War or Peace

This is an old article produced by the UK Green Party but one I have just reread and it raises some interesting points in regards to the global economy and capitalism.

War or Peace

A Stark Choice for the Direction of the Global Economy

Green Party Budget Briefing 2004

Whatever happened to the peace dividend? A few years ago we heard much about the extra cash that would be available to spend on improving the quality of our lives now that the Cold War had ended. But there was merely the blink of an eye between the ending of that war and the finding of a new enemy and the creation of a new war. With Communism defeated Islam became the new enemy, and the war on terror was born.

This process was driven not by foreign policy objectives but by economic objectives. Our economic system has competition at its heart, and that competition leads to war. The engine of the global economy is profit, and the profits from the buying and selling of arms are huge. The threat to the US on September 11 was not primarily a threat to its citizens but a threat to its corporate heart: the symbolic target of the World Trade Center was chosen with care. The real cause of the war on terror was not Osama bin Laden and radical Islamicists but an economic system that is based in gross inequality and aggressive exploitation.

It is time that as citizens of one of the richest economies in the world we decide to spend that wealth to improve the quality of our lives, the lives of those in the poorest countries, and the lives of future generations. It is time we chose a peace economy rather than a war economy.

War and the Dominance of the Dollar

Liberals the world over shrink from the vision of US imperialism bestriding the world from Venezuela to Equatorial Guinea. Moral arguments aside one is forced to ask how on earth can they pay for it. In terms of its debt-to-GDP ratio the US is in a worse position than countries generally perceived as basket-cases and regularly breaks the strict Eurozone rules. The US owes a total of $2,500 billion and runs a massive trade deficit with the rest of the world. So how can it afford to prosecute foreign wars and spend more on military equipment than the next 14 biggest spending countries combined?

The explanation lies in the world trading system established at Bretton Woods in the wake of the Second World War. It is not an accident that this system was designed at a conference in the US and that its three controlling bodies¾the IMF, the World Bank, and the WTO (formerly GATT)¾are all based there. Because the system guarantees the US a dominant role in the global economy. There were two controls in the system that prevented the USA from excessive economic domination The first was its obligation to maintain a link between its currency and gold, which was abandoned in 1971, when the costs of the Vietnam War made it impossible for Nixon to continue to prosecute the war and maintain national solvency. The second was the controls over currency that countries abandoned when financial markets were deregulated during the 1980s. Since these controls were abandoned the US has literally had a licence to print money: the dollar all the world’s economies use for trade. It makes the dollars, it controls them and it spends them, largely on arms.

This currency domination is well understood amongst Washington policy-makers. Professor Thomas Barnett of the US Naval War College wrote in January of 2003: ‘We trade little pieces of paper (our currency, in the form of a trade deficit) for Asia’s amazing array of products and services. We are smart enough to know this is a patently unfair deal unless we offer something of great value along with those little pieces of paper. That product is a strong US Pacific Fleet, which squares the transaction nicely.’¹ Barnett’s argument is that an implicit exchange is being made: we allow the US all the consumer goods and military materiel it wishes to have, in exchange for which it guarantees global security.

According to green economist Richard Douthwaite:

The US plans to spend $379bn on its armed forces next year. This is almost exactly equal to its trade deficit in 2001, so the transaction would indeed be ‘squared nicely’ if the rest of the world was happy to have the US play the role of global policeman and also to pay that policeman by allowing him to fill in a blank cheque for pretty well whatever sum he likes. But, given the policeman’s record of destabilising or overthrowing governments with which he has had ideological differences and the fact that he would continue to put his ‘particularistic national interests’ ahead of those of the rest of the world, I doubt if many countries would be entirely happy with the arrangement.²

The Real Costs of War

War is no longer a tool of foreign policy it is a major industry. The Green Deputy Mayor of London Jenny Jones revealed that she was shocked and horrified after her visit to this year’s Defence Systems and Equipment International Exhibition at Docklands:

Over the years I’ve read reports of how the arms trade operates, but seeing at first hand this host of men from all over the world bargaining over weapons systems which bring death and misery to millions brings home how inhumane this industry is. This fair encourages the sale of weapons which kill hundreds of civilians just because they happen to be in the wrong place. I saw delegations from countries wracked with civil unrest, repression and poverty, and I couldn’t help thinking of the millions of people in those countries who don’t have clean water or adequate food but do have expensively-equipped armies.

Quoted in Green World 42, Autumn/Winter 2003.

In the UK the arms industry is subsidised to the value of £420 million pounds. This means that a substantial part of our taxes, that could be spent on hospitals, schools or sent as aid to the poorer countries of the world ends up in the pocket’s of arms industry executives.

