"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘New World Order’

“As Nation-States Falter, Capitalism Shines”

In Uncategorized on June 9, 2013 at 5:39 pm

https://i1.wp.com/gerrardpanahon.com/wp-content/uploads/anti-corporate-personhood-i13.jpgOldspeak: ” It’s not a question of enough, pal. It’s a Zero Sum game – somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred – from one perception to another. Like magic. This painting here? I bought it ten years ago for sixty thousand dollars. I could sell it today for six hundred. The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at its finest.” –Gordon Gekko, in “Wall Street

‘The point to be made is this: Capitalism’s prime beneficiaries now control every aspect of economic power from political office to the tax code as well as unhindered blatant avoidance of taxes. As it follows, individual citizens of the nation states are left holding the bag and nation states are going broke. How long can this continue? The answer is: As long as nation-states can manage to carry more, and more, and more, and more debt, but Greece has already demonstrated a day of reckoning lurks around the corner… unless the trend of transnational omnipotence, which is capitalism on steroids, is broken, it is probable that the legacy nation-states, like the U.S., will continue to limp along into an ever-deeper pit of indebtedness as social services are slowly disassembled. This trend is accentuated by continuing weak economic behavior within the nation-state, but paradoxically, and regardless, capitalism thrives and shines!” –Robert Hunziker

“The Supra-national control grid continues to take shape. Fear mongering and the illusions of  “safety” and “security” have brought us to this damnable point.  Increased structural violence. Decreased empathy. Societal atomization. Runaway inequality. Perpetual war. Hyper-consumption. Constant surveillance of electronic communications and activities. Privatization of the commons. Cutting of social and public services. Exploding debt. Increasingly militarized and brutalizing “law enforcement” for the smallest infractions among  proles, and little to none for the titanic crimes of those in the  inner party. Dumbed down education. Fewer rights for the proles. The planned bankruptcies and liquidations of nation-states are in progress. With the elites continued secret negotiations of “trade agreements” like the Trans-Pacific Partnership, rendering nation states powerless to hold corporations accountable when they repeatedly and flagrantly violate laws, standards and protections, while giving corporations the power to sue nation states for having their laws, standards and protections which cost them “lost profits”, it seems that the transnational corporate networks’ omnipotence is growing  every day. It is the nature of vampire capitalism. Drain the victim to within an inch of it’s life, but keep it alive enough to keep feeding on indefinitely. Extract indefinitely. “Externalities” be damned. Greed fueled capitalists don’t know the meaning of the word “enough”. “More” is their perpetual objective. There’s only one way that story ends on a diseased & dying planet with only so much blood to extract. Bad. How long will citizens hold the bag?”

By Robert Hunziker @ Dissident Voice:

The world has been ruled by nation-states throughout modern history, ever since kings and queens were put out to pasture, but nation-states may be on the brink of extinction, similar to monarchies over the past 50-200 years.

Nation-states are not meeting the basic needs and requirements of the people, and, in particular, the legacy nation-states are bleeding through the gills. They’re taking on historic levels of debt while prospectively cutting social services wherever possible. This is a prescription for failure. The main problem is a shortage of revenues for the treasury.

But, capitalism, embodied within transnational corporations, does not require upbeat nation-states to thrive. They’re doing beautifully regardless of the drag of some of the world’s biggest countries. Worldwide, several major stock markets have recently set new records; meanwhile, nation-states sustain abnormally high unemployment levels and badly deteriorating finances. The contrast between the two is breathtaking. For example, the Eurozone unemployment rate is now over 12%; meanwhile, the major European bourses have recorded new highs over the past month.

It’s all about power and money. As such, “capitalism,” which is a nickname for global corporate interests, has all of the power and the money. For example, Apple has enough cash on hand to eliminate Cyprus’s debt with plenty of change left over. And, just the five largest NASDAQ high tech listed companies have combined revenues equal to the 30th largest country (Venezuela) in the world. Moreover, corporate balance sheets make most of the world’s leading countries look like financial dolts.

In point of fact, society is witnessing one of the biggest socio-economic disruptions in history as capitalism, consisting of transnational entities, overwhelms, and cripples, the capabilities of nation-states to function.

The inchoate corporate state is a reality, and it knows no borders or allegiances beyond other corporate interests. This is transnationalism at work, and it is feverishly conquering the planet, pushing aside weakened nation-states, which are powerless in the face of rampant, unchecked capitalism.

Twenty years ago, Gus Tyler (1911-2011), the ubiquitous radio commentator and author, conjectured as follows: “The rise of transnational companies has undermined a nation’s ability to manage its private economy. How can national political institutions cope with a global economy that dissolves national boundaries?”1

And, furthering his point, Tyler quoted Keynes, circa 1930: “The outstanding faults of the economic society in which we live is its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

It now appears both Keynes’ and Tyler’s forebodings were on the mark. Although, they would likely be surprised by how emphatically their words are ringing true as capitalism’s transnationalistic rise to power is unrivaled. In this pursuit of unrivaled power and influence, corporate interests unabashedly toss high-priced labor into the dustbin of nation-state unemployment rolls in favor or low wage/low regulatory jurisdictions even as these same transnational corporations shirk their responsibilities of paying a fair share of the obligations of the nation-states. And, they get away with it!

