civil wars" have also been conducted in several other strategic oil and gas regions including Nigeria, the Sudan, Colombia, Somalia, Yemen, Angola, not to mention Chechnya and several republics of the former Soviet Union. Ongoing US sponsored "civil wars", which often include the channelling of covert support to paramilitary groups, have been triggered in the Darfur region of Sudan as well as in Somalia, Darfur possesses extensive oil reserves. In Somalia, lucrative concessions have already been granted to four Anglo-American oil giants.

"According to documents obtained by The Times, nearly two-thirds of Somalia was allocated to the American oil giants Conoco, Amoco [now part of BP], Chevron and Phillips in the final years before Somalia's pro-U.S. President Mohamed Siad Barre was overthrown and the nation plunged into chaos in January, 1991. Industry sources said the companies holding the rights to the most promising concessions are hoping that the Bush Administration's decision to send U.S. troops to safeguard aid shipments to Somalia will also help protect their multimillion-dollar investments there." (America's Interests in Somalia, Global Research, 2002)

Globalization and the Conquest of the World's Energy Resources

The collective demonization of Muslims, including the vilification of Islam, applied Worldwide, constitutes at the ideological level, an instrument of conquest of the World's energy resources. It is part of the broader economic, political mechanisms underlying the New World Order.


Oil Reserves by Country

(Proven reserves in billions of barrels)
Rank
Country
Percent of World Reserves
World Oil, December 2004
Percent of World Reserves
Oil & Gas Journal, January 2006

1.
Saudi Arabia
24.2
262.1
20.6
266.8

2.
Canada*
0.4
4.7
13.8
178.8

3.
Iran
12.1
130.8
10.3
132.5

4.
Iraq
10.6
115.0
8.9
115.0

5.
Kuwait
9.2
99.7
7.9
101.5

6.
United Arab Emirates
6.5
69.9
7.6
97.8

7.
Venezuela*
4.8
52.4
6.1
79.7

8.
Russia
6.2
67.1
4.6
60.0

9.
Libya
3.2
33.6
3.0
39.1

10.
Nigeria
3.4
36.6
2.7
35.9

11.
United States
2.0
21.4
1.7
21.4

12.
China
1.4
15.4
1.4
18.3

13.
Qatar
1.8
20
1.2
15.2

14.
Mexico
1.4
14.8
1.0
12.9

15.
Algeria
1.4
15.3
0.9
11.4

16.
Brazil
1.0
11.2
0.9
11.2

17.
Kazakhstan
0.8
9.0
0.7
9.0

18.
Norway
0.9
9.9
0.6
7.7

19.
Azerbaijan
0.6
7.0
0.5
7.0

20.
India
0.5
4.9
0.4
5.8

21
Oman
0.4.
4.8
0.4
5.5

22
Angola
0.8.
9.0
0.4
5.4

23
Ecuador
0.5
5.5
0.4
4.6

24
Indonesia
0.5
5.3
0.3
4.3

25
UK
0.4
3.9
0.3
4.0

26
Yemen
0.3
3.0
0.3
4.0

27
Egypt
0.3
3.6
0.3
3.7

28
Malaysia
0.3
3.0
0.2
3.0

29
Gabon
0.2
2.2
0.2
2.5

30
Syria
0.2
2.3
0.2
2.5

31
Argentina
0.2
2.3
0.2
2.3

32
Equatorial Guinea
0.2
1,8
0.0
0.0

32
Colombia
0.1
1.5
0.1
1.5

33
Vietnam
0.1
1,3

0.6

34
Chad
0.0
0.0
0.1
1.5

35
Australia
0.3
3.6
0.1
1.4

36
Brunei
0.1
1.1
0.1
1.4

37
Denmark
0.1
1.3
0.1
1.3

38
Peru
0.1
0.9
0.1
1.0

Total Muslim Countries**
75.9
822.1
66.2
855.6

Total Western World (EU, North America, Australia)
4.1
44.8
16.5
213.3
Other Countries 20.6 214.9 17.3 223.6
World Total 100.0 1,081.8 100.0 1,292.5

Source: EIO: Energy Information Administration (Scroll down for explanatory notes on the table)

ANNEX

For details on th Campaign against the pipeline see
http://www.bakuceyhan.org.uk/more_info/bp_pipeline.htm

NOTES PERTAINING TO THE TABLE ON THE DISTRIBUTION OF OIL RESERVES
Indicated are the world's main oil reserve countries. Countries with less than 0.1 % of total reserves are not indicated.

The Oil and Gas Journal figures indicated above are based on proven oil reserves including the bituminous oil fields (oil sands or tar sands). The World Oil figures indicate oil reserves without the tar sands. The difference between the two sets of figures largely pertains to the position of Canada and Venezuela. The tar-sands are considered by some experts as not recoverable with present technology and prices, although this issue is the object of heated debate.

Muslim countries are indicated in bold. Percentages are rounded up to first decimal.

*Canada appears according to this estimate as the Second Country in terms of the size of proven reserves, due to the size of its bituminous oil fields. The Oil & Gas Journal's oil reserve estimate above for Canada includes 4.7 billion barrels of conventional crude oil and condensate reserves and 174.1 billion barrels of oil sands reserves.

In other recognized estimates, where the oil sands are not accounted for, Canada's reserves are much lower (in billions of barrels):

BP Statistical Review 16.802

Oil & Gas Journal 178.792

World Oil 4.700

BP notes that "the figure for Canadian oil reserves includes an official estimate of Canadian oil sands "under active development"." BP says of its data sources for oil reserves that "the estimates in this table have been compiled using a combination of primary official sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas Journal and an independent estimate of Russian reserves based on information in the public domain.

World Oil's Canadian oil reserve estimate "does not include 174 billion bbl [barrels] of oil sands reserves."

THE LIVING REALITY OF MILITARY- ECONOMIC FASCISM

Robert Higgs
http://www.mises.org/story/2450

"The business of buying weapons that takes place in the Pentagon is a corrupt business — ethically and morally corrupt from top to bottom. The process is dominated by advocacy, with few, if any, checks and balances. Most people in power like this system of doing business and do not want it changed." – Colonel James G. Burton (1993, 232)

In countries such as the United States, whose economies are commonly, though inaccurately, described as "capitalist" or "free-market," war and preparation for war systematically corrupt both parties to the state-private transactions by which the government obtains the bulk of its military goods and services.

On one side, business interests seek to bend the state's decisions in their favor by corrupting official decision-makers with outright and de facto bribes. The former include cash, gifts in kind, loans, entertainment, transportation, lodging, prostitutes' services, inside information about personal investment opportunities, overly generous speaking fees, and promises of future employment or "consulting" patronage for officials or their family members, whereas the latter include campaign contributions (sometimes legal, sometimes illegal), sponsorship of political fund-raising events, and donations to charities or other causes favored by the relevant government officials.

Reports of this sort of corruption appear from time to time in the press under the rubric of "military scandal" (see, for example, Biddle 1985, Wines 1989, Hinds 1992, "National Briefing" 2003, Pasztor and Karp 2004, Colarusso 2004, Calbreath and Kammer 2005, Wood 2005, Babcock 2006, Ross 2006, and "Defense Contractor Guilty in Bribe Case" 2006). On the other, much more important side, the state corrupts business people by effectively turning them into co-conspirators in and beneficiaries of its most fundamental activity — plundering the general public.

Participants in the military-industrial-congressional complex (MICC) are routinely blamed for "mismanagement," not infrequently they are accused of "waste, fraud, and abuse," and from time to time a few of them are indicted for criminal offenses (Higgs 1988, 1990, xx-xxiii, 2004; Fitzgerald 1989; Kovacic 1990a, 1990b).

All of these unsavory actions, however, are typically viewed as aberrations — misfeasances to be rectified or malfeasances to be punished while retaining the basic system of state-private cooperation in the production of military goods and services (for an explicit example of the "aberration" claim, see Fitzgerald 1989, 197–98). I maintain, in contrast, that these offenses and even more serious ones are not simply unfortunate blemishes on a basically sound arrangement, but superficial expressions of a thoroughgoing, intrinsic rottenness in the entire setup.

It is regrettable in any event for people to suffer under the weight of a state and its military apparatus, but the present arrangement — a system of military-economic fascism as instantiated in the United States by the MICC — is worse than full-fledged military-economic socialism. In the latter, the people are oppressed, because they are taxed, conscripted, and regimented, but they are not co-opted and corrupted by joining forces with their rapacious rulers; a clear line separates them from the predators on the "dark side."

With military-economic fascism, however, the line becomes blurred, and a substantial number of people actively hop back and forth across it: advisory committees, such as the Defense Science Board and the Defense Policy Board and university administrators meet regularly with Pentagon officials (see Borger 2003 for a report of an especially remarkable meeting), and the revolving door spins furiously — according to a September 2002 report, "[t]hirty-two major Bush appointees are former executives, consultants, or major shareholders of top weapons contractors" (Ciarrocca 2002, 2; see also Hamburger 2003, Doward 2003, Stubbing 1986, 90, 96, and Kotz 1988, 230), and a much greater number cross the line at lower levels.

Moreover, military-economic fascism, by empowering and enriching wealthy, intelligent, and influential members of the public, removes them from the ranks of potential opponents and resisters of the state and thereby helps to perpetuate the state's existence and its intrinsic class exploitation of people outside the state. Thus, military-economic fascism simultaneously strengthens the state and weakens civil society, even as it creates the illusion of a vibrant private sector patriotically engaged in supplying goods and services to the heroic military establishment (the Boeing Company's slickly produced television ads, among others, splendidly illustrate this propagandistically encouraged illusion).

Garden-variety Military-Economic Corruption of Government Officials

We need not dwell long on the logic of garden-variety military-economic corruption. As pots of honey attract flies, so pots of money attract thieves and con men. No organization has more money at its disposal than the US government, which attracts thieves and con men at least in full proportion to its control of wealth. Unscrupulous private parties who desire to gain a slice of the government's booty converge on the morally dismal swamp known as Washington, DC, and take whatever actions they expect will divert a portion of the loot into their own hands. Anyone who expects honor among thieves will be sorely disappointed by the details of these sordid activities.

Although headlines alone cannot convey the resplendently lurid details, they can suggest the varieties of putrid sloughs that drain into the swamp:

Audit Cites Pentagon Contractors [for widespread abuse of overhead charges]
Ex-Unisys Official Admits Paying Bribes to Get Pentagon Contracts
Top Republican on a House Panel Is Charged With Accepting Bribes
Ex-Pentagon Officials Sentenced [for taking monetary bribes and accepting prostitutes' services from contractors]
Northrop Papers Indicate Coverup: Documents from '80s Show Accounting Irregularities Were Hidden from Pentagon
Revolving Door Leads to Jail: Former Acquisition Official Convicted of Steering Business to Boeing for Personal Gain
Contractor "Knew How to Grease the Wheels": ADCS Founder Spent Years Cultivating Political Contacts
Graft Lurks within Pentagon's "Black Budget": Top-secret Items Escape Oversight
Contractor Pleads Guilty to Corruption: Probe Extends Beyond Bribes to Congressman
From Cash to Yachts: Congressman's Bribe Menu; Court Documents Show Randall "Duke" Cunningham Set Bribery Rates
Defense Contractor Guilty in Bribe Case
(Sources for these headlines appear, respectively, in the citations given in the third paragraph of this article.) Anyone who cares to accumulate all such news articles may look forward to full employment for the rest of his life.

"No organization has more money at its disposal than the US government, which attracts thieves and con men at least in full proportion to its control of wealth."
Yet, notwithstanding the many culprits who are caught in the act, one must realistically assume that a far greater number get away scot-free. As Ernest Fitzgerald, an extraordinarily knowledgeable authority with extensive personal experience, has observed, the entire system of military procurement is pervaded by dishonesty: "Government officials, from the majestic office of the president to the lowest, sleaziest procurement office, lie routinely and with impunity in defense of the system," and "the combination of loose procurement rules and government acquiescence in rip-offs leaves many a crook untouched" (1989, 312, 290).

Among the instructive cases now making their way through the justice system are several related to recently convicted congressman Randall "Duke" Cunningham, a war hero and longtime titan of the MICC who currently resides in a federal penitentiary. Chief among the persons under continuing investigation by the Federal Bureau of Investigation is Brent Wilkes, a DC high-flyer who is alleged to have been involved tangentially in events leading to the recent sacking of former congressman and Director of Central Intelligence Porter Goss. According to a May 7, 2006, report in the New York Daily News, ongoing FBI and CIA investigations of Kyle (Dusty) Foggo, formerly the third-ranking official at the Central Intelligence Agency (CIA), who resigned in May 2006 amid a swirl of allegations,

have focused on the Watergate poker parties thrown by defense contractor Brent Wilkes, a high-school buddy of Foggo's, that were attended by disgraced former Rep. Randy (Duke) Cunningham and other lawmakers.

Foggo has claimed he went to the parties "just for poker" amid allegations that Wilkes, a top GOP fund-raiser and a member of the $100,000 "Pioneers" of Bush's 2004 reelection campaign, provided prostitutes, limos and hotel suites to Cunningham.

Cunningham is serving an eight-year sentence after pleading to taking $2.4 million in bribes to steer defense contracts to cronies.

Wilkes hosted regular parties for 15 years at the Watergate and Westin Grand Hotels for lawmakers and lobbyists. Intelligence sources said Goss has denied attending the parties as CIA director, but that left open whether he may have attended as a Republican congressman from Florida who was head of the House Intelligence Committee. (Sisk 2006)

In your mind, multiply this squalid little scenario by one thousand, and you will begin to gain a vision of what goes on in the MICC's higher reaches. Evidently, the daily routine there is not all wailing and gnashing of teeth over how to defend the country against Osama bin Laden and his horde of murderous maniacs — our country's leaders require frequent periods of rest and recreation. If this sort of fun and games at taxpayer expense is your idea of responsible government, then you ought to answer "yes" when the pollster calls to ask whether you favor an increase in the defense budget. Our government is clearly at work — at work making chumps out of its loyal subjects and laughing at these rubes all the way to the bank.

Legal Corruption of Government Officials

The truly big bucks, of course, need not be compromised in the least by this sweaty species of fraud and workaday corruption (Kovacic 1990a,89–90, 103 n197; 1990b, 118, 130 n94–101). Just as someone who kills one person is a murderer, whereas someone who kills a million persons is a statesman, so the government officials who steer hundreds of billions of dollars, perhaps without violating any law or regulation, to the Star Wars contractors and the producers of other big-ticket weapon systems account for the bulk of the swag laundered through the Department of Defense and the Department of Homeland Security. (Lest the latter organization be overlooked, see the enormously revealing account by Bennett 2006.)

I am not saying that this huge component of the MICC is squeaky clean — far from it — but only that the corruption in this area, in dollar terms, falls mainly under the heading of legal theft, or at least in the gray area (Stubbing 1986, 407). As a Lockheed employee once wrote to Fitzgerald, "the government doesn't really need this stuff. It's just the best way to get rich quick. If they really needed all these nuclear bombs and killer satellites, they wouldn't run this place the way they do" (qtd. in Fitzgerald 1989, 313; see also Meyer 2002). I personally recall Fitzgerald's saying to me twenty years ago at Lafayette College, "A defense contract is just a license to steal."

Absence of Proper Accounting Invites Theft

Indeed, Fitzgerald appeared as a witness at Senator Chuck Grassley's September 1998 hearings titled "License to Steal: Administrative Oversight of Financial Control Failures at the Department of Defense." At those hearings, Grassley released two new audit reports prepared by the General Accounting Office and another report prepared by his staff in cooperation with the Air Force Office of Financial Management. According to Grassley's September 21, 1998, press release, "These reports consistently show that sloppy accounting procedures and ineffective or nonexistent internal controls leave DoD's accounts vulnerable to theft and abuse. Failure by the DoD to exercise proper accounting procedures has resulted in fraud and mismanagement of the taxpayers' money."

Although this sort of complaint has become an annual ritual, dutifully reported in the press, the Pentagon has never managed to put its accounts into a form that can even be audited. Like Dick Cheney, who chose not to fight in the Vietnam War, the military brass seems to have had other priorities, even though for more than a decade the Defense Department has invariably stood in violation of the 1994 federal statute that requires every government department to make a financial audit (Higgs 2005, 55–61).

"If this sort of fun and games at taxpayer expense is your idea of responsible government, then you ought to answer yes when the pollster calls to ask whether you favor an increase in the defense budget."
Testifying before a congressional committee on August 3, 2006, Thomas F. Gimble, the department's acting inspector general, emphasized "financial management problems that are long standing, pervasive, and deeply rooted in virtually all operations."

Expanding on this general observation with specific reference to the fiscal year 2005 agency-wide principal financial statements, he stated: "We issued a disclaimer of opinion for the statements because numerous deficiencies continue to exist related to the quality of data, adequacy of reporting systems, and reliability of internal controls."

Of the nine organizational components "required by the Office of Management and Budget (OMB) to prepare and obtain an audit opinion on their FY 2005 financial statements," only one received an unqualified opinion and one a qualified opinion. "All the others, including the agency-wide financial statements, received a disclaimer of opinion, as they have every year in the past…. The weaknesses that affect the auditability of the financial statements also impact other DoD programs and operations and contribute to waste, mismanagement, and inefficient use of DoD resources. These weaknesses affect the safeguarding of assets and proper use of funds and impair the prevention and identification of fraud, waste, and abuse" (US Department of Defense, Office of the Inspector General 2006, 1–2, emphasis added).

In Iraq since the US invasion in 2003, billions of dollars have simply disappeared without leaving a trace ("Audit: US Lost Track" 2005, Krane 2006). Surely they did not all evaporate in the hot desert sun. The accounts at Homeland Security are in equally horrible condition (Bennett 2006, 110–11).

No one knows how much money or specific property is missing from the military and homeland-security departments or where the missing assets have gone. If a public corporation kept its accounts this atrociously, the Securities and Exchange Commission would shut it down overnight. Government officials, however, need not worry about obedience to the laws they make to assure their credulous subjects that everything is hunky-dory inside the walls. When they are of a mind, they simply flout those laws with impunity.

PAC Contributions to Politicians and Their Parties Are Bribes

Political action committees (PACs) evolved and eventually obtained legal validation as vehicles for making lawful bribes to candidates for federal offices and to their political parties. Candidates now count on them for a large share of their campaign funds, and everyone over eleven years of age with an IQ above 70 understands that these contributions are made with an understanding that they will elicit a quid pro quo from the recipients who win the elections.

Military-economic interests have not been timid about forming PACs and transferring huge sums of money through them to the candidates. According to the Center for Responsive Politics, "defense" PACs transferred more than $70 million to candidates and parties in the election cycles from 1990 to 2006. Individuals and soft-money contributors (before soft-money contributions were outlawed after the 2002 elections) in the "defense" sector added more than $37 million, bringing the total to nearly $108 million (the figures are available here).

No one knows how much was added by illegal and hence unrecorded contributions made by military interests, but the addition might well have been substantial, if we may judge by the many accounts of individual instances of such contributions that have been brought to light over the years.

Figure 1 shows the amounts transferred during the past nine election cycles.


Figure 1. Contributions by "Defense" Interests in Federal Elections, 1990–2006

Source: Center for Responsive Politics
Note: Soft money contributions (defined as those that do not explicitly urge voters to cast their ballots for specific candidates) after the 2002 elections were banned by the Bipartisan Campaign Finance Reform Act.

Methodology: The numbers are based on contributions of $200 or more from PACs and individuals to federal candidates and from PAC, soft money and individual donors to political parties, as reported to the Federal Election Commission. Although election cycles are shown in the chart as 1996, 1998, 2000, etc., they actually represent two-year periods. For example, the 2002 election cycle runs from January 1, 2001, to December 31, 2002.



One may deny, of course, that PAC contributions constitute a form of corruption, inasmuch as they are legal within the statutorily specified limits, but such a denial would elevate form over substance. Both the givers and the receivers understand these payments in exactly the same way that they understand illegal forms of bribery, even though they never admit this understanding in public — political decorum must be served, if only to protect the children.

How Government Corrupts Business

A brief review of the history of US military contracting helps to clarify my claim that military-economic transactions tend to corrupt business. The most important historical fact is that before 1940, except during wartime, such dealings amounted to very little. The United States had only a tiny standing army and no standing munitions industry worthy of the name. When wars occurred, the government supplemented the products of its own arsenals and navy yards with goods and services purchased from private contractors, but most such items were off-the-shelf civilian goods, such as boots, clothing, food, and transportation services.

To be sure, plenty of occasions arose for garden-variety corruption in these dealings — bribes, kickbacks, provision of shoddy goods, and so forth (Brandes 1997) – but such malfeasances were usually one-shot or fleeting transgressions, because the demobilizations that followed the conclusion of each war removed the opportunity for such corruption to become institutionalized to a significant degree in law, persistent organizations, or ongoing practice.

Like gaudy fireworks, these sporadic outbursts of corruption flared brightly and then turned to dead cinders. No substantial peacetime contracting existed to fuel enduring corruption of the military's private suppliers, and much of the contracting that did take place occurred within the constraints of rigid solicitations and sealed-bid offers, which made cozy deals between a military buyer and a private seller difficult to arrange. At late as fiscal year 1940, the War Department made 87 percent of its purchases through advertising and invitations to bid (Higgs 2006a, 39).

"The Pentagon has never managed to put its accounts into a form that can even be audited."
All this changed abruptly and forever in 1940, and the situation that existed during the so-called defense period of 1940–41, before the United States became a declared belligerent in World War II, and the manner in which it was resolved had an enduring effect in shaping the contours of the MICC and hence in establishing its characteristic corruption of business.

The Roosevelt administration, desperate to build up the nation's capacity for war after the breathtaking German triumphs in the spring of 1940, made an abrupt about-face, abandoning its relentless flagellation of businessmen and investors and instead courting their favor as prime movers in the buildup of the munitions industries. Most businessmen, however, having been anathematized and legislatively pummeled for the past six years, were reluctant to enter into such deals, for a variety of reasons, chief among them being their fear and distrust of the federal government (Higgs 2006a, 36–38).

To placate the leery businessmen by shifting the risks from them onto the taxpayers, the government adopted several important changes in its procurement laws and regulations. These included negotiated cost-plus-fixed-fee contracts, instead of contracts arrived at within the solicitation-and-sealed-bid system; various forms of tax breaks; government loan guarantees; direct government funding of plants, equipment, and materials; and provision of advance and progress payments, sparing the contractors the need to obtain and pay interest on bank loans.

All of these arrangements, with greater or lesser variations in their details from time to time, became permanent features of the MICC (US Senate, Committee on Armed Services 1985, 35, 42, 553–67).

Even more important, as the new system operated on a vast scale during World War II, the dealings between the military purchasers and the private suppliers took on a fundamentally new style. As described by Wilberton Smith, the official historian of the Army's economic mobilization during the war:

The relationship between the government and its contractors was gradually transformed from an "arm's length" relationship between two more or less equal parties in a business transaction into an undefined but intimate relationship — partly business, partly fiduciary, and partly unilateral — in which the financial, contractual, statutory, and other instruments and assumptions of economic activity were reshaped to meet the ultimate requirements of victory in war. Under the new conditions, contracts ceased to be completely binding; fixed prices in contracts often became only tentative and provisional prices; excessive profits received by contractors were recoverable by the government; and potential losses resulting from many causes — including errors, poor judgments, and performance failures on the part of contractors — were averted by modification and amendment of contracts, with or without legal "consideration," whenever required by the exigencies of the war effort. (1959, 312, emphasis added)

Although Smith was describing the system as it came to operate during World War II, almost everything he said fits the postwar MICC as well (Higgs 2006a, 31–33), especially his depiction of the buyer-seller dealings as constituting "an undefined but intimate relationship" and his recognition that "contracts ceased to be completely binding."

Thus, the institutional changes made in 1940–41 and the wartime operation of the military-industrial complex in the context of these new rules put permanently in place the essential features of the modern procurement system, which has repeatedly demonstrated its imperviousness to reform for the past sixty years — it was too good a deal to give up even after the demise of the USSR and the end of the Cold War, and with breathtaking chutzpah, the system's kingpins parlayed the box-cutter attacks of 9/11 into an excuse to pour hundreds of billions of additional dollars into purchases of Cold War weaponry (Sapolsky and Gholz 2001, Isenberg and Eland 2002, Higgs 2004, Makinson 2004).

Under the old, pre-1940 system, a private business rarely had anything to gain by wining and dining military buyers or congressmen. Unless a firm made the lowest-priced sealed-bid offer to supply a carefully specified good, it would not get the contract. The military buyer knew what he needed, and he had a tightly limited budget with which to get it. After 1940, however, the newly established "intimate relationship" opened up a whole new world for wheeling and dealing on both sides of the deal — often it was difficult to say whether the government agent was shaking down the businessman or the businessman was bribing the government agent.

