HISTORY: The Tragedy of Haiti … and Us

Dr. Paul Farmer tells the story of the beautiful young Haitian girl Acéphie, whose family was driven out of their small farm by powerful forces: a hydroelectric company whose dam flooded the farmland; a dictator (Duvalier) who paid workers 10 cents a day; political violence that disrupted the operations of medical clinics. And a soldier who took advantage of her and gave her AIDS. When she died, her grief-stricken father hanged himself. [1]

Francois “Papa Doc” Duvalier became president of Haiti in 1957, and upon his death in 1971 was succeeded by his son Jean Claude “Baby Doc” Duvalier. During their 30 years of rule 60,000 Haitians were killed and many others were tortured by death squads. The Duvaliers, supported by the U.S., enriched themselves with foreign aid money while Haiti became the poorest country in the Western Hemisphere. The Haitian people worked in sweatshops for pennies a day while foreign industrialists made millions. In 1986, a people’s rebellion forced Baby Doc out, and the U.S. installed a military government, which continued to terrorize the citizens. [2]

In 1990 Jean-Bertrand Aristide, a Catholic priest, was elected president in Haiti’s first free democratic election. He surprised the western world by winning 67% of the vote in a field of 12 candidates that included the U.S. candidate, a former World Bank official. Months later Aristide was overthrown by a US-backed military coup. [3] The Council on Hemispheric Affairs stated after the coup: “Under Aristide…Haiti seemed to be on the verge of tearing free from the fabric of despotism and tyranny…”

For the next three years anarchy reigned in Haiti. A study by Boston Media Action revealed that while human rights abuses attributed to Aristide supporters were less than 1% of the total, they comprised 60% of the coverage in major journals during the two weeks following the coup, and over half of coverage in the New York Times through mid-1992. [4]

Aristide was finally allowed to return, provided that he accept a number of political and economic conditions mandated by the United States.

In 2000 Aristide was re-elected president with over 90% of the vote. The Organization of American States claimed that the election was conducted unfairly, and the U.S. began to withhold foreign aid from Haiti. [5] In 2003 the country was forced to send 90% of its foreign reserves to Washington to pay off its debt. Pressure from business and international organizations was relentless. Aristide was vilified by the Reuters and AP wire services, which relied on local media owned by Aristide’s opponents. On February 5, 2004 a major revolt again forced him out of office. He was flown by the U.S. to the Central African Republic. [6]

Conditions in Haiti have remained desperate, with crumbling roads and infrastructure and nonexistent public services, unemployment at 70%, half the adults illiterate, and the richest 1% of the population controlling nearly half of all of the wealth. [7]

It doesn’t seem possible that the situation could get worse. But now it has.

Paul Buchheit teaches at DePaul University. He can be reached at: pbuchhei@depaul.edu

Notes.

1 Paul Farmer, “Pathologies of Power” (University of California Press, 2005)

2 Noam Chomsky, “Year 501: the conquest continues” (Boston: South End Press, 1993)

3 “Coup in Haiti,” by Amy Wilentz, The Nation, March 4, 2004 (http://www.thenation.com/doc/20040322/wilentz)

How Israel Buried the UN’s War Crime Probe – Buying Off the Palestinian Authority

Israel celebrated at the weekend its success at the United Nations in forcing the Palestinians to defer demands that the International Criminal Court investigate allegations of war crimes committed by Israel during its winter assault on the Gaza Strip.

The about-turn, following furious lobbying from Israel and the United States, appears to have buried the damning report of Judge Richard Goldstone into the fighting, which killed some 1,400 Palestinians, most of them civilians.

Israeli diplomats suggested on Sunday that Washington had promised the Palestinian Authority, in return for delaying an inquiry, that the United States would apply “significant pressure” on Benjamin Netanyahu, the Israeli prime minister, to move ahead on a diplomatic process when the US envoy, George Mitchell, arrives in the region tomorrow.