For example, Google’s UK subsidiary may have sales of over $3 billion in the UK, but they only pay the UK $6 million in corporate taxes, or 0.002%, somewhat similar to Amazon, Starbucks, and the list goes on. Major multinational corporations sell products in high tax counties but book the same sales in low tax countries.

According to Google’s Executive Chairman Eric Schmidt, “I don’t think companies should decide what tax policies should be. I think governments should… All of us are operating in a very, very longstanding tax regime that was set up for various reasons that don’t necessarily make sense to me or anyone else. But they are the way the global tax regime works.”2

In short, everybody else is doing it, so why not Google?

And, isn’t Mr. Schmidt really stretching the credibility quotient when he states tax policy doesn’t make sense to “me or anyone else.”

The “longstanding tax regime,” referenced by Mr. Schmidt, is all about who has power over the purse. More precisely, the “long-standing tax regime” is the result of supply-side economic theory and globalization embraced by politicians who are beholden to global corporate interests. Over the past 40 years, corporate interests lobbied and supported political operatives to pass the very regulations, and loopholes, criticized by Mr. Schmidt. As it goes, Mr. Schmidt’s statement is an example of the fox lambasting the fox in the henhouse.

Recently, Robert Reich, Chancellor’s Professor of Public Policy, University of California at Berkeley elegantly summarized the issue, as follows: “As global capital becomes ever more powerful, giant corporations are holding governments and citizens up for ransom – eliciting subsidies and tax breaks from countries concerned about their nation’s ‘competitiveness’ – while sheltering their profits in the lowest-tax jurisdictions they can find.”3

As it goes, “who pays how much” to the U.S. federal government tells a big story: According to the U.S. Budget Office, “Tax Receipts By Source As Percentages of GDP: 1934-2015,” since 1950 and up to, and including, 2010: Individual tax payer contributions to the U.S. Treasury as a percentage of the country’s Gross Domestic Product (“GDP”) have rocketed upwards by 60% while corporate tax payments as a percentage of GDP, over the same time frame, have plummeted by 70%.

All the same, if a corporate CEO is confronted with this fact, he/she will explain how the top corporate tax rate is 35%, the same as individuals, but they omit to say that average individual taxpayers cannot conveniently move assets offshore to avoid taxes altogether (although, as for the wealthy, Mitt Romney, who has numerous offshore accounts nestled in prototypical tax havens, proved otherwise, and everybody knows he only pays a tax rate of 15% on the portion of his income that he ‘declares’ for taxes), and individual taxpayers, compared to multinationals, cannot declare taxes in low tax jurisdictions outside of the country where their income originates. This is the domain for corporation interests, not individuals.

Additionally, corporate interests have discovered fascinating ploys whereby corporate officers are enriched at the expense of all individual taxpayers. Here’s how it works, as only one example of many other tax dodges: The companies pay top executives a hefty amount in “stock options,” for which the tax code allows corporations to deduct the appreciated value of the stock. This means corporations eliminate some taxes by enriching executives. This is a win-win for corporations and their officers, and it is a lose-lose for individual taxpayers and the U.S. Treasury.

Indeed, this tinkering with the tax code provides a skillful and surreptitious methodology for grossly rich corporate executives to make tons more money, and allegedly, the “trickle down theory” claims they will invest these funds to create more jobs. This supply-side theory has worked wonders these past several years… correct?

The point to be made is this: Capitalism’s prime beneficiaries now control every aspect of economic power from political office to the tax code as well as unhindered blatant avoidance of taxes. As it follows, individual citizens of the nation states are left holding the bag and nation states are going broke. How long can this continue? The answer is: As long as nation-states can manage to carry more, and more, and more, and more debt, but Greece has already demonstrated a day of reckoning lurks around the corner.

Is it possible that one of the big time legacy nation-states might be next?

Japan: Case Study of a failing Nation-State

Japan, the world’s third largest economy, is a dead ringer for economic free-fall, but nobody knows for sure when it will happen. Japan’s government debt/GDP is double Greece’s.

Japan’s debt level is approximately 25 times tax revenue. Japan’s tax revenues are 43 trillion Yen (¥) of which 10 trillion ¥ pays for annual interest on outstanding debt. And, this inordinate complexity is with interest rates below one percent (1%). Imagine what will happen to Japan’s interest expenses when rates go up!

Furthermore, the country’s tax revenues are 43 trillion ¥, but they spend 102 trillion ¥, more than double tax collections. It is no wonder the country has had 10 finance ministers over the past 5 years!

As a result, large Japanese corporations are acquiring or merging businesses outside of Japan, and in typical transnational fashion, they’re looking to get out while the getting is good.

One respected U.S. economic newsletter says of Japan’s economic situation: “It’s a bug in search of a windshield.”

Market economies historically implode when public debt levels exceed five-to-seven times tax revenues for an extended period of time. In Japan’s case, their debt level is more than one quadrillion ¥ or a ‘billion billion’ ¥, which represents twenty-five times revenues of 43 trillion ¥. Along these lines, the ‘bug’ analogy is more than fitting.