"In Iraq since the US invasion in 2003, billions of dollars have simply disappeared without leaving a trace."
In fact, until the military purchasing agency certified a company as qualified, the firm could not make a valid offer, even in the context of competitive bidding. In the post-1940 era, only a small fraction of all contracts emerged from formally advertised, sealed-bid competition, and most contracts were negotiated without any kind of price competition (Higgs 2006a, 39; Stubbing 1986, 226, 411).

Deals came to turn not on price, but on technical and scientific capabilities, size, experience, and established reputation as a military supplier — vaguer attributes that are easier to fudge for one's friends. From time to time, deals also turned on the perceived need to keep a big firm from going under. For example, Fen Hampson observes that in the early 1970s, "The bidding [for production of the C-4 (Trident I) missile] was not opened to other companies because Lockheed was encountering financial difficulties at the time and desperately needed the business" (1989, 92).

Indeed, scholars have identified an extensive pattern of rotating major contracts that has been dubbed a "follow-on imperative" or a "bailout imperative," a virtual guarantee against bankruptcy, regardless of mismanagement or other corporate ineptitude (Nieburg 1966, 201, 269; Kurth 1973, 142–44; Kaufman 1972, 289; Dumas 1977, 458; Gansler 1980, 49, 172, 227; Stubbing 1986, 185–89, 200–04).

Subcontracts could also be used to prop up failing firms, and in nearly every large-scale project they served as the principal means of spreading the political patronage across many congressional districts (Kotz 1988, 128–29; Mayer 1990, 218–31). In truth, deals — especially the many important changes introduced into them after their initial formulation ("contract nourishment"), permitting contractors to "buy in now, get well later" (Stubbing 1986, 179–84) — came to turn in substantial part on "who you know." In Richard Stubbing's words, "Often it is raw politics, not military considerations, which ultimately determines the winner" (1986, 165).

All the successful major prime contractors — such as Lockheed Martin (see Cummings 2007), General Dynamics (see Franklin 1986), Rockwell (see Kotz 1988), Bechtel (see McCartney 1988), and Halliburton (see Briody 2004), for example — demonstrated beyond any doubt that in the MICC, cultivating friends in high places yields a high rate of return. Indeed, without such friends, a firm may be hard pressed to survive in this sector at all.

The tight budget constraints of the pre-1940 peacetime periods became vastly looser as trillions of dollars poured out of the congressional appropriations process during the endless national emergency of the Cold War and its sequel, the so-called war on terror. As Nick Kotz observed, "Now that the stakes in profits and jobs were far higher than those of any government program in history, dividing the spoils ensured that the game of politics would be played on a grand scale" (1988, 50). (Of course, the game of politics in reality, as distinct from the high-school-civics idealization, is essentially the game of corruption.) In fiscal year 2007, for example, the Department of Defense anticipates outlays of approximately $90 billion for procurement, $162 billion for operations and maintenance, $72 billion for research, development, testing, and evaluation, and $8 billion for military construction — components that sum to $332 billion (US Department of Defense, Office of the Under Secretary of Defense 2006, 15). Nearly all of this loot will end up in the pockets of private contractors; military personnel costs are separate from these accounts.

With plenty of money to go around, all that a would-be contractor needs is an old buddy in the upper reaches of a military bureaucracy or a friend on the House military appropriations subcommittee or in the Senate. (Nowadays, more than ever before, a single member of Congress can create magnificent gifts for his friends by making "earmarks," furtive amendments to an appropriations bill that everyone understands to be nothing but an individual legislator's pound of flesh taken out of the taxpayer's unfortunate corpus.)

"If a public corporation kept its accounts this atrociously, the SEC would shut it down overnight."
If one does not have such a friend in high places, one can acquire him (or her, as the infamous Darleen Druyun illustrates [see Colarusso 2004]) by ponying up the various forms of bribes to which many Pentagon officials and members of Congress have shown themselves to be highly receptive. After all, it's not as if the bureaucrat or the member of Congress is giving away his own money.

To keep this gravy train on the track, contractors and their trade associations, as well as the armed forces themselves, devote great efforts to increasing the amount of money Congress appropriates in total for "defense," and now also for "homeland security." Their campaign contributions and other favors go predominantly to the incumbent barons — congressional leaders and committee chairmen — and to the "hawks" who've never met a defense budget big enough to please them. As Fitzgerald notes, "In Washington you can get away with anything as long as you have the high moguls of Congress as accessories before and after the fact" (1989, 91).

Furthermore, as Kotz observes, "[t]here is a multiplier effect as the different military services, members of Congress, presidential administrations, and defense industries trade support for each other's projects" (1989, 235). In other words, the defense budget is not simply the biggest logroll in Congress (Stubbing 1986, 98), but the biggest logroll in Washington, DC. Fen Hampson remarks: "bureaucratic and political interests approach weapons acquisition and defense budget issues as non-zero-sum games; that is, as games where there are rewards and payoffs to all parties from cooperation or collusion" (1989, 282). Only the taxpayers lose, but their interests don't count: they are not "players" in this game, but victims.

To give the public a seeming interest in the whole wretched racket, the contractors also spend substantial amounts of money cultivating the public's yearning to have the military dish out death and destruction to designated human quarry around the world — commies, gooks, ragheads, Islamo-fascists, narco-terrorists, and so forth — who are said to threaten the precious "American way of life."

For example, Rockwell, a military contractor whose massive secret contributions helped to reelect Richard Nixon in 1972 (Kotz 1988, 103–04, Fitzgerald 1989, 84), once mounted "a secret grass-roots campaign code-named Operation Common Sense" that included "a massive letter-writing campaign … solicitation of support from national organizations … and production of films and advertisements as well as prepared articles, columns, and editorials that willing editors could print in newspapers and magazines" (Kotz 1988, 134–35) — all the news that's fit to print, so to speak.

Much money goes into producing glorification of the armed forces, and reports of those forces' stupidities and brutalities in exotic climes are dismissed as nothing but the fabrications of leftists and appeasers or, if they cannot plausibly be denied, alleged to be nothing more than the isolated misbehavior of a few "bad apples" (Higgs 2006b).

Lest the armed forces themselves prove insufficiently imaginative in conceiving of new and even more expensive projects for the lucky suppliers to carry out, the contractors hire battalions of mad geniuses to design the superweapons of the future and regiments of former generals and admirals to market these magnificent creations to their old friends and subordinates currently holding down desks at the Pentagon.

"With breathtaking chutzpah, the system's kingpins parlayed the box-cutter attacks of 9/11 into an excuse to pour hundreds of billions of additional dollars into purchases of Cold War weaponry."
Thus, as General James P. Mullins, former commander of the Air Force Logistics Command, has written, "the prime contractors are where the babies really come from." He explains: "[T]he contractor has already often determined what it wants to produce before the formal acquisition process begins…. The contractor validates the design through the process of marketing it to one of the services. If successful, the contractor gets a contract. Thus, to a substantial degree, the weapon capabilities devised by contractors create military requirements" (1986, 91; see also Stubbing 1986, 174).

In sum, the military-supply firms exemplify a fundamentally corrupt type of organization. Their income comes to them only after it has first been extorted from the taxpayers at gunpoint — hence their compensation amounts to receiving stolen property. They are hardly unwitting or unwilling recipients, however, because they are not drafted to do what they do. No wallflowers at this dance of death, they eagerly devote strenuous efforts to encouraging government officials to wring ever greater amounts from the taxpayers and to distribute the loot in ways that enrich the contractors, their suppliers, and their employees.

These efforts include both the licit and the illicit measures I have described, spanning the full range from making a legal campaign contribution to providing prostitutes to serve the congressman or the Pentagon bigwig after he has become bored with playing poker in the contractor's suite at a plush DC hotel.

(Note well: such "entertainment" expenses are likely to be accounted "allowable costs" by the defense contractor who bears them, and with only routine audacity he may add to them an "overhead" charge — the entire sum to be reimbursed ultimately by the taxpayers. [In general, "overhead proves to be a huge moneymaker for defense firms" (Stubbing 1986, 205).] Kotz [1988, 137], describes Rockwell's billing for entertainment, public relations, and lobbying in connection with its contract to build the B-1 bomber. Fitzgerald [1989, 197, 198–99] describes similar charges by General Dynamics, as well as boarding expenses for an executive's dog, and by Pratt and Whitney, including $7,085 for hors d'oeuvres at a Palm Beach golf resort and $2,735 for strolling musicians at another bash. Sometimes the contractors billed the government twice for the same outrageous expenses.)

Can Anything Be Done?

The short answer is "probably not." The MICC is deeply entrenched in the US political economy, which itself has been moving steadily closer to complete economic fascism for more than a century (Higgs 1987, 2007). Decades of studies, investigations, blue ribbon commission reports, congressional hearings and staff studies, and news media exposés detailing its workings from A to Z have scarcely dented it (Higgs 2004). For the most part, the official scrutiny is just for show, whereas the unofficial scrutiny is easily dismissed as the work of outsiders who don't know what they are talking about, not to mention that they are "America haters."

$13
"If people with the power to change an arrangement refrain from doing so for decades on end, the most reasonable conclusion is that they prefer things as they are."
Official evaluations, at their frankest, conclude that "[p]ast mistakes — whether in the procurement of a weapon system or in the employment of forces during a crisis — do not receive the critical review that would prevent them from recurring…. The lessons go unlearned, and the mistakes are repeated" (US Senate, Committee on Armed Services 1985, 8). Such evaluations, though seemingly forthright and penetrating, strike me as far-fetched. Of course, people sometimes makes mistakes, but if people with the power to change an arrangement refrain from doing so for decades on end, the most reasonable conclusion is that they prefer things as they are — that is, as a rule, there are no long-lasting "failed policies," properly speaking.

To apply here what I wrote twelve years ago in regard to several other kinds of policies: "Government policies succeed in doing exactly what they are supposed to do: channeling resources bilked from the general public to politically organized and influential interest groups" (Higgs 1995; see also Kotz 1989, 242–45).

Therefore, one must conclude that the MICC serves its intended purposes well, however much its chronic crimes and intrinsic corruption sully its self-proclaimed nobility. What you and I call corruption is, after all, precisely what the military-economic movers and shakers call the good life.

Ultimately, the most significant factor is that the post-World War II US foreign policy of global hegemony and recurrent military intervention places a strong floor beneath the MICC and serves as an all-purpose excuse for its many malfeasances (Eland 2004, Johnson 2004).

As Ludwig von Mises observed, "The root of the evil is not the construction of new, more dreadful weapons. It is the spirit of conquest…. The main thing is to discard the ideology that generates war" (1966, 832; see also Higgs and Close 2007). Until the scope of the US government's geopolitical ambitions and hence the scale of its military activities are drastically reduced, not much opportunity will exist for making its system of military-economic fascism less rapacious and corrupt.

Robert Higgs is editor of the Independent Review. See his book titles in the Mises Store and his archive in Mises Media. Send him mail. Comment on the blog.

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PREDATORY CAPITALISM, CORRUPTION AND MILITARISM: WHAT LIES AHEAD IN AN AGE OF NEOCON RULE?

Stephen Lendman
Global Research, January 2, 2007
http://globalresearch.ca/index.php?conte...cleId=4293


Borrowing the opening line from Dickens' Tale of Two Cities - "It was the best of times, it was the worst of times...." He referred to the French Revolution promising "Liberte, egalite and fraternite" that began in 1789, inspired by ours from 1775 - 1783. It ended a 1000 years of monarchal rule in France benefitting those of privilege and established the nation as a republic the way ours did for us here a few years earlier.

That was the good news. The bad was the wrong people came to power. They were the Jacobins who at first were revolutionary moderates and patriots until they lost control to extremists like Maximilien Robespierre who ushered in a "reign of terror" (The Great Terror sounding a lot like today's "war on terror") characterized by brutal repression against perceived enemies from within the Revolution who didn't get a chance to prove they weren't. In the name of defending it, individual rights were denied and civil liberties suspended. Laws were passed that allowed charging those designated counter-revolutionaries or enemies of the state with undefined crimes against liberty.

It resulted in justice being meted out to thousands for what Orwell called "thoughtcrimes" or for their freely expressed opinions and actions judged hostile to the state under a system of near-vigilante justice by the Paris Revolutionary (kangaroo) Tribunal with no right of appeal. It led to the public spectacle of an inglorious trip to and quick ending from the death penalty method of choice of the times - the guillotine that was barbaric but quick, and a much easier, less painful way to die for its victims than the use of state-inflicted torture-murder in the commonly drawn out lethal injection process used in 37 of the 38 death penalty states and by the federal government making the condemned endure a slow agonizing death unable to cry out while they're being made to suffer during their last moments of life. Instances of this barbarity aren't exceptions. They're the rule, the exception being this time a report or two of what really happens slipped out and made news.

Fast forward to the past year and the previous five under George Bush and ask: sound familiar? French Revolutionary laws during the "reign of terror," like the Law of Suspects, were earlier versions of our Patriot I and II and Military Commission Acts today. The Revolutionary Tribunal, with no chance for justice or right of appeal, was no different than our military courts today, and too many civil ones, in which any US citizen may now be tried anywhere in the world, with no habeas right of appeal or hope for due process and from which those sent there won't fare any better than the French did, doomed to meet their unjust fate - even though much in these laws today is unconstitutional and one day will be reversed by a High Court upholding the law instead of the extremist rogue one now empowered that scorns it.

What May Lie Ahead

At the end of the sixth horrific year under the reign of the Bush modern-day extremist Jacobin-neocons, we can now look ahead, but to what. We have an administration in charge for another two years one longtime analyst characterizes as "a bunch of crooks, incompetents and perverts" with the president's approval rating plunging as low as 28% in some independent polls and a growing number of people in the country demanding his impeachment and removal from office.

It's not likely from the new Democrat-led Congress arriving in January, as their DLC leadership took it off the table and so far only promises more of the same failed policy other than some minor tinkering around the edges to create an illusion of change no different than the deceptive kind of course correction proposed by the Baker "Gang of Ten" Iraq Study Group (ISG) that guarantees none at all. It doesn't leave members of the body politic with much hope for the new year that will likely just deliver more of the same rogue leadership and policy engendering growing public discontent and anger but not at a level so far to scare the those in power enough to want to address it.

The heart of the problem is the unpopular illegal war of aggression in Iraq, the cesspool of corruption and scorn for the law in Washington, and the assault on human rights and civil liberties in the country justified by the so-called "war on terror" now rebranded a "long war" against "Islamofascism" and "radicals and extremists" (who happen to be Muslims.) It's the same failed policy using the kind of deliberately provocative language intended to deceive the public to think a threat great enough exists to justify any state action in the name of national security including waging wars of aggression and all the horrors associated with them at home and abroad.

After the Baker "bob and weave,'' the now you see a change of course and now you don't, disingenuously suggesting a drawdown and exit strategy, the New York Times on December 16 reports "Military planners and White House budget analysts have been asked to provide President Bush with options for increasing American forces in Iraq by 20,000 or more."

The article goes on to say one option is to boost the force level by up to 50,000 even though any increase greater than 20 - 30,000 would be "prohibitive" - but it won't deter the Pentagon, on administration orders, from extending tours of duty even longer for forces now there and calling up thousands of reservists and greatly extended National Guard units to get into this quagmire even though it's recognized their presence will only make things worse as well as place an unfair burden on those called up, who've served before, and their families.

As of December 27, it's somewhat less clear what Iraq troop strength policy will emerge in January following comments by incoming Democrat chairman of the Senate Foreign Relations Committee, Joseph Biden, who just stated "I totally oppose this surging of additional American troops into Baghdad. It's contrary to the overwhelming body of informed opinion, both inside and outside the administration." Senator Biden will hold hearings on Iraq on January 9, and at that time things may heat up a bit at least in rhetoric if not in final policy.

Additional heat may be created in January after George Bush admitted for the first time on December 19 that the US isn't winning the war even though two weeks before the November mid-term elections he said emphatically "absolutely, we're winning in Iraq." He wouldn't acknowledge what most every honest observer knows including the Pentagon Joint Chiefs - that the wars in Iraq and Afghanistan are lost. They can't be won and won't be. No military solution is possible now or any time ahead.

The president is living in a state of denial, obsessed with his messianic mission fed him by the vice-president and hardest of his hard line neocon allies, and it shows in the outlandish solutions he proposes to an insoluble problem - send in more troops (that will only make things worse) and increase the overall size of the military (that guarantees a permanent state of war).

It also clearly sounds a lot like the first official hint from the chief executive that a draft is needed and will come at some unspecified time ahead - likely following another "made in Washington" 9/11 calamity severe enough to get the public to go along with something now thought intolerable. The president's sentiment was echoed on December 21 by administration Veterans Affairs secretary Jim Nicholson who (incredibly) said that "society would benefit" if the US reinstated the military draft. He didn't say for whom. He did go further when asked in a press conference whether it should include women saying: "I think if we bring back the draft, there should be no loopholes for anybody who happens to be drafted." Maybe, to his thinking, it should include pregnant mothers as well and single ones with small children.

Such openness by the VA secretary apparently was too much, too soon, and too clear for the White House that quickly got the Department of Veterans Affairs to issue a separate follow-up statement from Nicholson saying: "Let me be clear, I strongly support the all-volunteer military and do not support returning to a draft." Let the reader choose which message to believe, but, with the nation in a permanent state of war, it looks like the trial balloon and hint of a draft now being floated is the opening round to instituting one at some designated time ahead. That likelihood looms even greater as the Selective Service System announced it's planning a comprehensive test of the military draft machinery, which it hasn't done since 1998 while, at the same time, saying the agency isn't gearing up for a draft. But what else would they say as they make plans to do this on orders from the administration.

It all amounts to an increasing level of insanity from a power-crazed administration as well as sounding much like Benjamin Franklin's wisdom who said "The definition of insanity is doing the same thing over and over expecting different results." In the case of Iraq, doing it with more troops on the ground is even more insane as a greater occupying force there only guarantees a stronger resistance to it presenting more targets to aim at with virtually no chance for a peaceful resolution of the conflict short of a full unconditional withdrawal of all occupying forces, no strings attached, that won't happen. In the case of a future draft, now seeming more likely, it only guarantees this nation plans to stay in a permanent state of war against future enemies to be chosen with those in or to be included in the "axis of evil" heading the target list at some point ahead.

George Bush and others floating these lunatic schemes have no regard for the lives of those affected, and why should they. For now, their aim is to buy time, and as long as they can get away with it, they and their well-connected cronies and corporate friends stand to gain from the price everyone else has to pay - a huge one including the thousands of lives lost each week and the many more thousands of survivors whose lives will never be the same again.

Think what it means as the new year approaches. The nation is at war on two fronts, it's likely more ahead are contemplated by some in the administration, no substantive effort is being made to change course, and the condition at home is a relentless march toward becoming a full-blown national security police state we're already perilously close to. It's because the neocon-dominated Bush administration is reckless in ambition, out-of-control in policy, and the embodiment of a relentless and ruthless "weapon of mass destruction" unleashed on all humanity in its way.

It's underpinned by an extremist ideology based on rule by savage capitalism that's frighteningly close to and borders on the tipping edge of the classic definition of fascism combining corporatism with strong elements of patriotism and nationalism, a claimed messianic Almighty-directed and blessed mission, and characterized by authoritarian rule backed by the iron fist of militarism and 'homeland security" enforcers, illegally spying on everyone, and intolerant of dissent and opposition in an age where the law is what the chief executive says it is and all semblance of checks and balances no longer exist. In a word - despotism, but cloaked in the deceptive rhetoric of a modern democracy falsely claiming to serve the needs of all its people.

It's also an age of extreme greed and corruption infesting government and corporate boardrooms with the gap between rich and poor at levels greater than since the 19th century "Gilded Age" of the "robber barons." It's something economist Paul Krugman calls "entirely unprecedented" under George Bush that "For the first time in our history, so much (of the nation's economic growth has gone) to a small, wealthy minority" while the great majority can't stay even as inflation-adjusted wages fail to keep up with rising prices and poverty is growing in an age of affluence affecting tens of millions in the richest country ever in the world.

The grossness of this disparity was on the online business pages of the New York Times on Christmas Day in a story titled "Wall St. Bonuses" So Much Money, Too Few ($250,000) Ferraris. The article highlights that "The 2006 bonus gold rush has re-energized some luxury markets" like Manhattan real estate that had softened earlier in the year and echoed the lament of a real estate broker about a "dearth of listings for two clients trying to spend $20 million on Manhattan properties" while mentioning some of the Wall Street wealthy already in their luxury nests are buying $5 million apartments for their children and private resort vacation homes to boot.

The same ugly data is there overall worldwide in a newly released study by the Helsinki-based World Institute for Development Economics Research of the UN University that shows the richest 2% of adults in the world own more than half of its wealth compared, on the other end, with the assets of about half the world's population accounting for barely 1% of global wealth - lumps of coal only for them and a "Ba Humbug" dismissal for their plight by those with everything wanting still more.

The Cost to a Society Based on Predatory Capitalism and Out-of-Control Greed, Corruption and Militarism

The societal breakdown in the US is a national disgrace and affects many millions. A sampling of some of it is listed below:

-- 47 million Americans can't afford basic health insurance.

-- Over 80 million in total have no health coverage during some portion of each year and most of them are employed.

-- The Bush administration just proposed sweeping cuts in payments to pharmacies to reduce the Medicaid benefits 50 million poor in the country rely on, can't afford to make up the difference for on their own, and may have to forego medications they vitally need if pharmacies won't fill prescriptions at lower prices.

-- The US ranks 41st in infant mortality, and the World Health Organization (WHO) ranks the country 37th in the world in "overall health performance" and 54th in the fairness of health care despite spending at a current level overall of around $2 trillion a year or about double the amount per capita of the OECD countries that deliver superior health care overall to their citizens as a national priority.

-- Well over 12 millions Americans struggle daily to feed themselves, and many thousands across the country can't afford housing and are forced to sleep on the streets including in winter cold.

-- A just released December 14 US Conference of Mayors report said these conditions continue to worsen based on a survey of 23 cities showing 7% more requests for food aid in 2006 following a 12% jump in 2005 during a period of economic growth.

-- The same report showed requests for shelter rose 9% in 2006 with requests from families with children rising 5%.

-- Public education is deliberately being eroded with illiteracy in basic reading, math and computer skills shamefully high and rising.

-- The US prison population is the highest in the world at 2.2 million and increasing by 1000 a week, half of those in it are black, and half of the total prison population is there for non-violent offenses half of which are drug-related. The US prison system is a shameful Gulag and an affront to humanity. The appalling conviction and sentencing of first-time drug offender Weldon Angelos is but one of countless examples. He was convicted of three sales of marijuana in 2004 while in possession of a gun unrelated to the sale. Under the insane federal mandatory sentencing laws, he was sentenced to five years for the first offense and 25 years each for the other two totaling 55 years in federal prison or a likely life sentence if he's forced to serve it all because he possessed and sold a few "joints" of a substance less harmful than legal cigarettes that kill millions yearly while it's not known marijuana ever killed anyone using it. Only in America.

-- The true state of things overall is suppressed by the dominant corporate-controlled media (including the NPR and PBS parts of it) functioning as a national thought-control police controlling all mass communication and depriving the public of any real information vital to a healthy democracy and their welfare.

-- Racial segregation is as great as in the 1960s, and the national sport almost is demonizing Muslims as "terrorists, radicals, extremists and Islamofascists" and impoverished "people the color of the earth" Mexicans and Latin Americans as "illegal immigrant invaders polluting" our white western European society and culture, mindless that they only come el norte in desperate search of work because of the devastating effects of NAFTA on their lives that destroyed their ability to support their families.

Data from the Oakland Institute think tank specializing in social, economic and environmental issues shows that heavily subsidized US corn exports to Mexico have tripled since NAFTA came into force forcing two million Mexican corn farmers out of business, something that was predicted in advance but allowed to happen anyway. It also led to suicides but at a rate nowhere near the level globalized trade US-style had on farmers in India where as many as 100,000 of them have taken their own lives because "New World Order" indebtedness caused them to lose their farms and then everything else.

-- Childhood poverty in the US ranks 22nd and next to last among developed nations when there should be virtually none tolerated in the richest country in the world or toleration of any of the other listed abuses.

-- An alarming number of high-paying and other jobs have been exported abroad in a process that's gone on for decades but picked up in momentum since the 1980s and especially in recent years. Mckinsey Global Institute estimates the volume will grow 30 - 40% a year for the next five years. Forrester Research estimates 3.3 million white-collar jobs will be lost by 2015 with most affected areas in financial services and information technology, and University of California researchers estimate that "up to 14 million American jobs are at risk to outsourcing."

