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.
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
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
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 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.
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.