Transnationalism Reigns Supreme

In turn, some Japanese multinationals are exiting stage left in order not to get caught in Japan’s continual deflationary anti-bubble. “So far this year, Japanese firms have made more than $52.5 billion in global acquisitions, compared with $34.34 billion in all of 2010. Overall, Japanese companies are the second-largest acquirers in the world this year… according to Dealogic, a deal-tracking firm… It’s a trend that analysts expect to continue, and possible accelerate, as Japanese companies diversify their operations away from Japan’s stagnant economy….”4

Meanwhile, as a short-term preventative measure, and grasping for straws whilst in a quiescent panic mode, the government of Prime Minister Shinzo Abe has opened up the monetary spigots like Niagara Falls during the high season. This rapid devaluation of the yen, i.e., printing money like its going out of style, reminiscent of 1920s Germany, is jacking up Japan, Inc.’s worldwide competitiveness over the short term, as Japanese goods become cheaper versus the world because of intentional devaluation of the yen, but this damages economic interests with other countries, including the U.S., not to mention negative consequences for Japan down the line.

As an example, Toyota will book an extra 35 billion ¥, or 352 million USD, for every one Yen devaluation against the dollar. Regardless, Toyota announced plans to start building Lexus sedans in Kentucky as part of its plan to “become free of currency risk.” Hence, even though Toyota appreciates the short-term pop in earnings because of a rapidly depreciating yen, they continue to move operations offshore.

The Japan-Toyota scenario demonstrates the flexibility of transnationals. They can see a precipice on the horizon even though they do not know how imminently it will arrive. So, on a cautionary note, they move some operations to other countries. But, Japan cannot move the country’s governmental operations, infrastructure, schools, power plants, etc. Along these lines, as transnationals seek greener pastures overseas, Japan increasingly loses its tax base as its aging population over 60 grows to 30% versus a worldwide average of only 8% of the population over 60. To say this is a daunting problem is only too obvious.

At the end of the day, the country of Japan is left with an aging population and enormously high debts. Who’s going to care for the aging society? Not transnationals… they hire overseas workers where operations are relocated. Plus, they adroitly maneuver sales to where taxes are lowest. Thus, and increasingly, nation-states are left with the baggage, i.e., costs of infrastructure, unemployed, and medical expenses for the aging as well as depleting tax bases, meanwhile transnationals move on to new frontiers.

In this fashion, nation-states stagnate whilst multinational corporations thrive because of the flexibility to move wherever taxes and labor costs are most favorable. But, by definition, the legacy nation-states like Japan do not meet the criteria necessary for transnationals looking to move operations into their country because they provide too many costly social services and high wages!

The Trend for Nation-States

Over the past 40 years, with the onset of globalization in combination with transnational interests as dictated by the WTO, NAFTA, the World Bank, the IMF, the EU, the U.S. and other extra-international organizations long-standing policies and tax regimes have become embedded such that many of the policies required to maintain nation-states are flippantly at risk to the whims of transnationals. The complexity behind this favorable arrangement for tansnationals vis-à-vis nation-states is beyond the reach of average voting citizens and beyond the power of nation-states.

As it happens, unless the trend of transnational omnipotence, which is capitalism on steroids, is broken, it is probable that the legacy nation-states, like the U.S., will continue to limp along into an ever-deeper pit of indebtedness as social services are slowly disassembled. This trend is accentuated by continuing weak economic behavior within the nation-state, but paradoxically, and regardless, capitalism thrives and shines!

The upshot of this Gordian knot is destined to result in increasing enforcement via police state tactics while the crumbling apparatuses of nation-states threatens outbreaks of civil disobedience. Then, one has to wonder which frontier transnational elites will conquer next.

As follows, it may be in the best interests of the capital class to avoid this pitfall by calling for a return to an equitable distribution of taxes paid to the treasuries of the nation-states. Otherwise, they may run out of frontiers.

  1. Gus Tyler, The Nation-State vs. the Global Economy, Challenge, March-April, 1993.
  2. Cameron Hails Tax ‘Turning Point’ After Google Criticisms, BBC News, May 22, 2013.
  3. robertreich.org, Global Capital and the Nation State, May 20, 2013.
  4. Kathy Chu, Japanese Companies Look Outside for Expansion Opportunities, USA Today, Sept. 28, 2011. 

Robert Hunziker (MA in economic history at DePaul University, Chicago) is a former hedge fund manager and now a professional independent negotiator for worldwide commodity actual transactions and a freelance writer for progressive publications as well as business journals. He can be contacted at: rlhunziker@gmail.com. Read other articles by Robert.

Bill Moyers : PBS – The Secret Government (1987)

In Uncategorized on August 14, 2011 at 3:14 pm

Oldspeak:“Truth telling by one of the best in the business doing hard hitting, fact-based journalism, something you don’t see much in this age of vacuous and virulent infotainment. Something like this would never make air in present day corporate – controlled “news” organizations. Documenting the bald-faced lies of presidents both Dems & G.O.P. dating back to Truman, Americans secretly hiring Nazi Scientists after  WWII chronicling the inception of the National Security State created in 1947 that dominates foreign policy to this day and begat the long list of C.I.A dirty tricks, regime changes, assassinations, secret and proxy wars (Vietnam, Iran/Iraq, Laos, etc etc etc…). Powerful stuff. Really shines a harsh light on the length and breadth of the profound and sordid influence of the Military-Industrial Complex on this dying empire… And the same ploys that we’re implemented to get the U.S. into wars in the past are being used today only with much more complete and sophisticated manipulation of media. The closest thing we have to this today is WikiLeaks.