Let’s take the example of South Africa. In spite of its urgent development needs including an epidemic of AIDS and unemployment rates as high as 50 per cent in some of the black townships, in January 1999 Deputy Prime Minister Thabo Mbeki announced the cabinet’s provisional approval of the decision to re-equip the South African National Defence Force (SANDF). The items to be procured include;

· 28 Gripen fighters from BAe/SAAB for £1.09bn

· 24 Hawks trainer fighters from BAe for £470m

· 4 corvettes-class patrol boats from a German shipbuilding consortium

· 3 diesel submarines from the German submarine consortium

· 4 super Lynx helicopters from GKN-Westland

· 40 light helicopters from the Italian firm Agusta in which GKN-Westland has a stake

The total programme is valued at £3bn or R29bn. The costs, spread over fifteen years, will amount to an extra £200m (or R2bn) per annum, representing a 20% increase in the military budget. Tony Blair has promised £4bn. worth of investments in South Africa in order to ensure that a sizeable proportion of the value of these purchases will go to UK companies. Export credit guarantees will be supplied to underwrite the risks inherent in the deal; in other words, we, as taxpayers, will be subsidising it.³

How Global Capitalism was Saved by the War on Terror

Remember Enron? When it went bust in November 2001 with debts of $20bn. backed by only $2bn. of assets it was the worst scandal capitalism had ever had to explain away. Fortunately for the executives at Enron, and other US corporations that had inflated their stock-market value with ‘future value captured in the form of market capitalisation’ as Anderson call it in the fraudsters’ training manual,⁴ such explanations were drowned out in the clamour over the need to defend the ‘homeland’ and the launching of the ‘war on terror’. But this distraction was only one way in which this war prevented the collapse of several massive US corporations, and the potentially terminal destabilisation of the global economy this might cause.

Halliburton, with its $998m. debt, and the same taste in accounting advice, might have been next. It had used the same technique of ‘unbilled receivables’ to inflate the profits it reported to shareholders and the stock-market. The two companies shared many similarities: their place in the energy sector, vast borrowing, and close political ties with the White House. Like Enron they had postponed losses and counted money they had not even invoiced for as revenue, according to the pressure group Judicial Watch overstating profits to the value of $445m during 1999 to 2001. Living on the accounting edge like this might have worked during the boom of the 1990s but was becoming impossible in the insecure new century, especially once the foundations of the corporate world were cracked by the World Trade Center attack and the fall of Enron.

Dick Cheney, chief executive of Halliburton from 1995 to 2000, and now Vice-President of the US was no doubt a keen supporter of the fantasticial ‘war on terror’ and the huge increase in defence spending it required. Halliburton almost immediately received billion-dollar contracts from the Pentagon to build operational bases. It was also saved from lawsuits it was facing from former employees who had been poisoned by asbestos, via a legal reform capping the value of such suits, causing Halliburton shares to rise by 43%. Cheney is not entirely in the clear: he is still facing a fraud case filed by Halliburton investors in the Dallas court.

But Halliburton the company is now returned to the sorts of profits its shareholders enjoy. When Keynes’s said that capitalism was about digging holes and filling them in again he didn’t have the war in Iraq in mind, but the aphorism fits. Bush’s cronies have profited from the weapons that destroyed the country and are now gaining on the other side of the coin by winning multi-billion dollar contracts, paid for by Iraqi oil wealth, to repair the damage they caused against the will of the Iraqi people. War is a certainly a profitable business.

Best of all, of course, you can declare a country a ‘failed state’ and take it over yourself. This allows you to set the prices of the tasty assets on display, and privilege your friends and family in the asset acquisition that follows. When the Guardian writer Julian Borger recently called his article ‘Bush Cronies Advise on Buying Up Iraq’, again he was not talking figuratively. Here is how his colleague Rory McCarthy in Baghdad,⁵ explained what is going on:

Under the new rules, announced by the finance minister, Kamil Mubdir al-Gailani, in Dubai, foreign firms will have the right to wholly own Iraqi companies, except those in the oil, gas and mineral industries. There will be no restrictions on the amount of profits that can be repatriated or on using local products. Corporate tax will be set at 15%.

And here again we see Halliburton, this time in the guise of its subsidiary Kellogg, Brown and Root, where Dick Cheney cut his corporate teeth, winning a big contract, this time worth $7bn. and again to repair Iraq’s oil infrastructure. A company that was on the verge of a spectacular crash is now making good business again. Just one example of how the ‘war on terror’ has been a life-saver for US capitalism, with US growth figures moving from negative territory up to 4 per cent.

The Testosterone Economy: Thriving on Risk and Fear

The late phase of capitalism that we are living through prioritises risk. Risk-taking is now lauded and rewarded more than any other quality. Success stories under globalisation are based in borrowing money that you cannot possibly hope to pay back, and just hoping you will get away with it. The explanation for this extraordinary behaviour lies in the structure of our economic system and primarily the way money is created.

In the modern economy almost all money is created by being borrowed. So those who are prepared to borrow outrageous sums, unjustified by any assets they may have to back them up, are lauded and rewarded for their willingness to take risks. Without them the banks would not be able to bring money into existence and would not gain the face value of that money by doing so. Hence the sacred status of the entrepreneur. Because this money is lent with interest due, the entrepreneur must be able to find not only the lump sum, but also the additional value of the interest, hence his company must grow. Capitalism’s obsession with growth is not an economic inevitability, only an inevitable consequence of a money system based on interest-bearing debt.