But, according to Israeli and Palestinian analysts, diplomatic arm-twisting was not the only factor in the PA’s change of heart. Haaretz newspaper reported last week that, behind the scenes, Palestinian officials had faced threats that Israel would retaliate by inflicting enormous damage on the beleaguered Palestinian economy.

In particular, Israel warned it would renege on a commitment to allot radio frequencies to allow Wataniya, a mobile phone provider, to begin operations this month in the West Bank. The telecommunications industry is the bedrock of the Palestinian economy, with the current monopoly company, PalTel, accounting for half the worth of the Palestinian stock exchange.

The collapse of the Wataniya deal would have cost the Palestinian Authority hundreds of millions of dollars in penalties, blocked massive investment in the local economy and jeopardised about 2,500 jobs.

Omar Barghouti, a Jerusalem-based founder of a Palestinian movement for an academic and cultural boycott of Israel, denounced the Palestinian Authority’s move: “Trading off Palestinian rights and the fundamental duty to protect the Palestinians under occupation for personal gains is the textbook definition of collaboration and betrayal.”

The deal to establish Wataniya as the second Palestinian mobile phone operator has been at the centre of the international community’s plans to revive the West Bank’s economy and show that Palestinians are better off under the rule of Mahmoud Abbas, the Palestinian president, than Hamas.

Tony Blair, the Middle East envoy representing the so-called Quartet of the United States, Russia, the UN and the EU, brokered the agreement last summer, saying Wataniya’s investment of more than $700 million over the next 10 years would “provide a much-needed boost to the Palestinian economy”.

Wataniya is a joint venture between Palestinian investors, including close allies of Mr Abbas, and Qatari and Kuwaiti businessmen.

But while Mr Netanyahu has welcomed the deal as part of his plans for an “economic peace”, an option he prefers to Palestinian statehood, Israel has been dragging its feet in allocating the necessary frequencies.

Wataniya’s planned launch earlier this year had to be pushed back and the company has threatened to pull out of the deal if the new October 15 deadline is missed. If it does, the Palestinian Authority will have to repay $140m in licensing fees and could be liable for hundreds of millions more that Wataniya has invested in building 350 communication masts across the West Bank.

According to Who Profits?, an Israeli organization that investigates links between Israel and international companies in exploiting the occupied territories, Israel has a vested interest in limiting the success of the Palestinian mobile phone industry and protecting its control over extensive parts of the West Bank it wants for Jewish settlement.

The only existing Palestinian operator, Jawwal, a subsidiary of PalTel, has been blocked from building communications infrastructure in the so-called Area C of the West Bank, comprising 60 per cent of the territory, which is designated under full Israeli control.

Instead, four Israeli companies – Cellcom, Orange, Pelephone and Mirs – have built an extensive network of antennas and transmission stations for Jewish settlers in Area C. Mirs, a subsidiary of Motorola Israel, also has an exclusive licence to provide cellular services to the Israeli military.

Typically, Palestinians travelling outside the major population areas of the West Bank find a limited or non-existent Jawwal service and therefore have to rely on the Israeli companies.

A World Bank report last year found that as much as 45 per cent of the Palestinian mobile phone market may be in the hands of the Israeli companies. In violation of the Oslo Accords, these firms do not pay taxes to the PA for their commercial activity, losing the Palestinian treasury revenues of up to $60m a year.

Israeli companies also rake off additional surcharges on connections made by Palestinians using Jawwal, including calls between mobile phones and landlines, between the West Bank and Gaza and many within Area C, and international calls.

Dalit Baum, a founder of Who Profits?, said the importance of the telecommunications industry to the Palestinian economy made it a point of leverage over the PA at moments of diplomatic crisis, such as the Goldstone report.

She said: “This case highlights not only how Israel restricts Palestinian economic development through the occupation but also how it uses that control for its own economic and diplomatic advantage.”