Related Video:

CNN Special Assignment: Secret Government Succession Plan 11/17/91

By Bill Moyers @ PBS:

Chomsky: Is The World Too Big to Fail? The Contours Of Global Order

In Uncategorized on April 25, 2011 at 1:50 pm

Oldspeak: Chomsky, with a brilliant explication of the “Grand Area” doctrine, that has guided U.S. foreign policy under every U.S. President since the end of WWII.  ‘The U.S.  is to dominate the Western hemisphere, the Far East, and the former British empire, with its Middle East energy resources… Grand Area goals extended to as much of Eurasia as possible, at least its economic core in Western Europe. Within the Grand Area, the U.S. would maintain “unquestioned power,” with “military and economic supremacy,” while ensuring the “limitation of any exercise of sovereignty” by states that might interfere with its global designs.’ –Noam Chomsky. Careful observation of world events since WWII would show that implementation of this doctrine has been achieved with a large degree of success, and in this context, ostensibly odd and otherwise irrational foreign policy decisions make perfect sense. It remains to be seen how long the U.S. will be capable of maintaining its gargantuan global empire at the expense of the planet & billions living in poverty and despair on it.

By Noam Chomsky @ TomDispatch:

The democracy uprising in the Arab world has been a spectacular display of courage, dedication, and commitment by popular forces — coinciding, fortuitously, with a remarkable uprising of tens of thousands in support of working people and democracy in Madison, Wisconsin, and other U.S. cities. If the trajectories of revolt in Cairo and Madison intersected, however, they were headed in opposite directions: in Cairo toward gaining elementary rights denied by the dictatorship, in Madison towards defending rights that had been won in long and hard struggles and are now under severe attack.

Each is a microcosm of tendencies in global society, following varied courses. There are sure to be far-reaching consequences of what is taking place both in the decaying industrial heartland of the richest and most powerful country in human history, and in what President Dwight Eisenhower called “the most strategically important area in the world” — “a stupendous source of strategic power” and “probably the richest economic prize in the world in the field of foreign investment,” in the words of the State Department in the 1940s, a prize that the U.S. intended to keep for itself and its allies in the unfolding New World Order of that day.

Despite all the changes since, there is every reason to suppose that today’s policy-makers basically adhere to the judgment of President Franklin Delano Roosevelt’s influential advisor A.A. Berle that control of the incomparable energy reserves of the Middle East would yield “substantial control of the world.” And correspondingly, that loss of control would threaten the project of global dominance that was clearly articulated during World War II, and that has been sustained in the face of major changes in world order since that day.

From the outset of the war in 1939, Washington anticipated that it would end with the U.S. in a position of overwhelming power. High-level State Department officials and foreign policy specialists met through the wartime years to lay out plans for the postwar world. They delineated a “Grand Area” that the U.S. was to dominate, including the Western hemisphere, the Far East, and the former British empire, with its Middle East energy resources. As Russia began to grind down Nazi armies after Stalingrad, Grand Area goals extended to as much of Eurasia as possible, at least its economic core in Western Europe. Within the Grand Area, the U.S. would maintain “unquestioned power,” with “military and economic supremacy,” while ensuring the “limitation of any exercise of sovereignty” by states that might interfere with its global designs. The careful wartime plans were soon implemented.

It was always recognized that Europe might choose to follow an independent course. NATO was partially intended to counter this threat. As soon as the official pretext for NATO dissolved in 1989, NATO was expanded to the East in violation of verbal pledges to Soviet leader Mikhail Gorbachev. It has since become a U.S.-run intervention force, with far-ranging scope, spelled out by NATO Secretary-General Jaap de Hoop Scheffer, who informed a NATO conference that “NATO troops have to guard pipelines that transport oil and gas that is directed for the West,” and more generally to protect sea routes used by tankers and other “crucial infrastructure” of the energy system.

Grand Area doctrines clearly license military intervention at will. That conclusion was articulated clearly by the Clinton administration, which declared that the U.S. has the right to use military force to ensure “uninhibited access to key markets, energy supplies, and strategic resources,” and must maintain huge military forces “forward deployed” in Europe and Asia “in order to shape people’s opinions about us” and “to shape events that will affect our livelihood and our security.”

The same principles governed the invasion of Iraq. As the U.S. failure to impose its will in Iraq was becoming unmistakable, the actual goals of the invasion could no longer be concealed behind pretty rhetoric. In November 2007, the White House issued a Declaration of Principles demanding that U.S. forces must remain indefinitely in Iraq and committing Iraq to privilege American investors. Two months later, President Bush informed Congress that he would reject legislation that might limit the permanent stationing of U.S. Armed Forces in Iraq or “United States control of the oil resources of Iraq” — demands that the U.S. had to abandon shortly after in the face of Iraqi resistance.

In Tunisia and Egypt, the recent popular uprisings have won impressive victories, but as the Carnegie Endowment reported, while names have changed, the regimes remain: “A change in ruling elites and system of governance is still a distant goal.” The report discusses internal barriers to democracy, but ignores the external ones, which as always are significant.