It adds up to a nation in decline, losing its industrial base and becoming primarily a service-oriented economy mainly offering low-skill, low-pay jobs with the better, higher-paying ones growing scarcer, making a college degree in areas outside of critical skills almost worthless. Exporting jobs to low-wage countries is a boon for corporate bottom lines in an age of "globalized free trade" never characterized as fair for the harm it does to millions of wage earners at home or in the developing countries on the receiving end being exploited by capital that sucks out their wealth and impoverishes their people, many of whom work for near-slave-rate wages in a modern era of serfdom in countries around the world in Asia, Africa, Eastern Europe and Latin and Central America.

-- Worker outrage around the world in protest is growing in response to these abuses (unreported in the US) because most governments are doing little or nothing to ameliorate them. It showed up on November 22 in South Korea when over 200,000 workers belonging to the Korean Confederation of Trade Unions (KCTU) staged a general strike protesting in 17 cities against the bilateral US-Korea Free Trade Agreement currently being negotiated that will do to their members and farmers what NAFTA did to Mexicans and India's agricultural trade policies did to their small farmers. It continued on the streets in the days following and spilled over to the Big Sky Ski Resort in Big Sky, Montana where negotiations are being held in seclusion but are still unable to escape the daily protests held against them there.

-- It happened as well in Cebu City, Philippines where President Gloria Macapagal-Arroyo (closely allied to the failed Bush agenda and elected through fraud) had to cancel two Association of Southeast Asian Nations (ASEAN) meetings in December attended by 19 countries including the US and Canada. It was an abrupt ending to the meeting held to ratify trade and security agreements because of the mass protests by workers, farmers and others against their harmful effects forcing thousands in the country to leave daily to go abroad for work paying enough to support their families at home.

-- Workers almost everywhere have been harmed, including in the US, as union clout and worker rights here have declined in an age where the social contract government once had with its working people has been dismantled with less than 13% of the work force (the lowest in the industrialized world) unionized today compared to one-third of it in 1958. In an age of modern-day "robber barons," the middle class bedrock of a democratic state is slowly disappearing as the nation moves closer to becoming a banana republic at a time when 51 of the world's largest economies are corporate giants, most of them US-based.

It all goes on with no redress or sign of change in an age of out-of-control militarism and outlandish budgets supporting it that began ratcheting up under Ronald Reagan, along with big budget deficits to pay for it, and have gone wild under George Bush. The White House just approved a fiscal year 2008 near $470 billion Pentagon budget on top of an additional $100+ billion off-the-books amount minimum more that will boost this year's war budget for Iraq and Afghanistan to a yearly record of about $170 billion. It also needs tens of billions annually for "Homeland Security" and tens of billions more for the "spy agencies" totaling numbers in the range of well over $700 billion a year and rising - while social spending continues to be slashed to pay for it all in a heartless society scorning its people and their essential needs as long as the interests of capital are served along with the militarists in it profiting from its blood money.

Since WW II, when the US emerged as the only dominant nation left standing, Washington, instead of disarming and fostering peace, embarked on a now long-running program of militarization to maintain the country's political, economic and military preeminence over all others. It takes a lot of military spending to do it, that could have been used far more productively investing in human capital (like health and education) and physical capital (like essential infrastructure) as well as promoting non-military related business and industry that over time pay back far greater dividends than the short-term gains from building weapons and having large standing armies, navies and air forces that only exist to kill and destroy.

Productive spending also pays off in creating a society free from a dominant military culture like now exists out-of-control and hard to contain in the Pentagon that scorns civil liberties and democratic principles and values that have nearly vanished. The course this nation chose 60 years ago led to today's corrupted society armed to the teeth for endless wars with the most destructive weapons in human history deployed on over 800 known military bases in about 155 of the 192 countries of the world. It cost an unimaginable amount creating this monster as documented by the Center for Defense Information. It reported this country spent an estimated $21 trillion in constant dollars since 1945 on defense, the numbers continue to rise sharply, and the mindset of most of the nation's leaders, especially George Bush, is when you've got the might, you have to throw it around to prove it as well as scare off potential challengers.

Shamefully the US stands as a modern-day Sparta glorifying war and those put in charge to wage it. Witness the retirement ceremony for Army Major General Geoffrey Miller last summer when Army Vice Chief of Staff General Richard Cody awarded the man who supervised the infamous US Guantanamo and Abu Ghraib torture-prisons with the Distinguished Service Medal (DDSM). This award was established by Richard Nixon in 1970 so the Secretary of Defense could reward officers of the US Armed Forces "whose exceptional performance of duty and contributions to national security or defense have been at the highest levels."

Witness also the December 16 retirement ceremony at the Pentagon for unindicted war criminal and torture-authorizer Donald Rumsfeld complete with pomp and circumstance, George Bush and Dick Cheney in attendance for the spectacle, and a 19 round cannon salute that might have been better aimed. In open defiance of growing public anger over the war, speakers, including the president, shamelessly lauded Rumsfeld for the war of aggression he directed and his leadership in doing it. The galling scene showed Bush hugging Rumsfeld saying: "This man knows how to lead, and he did. And the country is better off for it." He failed to say for whom, but it got worse with Dick Cheney saying: "I believe the record speaks for itself - Don Rumsfeld is the finest Secretary of Defense this nation ever had."

Contrast those spectacles with the fate of extraordinary people like Lynne Stewart prosecuted for her crime of courage, honor and resisting tyranny. She was unjustly charged under the 1996 Antiterrorism Act with four counts of aiding and abetting a terrorist organization and violating Special Administration Measures (SAMS) imposed by the US Bureau of Prisons, which included a gag order on Sheik Abdel Rahman whom she represented as counsel for the defense in his 1995 trial because former US Attorney General Ramsey Clark asked her to take the case.

Lynne took it in the same spirit she spent her entire 30 year professional life as a courageous champion for the rights of the poor, underprivileged and those in society never afforded due process unless they're lucky enough to have an advocate like her. She broke no law, and her trial was a gross miscarriage of justice. Still, the Justice Department asked for a harsh 30 year sentence. It wasn't for any crime committed. It was to send a clear message to all in the legal community not to represent "unpopular clients" and not to afford them their legal right of due process with competent counsel when the government wants them put away.

Lynne for the present had the last word being vindicated in court on October 17 when Judge John G. Koeltl rejected the prosecution's case in the 28 month sentence he handed down allowing Lynne to remain free pending her appeal to a higher court, acknowledging it might overturn her conviction and effectively rebuking the Justice Department for their prosecution of a courageous woman who spent a lifetime fighting for justice.

The outcome was painfully different in an age of Muslim demonization and persecution shown in the prosecution of Dr. Rafil Dhafir, a Muslim American of Iraqi descent and practicing oncologist until his license was unjustly revoked as a prelude to the greater outrage committed against him. Dr. Dhafir was charged and tried in another US "kangaroo court" for what Katherine Hughes called and wrote his "crime of compassion." Katherine followed the trial daily in court for 17 weeks and remains his champion, continuing to work tirelessly for his vindication and release.

Dr. Dhafir was convicted and is now serving a 22 year sentence in federal prison for violating the Iraqi Sanctions Regulations (the IEEPA) having used his own funds and what he could raise from others to bring desperately needed humanitarian aid, including food and medical supplies, to Iraqi people unable to get them because of the punitive, harsh and unjust sanctions imposed prior to the 2003 war. He did it through his Help the Needy charity, and for it was convicted of violating the sanctions, tax fraud, money laundering, and mail and wire fraud - a total of 60 counts and found guilty on 59 of them.

The verdict sent another chill through the Muslim community, and as Katherine explained on her web site - dhafirtrial.net - "If we can get Rafil Dhafir, we can get anyone." Not quite, as Lynne Stewart's vindication proves. But it proves something else too. In the age of George Bush, the chance of prevailing against injustice as a white American is a lot better than for a "not-as-white" Arab Muslim, even an American one, especially one courageous enough to take on a mission of mercy in defiance of state policy unjustly prohibiting it.

Dr. Dhafir was confined at the federal prison in Fairton, NJ until December when he was transfered further away from his family, who weren't told. He's now at what's been described as the hellhole in Terre Haute, IN, in an area of right wing extremism and KKK influence, in a deliberate act of further barbaric vengeance to break his spirit, restrict his access to legal help and his family, and cause him undue pain and suffering in an age of US-sanctioned and authorized torture as a method of social control and inhumanity and because no dissenting authority has the courage to challenge Washington's willingness to go against the most basic principles of equity and justice.

A Look Back to Find Direction Ahead

A look back to an important anniversary just reached should have been duly noted and reflected on in the major media, but it passed nearly unnoticed. It was the December 15 anniversary of the Bill of Rights of 1791 to the Constitution framed in 1787. It gave us unimaginable freedoms up to that time written into the law of the land that overall was a great democratic experiment never tried before outside of ancient Athens for a few decades before it ended. It gave people the rights of free expression, religion and peaceable assembly; protection from illegal searches and seizure; the right of due process, against double jeopardy and to remain silent if accused; to a speedy trial by jury if charged with the right to counsel and to be able to call witnesses; protection from any cruel and unusual punishment and more.

Most of the credit for this historic achievement goes to James Madison who drafted the first 10 amendments and with his perseverance got the other Framers to go along. He then managed to get the needed two-thirds vote from both Houses of Congress and ratification by the required three-fourths of the states in 1791 to have them become the law of the land - a major landmark achievement today being defiled by those in power who have contempt for the freedoms the Founders gave us.

Madison is thought of by some to be the "Father of the Constitution," but it's more accurate to call him its Godfather as he had a lot of help from the other 54 Founders who met in the Philadelphia State House, where the Declaration of Independence was signed 11 years earlier, to frame this historic document for the new republic they hoped would last into "remote futurity" - if we could keep it as Ben Franklin warned at the time and would shudder now at how things turned out and condemn those in power responsible.

Two future presidents, Thomas Jefferson and John Adams were serving abroad as envoys to France and Britain and weren't in Philadelphia for this historic gathering. When they were back later on, Jefferson and Madison wanted twelve initial amendments to the Constitution instead of the original 10 that were adopted. Federalists John Adams and Alexander Hamilton, however, opposed the Bill of Rights entirely and managed to exclude from them the other two that included "freedom from monopolies in commerce," or what are now giant corporate predators, and "freedom from a permanent military," or today's standing armies waging wars of illegal aggression.

Imagine what might have been, what was lost, and how the country might be governed today had Jefferson and Madison prevailed. Still they deserve our gratitude for what they accomplished, and it's disconcerting at the least to wonder how much worse off we'd be now if they hadn't gotten any of the Bill of Rights freedoms in our founding law that although lost under neocon rule may one day be restored if we can survive in the meantime.

A Look Ahead In An Age of State-Sponsored Terror Under Neocon Rule

It's time to pause at year's end to give thanks for our blessings but reflect that the spirit of the season demands that the madness of Bush neocon rule be stopped and ended before it's too late. Six years is more than enough to know the administration's agenda at home and abroad is roguish, corrupted by greed and contempt for the law, ruthless in its pursuit of world dominance through the barrel of a gun, and arrogant enough to think it can get away with it because who'll challenge those in charge.

Internally, there no longer are checks and balances as the three branches of government under Republicans and Democrats are united for a common purpose, and their agenda to carry it out is hostile to the public interest. It's the ultimate expression of Lord Acton's dictum that "power corrupts, and absolute power corrupts absolutely." Positively it does in the age of George Bush and a culture obsessed with power, the lust for more of it, and the worship of the wealth and privilege that comes with it. It wreaks of the Vince Lombardi philosophy that "Winning isn't everything; it's the only thing," and the only rules are the ones those now in power make up as they go along justifying whatever they choose to do, regardless of its consequences always harmful to the great majority.

It's also based on might making right but not the way Abe Lincoln meant it when he said in his February, 1860 Cooper Union speech prior to his July presidential nomination that year: "Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it." He later expressed a spirit of reconciliation with the South and kind of humanity George Bush has contempt for in his second inaugural address in March, 1865 when he spoke of "malice toward none (and) charity for all" only weeks before his life was taken by an assassin's bullet. Imagining that language from George Bush, and meaning it, would be to imagine the unimaginable from a man who likely doesn't even understand it.

What is imaginable in the year ahead and thenceforth is a world without George Bush and his neocon extremist administration leading the nation on a path to hell. Those wanting justice demand the Congress act to impeach him and the vice-president and then remove them from office allowing for the chance charges will be brought against them both and others in their administration so they'll be held to account in the International Criminal Court (ICC) in the Hague or another judicial venue where officials may be prosecuted for war crimes, crimes against humanity and genocide. They committed them all and more against the people of Iraq, at least two of the three in Afghanistan, and a legion of others against the people of the United States and its Constitution.

It'll only happen if it comes from the bottom up, from enough public outrage bubbling to the surface vocally demanding justice be served and the rule of law restored and again respected. No one at any level in public or private life should ever be allowed to get away with the kind of reckless and gross criminality that's been rampant and out-of-control in Washington for the past six years under Republican neocon rule.

It's long past time to put an end to this criminal class of rogues in charge, running the country like their private fiefdom in a culture of galling corruption and scorn for the law that exceeds anything here ever preceding their tenure. Already there's a groundswell of growing outrage slowly building in size and intensity. As the new year approaches, it remains to be seen if a combination of those people of conscience can unite with enough others in the body politic to give us all what everyone should want and demand - an end to wars, a renewed respect for the law, accountability for those in government who violated it, and a commitment to serve the public interest with equity and equal justice for all in the true spirit of a real democracy restored from the grave and once again respected and cherished.

HOW TO END THE WAR

Friday, 02 February 2007
Russ Feingold
http://www.ichblog.eu/content/view/282/2/


Our founders wisely kept the power to fund a war separate from the power to conduct a war. In their brilliant design of our system of government, Congress got the power of the purse, and the president got the power of the sword. As James Madison wrote, “Those who are to conduct a war cannot in the nature of things, be proper or safe judges, whether a war ought to be commenced, continued or concluded.”

02/02/07 "TomPaine" -- -- Earlier this week, I chaired a hearing in the Senate Judiciary Committee to remind my colleagues in the Senate that, through the power of the purse, we have the constitutional power to end a war. At the hearing, a wide range of constitutional scholars agreed that Congress can use its power to end a military engagement.

The Constitution gives Congress the explicit power “[to] declare War,” “[t]o raise and support Armies,” “[t]o provide and maintain a Navy” and “[t]o make Rules for the Government and Regulation of the land and naval Forces.” In addition, under Article I, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” These are direct quotes from the Constitution of the United States. Yet to hear some in the Administration talk, it is as if these powers were written in invisible ink. They were not. These powers are a clear and direct statement from the founders of our republic that Congress has authority to declare, to define and, ultimately, to end a war.

If and when Congress acts on the will of the American people by ending our involvement in the Iraq war, Congress will be performing the role assigned it by the founding fathers—defining the nature of our military commitments and acting as a check on a president whose policies are weakening our nation.

There is plenty of precedent for Congress exercising its constitutional authority to stop U.S. involvement in armed conflict.

In late December 1970, Congress prohibited the use of funds for introducing United States ground combat troops into Cambodia or providing U.S. advisors to Cambodian military forces. In late June 1973, Congress set a date to cut off funds for combat activities in Southeast Asia.

More recently, President Clinton signed into law language that prohibited funding after March 31, 1994, for military operations in Somalia, with certain limited exceptions. And in 1998, Congress passed spending legislation that prevented U.S. troops from serving in Bosnia after June 30, 1998, unless the president made certain assurances.

Congress has the power to end military engagements, and there is little doubt that decisive action from the Congress is needed to end U.S. involvement in the war in Iraq. Despite the results of the election, and two months of study and supposed consultation—during which experts and members of Congress from across the political spectrum argued for a new policy—the president has decided to escalate the war. When asked whether he would persist in this policy despite congressional opposition, he replied: “Frankly, that’s not their responsibility.”

Last week Vice President Cheney was asked whether the non-binding resolution passed by the Foreign Relations Committee that will soon be considered by the full Senate would deter the president from escalating the war. He replied: “It’s not going to stop us.”

In the United States of America, the people are sovereign, not the president. It is Congress’ responsibility to challenge an administration that persists in a war that is misguided and that the nation opposes. We cannot simply wring our hands and complain about the administration’s policy. We cannot just pass resolutions saying “your policy is mistaken.” And we can’t stand idly by and tell ourselves that it’s the president’s job to fix the mess he made. It’s our job to fix the mess, too, and if we don’t do so we are abdicating our responsibilities.

Yesterday, I introduced legislation that will prohibit the use of funds to continue the deployment of U.S. forces in Iraq six months after enactment. By prohibiting funds after a specific deadline, Congress can force the president to bring our forces out of Iraq and out of harm’s way.

This legislation will allow the president adequate time to redeploy our troops safely from Iraq, and it will make specific exceptions for a limited number of U.S. troops who must remain in Iraq to conduct targeted counter-terrorism and training missions and protect U.S. personnel. It will not hurt our troops in any way—they will continue receiving their equipment, training, salaries, etc. It will simply prevent the president from continuing to deploy them to Iraq. By passing this bill, we can finally focus on repairing our military and countering the full range of threats that we face around the world.

As the hearing I chaired in the Senate Judiciary Committee made clear, this legislation is fully consistent with the Constitution of the United States. Since the president is adamant about pursuing his failed policies in Iraq, Congress has the duty to stand up and use its constitutional power to stop him. If Congress doesn’t stop this war, it’s not because it doesn’t have the power. It’s because it doesn’t have the will.

WHY THE US IS NOT LEAVING IRAQ: THE BOOMING BUSINESS OF WAR PROFITEERS

Prof. Ismael Hossein-zadeh
Global Research, January 12, 2007
http://www.globalresearch.ca/index.php?c...;themeId=2

The military-industrial-complex [would] cause military spending to be driven not by national security needs but by a network of weapons makers, lobbyists and elected officials. — Dwight D. Eisenhower

There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket. — General Smedley D. Butler


Neither the Iraq Study Group nor other establishment critics of the Iraq war are calling for the withdrawal of US troops from that country. To the extent that the Study Group or the new Congress purport to inject some "realism" into the Iraq policy, such projected modifications do not seem to amount to more than changing the drivers of the US war machine without changing its destination, or objectives: control of Iraq’s political and economic policies.

In light of the fact that by now almost all of the factions of the ruling circles, including the White House and the neoconservative war-mongerers, acknowledge the failure of the Iraq war, why, then, do they balk at the idea of pulling the troops out of that country?

Perhaps the shortest path to a relatively satisfactory answer would be to follow the money trail. The fact of matter is that not everyone is losing in Iraq. Indeed, while the Bush administration’s wars of choice have brought unnecessary death, destruction, and disaster to millions, including many from the Unites States, they have also brought fortunes and prosperity to war profiteers. At the heart of the reluctance to withdraw from Iraq lies the profiteers’ unwillingness to give up further fortunes and spoils of war.

Pentagon contractors constitute the overwhelming majority of these profiteers. They include not only the giant manufacturing contractors such as Lockheed Martin, Northrop Grumman and Boeing, but also a complex maze of over 100,000 service contractors and sub-contractors such as private army or security corporations and "reconstruction" firms.[1] These contractors of both deconstruction and "reconstruction," whose profits come mainly from the US treasury, have handsomely profited from the Bush administration’s wars of choice.

A time-honored proverb maintains that wars abroad are often continuations of wars at home. Accordingly, recent US wars abroad seem to be largely reflections of domestic fights over national resources, or public finance: opponents of social spending are using the escalating Pentagon budget (in combination with drastic tax cuts for the wealthy) as a cynical and roundabout way of redistributing national income in favor of the wealthy. As this combination of increasing military spending and decreasing tax liabilities of the wealthy creates wide gaps in the Federal budget, it then justifies the slashing of non-military public spending—a subtle and insidious policy of reversing the New Deal reforms, a policy that, incidentally, started under President Ronald Reagan.

Meanwhile, the American people are sidetracked into a debate over the grim consequences of a "pre-mature" withdrawal of US troops from Iraq: further deterioration of the raging civil war, the unraveling of the "fledgling democracy," the resultant serious blow to the power and prestige of the United States, and the like.

Such concerns are secondary to the booming business of war profiteers and, more generally, to the lure or the prospects of controlling Iraq’s politics and economics. Powerful beneficiaries of war dividends, who are often indistinguishable from the policy makers who pushed for the invasion of Iraq, have been pocketing hundreds of billions of dollars by virtue of war. More than anything else, it is the pursuit and the safeguarding of those plentiful spoils of war that are keeping US troops in Iraq.

The role of the Pentagon contractors,

The Pentagon contractors are both as a major driving force to the war on Iraq and a major obstacle to the withdrawal of US led forces.

The rise of the fortunes of the major Pentagon contractors can be measured, in part, by the growth of the Pentagon budget since President George W. Bush arrived in the White House: it has grown by more than 50 percent, from nearly $300 billion in 2001 to almost $455 billion in 2007. (These figures do not include the Homeland Security budget, which is $33 billion for the 2007 fiscal year alone, and the costs of the wars in Iraq and Afghanistan, which are fast approaching $400 billion.)

Large Pentagon contractors have been the main beneficiaries of this windfall. For example, a 2004 study by The Center for Public Integrity revealed that, for the 1998–2003 period, one percent of the biggest contractors won 80 percent of all defense contracting dollars. The top ten got 38 percent of all the money. Lockheed Martin topped the list at $94 billion, Boeing was second with $81 billion, Raytheon was third (just under $40 billion), followed by Northrop Grumman and General Dynamics with nearly $34 billion each.[2]

Fantastic returns to these armaments conglomerates have been reflected in the continuing jump in the value of their shares or stocks in the Wall Street: "Shares of U.S. defense companies, which have nearly trebled since the beginning of the occupation of Iraq, show no signs of slowing down. . . . All the defense companies—with very few exceptions—have been doing extremely well with mostly double-digit earnings growth. . . . The feeling that makers of ships, planes and weapons are just getting into their stride has driven shares of leading Pentagon contractors Lockheed Martin Corp., Northrop Grumman Corp., and General Dynamics Corp. to all-time highs. . . ."[3]

Major beneficiaries of war dividends include not only the giant manufacturing contractors such as Northrop Grumman and Lockheed Martin, but also a whole host of other war-induced service contractors that have mushroomed around the Pentagon and the Homeland Security apparatus in order to cash in on the Pentagon’s spending bonanza.

A highly profitable and fast growing industry that has evolved out of the Pentagon’s tendency to shower private contractors with tax-payers’ money is based on its increasing practice of the outsourcing of the many of the traditional military services to private businesses. "In 1984, almost two-thirds of [the Pentagon’s] contracting budget went for products rather than services. . . . By fiscal year 2003, 56 percent of Defense Department contracts paid for services rather than goods."

What is more, these services are not limited to the relatively simple or routine tasks and responsibilities such food and sanitation services or building maintenance. More importantly, they include "contracts for services that are highly sophisticated, strategic in nature, and closely approaching core functions that for good reason the government used to do on its own. The Pentagon has even hired contractors to advise it on hiring contractors."[4]

Private security contracting, a lucrative and rapidly growing industry, is a good example of the Pentagon’s policy of outsourcing. These contractors operate on the periphery of U.S. foreign policy by training foreign "security forces," or by "fighting terrorism." Often these private military corporations are formed by retired Special Forces personnel seeking to market their military expertise to the Pentagon, the State Department, the CIA, or foreign governments.

For example, MPRI, one of the largest and most active of these firms, which "has trained militaries throughout the world under contract to the Pentagon," was founded by former Army Chief of Staff Carl Vuono and seven other retired generals. The fortunes of these military training contractors, or modern-day mercenary companies, like those of the manufacturers of military hardware, have skyrocketed by virtue of heightened war and militarism under President George W. Bush. For example, "The per share price of stocks in L3 Communications, which owns MPRI, has more than doubled."[5]

As the Pentagon’s manufacturing contractors such as Lockheed Martin make fortunes through the production of the means of death and destruction, they also create profit opportunities for service contractors such as Halliburton that, like vultures, follow the plumes of the smoke of deconstruction and set up shop for "reconstruction."

For example, in the same month (October 2006) that the US forces lost a record number of soldiers in Iraq, and the Iraqi citizens lost many more, Halliburton announced that its third quarter revenue had risen by 19 percent to $5.8 billion. This prompted Dave Lesar, the company’s chairman, president and CEO, to declare, "This was an exceptional quarter for Halliburton."