Israel’s chief of staff, Gabi Ashkenazi, was reported last week to have conditioned his approval for Wataniya’s launch on the Palestinian leadership withdrawing demands for a referral to the war crimes tribunal.

Defense officials were reported to be angry that the PA had supported the attack on Gaza when it was launched last winter but were now pressing for Israeli soldiers to be put in the dock. One senior figure was quoted by the Haaretz newspaper saying: “The PA has reached the point where it has to decide whether it is working with us or against us.”

Under the Oslo accords, Israel retained ultimate control over the “electro-magnetic spectrum”, including the allocation of radio frequencies, in both Israel and the occupied territories.

Allan Richardson, Wataniya’s chief executive, who has previously launched mobile services in post-war Iraq and Afghanistan, blamed Israel for the company’s problems during an interview in July: “The obstacles we’re suffering from are obstacles you’ll never get anywhere else in the world.”

Last year Israel committed to providing Wataniya with a bandwidth of 4.8MHz, the absolute minimum required to provide coverage over the West Bank, but so far has offered only 3.8MHz.

Jawwal finally received 4.8MHz from Israel in 1999, two years after it launched. Despite the number of its subscribers growing tenfold to 1.1 million today, its bandwidth has remained the same. In comparison, Israel’s Cellcom company, with three times as many subscribers, has 37MHz.

Abdel Malik Jaber, PalTel’s chief executive, complained last year that millions of dollars of imported telecoms equipment was stuck at Israeli customs, some of it since 2004. Wataniya has made similar accusations against Israel.

Ref: Counerpunch

A version of this article originally appeared in The National (www.thenational.ae), published in Abu Dhabi.
Jonathan Cook is a writer and journalist based in Nazareth, Israel. His latest books are “Israel and the Clash of Civilisations: Iraq, Iran and the Plan to Remake the Middle East” (Pluto Press) and “Disappearing Palestine: Israel’s Experiments in Human Despair” (Zed Books). His website is http://www.jkcook.net.

READ THE UN REPORT ON ISRAELI(HAMAS) WAR CRIMES!!!

McNamara: From the Tokyo Firestorm to the World Bank

Robert McNamara, who died yesterday, July 6, served as Kennedy’s , then as Johnson’s defense secretary. He contributed more than most to the slaughter of 3.4 million Vietnamese (his own estimate). He went on to run the World Bank, where he presided over the impoverishment, eviction from their lands and death of many millions more round the world.

Just as George Kennan, one of the architects of the Cold War, helped bolt together the ramshackle scaffolding of bogus claims that provided the rationalization for Harry Truman’s great “arms scare” in 1948, launching the postwar arms race, McNamara tugged his forelock and said “Aye, aye, Sir” when Kennedy, campaigning against Nxon in the late 1950s attacked the Eisenhower/Nixon administration for having allowed a “missile gap” to develop that had now delivered America naked and helpless into the grip of the Soviet Union.

This was the biggest lie in the history of threat inflation and remains so to this day. At the moment when Kennedy, McNamara at his elbow, was flaying the Eisenhower administration for the infamous “gap”, the U.S. government from its spy planes that the Soviet Union had precisely one missile silo with an untested missile in it. The Russians knew that the US knew this, because they were fully primed about about the U-2 spy-plane overflights, most dramatically when U-2 pilot Gary Powers crashed near Sverdlovsk and told all to his captors

So when President Kennedy and Defense Secretary McNamara, took power in 1961, became privy to all intelligence from the spy flights, and announced that the U.S. was going to build 1000 ICBMs the Russians concluded that the US planned to wipe out the Soviet Union and immediately began a missile-building program of their own. So McNamara played a crucial, enabling role in the arms race in nuclear missiles. Before the “missile gap” it has been a “bomber race”.