The U.S. and its Western allies are sure to do whatever they can to prevent authentic democracy in the Arab world. To understand why, it is only necessary to look at the studies of Arab opinion conducted by U.S. polling agencies. Though barely reported, they are certainly known to planners. They reveal that by overwhelming majorities, Arabs regard the U.S. and Israel as the major threats they face: the U.S. is so regarded by 90% of Egyptians, in the region generally by over 75%. Some Arabs regard Iran as a threat: 10%. Opposition to U.S. policy is so strong that a majority believes that security would be improved if Iran had nuclear weapons — in Egypt, 80%. Other figures are similar. If public opinion were to influence policy, the U.S. not only would not control the region, but would be expelled from it, along with its allies, undermining fundamental principles of global dominance.

The Invisible Hand of Power

Support for democracy is the province of ideologists and propagandists. In the real world, elite dislike of democracy is the norm. The evidence is overwhelming that democracy is supported insofar as it contributes to social and economic objectives, a conclusion reluctantly conceded by the more serious scholarship.

Elite contempt for democracy was revealed dramatically in the reaction to the WikiLeaks exposures. Those that received most attention, with euphoric commentary, were cables reporting that Arabs support the U.S. stand on Iran. The reference was to the ruling dictators. The attitudes of the public were unmentioned. The guiding principle was articulated clearly by Carnegie Endowment Middle East specialist Marwan Muasher, formerly a high official of the Jordanian government: “There is nothing wrong, everything is under control.” In short, if the dictators support us, what else could matter?

The Muasher doctrine is rational and venerable. To mention just one case that is highly relevant today, in internal discussion in 1958, president Eisenhower expressed concern about “the campaign of hatred” against us in the Arab world, not by governments, but by the people. The National Security Council (NSC) explained that there is a perception in the Arab world that the U.S. supports dictatorships and blocks democracy and development so as to ensure control over the resources of the region. Furthermore, the perception is basically accurate, the NSC concluded, and that is what we should be doing, relying on the Muasher doctrine. Pentagon studies conducted after 9/11 confirmed that the same holds today.

It is normal for the victors to consign history to the trash can, and for victims to take it seriously. Perhaps a few brief observations on this important matter may be useful. Today is not the first occasion when Egypt and the U.S. are facing similar problems, and moving in opposite directions. That was also true in the early nineteenth century.

Economic historians have argued that Egypt was well-placed to undertake rapid economic development at the same time that the U.S. was. Both had rich agriculture, including cotton, the fuel of the early industrial revolution — though unlike Egypt, the U.S. had to develop cotton production and a work force by conquest, extermination, and slavery, with consequences that are evident right now in the reservations for the survivors and the prisons that have rapidly expanded since the Reagan years to house the superfluous population left by deindustrialization.

One fundamental difference was that the U.S. had gained independence and was therefore free to ignore the prescriptions of economic theory, delivered at the time by Adam Smith in terms rather like those preached to developing societies today. Smith urged the liberated colonies to produce primary products for export and to import superior British manufactures, and certainly not to attempt to monopolize crucial goods, particularly cotton. Any other path, Smith warned, “would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.”

Having gained their independence, the colonies were free to ignore his advice and to follow England’s course of independent state-guided development, with high tariffs to protect industry from British exports, first textiles, later steel and others, and to adopt numerous other devices to accelerate industrial development. The independent Republic also sought to gain a monopoly of cotton so as to “place all other nations at our feet,” particularly the British enemy, as the Jacksonian presidents announced when conquering Texas and half of Mexico.

For Egypt, a comparable course was barred by British power. Lord Palmerston declared that “no ideas of fairness [toward Egypt] ought to stand in the way of such great and paramount interests” of Britain as preserving its economic and political hegemony, expressing his “hate” for the “ignorant barbarian” Muhammed Ali who dared to seek an independent course, and deploying Britain’s fleet and financial power to terminate Egypt’s quest for independence and economic development.

After World War II, when the U.S. displaced Britain as global hegemon, Washington adopted the same stand, making it clear that the U.S. would provide no aid to Egypt unless it adhered to the standard rules for the weak — which the U.S. continued to violate, imposing high tariffs to bar Egyptian cotton and causing a debilitating dollar shortage. The usual interpretation of market principles.

It is small wonder that the “campaign of hatred” against the U.S. that concerned Eisenhower was based on the recognition that the U.S. supports dictators and blocks democracy and development, as do its allies.

In Adam Smith’s defense, it should be added that he recognized what would happen if Britain followed the rules of sound economics, now called “neoliberalism.” He warned that if British manufacturers, merchants, and investors turned abroad, they might profit but England would suffer. But he felt that they would be guided by a home bias, so as if by an invisible hand England would be spared the ravages of economic rationality.

The passage is hard to miss. It is the one occurrence of the famous phrase “invisible hand” in The Wealth of Nations. The other leading founder of classical economics, David Ricardo, drew similar conclusions, hoping that home bias would lead men of property to “be satisfied with the low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations,” feelings that, he added, “I should be sorry to see weakened.” Their predictions aside, the instincts of the classical economists were sound.