Jeff Tilley, an analyst who does research for Halliburton, likewise pointed out, "Iraq was better than expected. . . . Overall, there is nothing really to question or be skeptical about. I think the results are very good."

This led many critics to point out scornfully that when around the same time Vice President Dick Cheney told Rush Limbaugh that "if you look at the overall situation [in Iraq] they're doing remarkably well," he must have been talking about Halliburton.[6]

The service and "rebuilding" contractors are frequently called "reconstruction rackets" not only because they obtain generous and often no-bid contracts from their policy-making accomplices, but also because they habitually shirk on their contracts and skimp on what they promise to do. For example, an investigative on-the-ground report from Iraq, sponsored by the Institute for Southern Studies and titled "New Investigation Reveals Reconstruction Racket," showed that despite "billions of dollars spent, key pieces of Iraq's infrastructure—power plants, telephone exchanges, and sewage and sanitation systems—have either not been repaired, or have been fixed so poorly that they don't function."

The report, carried out by Pratap Chatterjee and Herbert Docena and published in the Institutes’ Publication Southern Exposure, further revealed that the giant Pentagon contractor Bechtel "has been given tens of millions to repair Iraq's schools. Yet many haven't been touched, and several schools that Bechtel claims to have repaired are in shambles. One 'repaired' school was overflowing with unflushed sewage."

The report also showed that out of a $2.2 billion "reconstruction" contract with Halliburton, the company spent only 10 percent on "community needs—the rest being spent on servicing U.S. troops and rebuilding oil pipelines. Halliburton has also spent over $40 million in the unsuccessful search for weapons of mass destruction."[7]

The spoils of war and devastation in Iraq have been so attractive that an an extremely large number of war profiteers have set up shop in that country in order to participate in the booty: "There are about 100,000 government contractors operating in Iraq, not counting subcontractors, a total that is approaching the size of the U.S. military force there, according to the military's first census of the growing population of civilians operating in the battlefield," reported The Washington Post in its 5 December 2006 issue.

The report, prepared by Renae Merle, further points out, "In addition to about 140,000 U.S. troops, Iraq is now filled with a hodgepodge of contractors. DynCorp International has about 1,500 employees in Iraq, including about 700 helping train the police force. Blackwater USA has more than 1,000 employees in the country, most of them providing private security. . . . MPRI, a unit of L-3 Communications, has about 500 employees working on 12 contracts, including providing mentors to the Iraqi Defense Ministry for strategic planning, budgeting and establishing its public affairs office. Titan, another L-3 division, has 6,500 linguists in the country."[8]

The fact that powerful beneficiaries of war dividends flourish in an atmosphere of war and international convulsion should not come as a surprise to anyone. What is surprising is that, in the context of the recent US wars of choice, these beneficiaries have also acquired the power of promoting wars, often by manufacturing "external threats to our national interest." In other words, profit-driven beneficiaries of war have also evolved as war makers, or contributors to war making.[9]

The following is a sample of such unsavory business–political relationships, as reported by Walter F. Roche and Ken Silverstein in a 14 July 2004 Los Angeles Times article, titled "Advocates of War Now Profit from Iraq’s Reconstruction:"

• Former CIA Director R. James Woolsey is a prominent example of the phenomenon, mixing his business interests with what he contends are the country's strategic interests.

• Neil Livingstone, a former Senate aide who has served as a Pentagon and State Department advisor and issued repeated public calls for Hussein's overthrow. He heads a Washington-based firm, GlobalOptions, Inc. that provides contacts and consulting services to companies doing business in Iraq.

• Randy Scheunemann, a former Rumsfeld advisor who helped draft the Iraq Liberation Act of 1998 authorizing $98 million in U.S. aid to Iraqi exile groups. He was the founding president of the Committee for the Liberation of Iraq. Now he's helping former Soviet Bloc states win business there.

• Margaret Bartel, who managed federal money channeled to Chalabi's exile group, the Iraqi National Congress, including funds for its prewar intelligence program on Hussein's alleged weapons of mass destruction. She now heads a Washington-area consulting firm helping would-be investors find Iraqi partners.

• K. Riva Levinson, a Washington lobbyist and public relations specialist who received federal funds to drum up prewar support for the Iraqi National Congress. She has close ties to Bartel and now helps companies open doors in Iraq, in part through her contacts with the Iraqi National Congress.

• Joe M. Allbaugh, who managed President Bush's 2000 campaign for the White House and later headed the Federal Emergency Management Agency, and Edward Rogers Jr., an aide to the first President Bush, recently helped set up New Bridge Strategies and Diligence, LLC to promote business in postwar Iraq.[10]

There are strong indications that these dubious relationships represent more than simple cases of sporadic or unrelated instances of some unscruplulous or rogue elements. Evidence shows that contracts for the "reconstruction" of Iraq were drawn long before the invasion and deconstruction of that country had started. In a fascinating report for The Nation magazine, titled "The Rise of Disaster Capitalism," Naomi Klein describes such long-projected "rebuilding" schemes as follows:

"Last summer, in the lull of the August media doze, the Bush Administration's doctrine of preventive war took a major leap forward. On August 5, 2004, the White House created the Office of the Coordinator for Reconstruction and Stabilization, headed by former US Ambassador to Ukraine Carlos Pascual. Its mandate is to draw up elaborate ‘post-conflict’ plans for up to twenty-five countries that are not, as of yet, in conflict. According to Pascual, it will also be able to coordinate three full-scale reconstruction operations in different countries ‘at the same time,’ each lasting ‘five to seven years.’"[11]

Here we get a glimpse of the real reasons or forces behind the Bush administration’s preemptive wars. As Klein puts it, "a government devoted to perpetual pre-emptive deconstruction now has a standing office of perpetual pre-emptive reconstruction." Klein also documents how (through Pascual’s office) contractors drew "reconstruction" plans in close collaboration with various government agencies and how, at times, contracts were actually pre-approved and paper work completed long before an actual military strike:

"In close cooperation with the National Intelligence Council, Pascual's office keeps ‘high risk’ countries on a ‘watch list’ and assembles rapid-response teams ready to engage in prewar planning and to ‘mobilize and deploy quickly’ after a conflict has gone down. The teams are made up of private companies, nongovernmental organizations and members of think tanks—some, Pascual told an audience at the Center for Strategic and International Studies in October, will have ‘pre-completed’ contracts to rebuild countries that are not yet broken. Doing this paperwork in advance could ‘cut off three to six months in your response time.’"

No business model or entrepreneurial paradigm can adequately capture the nature of this kind of scheming and profiteering. Not even illicit businesses based on rent-seeking, corruption or theft can sufficiently describe the kind of nefarious business interests that lurk behind the Bush administration’s preemptive wars. Only a calculated imperial or colonial kind of exploitation, albeit a new form of colonialism or imperialism, can capture the essence of the war profiteering associated with the recent US wars of aggression. As Shalmali Guttal, a Bangalore-based researcher put it, "We used to have vulgar colonialism. Now we have sophisticated colonialism, and they call it 'reconstruction.'"[12]

Classical colonial or imperial powers roamed on the periphery of the capitalist center, "discovered" new territories, and drained them off of their riches and resources. Today there are no new places in our planet to be "discovered." But there are many vulnerable sovereign countries whose governments can be overthrown, their infrastructures smashed to the ground, and fortunes made as a result (of both destruction and "reconstruction). And herein lies the genius of a parasitically efficient market mechanism, as well as a major driving force behind the Bush administration’s unprovoked unilateral wars of choice.

Not only does the new form of imperial or colonial aggression, driven largely by the powerful interests that are vested in the armaments industries and other war-based businesses, bring calamity to the vanquished, but it is also detrimental and burdensome to the victor, namely, the imperium and its citizens. Contrary to the external military operations of past empires, which usually brought benefits not only to the imperial ruling classes but also (through "trickle-down" effects) to their citizens, U.S. military expeditions and operations of late are not justifiable even on the grounds of national economic gains.

Indeed, escalating US military expansions and aggressions have become ever more wasteful and cost-inefficient as they are hollowing out the public treasury, undermining social spending, and accumulating national debt. Viewed in this light, the new form of imperialism can perhaps be called "parasitic" imperialism.

War profiteering is, of course, not new; it has always existed in the course of the history of warfare. What makes war profiteering in the context of the recent US wars of choice unique and extremely dangerous to world peace and stability, however, is the fact that it has become a major driving force behind war and militarism.

This is key to an understanding of why the US ruling elite is reluctant to pull US troops out of Iraq. The reluctance or "difficulty" of leaving Iraq stems not so much from pulling 140,000 troops out of that country as it is from pulling out more than 100,000 contractors. As Josh Mitteldorf of the University of Arizona recently put it, "There are a lot of contractors making a fortune and we don’t want that money tap turned off, even though it is borrowed money, which our children and grandchildren will have to repay."[13]

It follows that US troops will not be withdrawn from Iraq as long as antiwar voices are not raised beyond the premises and parameters of the official narrative or justification of the war: terrorism, democracy, civil war, stability, human rights, and the like. Antiwar forces need to extricate themselves from the largely diversionary and constraining debate over these secondary issues, and raise public consciousness of the scandalous economic interests that drive the war.

It is crucially important that public attention is shifted away from the confining official narrative of the war, parroted by the corporate media and political pundits, to the economic crimes that have been committed because of this war, both in Iraq and here in the United States. It is time to make a moral case for restoring Iraqi oil and other assets to the Iraqis. It is also time to make a moral case against the war profiteers’ plundering of our treasury, or tax dollars. To paraphrase the late General Smedley D. Butler, most wars could easily be ended—they might not even be started—if profits are taken out of them.[14]

Ismael Hossein-zadeh is a professor of economics at Drake University, Des Moines, Iowa. He is the author of the newly published book, The Political Economy of U.S. Militarism His Web page is http://www.cbpa.drake.edu/hossein-zadeh


NOTES:

1. Renae Merle, "Census Counts 100,000 Contractors in Iraq," The Washington Post (December 5, 2006), http://www.washingtonpost.com/wp-dyn/con...1_pf.html.

2. The Center for Public Integrity, "Report Finds $362 Billion in No-Bid Contracts at the Pentagon" (September 29, 2004),

http://www.publicintegrity.org/pns/defau...t=summary.

3. Bill Rigby, "Defense stocks may jump higher with big profits," Reuter (April 12, 2006), http://www.boston.com/business/articles/..._profits/.

4. The Center for Public Integrity, "Outsourcing the Pentagon" (September 29, 2004), http://www.publicintegrity.org/pns/report.aspx?aid=385.

5. Esther Schrader, "Companies Capitalize on War on Terror," Los Angeles Times (14 April 2002), http://www.latimes.com/news/nationworld/...ers.story.

6. Steve Young, "What Is Bad for America Is Good for Halliburton . . . Just Ask the Vice President," OpEdNews.com (23 October 2006), http://www.opednews.com/articles/opedne_...ameri.htm.

7. "War Profiteering," by Source Watch (a project of the Center for Media & Democracy), <http://www.sourcewatch.org/index.php?title=War_profiteering>.

8. Renae Merle, "Census Counts 100,000 Contractors in Iraq," Washington Post (December 5, 2006), http://www.washingtonpost.com/wp-dyn/con....html>.

9. William D. Hartung, How Much Are You Making on the War, Daddy? (New York: Nation Books, 2003); Chalmers Johnson, The Sorrows of Empire (New York: Metropolitan Books, 2004); Ismael Hossein-zadeh, The Political Economy of U.S. Militarism (New York & London: Palgrave-Macmillan, 2006).

10. "War Profiteering," by Source Watch (a project of the Center for Media & Democracy), http://www.sourcewatch.org/index.php?tit...ering>.

11. Naomi Klein, "The Rise of Disaster Capitalism," The Nation (May 2, 2005), http://www.thenation.com/docprint.mhtml?...klein>.

12. As quoted in Klein, "The Rise of Disaster Capitalism."

13. Josh Mitteldorf, "Why we’re not getting out of Iraq," Op Ed News (December 8, 2006), http://www.opednews.com/articles/opedne_...n.htm>.

14. Smedley D. Butler, War Is a Racket (Los Angeles: Feral House, 1935 [2003]).

GANGSTERS FOR CAPITALISM


Clinton L. Cox
Global Research, January 25, 2007
http://www.globalresearch.ca/index.php?c...cleId=4595


Although benign U.S. intentions are an article of faith among many Americans, theft, murder and oppression have always been central to U.S. policies and practices in the non-white world. George Bush’s crusade for ‘democracy’ is yet another chapter in the shameful saga.


“The U.S. has routinely destroyed democracy throughout the globe while its leaders spout words about spreading democracy.”

“I spent thirty-three years and four months in active military service as a member of this country’s most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle-man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism....

“I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.

“During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.” – Major-General Smedley Butler, 1933.

General Butler was the most decorated U.S. military officer of his day. His experiences helping the United States Government subvert democracy throughout the world so that multinational corporations could steal the land and resources of other nations, prompted him to write a short but politically devastating book, War is a Racket, in 1934. The use of military, economic and political power to control weaker nations is a thread that runs throughout the history of the United States from the past to the present – though most Americans either deny that fact or are ignorant of it.

The recent death of Augusto Pinochet, the Chilean torturer and murderer whom the United States helped bring to power in a coup in 1973 – toppling the democratically-elected government of Salvador Allende – was simply one of the latest reminders of the history of the U.S. government in subverting democracy in order to advance the interests of U.S. bankers, oil companies, sugar interests and other economically powerful groups. Far from being a force for good in the world, the U.S. has routinely destroyed democracy throughout the globe while its leaders spout words about spreading democracy: words Condoleezza Rice invoked while helping supply the Israelis with bombs they dropped on Lebanese children in what may have been a death blow to Lebanese democracy. Words George Bush invokes while killing hundreds of thousands of Iraqi men, women and children so that major U.S. companies can steal Iraq’s oil.

“The fear of democracy exists, by definitional necessity, in elite groups who monopolize economic and political power,” declared Haitian historian Patrick Bellegarde-Smith. Bellegarde-Smith was writing about Haiti’s history, but his observation applies equally well to the history of the United States, including its current history: those who rule this country fear democracy, especially in lands populated by people of color, because democracy in those lands and in those hands threatens the vast wealth and political power of white elites.

“Those who rule this country fear democracy, especially in lands populated by people of color.”

This fear is especially strong in a nation that was born from a decision by privileged white males to craft a Constitution that protected their privileges, whether their wealth had been gained from buying and selling enslaved Africans, stealing Native American land, or in some other kind of “business” transactions.

“We have a security that the general government can never emancipate them (slaves),” said Gen. Charles Pinckney of South Carolina in praising the advantages the new Constitution gave slaveowners, “We have obtained a right to recover our slaves in whatever part of America they may take refuge, which is a right we had not before. In short, we have made the best terms for the security of this species of property it was in our power to make.”

The men who ratified the Constitution invoked words about “democracy,” while making sure that Black people, Native Americans, women and white males without property, were not represented at their Constitutional Convention. Patrick Henry and other “patriots” successfully argued for passage of the Bill of Rights, in order to make sure the federal government could not free their slaves under any circumstances, such as it did with some of the Black men who fought in the Revolutionary War.

“May Congress not say that every black man must fight? Did we not see a little of this last war?” Henry asked in arguing for the Bill of Rights. And once Congress passed such a law freeing some Black men, he warned, it could also declare “that every slave who would go to the army should be free.”

Thus the Constitution of the United States and the Bill of Rights were adopted on the premise that slavery should be legally protected in the new nation. This pro-slavery decision shocked the Marquis de Lafayette and other freedom fighters, including the 5,000 Black American men who had risked their lives to build a new nation based on democracy.

And so when Black men, women and children in Haiti rebelled against the French who enslaved them and created a free Black republic, the reaction of those in power in the United States was not to embrace their democracy: rather, the so-called Founding Fathers were terrified at the thought of a Black-ruled democracy and passed even harsher laws to control slaves in the United States, lest the “infection” of freedom threaten slavery in this country.

“The so-called Founding Fathers were terrified at the thought of a Black-ruled democracy in Haiti.”

The result was the Fugitive Slave Act of 1793, which was authored by Pierce Butler of South Carolina, and was the first federal act making it a crime to harbor an escaped slave or to try and prevent a slave’s arrest or capture. The Act also made it mandatory to transport a recaptured slave to any state or territory that demanded his or her return.

The U.S. bitterly opposed democracy in Haiti precisely because it threatened slaveocracy in the U.S.

This pattern of U.S. opposition to the freedom of people of color, therefore, was seen from the earliest days of this nation as a threat to white power and privilege. The destruction of democratic governments whenever U.S. interests are threatened or perceived as being threatened, is a goal that is pursued no matter which party is in power.
The list of nations where the U.S. has subverted democracy is long and there are so many places we could begin. But let us start with Cuba and the Philippines in the Spanish-American war of 1898.

U.S. newspapers and politicians filled the air with alleged sympathy for the Cubans and Filipinos suffering under the brutality of the Spaniards. There were denunciations throughout this country of concentration camps in Cuba run by Spain’s Gen. Valeriano “Butcher” Weyler, a man described by the “New York Journal” as “pitiless, cold, an exterminator of men....There is nothing to prevent his carnal, animal brain from running riot with itself in inventing tortures and infamies of bloody debauchery.”

And so the United States went to war, including Buffalo Soldiers of the 9th and 10th Cavalry as well as other regiments of Black soldiers. While stationed in the South, the Black soldiers were disarmed and more of them were killed by sheriffs and other alleged upholders of the law than were killed fighting in the war. An estimated 123 Black men, women and children had been lynched the year before the soldiers went South: burned at the stake, hung from trees, riddled with bullets or flayed alive by white mobs. But still the soldiers went to fight for freedom for other people.

They were welcomed as liberators by the Cubans and fought bravely, including saving Theodore Roosevelt and his Rough Riders from near annihilation at a Spanish-held fort called Las Guasimas.

The Rough Riders could not advance “and dared not retreat,” said one Black soldier, “having been caught in a sunken place in the road, with a barbed-wire fence on one side and a precipitous hill on the other....At the moment when it looked as if the whole regiment would be swept down by the steel-jacketed bullets from the Mausers, four troops of the 10th U.S. Calvary came up on ‘double time.’”

“In justice to the colored race,” wrote Rough Rider Frank Knox, who later became Secretary of the Navy, “I must say that I never saw braver men anywhere. Some of those...will live in my memory forever.”

But another man had a far different opinion, especially of the Cubans. Winston Churchill, a young military observer from England, had not realized--just as most of the American public had not realized--that a large percentage of the Cuban fighters were Black. “A great danger presents itself,” an alarmed Churchill wrote. “Two-fifths of the insurgents in the field, are negroes. These men, with Antonio Maceo (a Black general affectionately nicknamed “The Bronze Titan” by his fellow Cubans) at their head, would, in the event of success, demand a predominant share of the government of the country....the results being, after years of fighting, another black republic.”

But Churchill need not have worried about the “danger” of Black participation in democracy. Within months of the Black soldiers’ deeds of bravery in the name of Cuban freedom, the U.S. government declared Cuba a “protectorate,” stationed a permanent occupying force of White soldiers on the island and seized its economy for the benefit of U.S. corporations.

Roosevelt, who would probably have been killed if the Black soldiers hadn't saved him, launched the political career that would carry him to the White House by turning on his rescuers and saying they could not carry on a fight once they lost their white officers. This appeal to White American racism was successful, even though the soldiers had made what one Rough Rider called “their great, fearless charges” under the command of Black sergeants after their White officers were killed, a fact Roosevelt knew full well.

The United States not only grabbed Cuba to prevent the Cubans from establishing a democracy and to open new markets for American corporations, but also stole Puerto Rico, Wake Island, Guam and Hawaii.

“The U.S. declared Cuba a ‘protectorate,’ stationed a permanent occupying force of White soldiers on the island and seized its economy for the benefit of U.S. corporations.”

Much of Hawaii’s land had already been taken over by American pineapple plantation owners, and much of its culture trashed and weakened by American missionaries. Hawaii, said U.S. officials, was “a ripe pear waiting to be plucked,” and they plucked it. In 1898, while Black soldiers died and were betrayed in the failed attempt to bring freedom to Cuba, the U.S. Congress passed a joint resolution annexing Hawaii and assigning the U.S. military to insure this country’s control of the islands.

Spain, seeing the futility of trying to stop the U.S. militarily, sold all its possessions to the United States for $20 million. This also included the Philippines, with Pres. William McKinley clothing the theft in the following words: “...there was nothing left for us to do but to take them all (all of Spain’s possessions) and to educate the Filipinos, and uplift and civilize and Christianize them, and by God’s grace do the very best we could by them, as our fellow men for whom Christ also died.”

The Filipinos, most of whom had already converted to Christianity in the decades before the Americans arrived, didn’t feel they needed “God’s grace” as defined by White Americans. In February 1899, under the leadership of Emilio Aguinaldo (who had been brought back to the Philippines from China by U.S. warships, in order to fight against the Spaniards), the Filipinos launched a war for freedom and democracy against the forces of the United States.

Though the war against the Filipinos is largely forgotten or ignored in this country, it was a bloody and brutal conflict that saw American soldiers and disease kill hundreds of thousands of Filipinos. While Black men, women and children were being tortured and killed in this country, White American soldiers slaughtered the brown-skinned inhabitants of the Philippines so that American businesses could expand into the Pacific.

“We will not renounce our part in the mission of our race, trustee, under God, of the civilization of the world,” said Sen. Albert Beveridge in the U.S. Senate, speaking for the economic and political interests of this country. “Where shall we turn for consumers of our surplus? Georgraphy answers the question. China is our natural customer....The Philippines give us a base at the door of all the East.”

And so Americans unleashed their indiscriminate brutality in the name of capitalism and democracy.

“Our fighting blood was up,” said one White soldier, “and we all wanted to kill ‘niggers.’....This shooting human beings beats rabbit hunting all to pieces."

In brutality reminiscent of that at Abu Ghraib and throughout Iraq, the Manila correspondent of the Philadelphia Ledger wrote: "Our soldiers have pumped salt water into men to make them talk, and have taken prisoners people who held up their hands and peacefully surrendered, and an hour later...stood them on a bridge and shot them down one by one..."

The Black American soldiers were disgusted with the racism they saw their "fellow" soldiers introducing to yet another land, and many of them deserted. One, George Fagan of the all-Black 24th Infantry Regiment, accepted a commission in the rebel army and fought against the White Americans.

Another soldier, William Simms, wrote home (the letters by Simms and 113 other Black soldiers are in Smoked Yankees and the Struggle for Empire, by William Gatewood): "I was struck by a question a little Filipino boy asked me, which ran about this way: 'Why does the American Negro come...to fight us where we are much a friend to him and have not done anything to him. He is all the same as me and me all the same as you. Why don't you fight those people in America who burn Negroes, that make a beast of you...?’"

Approximately 1,000 Black soldiers married Filipino women and U.S. officials were so alarmed at the friendships between Black soldiers and Filipinos, that they ordered the soldiers shipped home early. While the majority of White Americans supported the war against the Filipinos, there were large protests from the Black American community, including many of the soldiers.

"The first thing in the morning is the 'Nigger" and the last thing at night is the 'Nigger,'" wrote Sgt. Patrick Mason of the 24th to a Black newspaper, the Cleveland Gazette about White soldiers' routine use of the word to describe both the Filipinos and Black American soldiers. Another Black infantryman, William Fulbright, wrote the editor of the Black-owned Indianapolis Freeman: "This struggle on the islands has been naught but a gigantic scheme of robbery and oppression."

“U.S. officials were so alarmed at the friendships between Black soldiers and Filipinos, that they ordered the soldiers shipped home early.”

But while the majority of White Americans supported the war, there were many exceptions. Speaking of the actions of the United States and other Western nations in stealing land and imposing oppression in the name of democracy and spreading "civilization," author Mark Twain wrote in the New York Herald: "I bring you the stately matron of Christendom, returning bedraggled, besmirched, and dishonored from pirate raids in Kiao-Chou, Manchuria, South Africa, and the Philippines, with her soul full of meanness, her pocket full of boodle, and her mouth full of pious hypocrisies."

Between the end of the Spanish-American War and the beginning of the Great Depression in 1929, the United States sent its military into Latin American countries thirty-two times. Haiti alone was occupied from 1915-1934, so that the U.S. could control both its politics and its economy – just as the democratically-elected Bertrand Aristide was deposed by U.S.-supported drug dealers and murderers in 2004 for the same reasons.