It was entirely appropriate and logical that he began his services to the military working in Japan as a civilian analyst for Curt LeMay, the psychopathic Air Force general who ordered the raid that produced the Tokyo firestorm and who went on to become head of the Strategic Air Command and who boasted to Kennedy during the Cuban missile crisis that his missiles and B-52s were ready, willing and able to reduce the Soviet Union to a “smoldering, irradiated ruin in three hours”, a deed he was eager to accomplish.

LeMay was expert in guiding bright young systems analysts like McNamara into giving him the ex post facto intellectual rationales for enterprises on which he had long since set his mind. McNamara was an early member of the “defense intellectuals”, including Roberta and Albert Wohlstetter and Herman Kahn, who developed the whole argot of “controlled escalation”, “nuclear exchanges” and “mutual assured destruction” that kept the nuclear weapons plants, aerospace factories and nuclear labs at Los Alamos and Livermore and Oak Ridge humming along, decade after decade. McNamara liked to claim later, as he did to Errol Morris, that it was he who advised LeMay to send in his planes at lower altitude, the better to incinerate Japanese cities, but the historical record does not give him this dignity. He was a small player in LeMay’s murderous game.

He faded comfortably away. The last time we saw him vividly was in 2004 as the star of Morris’s wildly over-praised, documentary The Fog of War, talking comfortably about the millions of people he’s helped to kill.

Time and again, McNamara got away with it in that film, cowering in the shadow of baroque monsters like LeMay or LBJ, choking up about his choice of Kennedy’s gravesite in Arlington, sniffling at the memory of Johnson giving him the Medal of Freedom, spouting nonsense about how Kennedy would have pulled out of Vietnam, muffling himself in the ever- useful camouflage of the “fog of war.”

Now, the “fog of war” is a tag usually attributed to von Clausewitz, though the great German philosopher and theorist of war never actually used the phrase. Eugenia Kiesling argued a couple of years ago in Military Review that the idea of fog–unreliable information–wasn’t a central preoccupation of Clausewitz. “Eliminating fog”, Kiesling wrote, “gives us a clearer and more useful understanding of Clausewitz’s friction. It restores uncertainty and the intangible stresses of military command to their rightful centrality in ‘On War’. It allows us to replace the simplistic message that war intelligence is important with the reminder that Clausewitz constantly emphasizes moral forces in war.”

As presented by McNamara, through Morris, “the fog of war” usefully deflects attention from clear and unpleasant facts entirely unobscured by fog. Roberta Wohlstetter was a pioneer in this fogging technique back in the 1950s with her heavily subsidized Pearl Harbor: Warning and Decision, which deployed the idea of distracting “noise” as the phenomenon that prevented US commanders, ultimately Roosevelt, from comprehending the information that the Japanese were about to launch a surprise attack. Wohlstetterian “noise” thus obscured the fact that FDR wanted a Japanese provocation, knew the attack was coming, though not probably not its scale and destructiveness.

When McNamara looked back down memory lane there were no real shadows, just the sunlight of moral self-satisfaction: “I don’t fault Truman for dropping the bomb”; “I never saw Kennedy more shocked” (after the murder of Ngo Dinh Diem); “never would I have authorized an illegal action” (after the Tonkin Gulf fakery); “I’m very proud of my accomplishments and I’m very sorry I made errors” (his life). Slabs of instructive history, like “the missile gap”, were entirely missing from Morris’s film. In his later years he offered homilies about the menace of nuclear Armageddon, just like Kennan. It was cost-free for both men to say to say such things, grazing peacefully on the tranquil mountain pastures of their senior years. Why did they not encourage weapons designers in Los Alamos to mutiny, to resign? Or say that the atom spies in Los Alamos in the 1940s were right to try to level nuclear terror to some sort of balance? Why did they not extol the Berrigans and their comrades who served or are serving decades in prison for physically attacking nuclear missiles, beating the decks of the Sea Wolf nuclear submarine with their hammers.