The Iranian and Chinese “Threats”

The democracy uprising in the Arab world is sometimes compared to Eastern Europe in 1989, but on dubious grounds. In 1989, the democracy uprising was tolerated by the Russians, and supported by western power in accord with standard doctrine: it plainly conformed to economic and strategic objectives, and was therefore a noble achievement, greatly honored, unlike the struggles at the same time “to defend the people’s fundamental human rights” in Central America, in the words of the assassinated Archbishop of El Salvador, one of the hundreds of thousands of victims of the military forces armed and trained by Washington. There was no Gorbachev in the West throughout these horrendous years, and there is none today. And Western power remains hostile to democracy in the Arab world for good reasons.

Grand Area doctrines continue to apply to contemporary crises and confrontations. In Western policy-making circles and political commentary the Iranian threat is considered to pose the greatest danger to world order and hence must be the primary focus of U.S. foreign policy, with Europe trailing along politely.

What exactly is the Iranian threat? An authoritative answer is provided by the Pentagon and U.S. intelligence. Reporting on global security last year, they make it clear that the threat is not military. Iran’s military spending is “relatively low compared to the rest of the region,” they conclude. Its military doctrine is strictly “defensive, designed to slow an invasion and force a diplomatic solution to hostilities.” Iran has only “a limited capability to project force beyond its borders.” With regard to the nuclear option, “Iran’s nuclear program and its willingness to keep open the possibility of developing nuclear weapons is a central part of its deterrent strategy.” All quotes.

The brutal clerical regime is doubtless a threat to its own people, though it hardly outranks U.S. allies in that regard. But the threat lies elsewhere, and is ominous indeed. One element is Iran’s potential deterrent capacity, an illegitimate exercise of sovereignty that might interfere with U.S. freedom of action in the region. It is glaringly obvious why Iran would seek a deterrent capacity; a look at the military bases and nuclear forces in the region suffices to explain.

Seven years ago, Israeli military historian Martin van Creveld wrote that “The world has witnessed how the United States attacked Iraq for, as it turned out, no reason at all. Had the Iranians not tried to build nuclear weapons, they would be crazy,” particularly when they are under constant threat of attack in violation of the UN Charter. Whether they are doing so remains an open question, but perhaps so.

But Iran’s threat goes beyond deterrence. It is also seeking to expand its influence in neighboring countries, the Pentagon and U.S. intelligence emphasize, and in this way to “destabilize” the region (in the technical terms of foreign policy discourse). The U.S. invasion and military occupation of Iran’s neighbors is “stabilization.” Iran’s efforts to extend its influence to them are “destabilization,” hence plainly illegitimate.

Such usage is routine. Thus the prominent foreign policy analyst James Chace was properly using the term “stability” in its technical sense when he explained that in order to achieve “stability” in Chile it was necessary to “destabilize” the country (by overthrowing the elected government of Salvador Allende and installing the dictatorship of General Augusto Pinochet). Other concerns about Iran are equally interesting to explore, but perhaps this is enough to reveal the guiding principles and their status in imperial culture.  As Franklin Delano Roosevelt’s planners emphasized at the dawn of the contemporary world system, the U.S. cannot tolerate “any exercise of sovereignty” that interferes with its global designs.

The U.S. and Europe are united in punishing Iran for its threat to stability, but it is useful to recall how isolated they are. The nonaligned countries have vigorously supported Iran’s right to enrich uranium. In the region, Arab public opinion even strongly favors Iranian nuclear weapons. The major regional power, Turkey, voted against the latest U.S.-initiated sanctions motion in the Security Council, along with Brazil, the most admired country of the South. Their disobedience led to sharp censure, not for the first time: Turkey had been bitterly condemned in 2003 when the government followed the will of 95% of the population and refused to participate in the invasion of Iraq, thus demonstrating its weak grasp of democracy, western-style.

After its Security Council misdeed last year, Turkey was warned by Obama’s top diplomat on European affairs, Philip Gordon, that it must “demonstrate its commitment to partnership with the West.” A scholar with the Council on Foreign Relations asked, “How do we keep the Turks in their lane?” — following orders like good democrats. Brazil’s Lula was admonished in a New York Times headline that his effort with Turkey to provide a solution to the uranium enrichment issue outside of the framework of U.S. power was a “Spot on Brazilian Leader’s Legacy.” In brief, do what we say, or else.

An interesting sidelight, effectively suppressed, is that the Iran-Turkey-Brazil deal was approved in advance by Obama, presumably on the assumption that it would fail, providing an ideological weapon against Iran. When it succeeded, the approval turned to censure, and Washington rammed through a Security Council resolution so weak that China readily signed — and is now chastised for living up to the letter of the resolution but not Washington’s unilateral directives — in the current issue of Foreign Affairs, for example.

While the U.S. can tolerate Turkish disobedience, though with dismay, China is harder to ignore. The press warns that “China’s investors and traders are now filling a vacuum in Iran as businesses from many other nations, especially in Europe, pull out,” and in particular, is expanding its dominant role in Iran’s energy industries. Washington is reacting with a touch of desperation. The State Department warned China that if it wants to be accepted in the international community — a technical term referring to the U.S. and whoever happens to agree with it — then it must not “skirt and evade international responsibilities, [which] are clear”: namely, follow U.S. orders. China is unlikely to be impressed.