(In the months before the coup, Aristide had called for reparations from France for the slavery that had made Haiti France's richest colony. Aristide's demand angered both France and the U.S., as had his attempts to bring jobs and justice to the poor, and helped spur his removal from office. In a recent interview, Haitian folk-singing legend and political activist Annette Auguste, told how she was arrested by U.S. Marines shortly after the coup against Aristide and imprisoned for two years without ever being charged. Her only "crime" apparently was supporting Aristide and his attempts to help the poor. Auguste said that everyone in her house, including a five-year-old girl, were arrested by the Marines and handcuffed.)

U.S. Marines suppressed Haitian revolts, used forced labor, destroyed local democratic institutions, and jailed newspaper editors. Marine Major-Gen. Smedley Butler, who had retired in 1931, said the main purpose of the invasion of Haiti was so the Marines could act as bill collectors for the National City Bank of New York.

National City and other U.S. and Western banks had managed to gain control of Haiti's economy after the Haitians refused to pay Westerners for construction of the National Railway of Haiti. The railroad, which was largely financed by National City, was never completed. Its main terminal for Port-au-Prince, in fact, was built in a swamp two miles outside of town. The U.S. used the alleged default of the Haitian government toward National City and other bankers, to take control of Haiti, including collection of its money from customs and other sources.

When Woodrow Wilson became president, he took time off from introducing racial segregation into federal offices in Washington, D.C., to appoint William Jennings Bryant as Secretary of State. One of Bryant's first concerns was to learn more about Haiti, and when he was told the Haitians spoke French, he exclaimed: "Dear me, think of it! Niggers speaking French."

A 1918 law giving U.S. corporations the right to turn Haiti into a U.S. plantation, was passed by just 5% of the population after Wilson's Marines (led by Smedley Butler) disbanded the Haitian parliament at gunpoint as an essential move in establishing "economic development."

But White American racism was so strong, it destroyed even the pretense that the Marines had occupied Haiti for the good of the Haitian people. At any rate, U.S. officials soon openly admitted that they intended to control Haiti because of its strategic and military importance. They would also open up the island to any American businesses that wanted to invest there, but their main objective was to provide protection to the newly-constructed Panama Canal and the naval base at Guantanamo Bay in American-occupied Cuba. The United States also grabbed control of the deep harbor of Samana Bay in the Dominican Republic in 1916, by launching a military occupation of the island. Control of the bay had been a U.S. objective since the days of Secretary of State William Seward in Abraham Lincoln's cabinet.

Over seventy years later, President Bill Clinton secretly authorized the Texaco Oil Company to illegally ship oil to the Haitian junta that had overthrown Aristide. The next day Clinton once again sent the Marines into Haiti to "restore democracy."

U.S. planners under Clinton well understood (as so many people in so many previous administrations had understood), as writer and social critic Noam Chomsky has said, that "the threat of democracy can be overcome if economic sovereignty is eliminated.... The forces that reconquered the country are mostly inheritors of the U.S.-installed army and paramilitary terrorists."

“Once Allende comes to power we shall do all within our power to condemn Chile and all Chileans to utmost poverty."

While the United States has always been determined to destroy any democracy seen interfering with U.S. strategic and economic interests, the words and deeds used to justify that destruction have changed with the times.

In 1970, when the Chilean people elected Socialist Salvador Allende as their president, the U.S. ambassador to Chile said: "Not a nut or bolt shall reach Chile under Allende. Once Allende comes to power we shall do all within our power to condemn Chile and all Chileans to utmost poverty..."

So much for respecting the results of a democratic election.

In 1973 (on Sept. 11th, fittingly enough) the U.S. used covert action involving the Central Intelligence Agency and major corporations, to overthrow Allende. His overthrow resulted in an estimated 3,000 deaths and the torture of tens of thousands of ordinary Chileans – all with the whole-hearted support of the United States, which even sent advisers to help with the killings and torture.


The Beat Goes On

The history of the U.S. destruction of democracy would be tragic enough if it had stopped at this country's actions in Haiti and Latin America. Or even if it had stopped with the 1953 coup against the prime minister of Iran, Mohammad Mossadegh, because he had nationalized his country's oil industry and was going to make sure most of the profits went to the Iranian people rather than to multinational oil corporations. His overthrow was engineered by Kermit Roosevelt, the grandson of President Theodore Roosevelt, thus continuing the family tradition of subverting democracy and spreading imperialism.

The U.S. destruction of democracy continued with its complicity in the 1961murder of the democratically-elected leader of the Congo, Patrice Lumumba. Lumumba had declared that he was going to run the country for the Congolese and not for the American and European corporations who were determined to keep raping the wealth of the Congo.

"Everyone has realized that if the Congo dies, all Africa will be plunged into the night of defeat and servitude," Lumumba said in explaining why he had fought for the immediate independence of the Congo from Belgium. "The choice that was offered to us was none other than this alternative: freedom or the prolongation of our enslavement. There can be no compromise between freedom and slavery."

“The Eisenhower administration and the Central Intelligence Agency wholeheartedly backed the murder of Patrice Lumumba.”

And so the United States joined with other Western powers to make sure that Lumumba could not lead his people – and perhaps the rest of Africa – to freedom, rather than to the neo-colonialism that continues to this day in so much of that continent.

The murder of Lumumba was wholeheartedly backed by the Eisenhower administration and the Central Intelligence Agency. And the killers of Lumumba are said to be active in Congolese politics to this day, still subverting democracy and selling the country's riches to the West.

It was natural, then, that the U.S. supported the mass murderer and torturer, Jonas Savimbi, in Angola – where landmines Savimbi was given courtesy of rightwing politicians in the United States, South Africa and Israel, continue to maim and kill men, women and children to this day. Savimbi was seen as the West's best "hope" for stopping Angola from becoming an independent nation in control of its own resources, especially its oil.

The U.S. destruction of democracy also continued in countless other countries, including East Timor in Indonesia. While millions mourn the passing of ex-President Gerald Ford, few remember and the corporate media never mention that the U.S. government – with Ford's approval and the whole-hearted support of then-Secretary of State Henry Kissinger – gave the go-ahead for the Indonesian government to slaughter hundreds of thousands of Timorese because they wanted democracy. Ninety per cent of the weapons the Indonesians used to murder the Timorese, were supplied by the United States, which knew they would be used for that purpose.

Today the U.S. supports the regime in Nigeria that has spent years helping major oil companies to destroy the land and livelihood – and often the lives – of ordinary Nigerians. In the eyes of this government, and in the eyes of the military men in Nigeria, oil is much more important than the lives of innocent people. And so today the people in the Niger Delta continue to fight to preserve the land and air that has always given them life, against the combined forces of U.S. multinational corporations and the U.S.-supported Nigerian military.

But the most massive destruction of democracy by the United States is being done in the name of spreading democracy in the Middle East: its invasion and occupation of Iraq, and the measures it has taken to control Iraq's oil. One consultant – in referring to the deposits in Iraq's vast Western desert – called them the "Holy Grail" of the oil industry, a view echoed by most big oil executives.

Vice-President Dick Cheney and other neocons had been working for decades to get their hands on that oil, and accelerated their efforts once George W. Bush became president. By the time Bush invaded Iraq, his administration and oil executives had planned exactly what to do.

Just one month before the U.S. invasion of Iraq in 2003, investigative journalist Greg Palast was given a State Department document that laid out the United States government's plan to seize Iraq, its oil and everything else of value in the country.

The document, called "Moving the Iraqi Economy from Recovery to Growth," was a dream come true for neocons and their corporate supporters. It called for lowering taxes on big business, quick sales of Iraq's banks, bridges and all other "state enterprises" to foreigners (mainly Americans), allowing foreign corporations to take all of their profits out of Iraq, eliminating tariffs so U.S. imports would not be taxed and even revising Iraq's copyright laws to provide fifty years of retroactive royalty payments to the U.S. recording industry and twenty years of royalties to Microsoft.


“J. Paul Bremer promptly issued 100 orders designed to carry out the goals of big oil and other corporate interests in Iraq.”

But most of all it concentrated on taking the oil industry out of the hands of Iraqis and placing it in the control of Americans and other Westerners. The one law they didn't change was Saddam Hussein's ban on unions. There was no talk about bringing democracy to Iraq, but there was plenty of talk about controlling Iraqi's oil. Executives from Chevron-Texaco, Royal Dutch-Shell and other oil industry representatives, met at the White House and came up with a 300-page addendum to the plan. This addendum called for the complete turnover of Iraq's oil industry to international oil companies.

J. Paul Bremer, who had been the managing director of Kissinger Associates, was installed in Saddam Hussein's old palace to run Iraq as head of the Coalition Provisional Authority. He promptly issued 100 orders designed to carry out the goals of big oil and other corporate interests. Cargill – the world's biggest grain dealer – was able to dump hundreds of thousands of tons of wheat on the Iraqi market, thanks to the U.S. elimination of taxes and tariffs on imported foreign products. One result of this dumping was the devastation of the livelihoods of Iraqi farmers, who could not compete with the cheaper surpluses that flooded their country (Australian surpluses were also dumped on them).

Although Although U.S. officials from Bush on down like to brag about bringing democracy to Iraq, Bremer cancelled scheduled elections and only allowed them to be held after Ayatollah Ali Husaini Sistani threatened to bring a million Shi'ites into the streets to protest Bremer's action.

General Jay Garner, who preceded Bremer as head of the CPA but was quickly fired after refusing to carry out the Economy Plan, said he was bitterly opposed to U.S. attempts to seize Iraq's oil, pipelines, refineries and ports.

"That's one fight you don't want to take on," he told Palast.

But the U.S. is taking it on. While the corporate media in this country have virtually ignored those parts of the Iraq Study Group report dealing with Iraq's oil, a simple reading of the report shows that in Chapter 1, Page 1are these words: "It (Iraq) has the world's second-largest known oil reserves." The report then goes on to show what the United States can and should do to gain control of Iraq's oil, including privatizing it, opening Iraq to private energy and oil companies, and "helping" the Iraqis draft a new national oil law. This proposed law, which American "advisers" are working on virtually every day, would assure U.S. and Western control of Iraq's oil for decades to come. Under this law, as under the rule of the previous colonial powers, the people of Iraq would have virtually nothing to say about who gets their oil and how much they have to pay for it.

Two of the report's authors, James A. Baker III (the first President Bush's secretary of state) and Lawrence Eagleburger, have spent most of their adult lives representing oil companies. In 1982, when then-President Ronald Reagan removed Iraq from the list of companies sponsoring terrorism, Baker and Eagleburger took steps to expand trade with Iraq. The two ultimately helped Saddam Hussein's Iraq receive billions of dollars, which the dictator then used to buy U.S. goods. In 1984, when Baker became treasury secretary and Eagleburger became president of Kissinger Associates, Reagan opened full diplomatic relations with Saddam Hussein's Iraq.

Baker and Eagleburger were especially interested in Iraq's "vast oil reserves," and wasted no time in helping both their oil company clients and their law firms get their hands on Iraqi oil money. It is worth noting that the Iraqi Study Group report was written, not only by these men, but by several other conservatives who have long expressed a desire to control Iraq's oil.

U.S. oil companies have said that passage of a new Iraqi oil law is even more important than security concerns in deciding when they will move into Iraq. Many people, therefore, see the continuing presence of U.S. troops in Iraq as necessary both to pressure Iraqi lawmakers to pass the new law, and to try and guarantee security for the oil companies.

“Most Iraqi lawmakers don't even know details about the law the U.S. is trying to force down their throats.”

When Bremer quickly left Iraq (some would say when he "fled"), he left behind nearly 200 American "experts" to oversee each new Iraqi minister (these ministers also had to be approved beforehand by the U.S. government).

The proposed new law is being worked on feverishly by these American "advisers" and would require Iraqi lawmakers to sign what are called "production sharing agreements" (PSAs). PSAs are usually negotiated with weak governments and typically last for at least 15 to 20 years. Most Iraqi lawmakers don't even know details about the law the U.S. is trying to force down their throats. Iraqi knowledge or consent isn't considered necessary in the taking over of Iraq's oil, though, anymore than it is considered necessary whenever the U.S. decides that controlling another country's resources is more important than helping sustain or establish democracy.
Greg Gregg Muttitt, a member of a social and environmental NGO (Non-Governmental Organization) operating in Iraq, said he was recently at a meeting of members of the Iraqi Parliament (MPs) and asked how many "had seen the law. Out of twenty, only one MP had seen it."

The same lack of Iraqi participation was evident when Iraq's constitution was drafted, giving Americans and other Westerners the ability to assume effective control of the country's oil. The U.S. has even locked in its new laws, rules and regulations, so that it will be almost impossible for any future Iraqi government to change them.

Said one Sunni negotiator: "This constitution was cooked up in an American kitchen, not an Iraqi one."

Though the corporate media in this country say virtually nothing about the subject, the U.S. has spent billions of dollars to build permanent military bases in Iraq. This country has also built the biggest embassy with the biggest staff in the world in Iraq: a staff that includes many CIA agents. Paul Wolfowitz, former deputy defense secretary and one of the architects of the invasion of Iraq, is now president of the World Bank, In that position, say many critics, he is pressuring Iraqis to sign the new oil law quickly, before Chinese, Russian and Indian oil firms can move in. To put more pressure on the Iraqis, Wolfowitz recently opened a World Bank office in Baghdad.


A Nation of Locusts

The hypocrisy inherent in the deeds of the U.S. government as opposed to its words, has thus continued unchanged from the writing of the Constitution and Bill of Rights by a few privileged white males intent on protecting their economic, political and social privileges.

John F. Kennedy, who is revered by millions of Americans, including African Americans, directed the overthrow of Bolivia's democratically elected government because he saw it as threatening U.S. corporate control. Kennedy then supported installation of one of the many neo-Nazi governments this country has inflicted on Latin America (Successive U.S. governments, for instance, were perfectly happy with a Cuba riddled by drugs, prostitution, racial discrimination, and lack of health care and schools, as long as the rightwing dictators who controlled Cuba put American interests above the interests of their own poor and largely Black and Brown population).

In 2000, the U.S. hailed the overthrow of the democratically elected Black Indian president of Venezuela, Hugo Chavez, and his replacement by a rightwing publisher who immediately dissolved parliament, the judiciary and other instruments of democracy. Chavez was quickly returned to power by a popular uprising, but not before Secretary of State Condoleezza Rice and other officials praised what they hoped and thought would be another pro-rich regime. Chavez's "crime" consisted mainly of using Venezuela's resources, including its oil, to benefit poor Venezuelans instead of rich Americans. Rightwing individuals and organizations intent on destroying Venezuela's democracy, are still being supported financially and politically by the United States.

“The Pentagon is now training soldiers to destroy teachers, doctors, writers and anyone else in Latin America who tries to bring democracy to that region's largely Indian and Black populations.”

U.S. training of the Latin American military has sharply increased in the last few years. And that training has been shifted from the State Department, which demanded at least minimal supervision and investigation of human rights abuses, to the Pentagon, which asks for none. The new training mission for the Latin American military, as defined by the Pentagon, is now the fighting of "radical populism." In plain English, that means the Pentagon is now training soldiers to destroy teachers, doctors, writers and anyone else in Latin America who tries to bring democracy to that region's largely Indian and Black populations.

And so today in Venezuela, Nigeria, Haiti, Iraq and probably many other countries we're not even aware of, democracy is being destroyed or threatened by the United States, as it has been throughout history when big business wanted it destroyed.

In "Confessions of an Economic Hit Man," John Perkins describes how he was often sent by the U.S. government into some Third World country that had something the U.S. wanted: from oil or other natural resources to strategic location. He then tried to persuade the country's leader to agree to a project like building oil pipelines or a power plant or a dam. Anything that would cost a lot of money.

The cost of the project, which would be grossly inflated, would be paid for by loans from the World Bank and International Monetary Fund. All work would be done by American firms, which received huge profits. Inevitably the Third World country would be unable to repay the loan and would then become, in effect, an American puppet doing whatever the U.S. wanted – from giving control of its resources to multinational corporations to voting whatever way the U.S. wanted in the United Nations to allowing the U.S. to build military bases in the country.

If the hit man's plan didn't work, Perkins said, then the U.S. government sent in "jackals" from the CIA to try and foment civil disorder. If the leader of the Third World country still resisted, "accidents" happened to them. In the 1980's, Panama's Omar Torrijos, who insisted on retaining control of Panama's resources and helping the poor in his country, and Ecuador's Jaime Roldas, whose goals were the same for his country, were both killed in mysterious plane crashes.

Torrijos had taken land from the rich and given it to peasants, and initiated other economic and social programs that antagonized powerful Panamanian families and their American supporters.

“If the leader of the Third World country still resisted, ‘accidents’ happened to them.”

"Their deaths were not accidental," Perkins said of Torrijos and Roldas in an interview on the radio and television show Democracy Now. "They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We Economic Hit Men failed to bring Roldos and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in... It's only in rare instances like Iraq where the military comes in as a last resort (as of 2006, the U.S. maintained 725 military bases in 132 countries, including a huge new base in the nation of Djibouti to help control Africa, its resources and its politics. The CIA Fact Book, in describing Djibouti’s importance to the West, said it has a "strategic location near (the) world's busiest shipping lanes and close to Arabian oilfields..." Djibouti, in fact, can control access to the Red Sea, which is why both France and the U.S. maintain a strong military presence in that small African nation).

If Torrijos and Roldas had gone along with U.S. wishes, their nations would have been plunged into widespread poverty, and large American corporations would have taken over their infrastructure, resources and political decision-making.

And so while the military is still used to control other nations and their resources, as we can easily see in Iraq, the economic controls in the so-called Free Trade Agreements the U.S. has forced on much of Latin America, are now increasingly used to steal the riches of other regions. Even the forgiveness of the debt of poor nations that Bush has bragged about, said Perkins, is a "complete sham" that forces the poor nations to allow large American corporations to take over their water, gas, power, telephone and education systems.

The U.S. destruction of democracy can be compared to the actions of locusts. I used to spend every summer on my grandparents' farm in Ohio, and I helped my grandfather plant, repair fences, bring in the hay, whatever needed doing. He was a man who could go hours without saying more than a few dozen words. But he said one thing I've never forgotten, because it applies to so many situations in life, including U.S. history: "When locusts move on, they leave nothing behind."

This nation has acted like a plague of locusts in other lands throughout its history (and as slave-owning, land-stealing locusts within this country, starting with the enslavement of Africans and the slaughtering of Native Americans because Whites wanted their land and labor). While the method of this country's greed-driven destruction has sometimes changed, the goal remains the same as it has always been: to steal in order to make rich Americans richer, even if that means creating generation after generation of locusts swarming around the world, seizing everything they value.

Or, as Marine Major-General Smedley Butler described them when he summed up his career decades ago: creating generation after generation of "gangsters for capitalism."

WHO RULES AMERICA?

Prof. James Petras
Global Research, January 13, 2007
http://www.globalresearch.ca/index.php?c...cleId=4441


In the broadest and deepest sense, understanding how the US political system functions, the decisions of war and peace are taken, who gets what, how and why, requires that we address the question of 'Who rules America?' In tackling the question of 'ruling' one needs to clarify a great deal of misunderstandings, particularly the confusion between those who make governmental decisions and the socio-economic institutional parameters which define the interests to be served. 'Ruling' is exacting: it defines the 'rules' to be followed by the political and administrative decision-makers in formulating budgetary expenditures, taxes, labor and social legislation, trade policy, military and strategic questions of war and peace. The 'rules' are established, modified and adjusted according to the specific composition of the leading sectors of a ruling class (RC). Rules change with shifts in power within the ruling class. Shifts in power can reflect the internal dynamics of an economy or the changing position of economic sectors in the world economy, particularly the rise and decline of economic competitors.

The 'rules' imposed by one economic sector of the RC at a time of favorable conditions in the world economy, will be altered as new dominant economic sectors emerge and unfavorable external conditions weaken the former dominant economic sectors. As we shall describe below the relative and absolute decline of the US manufacturing sector is directly related to the rise of a multidimensional 'financial sector' and to the greater competitiveness of other manufacturing countries. The result is an accelerating process of liberalization of the economy favored by the ascending financial sectors. Liberalization in pursuit of unregulated flows of investments, buyouts, acquisitions and trade increases the financial sector's profits, commissions, incomes and bonuses. Liberalization facilitates the financial sector's acquisition of assets. The declining competitiveness of the older ruling class manufacturing sector dependent on statist protectionism and subsidies leads to 'rear-guard' policies, attempting to fashion an unwieldy policy of liberalization abroad and protectionism at home.

The answer to the question of who rules depends on specifying the historical moment and place on the world economy. The answer is complicated by the fact that shifts among 'sectors' of the ruling class involves a prolonged 'transitional period'. During this period declining and ascending sectors may intermingle and the class members of declining sectors 'convert' to the rising sector. Hence while power between economic sectors may change, the leading class groupings may not lose out or decline. They merely shift their investments and adapt to the new and more lucrative opportunities created by the ascending sector.

For example, while US manufacturing sector has declined relative to 'finance capital', many of the major investment institutions have shifted to the new financial 'growth sectors.' Concomitantly, the converted sectors of the ruling class will shift their policies toward greater liberalization and deregulation, thus severely weakening the rear-guard demands of the uncompetitive manufacturing sector. Equally important within the declining economic sectors of the RC, drastic structural changes may ensue, to regain profitable returns and retain influence and power. Foremost of these changes is relocation of production overseas to low wage, low tax, non-union locations, the introduction of IT technology designed to reduce labor costs and increase productivity, and diversification of economic activity to incorporate lucrative financial 'services'.

For example General Electric has moved from manufacturing toward financial services, relocated labor intensive activity off-shore and computerized operations. Through these moves the distinction between 'manufacturing' and financial capital has been made obsolete in describing the 'ruling class'.

To the degree that older manufacturing capitalists retain any economic and political weight in the RC, they have done so via sub-contracting overseas to Asia and Mexico (General Motors/Ford), invested in overseas plants to capture foreign markets, or have been converted in large part into commercial and importing operations (shoes, textiles, toys, electronics and computer chips).

Locally based manufacturers which remain in the RC are largely found among military contractors living off the largesse of state spending and depending on the political support of congressional and trade union officials, eager to secure employment for a shrinking manufacturing labor force.

During this transitional period of rapid and all-encompassing changes in the ruling class, enormous financial opportunities have opened up throughout the world. As a result of political tensions within the 'governing class', key policymakers are drawn directly from the most representative institutions of Wall Street. Key economic policies, especially those which are most relevant to the RC, tend to be overwhelmingly in the hands of tried and experienced top leaders from Wall Street.

Despite (or because of) the ascendancy of various sectors of financial capital in the RC, and their agreements on a host of 'liberalizing' economic policies, they are not homogeneous in all of their political outlooks, party affiliations, or their foreign policy outlook. Most of these political differences are questions of small matter – except on one issue where there is a major and growing rift, namely in the Middle East. A sector of the RC strongly aligned with the state of Israel supports a bellicose policy toward the Jewish state's adversaries (Iran, Syria, Hezbollah and Palestine) as opposed to another sector of the RC favoring a diplomatic approach, directed toward securing closer ties with Arab and Persian elites. Given the highly militarized turn in US foreign policy (largely due to the ascendancy of neo-conservative ideologues, the strong influence of the Zionist Lobby, and the instability and failures of their policies in the Middle East and China) the RC has pressed for and secured direct control over foreign economic policy.

The tensions and conflicts within the RC – especially between the Zioncons and the 'free marketeers' – have been papered over by the enormous economic benefits accruing to all sectors. All RC financial sectors have been enriched by White House and Congressional policies. All have benefited from the ascendancy of 'liberalizing regimes' throughout the world. They have reaped the gains of the expansionary phase of the international economy. While the entire ruling financial, real estate and trading sectors have been the main beneficiaries, it has been the financial groups, particularly the investment banks that have led the way and provide the political leadership.

Ascendancy of Financial Capital

'Finance capital' has many faces and cannot be understood without reference to specific sectors. Investment banks, pension funds, hedge funds, savings and loan banks, investment funds are only a few of the operative managers of a multi-trillion dollar economy. Moreover each of these sectors have specialized departments engaged in particular types of speculative-financial activity including commodity and currency, trading, consulting and managing acquisition and mergers. Despite a few exposés, court cases, fines and an occasional jailing, the financial sector writes its rules, controls its regulators and has secured license to speculate on everything, everywhere and all the time. They have created the framework or universe in which all other economic activities (manufacturing, retail sales and real estate) take place.