It’s true that when he was head of the Ford Division of the Ford Motor Company in the mid- 1950s, McNamara did push for safety options–seat belts and padded instrument panels. Ford dealer brochures for the ’56 models featured photos of how Ford and GM models fared in actual crashes, to GM’s disadvantage. But as Ralph Nader describes it, in December, 1955, a top GM executive called Ford’s vice president for sales and said Ford’s safety campaign had to stop. These Ford executives, many of them formerly from GM, had a saying, Chevy could drop its price $25 to bankrupt Chrysler, $50 to bankrupt Ford. Ford ran up the white flag. The safety sales campaign stopped. McNamara took a long vacation in Florida, his career in Detroit in the balance, and came back a team player. Safety went through the windscreen and lay in a coma for years.

McNamara had very dirty hands, however hard he and admirers like Morris scrubbed them. Why did Defense Secretary McNamara overrule all expert review and procurement recommendations and insist that General Dynamics rather than Boeing make the disastrous F-111, at that time one of the largest procurement contracts in the Pentagon’s history? Could it be that Henry Crown of Chicago was calling in some chits for his role in fixing the 1960 JFK vote in Cook County, Illinois? Crown, of Chicago Sand and Gravel, had $300 million of the mob’s money in GD debentures, and after the disaster of the Convair, GD needed the F-111 to avoid going belly- up, taking the mob’s $300 million with it. McNamara misled Congressional investigators about this for years afterward.

To interviewers McNamara paid great stress on JFK’s “shock”, just a few weeks before he himself was killed, at the assassination of South Vietnam’s Ngo Dinh Diem and his brother. He also promoted the view that Kennedy was planning to withdraw from Vietnam. He oversaw the fakery of the Gulf of Tonkin “attack” that prompted the Gulf of Tonkin Resolution in 1964, whereby Congress gave LBJ legal authority to prosecute and escalate the war in Vietnam. He was a career “front man” for the Kennedys, called even to Chappaquiddick to help Ted Kennedy figure out what to say about it.

The Six Day War? Just before this ’67 war the Israelis were ready to attack and knew they were going to win but couldn’t get a clear go- ahead from the Johnson Administration. As the BBC documentary The 50 Years War narrates, Meir Amit, head of Israel’s Mossad, flew to Washington. The crucial OK came from McNamara, thus launching Israel’s long-planned, aggressive war on Egypt, Jordan and Syria, which led to present disasters. It was McNamara, after Israel’s deliberate attack on the US ship Liberty during that war (with thirty-four US sailors dead and 174 wounded), who supervised the cover- up.

McNamara had a 13-year stint running the World Bank, whither he was dispatched by LBJ, Medal of Freedom in hand. McNamara liked to brandish his Bank years as his moral redemption and all too often his claim is accepted by those who have no knowledge of the actual, ghastly record. In fact the McNamara of the World Bank evolved naturally, organically, from the McNamara of Vietnam. The one was prolegomenon to the other, the McNamara-sponsored horrors in Vietnam perhaps on a narrower and more vivid scale, but ultimately lesser in dimension and consequence. No worthwhile portrayal of McNamara could possibly avoid McNamara’s performance at the World Bank because there, within the overall constraints of the capitalist system he served, he was his own man. There was no LeMay, no LBJ issuing orders. And as his own man, McNamara amplified the ghastly blunders, corruptions and lethal cruelties of American power as inflicted upon Vietnam to a planetary scale. The best terse account of the McNamara years is in Bruce Rich’s excellent history of the Bank, Mortgaging the Earth, published in 1994.

When McNamara took over the Bank, “development” loans (which were already outstripped by repayments) stood at $953 million and when he left, at $12.4 billion, which, discounting inflation, amounted to slightly more than a 6- fold increase. Just as he multiplied the troops in Vietnam, he ballooned the Bank’s staff from 1,574 to 5,201. The Bank’s shadow lengthened steadily over the Third World. Forests, in the Amazon, in Cameroon, in Malaysia, in Thailand, fell under the axe of “modernization”. Peasants were forced from their lands. Dictators like Pinochet and Ceausescu were nourished with loans.