There is also much concern about the growing Chinese military threat. A recent Pentagon study warned that China’s military budget is approaching “one-fifth of what the Pentagon spent to operate and carry out the wars in Iraq and Afghanistan,” a fraction of the U.S. military budget, of course. China’s expansion of military forces might “deny the ability of American warships to operate in international waters off its coast,” the New York Times added.

Off the coast of China, that is; it has yet to be proposed that the U.S. should eliminate military forces that deny the Caribbean to Chinese warships. China’s lack of understanding of rules of international civility is illustrated further by its objections to plans for the advanced nuclear-powered aircraft carrier George Washington to join naval exercises a few miles off China’s coast, with alleged capacity to strike Beijing.

In contrast, the West understands that such U.S. operations are all undertaken to defend stability and its own security. The liberal New Republic expresses its concern that “China sent ten warships through international waters just off the Japanese island of Okinawa.” That is indeed a provocation — unlike the fact, unmentioned, that Washington has converted the island into a major military base in defiance of vehement protests by the people of Okinawa. That is not a provocation, on the standard principle that we own the world.

Deep-seated imperial doctrine aside, there is good reason for China’s neighbors to be concerned about its growing military and commercial power. And though Arab opinion supports an Iranian nuclear weapons program, we certainly should not do so. The foreign policy literature is full of proposals as to how to counter the threat. One obvious way is rarely discussed: work to establish a nuclear-weapons-free zone (NWFZ) in the region. The issue arose (again) at the Non-Proliferation Treaty (NPT) conference at United Nations headquarters last May. Egypt, as chair of the 118 nations of the Non-Aligned Movement, called for negotiations on a Middle East NWFZ, as had been agreed by the West, including the U.S., at the 1995 review conference on the NPT.

International support is so overwhelming that Obama formally agreed. It is a fine idea, Washington informed the conference, but not now. Furthermore, the U.S. made clear that Israel must be exempted: no proposal can call for Israel’s nuclear program to be placed under the auspices of the International Atomic Energy Agency or for the release of information about “Israeli nuclear facilities and activities.” So much for this method of dealing with the Iranian nuclear threat.

Privatizing the Planet

While Grand Area doctrine still prevails, the capacity to implement it has declined. The peak of U.S. power was after World War II, when it had literally half the world’s wealth. But that naturally declined, as other industrial economies recovered from the devastation of the war and decolonization took its agonizing course. By the early 1970s, the U.S. share of global wealth had declined to about 25%, and the industrial world had become tripolar: North America, Europe, and East Asia (then Japan-based).

There was also a sharp change in the U.S. economy in the 1970s, towards financialization and export of production. A variety of factors converged to create a vicious cycle of radical concentration of wealth, primarily in the top fraction of 1% of the population — mostly CEOs, hedge-fund managers, and the like. That leads to the concentration of political power, hence state policies to increase economic concentration: fiscal policies, rules of corporate governance, deregulation, and much more. Meanwhile the costs of electoral campaigns skyrocketed, driving the parties into the pockets of concentrated capital, increasingly financial: the Republicans reflexively, the Democrats — by now what used to be moderate Republicans — not far behind.

Elections have become a charade, run by the public relations industry. After his 2008 victory, Obama won an award from the industry for the best marketing campaign of the year. Executives were euphoric. In the business press they explained that they had been marketing candidates like other commodities since Ronald Reagan, but 2008 was their greatest achievement and would change the style in corporate boardrooms. The 2012 election is expected to cost $2 billion, mostly in corporate funding. Small wonder that Obama is selecting business leaders for top positions. The public is angry and frustrated, but as long as the Muasher principle prevails, that doesn’t matter.

While wealth and power have narrowly concentrated, for most of the population real incomes have stagnated and people have been getting by with increased work hours, debt, and asset inflation, regularly destroyed by the financial crises that began as the regulatory apparatus was dismantled starting in the 1980s.

None of this is problematic for the very wealthy, who benefit from a government insurance policy called “too big to fail.” The banks and investment firms can make risky transactions, with rich rewards, and when the system inevitably crashes, they can run to the nanny state for a taxpayer bailout, clutching their copies of Friedrich Hayek and Milton Friedman.

That has been the regular process since the Reagan years, each crisis more extreme than the last — for the public population, that is. Right now, real unemployment is at Depression levels for much of the population, while Goldman Sachs, one of the main architects of the current crisis, is richer than ever. It has just quietly announced $17.5 billion in compensation for last year, with CEO Lloyd Blankfein receiving a $12.6 million bonus while his base salary more than triples.

It wouldn’t do to focus attention on such facts as these. Accordingly, propaganda must seek to blame others, in the past few months, public sector workers, their fat salaries, exorbitant pensions, and so on: all fantasy, on the model of Reaganite imagery of black mothers being driven in their limousines to pick up welfare checks — and other models that need not be mentioned. We all must tighten our belts; almost all, that is.

Teachers are a particularly good target, as part of the deliberate effort to destroy the public education system from kindergarten through the universities by privatization — again, good for the wealthy, but a disaster for the population, as well as the long-term health of the economy, but that is one of the externalities that is put to the side insofar as market principles prevail.

Another fine target, always, is immigrants. That has been true throughout U.S. history, even more so at times of economic crisis, exacerbated now by a sense that our country is being taken away from us: the white population will soon become a minority. One can understand the anger of aggrieved individuals, but the cruelty of the policy is shocking.