'Finance capital' is not an isolated sector and cannot be counterposed to the 'productive economy' except in the most marginal 'local activity'. In large part finance capital interacts with and is the essential driving force in real estate speculation, agro-business, commodity production and manufacturing activity. To a large degree 'market prices' are as influenced by speculative intervention as they are by 'supply and demand'. Equally important, the entire architecture of the 'paper empire' (the entire complex of inter-related financial investments) is ultimately dependent on the production of goods and services. The structure of power and wealth takes the form of an inverted triangle in which a vast army of workers, peasants and salary employees produce value which becomes the basis for near and remote, simple and exotic, lucrative and speculative financial instruments. The transfer of value from the productive activities of labor up through the ladder and branches of financial instruments is carried out through various vehicles: direct financial ownership of enterprises, credit, debt leveraging, buyouts and mergers. The tendency of 'productive capitalists' is to start-up an enterprise, innovate, exploit labor, capture markets and then 'sell-out' or go 'public' (stock offerings). The financial sector acts as combined intermediary, manager, proxy-purchaser and consultant, capturing substantial fees and expanding their economic empires and… preparing the way to higher levels of acquisitions and mergers… 'Finance capital' is the midwife of the concentration and centralization of wealth and capital as well as the direct owner of the means of production and distribution. From exacting a larger and larger 'tribute' or 'rent' (commission or fee) on each large-scale capital transaction, 'finance capital' has moved toward penetrating and controlling an enormous array of economic activities, transferring capital across national and sectoral boundaries, extracting profits and dumping shares according to the business, product and profit cycle.

Within the ruling class, the financial elite is the most parasitical component and exceeds the corporate bosses (CEOs) and most entrepreneurs in wealth and annual payments. It falls short of the annual income and assets of the super-rich entrepreneurs like William Gates and Michael Dell.

The financial ruling class is internally stratified into three sub-groups: at the top are big private equity bankers and hedge-fund managers, followed by the Wall Street chief executives, who in turn are above the next rung of senior associate or vice-presidents of a big private equity funds who is followed by their counterparts at Wall Street's public equity funds. Top hedge fund managers and executive have made $1 billion dollars or more a year – several times what the CEO's make at publicly traded investment houses. For example in 2006 Lloyd Blankfein, CEO of Goldman Sachs, was paid $53.4 million, while Dan Ochs, executive of the hedge fund Och-Ziff Capital paid himself $220 million dollars. That same year the Morgan Stanley CEO received $40 million dollars, while the chief executive of the hedge fund Citadel was paid over $300 million dollars.

While the 'hedge fund' speculators receive the highest annual salaries, the private equity executives can equal their hundreds of millions payments through deal fees and special dividend payments from portfolio companies. This was especially true in 2006 when buyouts reached a record $710 billion dollars. The big bucks for the private equity bosses comes from the accumulating stake executives have in portfolio companies. They typically skim 20% of profits, which are realized when a group sells or lists a portfolio company. At that time, the payday runs into the hundreds of millions of dollars.

The subset of the financial ruling class is the 'junior bankers' of private equity firms who take about $500,000 a year. At the bottom rung are the 'junior bankers' of publicly traded investment houses ('Wall Street') who average $350,000 a year. The financial ruling class is made up of these multi-billionaire elites from the hedge funds, private and public equity bankers and their associates in big prestigious corporate legal and accounting firms. They in turn are linked to the judicial and regulatory authorities, through political appointments and contributions, and by their central position in the national economy.

Within the financial ruling class, political leadership does not usually come from the richest hedge fund speculators, even less among the 'junior bankers'. Political leaders come from the public and private equity banks, namely Wall Street - especially Goldman Sachs, Blackstone, the Carlyle Group and others. They organize and fund both major parties and their electoral campaigns. They pressure, negotiate and draw up the most comprehensive and favorable legislation on global strategies (liberalization and deregulation) and sectoral policies (reductions in taxes, government pressure on countries like China to 'open' their financial services to foreign penetration and so on). They pressure the government to 'bailout' bankrupt and failed speculative firms and to balance the budget by lowering social expenditures instead of raising taxes on speculative 'windfall' profits.

The Dance of the Billions: Finance Capital Reaps the Profits from their Power

Speculators of the world had a spectacular year in 2006 as global equities hit double digit gains in the US, European and Asian markets. China, Brazil, Russia and India were centers of speculative profiteering as the China FTSE index rose 94%, Russia's stock market rose 60%, Brazil's Bovespa was up 32.9% and India's Sensex climbed 46.7%. In large part the stock markets rose because of cheap credit (to speculate), strong liquidity (huge financial, petrol and commodity profits and rents) and so-called 'reforms' which gave foreign investors greater access to markets in China, India and Brazil. The biggest profits in stock market speculation occurred under putative 'center-left' regimes (Brazil and India) and 'Communist' China, which have realigned themselves with the most retrograde and 'leading' sectors of their financial ruling class.

Russia's booming stock market reflects a different process involving the re-nationalization of gas and petroleum sectors, at the expense of the gangster-oligarchs of the Yeltsin era and the 'give-away' contracts to European/US oil and gas companies (Shell, Texaco). As a result huge windfall profits have been re-cycled internally among the new Putin era millionaires who have been engaged in conspicuous consumption, speculation and investment in joint ventures with foreign manufacturers in transport and energy related industries.

The shift toward foreign-controlled speculative capital emerging in China, India and Brazil as opposed to 'national and state' funded investment in Russia accounts for the irrational and vitriolic hostility exhibited by the western financial press to President Putin.

One of the major sources of profit-making is in the area of 'mergers and acquisitions' (M&A) – the buying and selling of multinational conglomerates, with $3,900 billion in deals for 2006. Investment banks took $18.8 billion dollars in 'fees' leading to multi-million dollar bonuses for 'M&A' bankers. M&A, hostile or benign, are largely speculative activity fueled by cheap debt and leading to the greater concentration of ownership and profits. Today it is said 2% of the households own 80% of the world's assets. Within this small elite, a fraction embedded in financial capital owns and controls the bulk of the world's assets and organizes and facilitates further concentration of conglomerates. The value of speculative M&A on a world scale is 16% higher than at the height of the 'DOTCOM' speculative boom in 2000. In the US alone over $400 billion dollars worth of private equity deals were struck in 2005, three times higher than the previous year.

To understand who are the leading members of the financial ruling class one needs only to look at the ten leading private equity banks and the value and number of M&A deals in which they were engaged:



Private equity rankings by M&A deals (Year to Dec 20 2006)

US Value $bn Number

Blackstone 85.3 12

Texas Pacific 81.9 11

Bain Capital Partners 74.7 9

Thomas H Lee Partners 53.4 6

Goldman Sachs 51.2 5

Carlyle 50.0 14

Apollo Management 44.9 7

Kohlberg Kravis Roberts 44.5 3

Merrill Lynch 35.9 3

Cerberus Capital Management 28.6 4

Industry Total 402.6 1,157

(Financial Times 12/27/2006 p 13 - FT montage:Bob Haslett



The crucial fact is that these private equity banks are involved in every sector of the economy, in every region of the world economy and increasingly speculate in the conglomerates which are acquired.

In the era of the ascendancy of speculative finance capital it is not surprising that the three leading investment banks, Goldman Sachs, Lehman Brothers and Bear Stearns reported record annual profits, based on their expansion in Europe and Asia, and their transfer of profits from manufacturing and services to the financial sector. For the year 2006, Goldman Sachs (GS) recorded the most profitable year ever for a Wall Street investment bank, on the basis of big (speculative) 'trading gains and lucrative investment in the world's worst sweatshops in Asia. GS reported a 69% jump in annual earnings to $9.54 billion dollars. Lehman Brothers (LB) and Bear Stearns (BS) equity banks also recorded record earnings. LB earned a record $4billion for the year. SB earned a record $2.1 billion dollars. For the year Lehman set aside about $334,000 dollars per junior banker, while top speculators and bankers earned a big multiple of that amount.

For the year 2006 investment banking revenue reached nearly $38 billion dollars compared to $25 billion dollars in 2004 – an increase of 34% (Financial Times Dec. 13, 2006 p.15).

The dominance of finance capital has been nurtured by the speculative activity of the controllers and directors of state-owned companies. 'State' ownership is an ambiguous term since it raises a further more precise question: 'Who owns the state'? In the Middle East there are seven state-owned oil and gas companies. In six of those companies the principal beneficiaries are a small ruling elite. They recycle their revenues and profits through US and EU investment banks largely into bonds, real estate and other speculative financial instruments (FT Dec 15, 2006 p.11). State ownership and speculative capital, in the context of closed 'Gulf-State' type of ruling classes, are complementary, not contradictory, activities. The ruling regime in Dubai converts oil rents into building a regional financial center. Many Jewish-American-led Wall Street investment banks cohabitate with new Islamic-based investment houses, both reaping speculative returns.

Much of the investment funds now in the hands of US investment banks, hedge funds and other sectors of the financial ruling class originated in profits extracted from workers in the manufacturing and service sector. Two inter-related processes led to the growth and dominance of finance capital: the transfer of capital and profits from the 'productive' to the financial and speculative sector and the transfer of finance capital overseas, in the form of take-over of foreign assets now equivalent of around 80% of the US GDP. The roots of finance capital are embedded in three types of intensified exploitation: 1) of labor (via extended hours, transfer of pension and health costs from capital to labor, frozen minimum wage, stagnant and declining real wages and salaries); 2) of manufacturing profits (through higher rents, inter-sectoral transfers to financial instruments, interest payments and fees and commissions for mergers and acquisitions); and 3) via state fiscal policies by lowering capital gains taxes, increasing tax write-offs and tax incentives for overseas investments and imposing regressive local, state and federal taxes.

The result is increasing inequality between, on the one hand, senior and junior bankers, public, private equity, investment and hedge fund directors, and their entourage of lawyers, accountants and, on the other hand, wage and salaried workers. Income ratios range between 400 to 1 and 1,000 to 1, between the ruling class and median wage and salary workers is the norm.

Crisis of the Working and Middle Class – (Begin to Worry the Ruling Class)

Living standards for the working and middle class and the urban poor have declined substantially over the past thirty years (1978-2006) to a point where one can point to a burgeoning crises. While real hourly wages in constant 2005 dollars have stagnated, health, pension, energy and educational costs (increasingly borne by wage and salary workers) have skyrocketed. If extensions in work time and intensification of work place production (increases in productivity) are included in the equation, it is clear that living (including working) conditions have declined sharply. Even the financial press can write articles entitled: "Why Ordinary Americans have Missed Out on the Benefits of Growth" (FT November 2, 2006 p.11).

Financial and investment banks are in charge of advising and directing the 'restructuring' of enterprises for mergers and acquisitions by downsizing, outsourcing, give-backs and other cost-cutting measures. This has led to downward mobility for the wage and salaried workers who retain their jobs even as their tenure is more precarious. In other words, the greater the salaries, bonuses, profits and rents for the financial ruling class engaged in 'restructuring' for M&As, the greater the decline in living standards for the working and middle class.

One measure of the enormous influence of the financial ruling class in heightening the exploitation of labor is found in the enormous disparity between productivity and wages. Between 2000 and 2005, the US economy grew 12%, and productivity (measured by output per hour worked in the business sector) rose 17% while hourly wages rose only 3%. Real family income fell during the same period (FT November 2, 2006 p.11). According to a poll in the fall of November 2006, three quarters of Americans say they are either worse off or no better off than they were six years ago (FT November 3, 2006 p.13).

The impact of the policies of the financial ruling class on both the manufacturing and service sectors transcends their profit skimming, credit leverage on business operations and management practices. It embraces the entire architecture of the income, investment and class structure. The growth of vast inequalities between the yearly payments of the financial ruling class and the medium salary of workers has reached unprecedented levels. The financial elite receives something in the range of a ratio of 500 up to 1000 times that of an average worker, depending on how narrowly or broadly we conceive of the financial ruling class.

Members of the financial ruling class have noted these vast and growing inequalities and express some concern over their possible social and political repercussions. According to the Financial Times (December 21, 2006), billionaire Stephen Schwartzman, CEO of the private equity group Blackstone warned "that the widening gap between Wall Street's lavish pay packages and middle America's stagnating wages risks causing a political and social backlash against the US's 'New Rich'". Treasury Secretary and former CEO of Goldman Sachs, Hank Paulson admitted that median wage stagnation was a problem and that amidst "strong economic expansion many Americans simply are not feeling (sic!) the benefits" (FT November 2, 2006 p. 11).

Ben Bernanke, Chairman of the Federal Reserve Bank testified before the Senate that "inequality is potentially a concern for the US economy…to the extent that incomes and wealth are spreading apart. I think that is not a good trend" (Ibid). In 2005 the proportion of national income to GDP going to profits, rents and other non-wage and salary sources is at record levels – 43%. Inequality in the distribution of national income in the US is the worst in the entire developed capitalist world. Moreover studies of time series data reveal that in the US inequality increased far greater and intergenerational social mobility was far more difficult in the US than any country in Western Europe. The growth of monstrous and rigid class inequalities reflects the narrow social base of an economy dominated by finance capital, its ingrown intergenerational linkages and the exorbitant entry fees ($50,000 per annum tuition with room and board) to elite private universities and post-graduate business schools. Equally important, the political power of finance capital and its 'associated' conglomerates wield uncontested political power in the US in comparison to any country in Europe. As a result the US government redistributes far less through the tax and social security, health and educational system than other countries. (ibid)

While some financial rulers express some anxiety about a 'backlash' from the deepening class divide, not a single one publicly supports any tax or other redistributive measures. Instead they call for increases in educational up-grading, job retraining and greater geographical mobility, though it is precisely among the educated middle class which is suffering salary stagnation.

Neither the Democratic Party majority in Congress, nor the Republican-controlled Executive offer any proposals to challenge the financial ruling class's dominance nor are there any proposals to reverse its most retrograde policies causing the growing inequalities, wage stagnation and the increasing rigidity of the class structure. The reason has been reported in the Wall Street Journal and the Financial Times: An overwhelming chunk of the funds that Democrats raise nationally for election campaigns comes either from Wall Street financiers or Silicon Valley software entrepreneurs. (FT November 3, 2006 p. 13). The Democratic congressional electoral campaign was tightly controlled by two of Wall Street's favorite Democrats, Senator Charles 'Israel First' Schumer and Congressman Rahm Immanuel, who selectively funded candidates who were pro-war, pro-Wall Street and unconditionally pro-Israel. Democrats slated to head strategic Congressional committees like Zion-Lib Barney Frank have already announced they have 'good working relations' with Wall Street.

The Financial Ruling Class Also Governs

Ruling classes rule the economy, are at the top of the social structure and establish the parameters and rules within which the politicians operate. More often than not few actually engage directly in congressional politics, preferring to build economic empires while channeling money toward candidates prepared to do their bidding. Only when an apparent division occurs, especially within the Executive, between the interests of the ruling class and the policies of the regime will elite members of the ruling class intervene directly or take a senior executive position to 'rectify' policy.

Ruling Class Political Power: Paulson Takes Over Treasury

Several sharp divergences occurred during the Bush regime between finance capital and policymakers. These policies prejudiced or threatened to seriously damage important sectors of the financial ruling class. Theses include: 1) the aggressive militarist and protectionist policies pursued by senior Pentagon officials and 'Zion-con' Senators toward China; 2) the political veto by Congress of the sale of US port management to a Gulf State-owned company and of a US oil company to China; 3) the failure of the Bush regime to secure the privatization of social security and to weaken the regulatory measures introduced in the aftermath of the massive corporate (Enron and World Com) and Wall Street swindles and 4. the need to put a check on the uncontrolled growth of fiscal deficits resulting from the Middle East wars, the ballooning trade deficits and the weakening dollar.

The headlines of the financial press (FT December 4, 2006 p.3) spell out finance capital's direct intervention into key White House policy making:

"Goldman Sachs Top Alumni Wield Clout in White House"

and

"Former Bank Executives Hold Unprecedented Power within a US Administration"

US financial and manufacturing ruling classes have long influenced, advised and formulated policy for US Presidents. But given the stakes, the risks and the opportunities facing the financial ruling class, it has moved directly into key government posts. What is especially unprecedented is the dominant presence of members from one investment bank – Goldman Sachs. In late November 2006, Goldman Sachs (GS) senior executive William Dudley took over the Federal Reserve Bank of New York markets group. Hank Paulson, ex-CEO of GS is Treasury Secretary – explicitly anointed by President Bush as undisputed czar of all economic policies. Reuben Jeffrey, a former GS managing partner is the chief regulator of commodity futures and options trading, Joshua Bolten, White House Chief of Staff (he decides who Bush sees, when and for how long – in other words arranges Bush's agenda) served as GS executive director. Robert Steel, former GS vice chairman, advises Paulson on domestic finance. Randall Fort, ex-GS director of global security, advises Secretary of State Rice. The ex-GS officials also dominate Bush's working group on financial markets and financial crisis management. The investment bankers wielding state power will control the Bush regime's biggest housing giants (Fannie Mae and Freddie Mac), tax policy, energy markets – all issues that directly affect the investment banks. In other words, the financial banks will be 'regulated' by their own executives. The degree of finance capital's stranglehold on political power is evidenced by the total lack of criticism by either party. As one financial newspaper noted: "Neither Mr. Bush nor Goldman have been criticized by Democrats for holding too many powerful jobs in part because the investment bank (GS) also has deep ties to Democrats. Goldman represented the biggest single donor base to the Democrats ahead of this (2006) year's mid-term election". (FT December 4, 2006)

Among Paulson's first moves was to organize a top level delegation to China and a working group to work on forming a 'strategic partnership'. Its task is to accelerate the 'opening' of China's financial markets to penetration and majority takeovers by US operated investment funds. This represents a potential multi-trillion dollar window of opportunity. By seizing the initiative Paulson hopes to undercut the anti-China cohort of neo-con, Pentagon and White House militarists, as well as backwater backers of Taiwanese independence and Congressional chauvinist demagogues like Senator Schumer who threaten to undermine lucrative US-Chinese economic relations.

To lower the fiscal deficit, Paulson proposes to 'reform' entitlements - reduce spending on Medicare and Medicaid and to work out a deal with the Democrats to privatize Social Security piecemeal.

Where finance capital has not been able to fashion a coherent economic strategy is with regard to Washington's Middle East wars. Because of the pull of the Zionist Lobby on many of leading lights of Wall Street – including its unofficial mouthpieces – the Wall Street Journal and the NY Times – Paulson has failed to formulate a strategy. He sis not even pay lip service to the Baker Iraq Study Group report's proposal to gradually draw down troops for fear of alienating some key senior executives of Goldman Sachs, Stern, Lehman Brothers et al who follow the 'Israel First' line. As a result, Paulson has to work around the Lobby by focusing on dealing with the Gulf city-state monarchies and Saudi Arabia in order to avoid another disastrous repetition of the Dubai Port management sale. Paulson above all wants to avoid Zionist political interference with the two way flow of finance capital between the petrol-financial-banking complexes in the Gulf States and Wall Street. He wants to facilitate US finance capital's access to the large dollar surpluses in the region. It is not surprising that the Israeli regime has accommodated their wealthy and influential financial backers on Wall Street by drawing a distinction between 'moderate' (Gulf States) with whom they claim common interests and 'Islamic extremists'. Israeli Prime Minister Olmert has directed his zealots in the US-Jewish Lobby to take heed of the refinements in the Party Line in dealing with US-Arab relations.

Nevertheless with all its concentrated political power and its enormous wealth and economic leverage over the economy, Wall Street cannot control or avoid serious economic vulnerabilities or possible catastrophic military-political events.

The Future of the Financial Ruling Class

What is abundantly clear is that one of the main threats to world markets – and the health of the financial ruling class – is an Israeli military attack on Iran. This will extend warfare throughout Asia and the Islamic world, drive energy prices beyond levels heretofore known, cause a major recession and likely a crash in financial markets. But as in the case of the relationships between Israel and the US, the Zionist Lobby calls the shots and its Wall Street acolytes acquiesce. As matters now stand, the pro Israel Lobby supports the escalation of the Iraq war and the savaging of Palestine, Somalia and Afghanistan. It has neutralized the biggest and most concerted effort by big name centrist political figures to alter White House policy. Baker, Carter, former military commanders of US forces in Iraq have been savaged by the Zionist ideologues. Under their influence the White House is putting into practice the war strategy presented by the 'American' Enterprise Institute (a Zioncon thinktank). As a result parallel to Bush's appointment of Paulson and Wall Streeters to run imperial economic policy, he has appointed an entire new pro-war civilian military-security apparatus to escalate and extend the Middle East wars to Africa (Somalia) and Latin America (Venezuela).

Sooner or later a break between Wall Street and the militarists will occur. The additional costs of an escalating wars, the continual ballooning debt payments, huge imbalances in the balance of payments and decreasing inflows of capital as multi-national repatriate profits and overseas central banks diversify their currency reserves will force the issue. The enormous and growing inequalities, the massive concentration of wealth and capital at a time of declining living standards and stagnant income for the vast majority, gives the financial ruling class little political capital or credibility if and when an economic and financial crisis breaks.

With foreign investors owning 47% of all marketable US Treasury bonds in 2006 compared to 33% in 2001 and foreign holdings of US corporate debt up to 30% today, from 23% just 5 years ago, a rapid sell-off would totally destabilize US financial markets and the economic system as well as the world economy. A rapid sell-off of dollars with catastrophic consequences cannot be ruled out if US-Zionist militarism continues to run amuck, creating conditions of extended and prolonged warfare.

The paradox is that some of the most wealthy and powerful beneficiaries of the ascendancy of finance capital are precisely the same class of people who are financing their own self-destruction. While cheap finance fueling multi-billion dollar mergers, acquisitions, commissions and executive payoffs, heightened militarism operates on a budget plagued by tax reductions, exemptions and evasions for the financial ruling class and ever greater squeezing of the overburdened wage and salary classes. Something has to break the cohabitation between ruling class financiers and political militarists. They are running in opposite directions. One is investing capital abroad and the other spending borrowed funds at home. For the moment there are no signs of any serious clashes at the top, and in the middle and working classes there are no signs of any political break with the two Wall Street parties or any challenge to the militarist-Zionist stranglehold on Congress. Likely it will take a catastrophe, like a White House-back Israeli nuclear attack on Iran to detonate the kind of crisis which will provoke a deep and widespread popular backlash of all things military, financial and made in Israel.

PROFITS UBER ALLES ! AMERICAN CORPORATIONS AND HITLER

Dr. Jacques R. Pauwels
Global Research, January 27, 2007
http://www.globalresearch.ca/index.php?c...cleId=4607


While America is at war in the Middle East, this incisive and carefully researched article by Jacques Pauwels provides with a historical understanding of the relationship between war and profit.


In the United States, World War II is generally known as "the good war."

In contrast to some of America's admittedly bad wars, such as the near-genocidal Indian Wars and the vicious conflict in Vietnam, World War II is widely celebrated as a "crusade" in which the US fought unreservedly on the side of democracy, freedom, and justice against dictatorship.

No wonder President George W. Bush likes to compare his ongoing "war against terrorism" with World War II, suggesting that America is once again involved on the right side in an apocalyptic conflict between good and evil. Wars, however, are never quite as black-and-white as Mr. Bush would have us believe, and this also applies to World War II. America certainly deserves credit for its important contribution to the hard-fought victory that was ultimately achieved by the Allies. But the role of corporate America in the war is hardly synthesized by President Roosevelt's claim that the US was the "arsenal of democracy." When Americans landed in Normandy in June 1944 and captured their first German trucks, they discovered that these vehicles were powered by engines produced by American firms such as Ford and General Motors. 1 Corporate America, it turned out, had also been serving as the arsenal of Nazism.


Fans of the Führer

Mussolini enjoyed a great deal of admiration in corporate America from the moment he came to power in a coup that was hailed stateside as "a fine young revolution." 2 Hitler, on the other hand, sent mixed signals. Like their German counterparts, American businessmen long worried about the intentions and the methods of this plebeian upstart, whose ideology was called National Socialism, whose party identified itself as a workers' party, and who spoke ominously of bringing about revolutionary change. 3 Some high-profile leaders of corporate America, however, such as Henry Ford liked and admired the Führer at an early stage. 4

Other precocious Hitler-admirers were press lord Randolph Hearst and Irénée Du Pont, head of the Du Pont trust, who according to Charles Higham, had already "keenly followed the career of the future Führer in the 1920s" and supported him financially. 5

Eventually, most American captains of industry learned to love the Führer. It is often hinted that fascination with Hitler was a matter of personalities, a matter of psychology. Authoritarian personalities supposedly could not help but like and admire a man who preached the virtues of the "leadership principle" and practised what he preached first in his party and then in Germany as a whole.

Although he cites other factors as well, it is essentially in such terms that Edwin Black, author of the otherwise excellent book IBM and the Holocaust, explains the case of IBM chairman Thomas J. Watson, who met Hitler on a number of occasions in the 1930s and became fascinated with Germany's authoritarian new ruler. But it is in the realm of political economy, not psychology, that one can most profitably understand why corporate America embraced Hitler.