The other motivator for the enterpreneur is fear: fear of the risks he has taken, fear of failure, and above all fear of being a loser. Since our economy is typified by hierarchy nobody wants to end up anywhere else but on top of the dung-heap. Capitalism operates like a pump, where the energy of those who have least pushes them upwards to become those who have most; inequality is the motor that operates this pump.

This inequality has damaging psychological consequences. There is understandable anxiety in the medical community surrounding the statistical evidence that those in professional occupations live considerably longer than those in manual occupations. Data from the Office for National Statistics indicate that men in social class I live 7.4 years longer than men in social class V; for women the difference is 5.7 years.⁶ More surprisingly, US researchers have found that inequality is bad for life expectancy of all in a society, since the relationship they found between a measure of inequality across society as a whole (the Gini coefficient) and the life expectancy of that society remained after they had controlled for poverty. They called this finding the Robin Hood Index, suggesting that Robin Hood’s redistribution deserves the warmth it has always received. The authors conclude:

The paper suggests that that there is a relation between income distribution and life expectancy. It concluded that variations between states in the inequality of income were associated with increased mortality from several causes. Relative poverty, i.e. the size of the gap between the wealthy and less well off, seems to matter in its own right: the greater the gap between the rich and poor, the lower the average life expectancy. This association is independent of that between absolute income and life expectancy. Therefore it matters, not only how affluent a country is, but also how economic gains are distributed among its members.⁷

Jeremy Seabrook argues that what is so damaging about inequality under capitalism is that it is used to spur us to greater economic effort and to do this we must feel ashamed of our relative lack of affluence. Our desire to remove the shame of poverty is what generates our energy to engage in capitalism, to increase our monetary holdings, to ensure that we are on the winning side of the unequal distribution:

If at the earlier moment of industrialization the persistence of poverty could be explained by a productive capacity only rudimentarily established, such an excuse is no longer possible. It becomes clear, therefore, that the survival of poverty is essential for ideological and not material reasons. Indeed, the maintenance of a felt experience of insufficiency is essential to any capitalist version of development.⁸

The feeling of insufficiency, what has elsewhere been called ‘the ethic of scarcity’ becomes part of our drive to accumulate more, in a rat-race that we can never win. The advertising industry plays its own part in increasing our feeling of ‘deprivation’ and our felt need for a range of wholly worthless gadgets that we are sure the person behind the Leylandia hedge must already own. Oliver James identifies this endless struggle to keep up with the Jones’s as a primary cause of the epidemic of depression afflicting Western societies.

Peace and the Steady State Economy

We need to step off the treadmill of growth and competition and build a steady-state economy. This means an end to economic growth and in many sectors it will mean a contraction of activity. A respect for planetary limits makes this inevitable. The addiction to economic growth is killing us all. In spite of the squeals from those who benefit from this economic system, surely your children’s ability to breathe fresh air is worth more than a battery-powered cocktail stirrer? Do you really need a plasma TV if it means that the whole of the population of Kiribati will be displaced and thousands will drown in Bangladesh? These are the choices we are actually making every day. We should make the moral choice to cut our consumption and stop and smell the roses instead.

The competition for resources that is generating the wars and the injustice that gives rise to terrorism could also be ended by the move to the steady state. The economic energy that we have available without destroying the planet should be used to meet real human needs in the South as well as the West. Such a global compact based on fairness and justice would be an important step towards the peace that would give us more satisfaction than any number of consumer goods.

And finally, we need to build up strong local economies that would give us real security rather than leaving us at the mercy of corporations. The impulse towards increasing the quantity of goods produced locally and reducing the expansion of international trade came as a result of concern about the huge levels of carbon dioxide needlessly produced as biscuit-carrying juggernauts pass each other on Europe’s congested road network, or as we find vegetables on our supermarket shelves grown in countries whose people are starving. As well as improving our quality of life and our human relationships a system of strong local economies would reinforce our identities as part of a functioning human community.

Notes

1. Asia: The Military-Market Link’ The U.S. Naval Institute, January, 2002 pp. 53-56. See http://www.nwc.navy.mil/newrulesets/AsiaTheMilitary-MarketLink.htm

2. ‘Defence and the Dollar’, Feasta Review, 2004.

3. Information from Campaign Against the Arms Trade website: caat.org.uk.

4. Libert, B. D., Samek, S. S. and Boulton, R. E. S. (2000), Cracking the Value Code: How Successful Businesses are Creating Wealth in the New Economy (New York: HarperBusiness).

5. McCarthy, R. (2003), ‘Foreign firms to bid in huge Iraqi sale’, Guardian online, 22 Sept.

6. ONS (2002), Trends in Life Expectancy by Social Class 1972-1999 (London: SO), Tables 1-4.

7. Kennedy, B.P., Ichiro, K., and Prothrow-Stith, D. (1996) ‘Income Distribution and Mortality: Cross Sectional Ecological Study of the Robin Hood Index in the United States’,. British Medical Journal, 312:1004-1007.

8. Seabrook, J. (2001), Landscapes of Poverty, p. 4.