Who are the immigrants targeted? In Eastern Massachusetts, where I live, many are Mayans fleeing genocide in the Guatemalan highlands carried out by Reagan’s favorite killers. Others are Mexican victims of Clinton’s NAFTA, one of those rare government agreements that managed to harm working people in all three of the participating countries. As NAFTA was rammed through Congress over popular objection in 1994, Clinton also initiated the militarization of the U.S.-Mexican border, previously fairly open. It was understood that Mexican campesinos cannot compete with highly subsidized U.S. agribusiness, and that Mexican businesses would not survive competition with U.S. multinationals, which must be granted “national treatment” under the mislabeled free trade agreements, a privilege granted only to corporate persons, not those of flesh and blood. Not surprisingly, these measures led to a flood of desperate refugees, and to rising anti-immigrant hysteria by the victims of state-corporate policies at home.

Much the same appears to be happening in Europe, where racism is probably more rampant than in the U.S. One can only watch with wonder as Italy complains about the flow of refugees from Libya, the scene of the first post-World War I genocide, in the now-liberated East, at the hands of Italy’s Fascist government. Or when France, still today the main protector of the brutal dictatorships in its former colonies, manages to overlook its hideous atrocities in Africa, while French President Nicolas Sarkozy warns grimly of the “flood of immigrants” and Marine Le Pen objects that he is doing nothing to prevent it. I need not mention Belgium, which may win the prize for what Adam Smith called “the savage injustice of the Europeans.”

The rise of neo-fascist parties in much of Europe would be a frightening phenomenon even if we were not to recall what happened on the continent in the recent past. Just imagine the reaction if Jews were being expelled from France to misery and oppression, and then witness the non-reaction when that is happening to Roma, also victims of the Holocaust and Europe’s most brutalized population.

In Hungary, the neo-fascist party Jobbik gained 17% of the vote in national elections, perhaps unsurprising when three-quarters of the population feels that they are worse off than under Communist rule. We might be relieved that in Austria the ultra-right Jörg Haider won only 10% of the vote in 2008 — were it not for the fact that the new Freedom Party, outflanking him from the far right, won more than 17%. It is chilling to recall that, in 1928, the Nazis won less than 3% of the vote in Germany.

In England the British National Party and the English Defence League, on the ultra-racist right, are major forces. (What is happening in Holland you know all too well.) In Germany, Thilo Sarrazin’s lament that immigrants are destroying the country was a runaway best-seller, while Chancellor Angela Merkel, though condemning the book, declared that multiculturalism had “utterly failed”: the Turks imported to do the dirty work in Germany are failing to become blond and blue-eyed, true Aryans.

Those with a sense of irony may recall that Benjamin Franklin, one of the leading figures of the Enlightenment, warned that the newly liberated colonies should be wary of allowing Germans to immigrate, because they were too swarthy; Swedes as well. Into the twentieth century, ludicrous myths of Anglo-Saxon purity were common in the U.S., including among presidents and other leading figures. Racism in the literary culture has been a rank obscenity; far worse in practice, needless to say. It is much easier to eradicate polio than this horrifying plague, which regularly becomes more virulent in times of economic distress.

I do not want to end without mentioning another externality that is dismissed in market systems: the fate of the species. Systemic risk in the financial system can be remedied by the taxpayer, but no one will come to the rescue if the environment is destroyed. That it must be destroyed is close to an institutional imperative. Business leaders who are conducting propaganda campaigns to convince the population that anthropogenic global warming is a liberal hoax understand full well how grave is the threat, but they must maximize short-term profit and market share. If they don’t, someone else will.

This vicious cycle could well turn out to be lethal. To see how grave the danger is, simply have a look at the new Congress in the U.S., propelled into power by business funding and propaganda. Almost all are climate deniers. They have already begun to cut funding for measures that might mitigate environmental catastrophe. Worse, some are true believers; for example, the new head of a subcommittee on the environment who explained that global warming cannot be a problem because God promised Noah that there will not be another flood.

If such things were happening in some small and remote country, we might laugh. Not when they are happening in the richest and most powerful country in the world. And before we laugh, we might also bear in mind that the current economic crisis is traceable in no small measure to the fanatic faith in such dogmas as the efficient market hypothesis, and in general to what Nobel laureate Joseph Stiglitz, 15 years ago, called the “religion” that markets know best — which prevented the central bank and the economics profession from taking notice of an $8 trillion housing bubble that had no basis at all in economic fundamentals, and that devastated the economy when it burst.

All of this, and much more, can proceed as long as the Muashar doctrine prevails. As long as the general population is passive, apathetic, diverted to consumerism or hatred of the vulnerable, then the powerful can do as they please, and those who survive will be left to contemplate the outcome.

Noam Chomsky is Institute Professor emeritus in the MIT Department of Linguistics and Philosophy. He is the author of numerous best-selling political works. His latest books are a new edition of Power and Terror, The Essential Chomsky (edited by Anthony Arnove), a collection of his writings on politics and on language from the 1950s to the present, Gaza in Crisis, with Ilan Pappé, and Hopes and Prospects, also available as an audiobook. This piece is adapted from a talk given in Amsterdam in March.

Copyright 2011 Noam Chomsky