In the 1920s many big American corporations enjoyed sizeable investments in Germany. IBM established a German subsidiary, Dehomag, before World War I; in the 1920s General Motors took over Germany's largest car manufacturer, Adam Opel AG; and Ford founded a branch plant, later known as the Ford-Werke, in Cologne. Other US firms contracted strategic partnerships with German companies. Standard Oil of New Jersey — today's Exxon — developed intimate links with the German trust IG Farben. By the early 1930s, an élite of about twenty of the largest American corporations had a German connection including Du Pont, Union Carbide, Westinghouse, General Electric, Gilette, Goodrich, Singer, Eastman Kodak, Coca-Cola, IBM, and ITT. Finally, many American law firms, investment companies, and banks were deeply involved in America's investment offensive in Germany, among them the renowned Wall Street law firm Sullivan & Cromwell, and the banks J. P. Morgan and Dillon, Read and Company, as well as the Union Bank of New York, owned by Brown Brothers & Harriman.

The Union Bank was intimately linked with the financial and industrial empire of German steel magnate Thyssen, whose financial support enabled Hitler to come to power. This bank was managed by Prescott Bush, grandfather of George W. Bush. Prescott Bush was allegedly also an eager supporter of Hitler, funnelled money to him via Thyssen, and in return made considerable profits by doing business with Nazi Germany; with the profits he launched his son, the later president, in the oil business. 6 American overseas ventures fared poorly in the early 1930s, as the Great Depression hit Germany particularly hard. Production and profits dropped precipitously, the political situation was extremely unstable, there were constant strikes and street battles between Nazis and Communists, and many feared that the country was ripe for a "red" revolution like the one that had brought the Bolsheviks to power in Russia in 1917.

However, backed by the power and money of German industrialists and bankers such as Thyssen, Krupp, and Schacht, Hitler came to power in January 1933, and not only the political but also the socio-economic situation changed drastically.

Soon the German subsidiaries of American corporations were profitable again. Why? After Hitler came to power American business leaders with assets in Germany found to their immense satisfaction that his so-called revolution respected the socio-economic status quo.

The Führer's Teutonic brand of fascism, like every other variety of fascism, was reactionary in nature, and extremely useful for capitalists' purposes. Brought to power by Germany's leading businessmen and bankers, Hitler served the interests of his "enablers." His first major initiative was to dissolve the labour unions and to throw the Communists, and many militant Socialists, into prisons and the first concentration camps, which were specifically set up to accommodate the overabundance of left-wing political prisoners.

This ruthless measure not only removed the threat of revolutionary change — embodied by Germany's Communists — but also emasculated the German working class and transformed it into a powerless "mass of followers" (Gefolgschaft), to use Nazi terminology, which was unconditionally put at the disposal of their employers, the Thyssens and Krupps. Most, if not all firms in Germany, including American branch plants, eagerly took advantage of this situation and cut labour costs drastically. The Ford-Werke, for example, reduced labour costs from fifteen per cent of business volume in 1933 to only eleven per cent in 1938. (Research Findings, 135–6)

Coca-Cola's bottling plant in Essen increased its profitability considerably because, in Hitler's state, workers "were little more than serfs forbidden not only to strike, but to change jobs," driven "to work harder [and] faster" while their wages "were deliberately set quite low." 7

In Nazi Germany, real wages indeed declined rapidly, while profits increased correspondingly, but there were no labour problems worth mentioning, for any attempt to organize a strike immediately triggered an armed response by the Gestapo, resulting in arrests and dismissals. This was the case in GM's Opel factory in Rüsselsheim in June 1936. (Billstein et al., 25) As the Thuringian teacher and anti-fascist resistance member Otto Jenssen wrote after the war, Germany's corporate leaders were happy "that fear for the concentration camp made the German workers as meek as lapdogs." 8 The owners and managers of American corporations with investments in Germany were no less enchanted, and if they openly expressed their admiration or Hitler — as did the chairman of General Motors, William Knudsen, and ITT-boss Sosthenes Behn — it was undoubtedly because he had resolved Germany's social problems in a manner that benefited their interests. 9

Depression? What Depression?

Hitler endeared himself to corporate America for another very important reason: he conjured up a solution to the huge problem of the Great Depression. His remedy proved to be a sort of Keynesian stratagem, whereby state orders stimulated demand, got production going again, and made it possible for firms in Germany — including foreign-owned firms — to increase production levels dramatically and to achieve an unprecedented level of profitability.

What the Nazi state ordered from German industry, however, was war equipment, and it was soon clear that Hitler's rearmament policy would lead inexorably to war, because only the spoils resulting from a victorious war would enable the regime to pay the huge bills presented by the suppliers.

The Nazi rearmament program revealed itself as a wonderful window of opportunity for the subsidiaries of US corporations. Ford claims that its Ford-Werke was discriminated against by the Nazi regime because of its foreign ownership, but acknowledges that in the second half of the 1930s its Cologne subsidiary was "formally certified [by the Nazi authorities] ... as being of German origin" and therefore "eligible to receive government contracts." (Research Findings, 21) Ford took advantage of this opportunity, though the government orders were almost exclusively for military equipment. Ford's German branch plant had posted heavy losses in the early 1930s, however, with lucrative government contracts thanks to Hitler's rearmament drive, the Ford-Werke's annual profits rose spectacularly from 63,000 Reichsmarks in 1935 to 1,287,800 RM in 1939.

GM's Opel factory in Rüsselsheim near Mainz fared even better. Its share of the German automobile market grew from 35 per cent in 1933 to more than 50 per cent in 1935, and the GM subsidiary, which had lost money in the early 1930s, became extremely profitable thanks to the economic boom caused by Hitler's rearmament program. Earnings of 35 million RM — almost 14 million dollars (US) — were recorded in 1938. (Research Findings, 135–6; and Billstein et al., 24) 10 In 1939, on the eve of the war, the chairman of GM, Alfred P. Sloan, publicly justified doing business in Hitler's Germany by pointing to the highly profitable nature of GM's operations under the Third Reich. 11

Yet another American corporation that enjoyed a bonanza in Hitler's Third Reich was IBM. Its German subsidiary, Dehomag, provided the Nazis with the punch-card machine — forerunner of the computer — required to automate production in the country, and in doing so IBM-Germany made plenty of money. In 1933, the year Hitler came to power, Dehomag made a profit of one million dollars, and during the early Hitler years the German branch plant paid IBM in the US some 4.5 million dollars in dividends. By 1938, still in full Depression, "annual earnings were about 2.3 million RM, a 16 per cent return on net assets," writes Edwin Black. In 1939 Dehomag's profits increased spectacularly again to about four million RM. (Black, 76–7, 86–7, 98, 119, 120–1, 164, 198, and 222)

American firms with branch plants in Germany were not the only ones to earn windfalls from Hitler's rearmament drive. Germany was stockpiling oil in preparation for war, and much of this oil was supplied by American corporations. Texaco profited greatly from sales to Nazi Germany, and not surprisingly its chairman, Torkild Rieber, became yet another powerful American entrepreneur who admired Hitler. A member of the German secret service reported that he was "absolutely pro-German" and "a sincere admirer of the Führer." Rieber also became a personal friend of Göring, Hitler's economic czar. 12

As for Ford, that corporation not only produced for the Nazis in Germany itself, but also exported partially assembled trucks directly from the US to Germany. These vehicles were assembled in the Ford-Werke in Cologne and were ready just in time to be used in the spring of 1939, in Hitler's occupation of the part of Czechoslovakia that had not been ceded to him in the infamous Munich Agreement of the previous year. In addition, in the late 1930s, Ford shipped strategic raw materials to Germany, sometimes via subsidiaries in third countries; in early 1937 alone, these shipments included almost 2 million pounds of rubber and 130,000 pounds of copper. (Research Findings, 24, and 28)

American corporations made a lot of money in Hitler's Germany; this, and not the Führer's alleged charisma, is the reason why the owners and managers of these corporations adored him. Conversely, Hitler and his cronies were most pleased with the performance of American capital in the Nazi state. Indeed, the American subsidiaries' production of war equipment met and even surpassed the expectations of the Nazi leadership.

Berlin promptly paid the bills and Hitler personally showed his appreciation by awarding prestigious decorations to the likes of Henry Ford, IBM's Thomas Watson, and GM's export director, James D. Mooney. The stock of American investments in Germany increased considerably after Hitler came to power in 1933. The major reason for this was that the Nazi regime did not allow profits made by foreign firms to be repatriated, at least not in theory. In reality, corporate headquarters could circumvent this embargo by means of stratagems such as billing the German subsidiary for "royalties" and all sorts of "fees." Still, the restriction meant that profits were largely reinvested within the land of opportunity that Germany revealed itself to be at the time, for example in the modernization of existing facilities, in the construction or acquisition of new factories, and in the purchase of Reich bonds and real estate. IBM thus reinvested its considerable earnings in a new factory in Berlin-Lichterfelde, in an expansion of its facilities at Sindelfingen near Stuttgart, in numerous branch offices throughout the Reich, and in the purchase of rental properties in Berlin and other real estate and tangible assets. (Black, 60, 99, 116, and 122–3)

Under these circumstances, the value of IBM's German venture increased considerably, by late 1938 the net worth of Dehomag had doubled from 7.7 million RM in 1934 to over 14 million RM. (Black, 76–7, 86–7, 98, 119–21, 164, 198, and 222) The value of the total assets of the Ford-Werke likewise mushroomed in the 1930s, from 25.8 million RM in 1933 to 60.4 million RM in 1939. (Research Findings, 133) American investment in Germany thus continued to expand under Hitler, and amounted to about 475 million dollars by the time of Pearl Harbor. (Research Findings, 6) 13

Better Hitler than "Rosenfeld"

Throughout the "dirty thirties," corporate profits in the US remained depressed, at home firms like GM and Ford could only dream of the kind of riches their branch plants in Germany were accumulating thanks to Hitler. In addition, at home corporate America experienced problems with labour activists, Communists, and other radicals. What about the vicious trademarks of the Führer's personality and regime?

Did they not disturb the leaders of corporate America? Apparently not much, if at all. The racial hatred propagated by Hitler, for example, did not overly offend their sensibilities. After all, racism against non-Whites remained systemic throughout the US and anti-Semitism was rife in the corporate class. In the exclusive clubs and fine hotels patronized by the captains of industry, Jews were rarely admitted; and some leaders of corporate America were outspoken anti-Semites. 14

In the early 1920s, Henry Ford cranked out a vehemently anti-Semitic book, The International Jew, which was translated into many languages; Hitler read the German version and acknowledged later that it provided him with inspiration and encouragement. Another notoriously anti-Semitic American tycoon was Irénée Du Pont, even though the Du Pont family had Jewish antecedents. 15 Corporate America's anti-Semitism strongly resembled that of Hitler, whose view of Judaism was intimately interwoven with his view of Marxism, as Arno J. Mayer has convincingly argued in his book Why Did the Heavens not Darken? 16

Hitler claimed to be a socialist, but his was supposed to be a "national" socialism, a socialism for racially pure Germans only. As for genuine socialism, which preached international working-class solidarity and found its inspiration in the work of Karl Marx, it was despised by Hitler as a Jewish ideology that purported to enslave or even destroy Germans and other "Aryans." Hitler loathed as "Jewish" all forms of Marxism, but none more so than communism (or "Bolshevism") and he denounced the Soviet Union as the homeland of "Jewish" international socialism.

In the 1930s, the anti-Semitism of corporate America likewise revealed itself to be the other side of the coin of anti-socialism, anti-Marxism, and red-baiting. Most American businessmen denounced Roosevelt's New Deal as a "socialistic" meddling in the economy. The anti-Semites of corporate America considered Roosevelt to be a crypto-Communist and an agent of Jewish interests, if not a Jew himself; he was routinely referred to as "Rosenfeld," and his New Deal was vilified as the "Jew Deal." 17

In his book The Flivver King, Upton Sinclair described the notoriously anti-Semitic Henry Ford dreaming of an American fascist movement that "pledged to put down the Reds and preserve the property interests of the country; to oust the Bolshevik [Roosevelt] from the White House and all his pink professors from the government services ... [and] to make it a shooting offense to talk communism or to call a strike." 18 Other American tycoons also yearned for a fascist saviour who might rid America of its "reds" and thus restore prosperity and profitability. Du Pont provided generous financial support to America's own fascist organizations, such as the infamous "Black Legion," and was even involved in plans for a fascist coup d'état in Washington. (Hofer and Reginbogin, 585–6) 19

Why Worry about the Coming War?

It was quite obvious that Hitler, who was rearming Germany to the teeth, was going to unleash a major war sooner or later. Whatever misgivings America's captains of industry may initially have had in this respect soon dissipated, because the cognoscenti of international diplomacy and business in the 1930s widely expected that Hitler would spare western countries, instead attacking and destroying the Soviet Union as promised in Mein Kampf. To encourage and assist him in the task that he considered his great mission in life, 20 was the hidden objective of the infamous appeasement policy pursued by London and Paris, and tacitly approved by Washington. 21

Corporate leaders in all western countries, including most emphatically the US, loathed the Soviet Union because that state was the cradle of the communist "counter system" to the international capitalist order of things, and a source of inspiration to America's own "reds." Furthermore, they found particularly offensive that the homeland of communism did not fall prey to the Great Depression, but experienced an industrial revolution that has been favourably compared by American historian, John H. Backer with the widely celebrated "economic miracle" of West Germany after World War II. 22

The appeasement policy was a devious scheme, whose real objective had to be concealed from the British and French publics. It backfired spectacularly because its contortions eventually made Hitler suspicious about the real intentions of London and Paris, which caused him to make a deal with Stalin, and thus led to Germany's war against France and Great Britain rather than the Soviet Union.

Nevertheless, the dream of a German crusade against the communist Soviet Union on behalf of the capitalist West refused to die. London and Paris merely launched a "Phoney War" against Germany, hoping that Hitler would eventually turn against the Soviet Union after all. This was also the idea behind quasi-official missions to London and Berlin, undertaken by GM's James D. Mooney, who tried very hard — as did the US ambassador in London, Joseph Kennedy, father of John F. Kennedy — to persuade German and British leaders to resolve their inconvenient conflict, so that Hitler could devote his undivided attention to his great eastern project. In a meeting with Hitler in March 1940, Mooney made a plea for peace in western Europe, suggesting "that Americans had understanding for Germany's standpoint with respect to the question of living space" — in other words, that they had nothing against his territorial claims in the East. (Billstein et al., 37–44) 23

These American initiatives, however, did not produce the hoped-for results. The owners and managers of American corporations with subsidiaries in Germany undoubtedly regretted that the war Hitler had unleashed in 1939 was a war against the West, but in the final analysis it did not matter all that much. What did matter was this: helping Hitler to prepare for war had been good business and the war itself opened up even more extravagant prospects for doing business and making profits.

Putting the Blitz in the Blitzkrieg

Germany's military successes of 1939 and 1940 were based on a new and extremely mobile form of warfare, the Blitzkrieg, consisting of extremely swift and highly synchronized attacks by air and land.

To wage "lightning war," Hitler needed engines, tanks, trucks, planes, motor oil, gasoline, rubber, and sophisticated communication systems to insure that the Stukas struck in tandem with the Panzers. Much of that equipment was supplied by American firms, mainly German subsidiaries of big American corporations, but some was exported from the US, albeit usually via third countries. Without this kind of American support, the Führer could only have dreamed of "lightning wars," followed by "lightning victories," in 1939 and 1940.

Many of Hitler's wheels and wings were produced in the German subsidiaries of GM and Ford. By the end of the 1930s these enterprises had phased out civilian production to focus exclusively on the development of military hardware for the German army and air force.

This switch, requested — if not ordered — by the Nazi authorities, had not only been approved, but even actively encouraged by the corporate headquarters in the US. The Ford-Werke in Cologne proceeded to build not only countless trucks and personnel carriers, but also engines and spare parts for the Wehrmacht. GM's new Opel factory in Brandenburg cranked out "Blitz" trucks for the Wehrmacht, while the main factory in Rüsselsheim produced primarily for the Luftwaffe, assembling planes such as the JU-88, the workhorse of Germany's fleet of bombers. At one point, GM and Ford together reportedly accounted for no less than half of Germany's entire production of tanks. (Billstein et al., 25,) 24

Meanwhile ITT had acquired a quarter of the shares of airplane manufacturer Focke-Wulf, and so helped to construct fighter planes. 25 Perhaps the Germans could have assembled vehicles and airplanes without American assistance. But Germany desperately lacked strategic raw materials, such as rubber and oil, which were needed to fight a war predicated on mobility and speed. American corporations came to the rescue.

As mentioned earlier, Texaco helped the Nazis stockpile fuel. In addition, as the war in Europe got underway, large quantities of diesel fuel, lubricating oil, and other petroleum products were shipped to Germany not only by Texaco but also by Standard Oil, mostly via Spanish ports. (The German Navy, incidentally, was provided with fuel by the Texas oilman William Rhodes Davis.) 26 In the 1930s Standard Oil had helped IG Farben develop synthetic fuel as an alternative to regular oil, of which Germany had to import every single drop. (Hofer and Reginbogin, 588–9)

Albert Speer, Hitler's architect and wartime armament minister, stated after the war that without certain kinds of synthetic fuel made available by American firms, Hitler "would never have considered invading Poland." 27 As for the Focke-Wulfs and other fast German fighter planes, they could not have achieved their deadly speed without a component in their fuel known as synthetic tetraethyl; the Germans themselves later admitted that without tetraethyl the entire Blitzkrieg concept of warfare would have been unthinkable.

This magic ingredient was produced by an enterprise named Ethyl GmbH, a daughter firm of a trio formed by Standard Oil, Standard's German partner IG Farben, and GM. (Hofer and Reginbogin, 589) 28 Blitzkrieg warfare involved perfectly synchronized attacks by land and by air, and this required highly sophisticated communications equipment. ITT's German subsidiary supplied most of that apparatus, while other state-of-the-art technology useful for Blitzkrieg purposes came compliments of IBM, via its German branch plant, Dehomag. According to Edwin Black, IBM's know-how enabled the Nazi war machine to "achieve scale, velocity, efficiency"; IBM, he concludes, "put the 'blitz' in the krieg for Nazi Germany." (Black, 208) From the perspective of corporate America it was no catastrophe that Germany had established its mastery over the European continent by the summer of 1940.

Some German subsidiaries of American corporations — for example the Ford-Werke and Coca-Cola's bottling plant in Essen — were expanding into the occupied countries, riding the coat-tails of the victorious Wehrmacht. IBM's president, Thomas Watson, was confident that his German branch plant would gain advantage from Hitler's triumphs. Black writes: "Like many [other US businessmen], Watson expected" that Germany would remain master of Europe, and that IBM would benefit from this by "[ruling] the data domain," that is, by providing Germany with the technological tools for total control. (Black, 212)

On 26 June 1940 a German commercial delegate organized a dinner at the Waldorf-Astoria hotel in New York to cheer the victories of the Wehrmacht in western Europe. Many leading industrialists attended, including James D. Mooney, the executive in charge of GM's German operations. Five days later, the German victories were again celebrated in New York, this time at a party hosted by the philo-fascist Rieber, boss of Texaco. Among the leaders of corporate America present were James D. Mooney and Henry Ford's son, Edsel. 29

What a Wonderful War!

Nineteenfourty proved an exceptionally good year for corporate America. Not only did the subsidiaries in Germany share in the spoils of Hitler's triumphs, but the European conflict was generating other wonderful opportunities. America herself was now preparing for a possible war, and from Washington orders for trucks, tanks, planes, and ships started rolling in. Moreover, initially on a strict "cash-and-carry" basis and then through "Lend-Lease," President Roosevelt allowed American industry to supply Great Britain with military hardware and other equipment, thus enabling brave little Albion to continue the war against Hitler indefinitely.

By the end of 1940, all belligerent countries as well as armed neutrals like the US itself were being girded with weaponry cranked out by corporate America's factories, whether stateside, in Great Britain (where Ford et al., also had branch plants), or in Germany. It was a wonderful war indeed, and the longer it lasted, the better — from a corporate point of view.

Corporate America neither wanted Hitler to lose this war nor to win it; instead they wanted this war to go on as long as possible. Henry Ford had initially refused to produce weapons for Great Britain, but now he changed his tune. According to his biographer, David Lanier Lewis, he "expressed the hope that neither the Allies nor the Axis would win [the war]," and he suggested that the US should supply both the Allies and the Axis powers with "the tools to keep on fighting until they both collapse." 30

On 22 June 1941 the Wehrmacht rolled across the Soviet border, powered by Ford and GM engines and equipped with the tools produced in Germany by American capital and know-how.

While many leaders of corporate America hoped that the Nazis and the Soviets would remain locked for as long as possible in a war that would debilitate them both, 31 thus prolonging the European war that was proving to be so profitable, the experts in Washington and London predicted that the Soviets would be crushed, "like an egg" by the Wehrmacht. 32 The USSR, however, became the first country to fight the Blitzkrieg to a standstill.

And on 5 December 1941, the Red Army even launched a counter-offensive. 33 It was henceforth evident that the Germans would be preoccupied for quite some time on the Eastern Front, that this would also permit the British to continue to wage war, and that the profitable Lend-Lease business would therefore continue indefinitely. The situation became even more advantageous to corporate America when it appeared that business could henceforth also be done with the Soviets. Indeed, in November 1941, when it had already become clear that the Soviet Union was not about to collapse, Washington agreed to extend credit to Moscow, and concluded a Lend-Lease agreement with the USSR, thus providing the big American corporations with yet another market for their products.

American Aid to the Soviets...and to the Nazis

After the war, it would become customary in the West to claim that the unexpected Soviet success against Nazi Germany had been made possible because of massive American assistance, provided under the terms of a Lend-Lease agreement between Washington and Moscow, and that without this aid the Soviet Union would not have survived the Nazi attack. This claim is doubtful.

First, American material assistance did not become meaningful before 1942, that is, long after the Soviets had single-handedly put an end to the progress made by the Wehrmacht and had launched their first counteroffensive. Second, American aid never represented more than four to five per cent of total Soviet wartime production, although it must be admitted that even such a slim margin may possibly prove crucial in a crisis situation. Third, the Soviets themselves cranked out all of the light and heavy high-quality weapons — such as the T-34 tank, probably the best tank of World War II — that made their success against the Wehrmacht possible. 34 Finally, the much-publicized Lend-Lease aid to the USSR was to a large extent neutralized — and arguably dwarfed — by the unofficial, discreet, but very important assistance provided by American corporate sources to the German enemies of the Soviets. In 1940 and 1941 American oil trusts increased the lucrative oil exports to Germany; large amounts delivered to Nazi Germany via neutral states.

The American share of Germany's imports of vitally important oil for engine lubrication (Motorenöl) increased rapidly, from 44 per cent in July 1941 to 94 per cent in September 1941. Without US-supplied fuel, the German attack on the Soviet Union would not have been possible, according to the German historian Tobias Jersak, an authority in the field of American "fuel for the Führer." 35 Hitler was still ruminating the catastrophic news of the Soviet counter-offensive and the failure of the Blitzkrieg in the East, when he learned that the Japanese had launched a surprise attack on Pearl Harbor on 7 December 1941. The US were now at war with Japan, but Washington made no move to declare war on Germany.

Hitler had no obligation to rush to the aid of his Japanese friends, but on 11 December 1941, he declared war on the US, probably expecting — vainly as it turned out — that Japan would reciprocate by declaring war on the Soviet Union. Hitler's needless declaration of war, accompanied by a similarly frivolous Italian declaration of war, made the US an active participant in the war in Europe. How did this affect the German assets of the big American corporations? 36

Business as Usual

The German subsidiaries of American corporations were not ruthlessly confiscated by the Nazis and removed entirely from the control of stateside corporate headquarters until the defeat of Germany in 1945, as parent companies would claim after the war. Regarding the assets of Ford and GM, for example, the German expert Hans Helms states, "not even once during their terror regime did the Nazis undertake the slightest attempt to change the ownership status of Ford [i.e. the Ford-Werke] or Opel." 37 Even after Pearl Harbor, Ford retained its 52 per cent of the shares of Ford-Werke in Cologne, and GM remained Opel's sole proprietor. (Billstein et al., 74, and 141)

Moreover, the American owners and managers maintained a sometimes considerable measure of control over their branch plants in Germany after the German declaration of war on the US. There is evidence that the corporate headquarters in the US and the branch plants in Germany stayed in contact with each other, either indirectly, via subsidiaries in neutral Switzerland, or directly by means of modern worldwide systems of communications. The latter was supplied by ITT in collaboration with Transradio, a joint venture of ITT itself, RCA (another American corporation), and the German firms Siemens and Telefunken. 38

In its recent report on its activities in Nazi Germany, Ford claims that its corporate headquarters in Dearborn had no direct contact with the German subsidiary after Pearl Harbor. As for the possibility of communications via branch plants in neutral countries, the report states that "there is no indication of communication with each other through these subsidiaries." (Research Findings, 88)

However, the lack of such "indication" may simply mean that any evidence of contacts may have been lost or destroyed before the authors of the report were allowed access to the relevant archives; after all, this archival access was only granted more than 50 years after the facts. Moreover, the report itself acknowledges somewhat contradictorily that an executive of the Ford-Werke did travel to Lisbon in 1943 for a visit to the Portuguese Ford subsidiary, and it is extremely unlikely that Dearborn would have been unaware of this. As for IBM, Edwin Black writes that during the war its general manager for Europe, Dutchman Jurriaan W. Schotte, was stationed in the corporate headquarters in New York, where he "continued to regularly maintain communication with IBM subsidiaries in Nazi territory, such as his native Holland and Belgium." IBM could also "monitor events and exercise authority in Europe through neutral country subsidiaries," and especially through its Swiss branch in Geneva, whose director, a Swiss national, "freely travelled to and from Germany, occupied territories, and neutral countries."