From Vietnam to the planet: The language of American idealism and high purpose was just the same. McNamara blared his mission of high purpose in 1973 in Nairobi, initiating the World Bank’s crusade on poverty. “The powerful have a moral obligation to assist the poor and the weak.” The result was disaster, draped, as in Vietnam with obsessive secrecy, empty claims of success and mostly successful efforts to extinguish internal dissent. And as with Vietnam, McNamara’s obsession with statistics, produced a situation, (according to S. Shaheed Husain, then the Bank’s vice president in charge of Operations) where, “without knowing it, McNamara manufactured data. If there was a gap in the numbers, he would ask staff to fill it, and others made it up for him.”

At McNamara’s direction the Bank would prepare five year “master country lending plans”, set forth in “country programming papers. “In some cases, Rich writes, “even ministers of a nation’s cabinet could not obtain access to these documents, which in smaller, poor countries, were viewed as international decrees on their economic fate.”

These same “decrees” were drawn up by technocrats (in Vietnam they were the “advisers”) often on the basis of a few short weeks in the target country. Corruption seethed. Most aid vanished into the hands of local elites who very often used the money to steal the resources–pasture, forest, water, of the very poor whom the Bank was professedly seeking to help. In Vietnam, Agent Orange and napalm.

Across the third world, the Bank underwrote “Green Revolution” technologies that the poorest peasants couldn’t afford and that drenched land in pesticides and fertilizer. Vast infrastructural projects such as dams and kindred irrigation projects once again drove the poor from their lands, from in Brazil to India. It was the malign parable of “modernization” written across the face of the third world, with one catatrophe after another catastrophes prompted by the destruction of traditional subsistence rural economies.

The appropriation of smaller farms and common areas, Rich aptly comments, “resembled in some respects the enclosure of open lands in Britain prior to the Industrial Revolution–only this time on a global scale, intensified by Green Revolution agricultural technology.” As an agent of methodical planetary destruction, McNamara should be ranked in the top tier of earth-wreckers of all time.

“Management”, McNamara declared in 1967 “is the gate through which social and economic and political change, indeed change in every direction, is diffused through society.” The managerial ideal for McNamara was managerial dictatorship. World Bank loans surged to Pinochet’s Chile after Allende’s overthrow, to Uruguay, to Argentina, to Brazil after the military coup, to the Philippines, to Suharto after the ’65 coup in Indonesia.

And to the Romania of Ceausescu. McNamara poured money–$2.36 billion between 1974 and 1982–into the tyrant’s hands. In 1980 Romania was the Bank’s eighth biggest borrower. As McNamara crowed delightedly about his “faith in the financial morality of socialist countries” Ceausescu razed whole villages, turned hundreds of square miles of prime farm land into open- pit mines, polluted the air with coal and lignite, turned Rumania into one vast prison, applauded by the Bank in an amazing 1979 economic study as being a fine advertisement for the “Importance of Centralized Economic Control”. Another section of that same 1979 report, titled “Development of Human Resources”, featured these chilling words: “To improve the standards of living of the population as a beneficiary of the development process, the government has pursued policies to make better use of the population as a factor of production… An essential feature of the overall manpower policy has been … to stimulate an increase in birth rates.” Ceausescu forbade abortions, and cut off disrtribution of contraceptives. Result: ten of thousand of abandoned children, dumped in orphanages, another sacrificial hecatomb in McNamara’s lethal hubris.

In his later years, McNamara never offered any reflection on the social system that produced and promoted him, a perfectly nice, well- spoken war criminal. As his inflation of his role in the foe- bombing of Japan showed, he could go so far as to falsely though complacently indict himself, while still shirking bigger, more terrifying and certainly more useful reflections on the system that blessed him and mercilessly killed millions upon millions under FDR, Truman, Eisenhower, JFK, LBJ, Nixon.