Finally, like many other large US corporations, IBM could also rely on American diplomats stationed in occupied and neutral countries to forward messages via diplomatic pouches. (Black, 339, 376, and 392–5) The Nazis not only allowed the American owners to retain possession and a certain amount of administrative control over their German assets and subsidiaries, but their own intervention in the management of Opel and the Ford-Werke, for example, remained minimal.

After the German declaration of war against the US, the American staff members admittedly disappeared from the scene, but the existing German managers — confidants of the bosses in the US — generally retained their positions of authority and continued to run the businesses, thereby keeping in mind the interests of the corporate headquarters and the shareholders in America.

For Opel, GM's headquarters in the US retained virtually total control over the managers in Rüsselsheim; so writes American historian Bradford Snell, who devoted attention to this theme in the 1970s, but whose findings were contested by GM. A recent study by German researcher Anita Kugler confirms Snell's account while providing a more detailed and more nuanced picture. After the German declaration of war on the US, she writes the Nazis initially did not bother the management of Opel at all. Only on 25 November 1942 did Berlin appoint an "enemy assets' custodian," but the significance of this move turned out to be merely symbolic. The Nazis simply wanted to create a German image for an enterprise that was owned 100 per cent by GM throughout the war. (Billstein et al., 61)

In the Ford-Werke, Robert Schmidt, allegedly an ardent Nazi, served as general manager during the war, and his performance greatly satisfied both the authorities in Berlin and the Ford managers in America. Messages of approval and even congratulations — signed by Edsel Ford — were regularly forthcoming from Ford's corporate headquarters in Dearborn. The Nazis too were delighted with Schmidt's work; in due course they awarded him the title, "leader in the field of the military economy." Even when, months after Pearl Harbor, a custodian was appointed to oversee the Ford plant in Cologne, Schmidt retained his prerogatives and his freedom of action. 39 IBM's wartime experience with Axis custodians in Germany, France, Belgium, and other countries was likewise far from traumatic.

According to Black, "they zealously protected the assets, extended productivity, and increased profits"; moreover, "existing IBM managers were kept in place as day-to-day managers and, in some cases, even appointed deputy enemy custodians." (Black, 376, 400–2, 405, and 415) The Nazis were far less interested in the nationality of the owners or the identity of the managers than in production, because after the failure of their Blitzkrieg strategy in the Soviet Union they experienced an ever-growing need for mass-produced airplanes and trucks.

Ever since Henry Ford had pioneered the use of the assembly line and other "Fordist" techniques, American firms had been the leaders in the field of industrial mass production, and the American branch plants in Germany, including GM's Opel subsidiary, were no exception to this general rule. Nazi planners like Göring and Speer understood that radical changes in Opel's management might hinder production in Brandenburg and Rüsselsheim. To maintain Opel's output at high levels, the managers in charge were allowed to carry on because they were familiar with the particularly efficient American methods of production. Anita Kugler concludes that Opel, "made its entire production and research available to the Nazis and thus — objectively speaking — contributed to enhance their long-term capability to wage war." (Billstein et al., 81) 40

Experts believe that GM's and Ford's best wartime technological innovations primarily benefitted their branch plants in Nazi Germany. As examples they cite all-wheel-drive Opel trucks, which proved eminently useful to the Germans in the mud of the Eastern Front and in the desert of North Africa, as well as the engines for the brand new ME-262, the first jet fighter, were also assembled by Opel in Rüsselsheim. 41 As for the Ford-Werke, in 1939 this firm also developed a state-of-the-art truck — the Maultier ("mule") — that had wheels on the front and a track on the back end. The Ford-Werke also created a "cloak company," Arendt GmbH, to produce war equipment other than vehicles, specifically machining parts for airplanes. But Ford claims that this was done without Dearborn's knowledge or approval.

Towards the end of the war this factory was involved in the top-secret development of turbines for the infamous V-2 rockets that wreaked devastation on London and Antwerp. (Research Findings, 41–2) ITT continued to supply Germany with advanced communication systems after Pearl Harbor, to the detriment of the Americans themselves, whose diplomatic code was broken by the Nazis with the help of such equipment. 42 Until the very end of the war, ITT's production facilities in Germany as well as in neutral countries such as Sweden, Switzerland, and Spain provided the German armed forces with state-of-the-art martial toys. Charles Higham offers specifics:

After Pearl Harbor the German army, navy, and air force contracted with ITT for the manufacture of switchboards, telephones, alarm gongs, buoys, air raid warning devices, radar equipment, and thirty thousand fuses per month for artillery shells ... This was to increase to fifty thousand per month by 1944. In addition, ITT supplied ingredients for the rocket bombs that fell on London, selenium cells for dry rectifiers, high-frequency radio equipment, and fortification and field communication sets. Without this supply of crucial materials it would have been impossible for the German air force to kill American and British troops, for the German army to fight the Allies, for England to have been bombed, or for Allied ships to have been attacked at sea. 43

No surprise then that the German subsidiaries of American enterprises were regarded as "pioneers of technological development" by the planners in Germany's Reich Economics Ministry and other Nazi authorities involved in the war effort. 44

Edwin Black also claims that IBM's advanced punch card technology, precursor to the computer, enabled the Nazis to automate persecution. IBM allegedly put the fantastical numbers in the Holocaust, because it supplied the Hitler regime with the Hollerith calculating machines and other tools that were used to "generate lists of Jews and other victims, who were then targeted for deportation" and to "register inmates [of concentration camps] and track slave labor." (Black, xx) However, critics of Black's study maintain that the Nazis could and would have achieved their deadly efficiency without the benefit of IBM's technology. In any event, the case of IBM provides yet another example of how US corporations supplied state-of-the-art technology to the Nazis and obviously did not care too much for what evil purposes this technology would be used.

Profits über Alles!

The owners and managers of the parent firms in the US cared little what products were developed and rolled off the German assembly lines. What counted for them and for the shareholders were only the profits. Branch plants of American corporations in Germany achieved considerable earnings during the war, and this money was not pocketed by the Nazis. For the Ford-Werke precise figures are available.

The profits of Dearborn's German subsidiary rose from 1.2 million RM in 1939 to 1.7 million RM in 1940, 1.8 million RM in 1941, 2.0 million RM in 1942, and 2.1 million RM in 1943. (Research Findings, 136). 45 The Ford subsidiaries in occupied France, Holland, and Belgium, where the American corporate giant also made an industrial contribution to the Nazi war effort, were likewise extraordinarily successful. Ford-France, for example — not a flourishing firm before the war — became very profitable after 1940 thanks to its unconditional collaboration with the Germans; in 1941 it registered earnings of 58 million francs, an achievement for which it was warmly congratulated by Edsel Ford. (Billstein et al, 106; and Research Findings, 73–5) 46

As for Opel, that firm's profits skyrocketed to the point where the Nazi Ministry of Economics banned their publication to avoid bad blood on the part of the German population, which was increasingly being asked to tighten its collective belt. (Billstein et al, 73) 47 IBM not only experienced soaring profits in its German branch plant, but, like Ford, also saw its profits in occupied France jump primarily because of business generated through eager collaboration with the German occupation authorities. It was soon necessary to build new factories. Above all, however, IBM prospered in Germany and in the occupied countries because it sold the Nazis the technological tools required for identifying, deporting, ghettoizing, enslaving, and ultimately exterminating millions of European Jews, in other words, for organizing the Holocaust. (Black, 212, 253, and 297–9)

It is far from clear what happened to the profits made in Germany during the war by American subsidiaries, but some tantalizing tidbits of information have nevertheless emerged. In the 1930s American corporations had developed various strategies to circumvent the Nazis' embargo on profit repatriation. IBM's head office in New York, for example, regularly billed Dehomag for royalties due to the parent firm, for repayment of contrived loans, and for other fees and expenses; this practice and other byzantine inter-company transactions minimized profits in Germany and thus simultaneously functioned as an effective tax-avoidance scheme. In addition, there were other ways of handling the embargo on profit repatriation, such as reinvestment within Germany, but after 1939 this option was no longer permitted, at least not in theory.

In practice, the American subsidiaries did manage to quite considerably increase their assets that way. Opel, for example, took over a foundry in Leipzig in 1942. 48 It also remained possible to use earnings in order to improve and modernize the branch plant's own infrastructure, that too, happened in the case of Opel.

There also existed opportunities for expansion in the occupied countries of Europe. Ford's subsidiary in France used its profits in 1941 to build a tank factory in Oran, Algeria; this plant allegedly provided Rommel's Africa Corps with the hardware needed to advance all the way to El Alamein in Egypt. In 1943 the Ford-Werke also established a foundry not far from Cologne, just across the Belgian border near Liège, to produce spare parts. (Research Findings, 133) It is likely, furthermore, that a portion of the lucre amassed in the Third Reich was transferred back to the US in some way, for example, by way of neutral Switzerland. Many US corporations maintained offices there that served as intermediaries between stateside headquarters and their subsidiaries in enemy or occupied countries, and that were also involved in "profit funnelling," as Edwin Black writes in connection with the Swiss branch of IBM. (Black, 73) 49

For the purpose of profit repatriation, corporations could also call on the experienced services of the Paris branches of some American banks, such as Chase Manhattan and J.P. Morgan, and of a number of Swiss banks. Chase Manhattan was part of the Rockefeller empire, as was Standard Oil, IG Farben's American partner; its branch in German-occupied Paris remained open throughout the war and profited handsomely from close collaboration with the German authorities. On the Swiss side there also happened to be some financial institutions involved that — without asking difficult questions — took care of the gold robbed by the Nazis from their Jewish victims. An important role was played in this respect by the Bank for International Settlements (BIS) in Basel, a presumably international bank that had been founded in 1930 within the framework of the Young Plan for the purpose of facilitating German reparation payments after World War I.

American and German bankers (such as Schacht) dominated the BIS from the start and collaborated cozily in this financial venture. During the war, a German and a member of the Nazi Party, Paul Hechler, functioned as director of the BIS, while an American, Thomas H. McKittrick, served as president. McKittrick was a good friend of the American ambassador in Berne and American secret service [OSS, forerunner of the CIA] agent in Switzerland, Allen Dulles. Before the war, Allen Dulles and his brother John Foster Dulles had been partners in the New York law firm of Sullivan & Cromwell, and had specialized in the very profitable business of handling American investments in Germany. They had excellent connections with the owners and top managers of American corporations and with bankers, businessmen, and government officials — including Nazi bigwigs — in Germany. After the outbreak of war, John Foster became the corporate lawyer for the BIS in New York, while Allen joined the OSS and took up a post in Switzerland, where he happened to befriend McKittrick. It is widely known that during the war the BIS handled enormous amounts of money and gold originating in Nazi Germany. 50 Is it unreasonable to suspect that these transfers might have involved US-bound profits of American branch plants, in other words, money hoarded by clients and associates of the ubiquitous Dulles brothers?

Bring on the Slave Labour!

Before the war, German corporations had eagerly taken advantage of the big favour done for them by the Nazis, namely the elimination of the labour unions and the resulting transformation of the formerly militant German working class into a meek "mass of followers." Not surprisingly, in Nazi Germany real wages declined rapidly while profits increased correspondingly. During the war prices continued to rise, while wages were gradually eroded and working hours were increased. 51 This was also the experience of the labour force of the American subsidiaries. In order to combat the labour shortages in the factories, the Nazis relied increasingly on foreign labourers who were put to work in Germany under frequently inhuman conditions.

Together with hundreds of thousands of Soviet and other POWs as well as inmates of concentration camps, these Fremdarbeiter (forced labourers) formed a gigantic pool of workers that could be exploited at will by whomever recruited them, in return for a modest remuneration paid to the SS. The SS, moreover, also maintained the required discipline and order with an iron hand. Wage costs thus sank to a level of which today's downsizers can only dream, and the corporate profits augmented correspondingly.

The German branch plants of American corporations also made eager use of slave labour supplied by the Nazis, not only Fremdarbeiter, but also POWs and even concentration camp inmates. For example, the Yale & Towne Manufacturing Company based in Velbert in the Rhineland reportedly relied on "the aid of labourers from Eastern Europe" to make "considerable profits," 52 and Coca-Cola is also noted to have benefitted from the use of foreign workers, as well as prisoners of war in its Fanta plants. 53 The most spectacular examples of the use of forced labour by American subsidiaries, however, appear to have been provided by Ford and GM, two cases that were recently the subject of a thorough investigation.

Of the Ford-Werke it is alleged that starting in 1942 this firm "zealously, aggressively, and successfully" pursued the use of foreign workers and POWs from the Soviet Union, France, Belgium, and other occupied countries — apparently with the knowledge of corporate headquarters in the US. 54 Karola Fings, a German researcher who has carefully studied the wartime activities of the Ford-Werke, writes:

[Ford] did wonderful business with the Nazis. Because the acceleration of production during the war opened up totally new opportunities to keep the level of wage costs low. A general freeze on wage increases was in effect in the Ford-Werke from 1941 on. However, the biggest profit margins could be achieved by means of the use of so-called Ostarbeiter [forced workers from Eastern Europe]. 55 The thousands of foreign forced labourers put to work in the Ford-Werke were forced to slave away every day except Sunday for twelve hours, and for this they received no wage whatsoever.

Presumably even worse was the treatment reserved for the relatively small number of inmates of the concentration camp of Buchenwald, who were made available to the Ford-Werke in the summer of 1944. (Research Findings, 45–72) In contrast to the Ford-Werke, Opel never used concentration camp inmates, at least not in the firm's main plants in Rüsselsheim and Brandenburg. The German subsidiary of GM, however, did have an insatiable appetite for other types of forced labour, such as POWs. Typical of the use of slave labour in the Opel factories, particularly when it involved Russians, writes historian Anita Kugler, were "maximum exploitation, the worst possible treatment, and...capital punishment even in the case of minor offences." The Gestapo was in charge of supervising the foreign labourers. 56

A Licence to Work for the Enemy

In the US, the parent corporations of German subsidiaries worked very hard to convince the American public of their patriotism, so that no ordinary American would have thought that GM, for example, which financed anti-German posters at home, was involved on the distant banks of the Rhine in activities that amounted to treason. 57

Washington was far better informed than John Doe, but the American government observed the unwritten rule stipulating that "what is good for General Motors is good for America," and turned a blind eye to the fact that American corporations accumulated riches through their investments in, or trade with, a country with which the US was at war.

This had a lot to do with the fact that corporate America became even more influential in Washington during the war than it had been before; indeed, after Pearl Harbor representatives of "big business" flocked to the capital in order to take over many important government posts.

Supposedly they were motivated by sterling patriotism and offered their services for a pittance, and they became known as "dollar-a-year men." Many, however, appeared to be there in order to protect their German assets. Former GM president William S. Knudsen, an outspoken admirer of Hitler since 1933 and friend of Göring, became director of the Office of Production Management. Another GM executive, Edward Stettinius Jr., became Secretary of State, and Charles E. Wilson, president of General Electric, became "the powerful number-two man at the War Production Board." 58

Under these circumstances, is it any wonder that the American government preferred to look the other way while the country's big corporations squirreled in the land of the German enemy? In fact, Washington virtually legitimated these activities. Barely one week after the Japanese attack on Pearl Harbor, on 13 December 1941, President Roosevelt himself discreetly issued an edict allowing American corporations to do business with enemy countries — or with neutral countries that were friendly with enemies — by means of a special authorization. 59

This order clearly contravened the supposedly strict laws against all forms of "trading with the enemy." Presumably, Washington could not afford to offend the country's big corporations, whose expertise was needed in order to bring the war to a successful end. As Charles Higham has written, Roosevelt's administration "had to get into bed with the oil companies [and with the other big corporations] in order to win the war." Consequently, government officials systematically turned a blind eye to the unpatriotic conduct of American investment capital abroad, but there were some exceptions to this general rule. "In order to satisfy public opinion," writes Higham, token legal action was taken in 1942 against the best-known violator of the "trading with the enemy" legislation, Standard Oil. But Standard pointed out that it "was fueling a high percentage of the Army, Navy, and Air Force, [thus] making it possible for America to win the war."

The Rockefeller enterprise eventually agreed to pay a minor fine "for having betrayed America" but was allowed to continue its profitable commerce with the enemies of the United States. 60 A tentative investigation into IBM's arguably treasonous activities in the land of the Nazi enemy was similarly aborted because the US needed IBM technology as much as the Nazis did. Edwin Black writes: "IBM was in some ways bigger than the war." Both sides could not afford to proceed without the company's all-important technology. "Hitler needed IBM. So did the Allies." (Black, 333, and 348) Uncle Sam briefly wagged a finger at Standard Oil and IBM, but most owners and managers of corporations who did business with Hitler were never bothered at all. The connections of ITT's Sosthenes Behn with Nazi Germany, for example, were a public secret in Washington, but he never experienced any difficulties as a result of them. Meanwhile, it would appear that the headquarters of the Western Allies were keen to go as easy as possible on the American-owned enterprises in Germany. According to German expert Hans G. Helms, Bernard Baruch, a high-level advisor to President Roosevelt, had given the order not to bomb certain factories in Germany, or to bomb them only lightly; it is hardly surprising that the branch plants of American corporations fell into this category. And indeed, while Cologne's historical city centre was flattened in repeated bombing raids, the large Ford factory on the outskirts of the city enjoyed the reputation of being the safest place in town during air attacks, although some bombs did of course occasionally fall on its properties. (Billstein et al, 98-100) 61

After the war GM and the other American corporations that had done business in Germany were not only not punished, but even compensated for damages suffered by their German subsidiaries as a result of Anglo-American bombing raids. General Motors received 33 million dollars and ITT 27 million dollars from the American government as indemnification. The Ford-Werke had suffered relatively little damage during the war, and had received more than 100,000 dollars in compensation from the Nazi regime itself; Ford's branch plant in France, meanwhile, had managed to wrest an indemnification of 38 million francs from the Vichy Regime. Ford nevertheless applied in Washington for 7 million dollars worth of damages, and after much wrangling received a total of 785,321 dollars "for its share of allowable losses sustained by Ford-Werke and Ford of Austria during the war," which the company has acknowledged in its recently published report. (Research Findings, 109)

Corporate America and Post-War Germany

When the war in Europe ended, corporate America was well positioned to help determine what would happen to defeated Germany in general, and to their German assets in particular. Long before the guns fell silent, Allan Dulles from his observation post in Berne, Switzerland, established contact with the German associates of the American corporations he had earlier served as a lawyer in Sullivan & Cromwell, and as Patton's tanks pushed deep into the Reich in the spring of 1945, ITT boss Sosthenes Behn donned the uniform of an American officer and rode into defeated Germany to personally inspect his subsidiaries there. More importantly the administration in the US occupation zone of Germany teemed with representatives of firms such as GM and ITT. 62 They were there, of course, to ensure that Corporate America would continue to enjoy the full usufruct of its profitable investments in defeated and occupied Germany. One of their first concerns was to prevent the implementation of the Morgenthau Plan. Henry Morgenthau was Roosevelt's secretary of the Treasury, who had proposed to dismantle German industry, thereby transforming Germany into a backward, poor, and therefore harmless agrarian state.

The owners and managers of corporations with German assets were keenly aware that implementation of the Morgenthau Plan meant the financial death knell for their German subsidiaries; so they fought it tooth and nail. A particularly outspoken opponent of the plan was Alfred P. Sloan, the influential chairman of the board of GM. Sloan, other captains of industry, and their representatives and contacts in Washington and within the American occupation authorities in Germany, favoured an alternative option: the economic reconstruction of Germany, so that they would be able to do business and make money in Germany, and eventually they got what they wanted. After the death of Roosevelt, the Morgenthau Plan was quietly shelved, and Morgenthau himself would be dismissed from his high-ranking government position on 5 July 1945 by President Harry Truman. Germany — or at least the western part of Germany — would be economically reconstructed, and US subsidiaries would turn out to be major beneficiaries of this development. 63

The American occupation authorities in Germany in general, and the agents of American parent companies of German subsidiaries within this administration in particular, faced another problem. After the demise of Nazism and of European fascism in general, the general mood in Europe was — and would remain for a few short years — decidedly anti-fascist and simultaneously more or less anti-capitalist, because it was widely understood at that time that fascism had been a manifestation of capitalism. Almost everywhere in Europe, and particularly in Germany, radical grassroots associations, such as the German anti-fascist groups or Antifas, sprang up spontaneously and became influential. Labour unions and left-wing political parties also experienced successful comebacks; they enjoyed wide popular support when they denounced Germany's bankers and industrialists for bringing Hitler to power and for collaborating closely with his regime, and when they proposed more or less radical anti-capitalist reforms such as the socialization of certain firms and industry sectors.

Such reform plans, however, violated American dogmas regarding the inviolability of private property and free enterprise, and were obviously a major source of concern to American industrialists with assets in Germany. 64 The latter were also aghast at the emergence in Germany of democratically elected "works' councils" that demanded input into the affairs of firms. To make matters worse, the workers frequently elected Communists to these councils. This happened in the most important American branch plants, Ford-Werke and Opel.

The Communists played an important role in Opel's work's council until 1948, when GM officially resumed Opel's management and promptly put an end to the experiment. The American authorities systematically opposed the anti-fascists and sabotaged their schemes for social and economic reform at all levels of public administration as well as in private business. In the Opel plant in Rüsselsheim, for example, the American authorities collaborated only reluctantly with the anti-fascists, while doing everything in their power to prevent the establishment of new labour unions and to deny the works' councils any say in the firm's management. Instead of allowing the planned democratic "bottom-up" reforms to blossom, the Americans proceeded to restore authoritarian "top-down" structures wherever possible.

They pushed the anti-fascists aside in favour of conservative, authoritarian, right-wing personalities, including many former Nazis. At the Ford-Werke in Cologne, anti-fascist pressure forced the Americans to dismiss the Nazi general manager Robert Schmidt, but thanks to Dearborn and the American occupation authorities he and many other Nazi managers were soon firmly back in the saddle. 65

Capitalism, Democracy, Fascism, and War

"About the things one cannot speak about, one ought to remain silent," declared the famous philosopher Wittgenstein, and a colleague, Max Horkheimer, paraphrased him with regard to the phenomenon of fascism and its German variety, Nazism, by emphasizing that if one wants to talk about fascism, one cannot remain silent about capitalism.

Hitler's Third Reich was a monstrous system made possible by Germany's top business leaders, and while it proved a catastophe for millions of people, it functioned as a Nirvana for corporate Germany. Foreign-owned enterprises were also allowed to enjoy the wonderful services

Hitler's regime rendered to das Kapital, such as the elimination of all workers' parties and labour unions, a rearmament program that brought them immense profits, and a war of conquest that eliminated foreign competition and provided new markets, cheap raw materials, and an unlimited supply of even cheaper labour from POWs, foreign slave labourers, and concentration camp inmates. The owners and managers of America's leading corporations admired Hitler because in his Third Reich they could make money like nowhere else, and because he stomped on German labour and swore to destroy the Soviet Union, homeland of international communism.

Edwin Black wrongly believes that IBM was atypical of American corporations in flourishing from capitalism's great fascist feast on the banks of the Rhine. Many, if not all of these corporations, took full advantage of the elimination of labour unions and left-wing parties and the orgy of orders and profits made possible by rearmament and war. They betrayed their country by producing all sorts of equipment for Hitler's war machine even after Pearl Harbor, and they objectively helped the Nazis to commit horrible crimes.