Like Speer, he got away with it, never having to hang his head or drop through a trap door with a rope around his neck, as he richly deserved.

Ref: counterpunch

De-Dollarization: Dismantling America’s Financial-Military Empire (bye bye US fucking A!)

The city of Yakaterinburg, Russia’s largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.

Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system. A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire. But George W. Bush (“I’m a uniter, not a divider”) built on the Clinton administration’s legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.

What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.” What this means in plain English is: We have reached our limit in subsidizing the United States’ military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.

“The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much. Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.

The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks. These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.

When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.

This means creating a new alternative. Rather than making merely “cosmetic changes as some countries and perhaps the international financial organisations themselves might want,” Mr. Medvedev ended his St. Petersburg speech, “what we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries will not dominate.”

When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – land these loans have financed most of the US Government’s domestic budget deficits for over three decades now! Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

The main political issue confronting the world’s central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?

For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself. Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4] Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine. The nation has too many dollar assets as it is, his colleagues explained. Central bank governor Zhou Xiaochuan of the People’s Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.

In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting. As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself? The United States is now the world’s largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.

The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors. And at home, Congress blocked China’s CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.

In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups. To date, China’s attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations. They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout. Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.

Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve’s credit bubble drove interest rates down China’s sovereign wealth funds sought to diversify in late 2007. China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa’s Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis. But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.

Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.

On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means. The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.’”6

At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings. It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America’s balance-of-payments deficit. Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.

Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China’s currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan. This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don’t mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring. When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China’s US investments therefore were safe and sound, he was greeted with derisive laughter.7

Anticipation of a rise in China’s exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency. So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?

To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner’s visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country’s central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8

An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.

Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order. If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.

US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.

Ref: Global Research

Notes
1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,

Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”

2 Kremlin.ru, June 5, 2009, in Johnson’s Russia List, June 8, 2009, #8.

3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int’l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body. That means using the Chinese currency to settle international trade payments …”

4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.

5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.

6 “Another Dollar Crisis inevitable unless U.S. starts Saving – China central bank adviser. Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009. http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia

7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.

8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.

World Bank: Palestinian economy could flourish if Israel eased restrictions

The Palestinian economy has “incredible potential” that could be unleashed if Israel eases restrictions on Palestinian movement, the area’s World Bank chief said Wednesday, a day after a high-level World Bank delegation inaugurated a sewage storage facility in a rare trip to Hamas-ruled Gaza.

It took three years, rather than the scheduled nine months, to build the treatment basins meant to drain a sewage lake in northern Gaza. The delays were caused by an Israeli border closure of the territory, along with frequent flare-ups of violence that have made it difficult to get construction materials into Gaza.

In a new round of fighting late Tuesday and Wednesday, Israeli forces killed six Hamas militants and Hamas unleashed a rocket barrage on Israeli border communities, jeopardizing a five-month-old cease-fire.
Advertisement
Gaza has been largely cut off from the world since the Islamic militant Hamas seized control by force in June 2007. Much of the world has joined Israel’s boycott of Hamas, though international organizations have warned that the border closure causes severe hardship for Gaza’s 1.4 million residents.

Daniela Gressani, the World Bank’s vice president for the Middle East and North Africa, said the international community must not give up on Gaza.

“It is obviously very difficult to work under the current circumstances in Gaza. I don’t think there is an alternative to remaining engaged,” she told the Associated Press.

She said the bank would now push ahead with the second stage of the Gaza sewage project, a treatment plant. Untreated Gaza sewage is routinely pumped into the Mediterranean because the closure at times deprives Gaza of sufficient fuel to operate already overburdened treatment plants.

The delegation included senior officials of several World Bank branches, and the visit to the Palestinian territories was meant to give a boost to efforts to revive the Palestinian economy, participants said. The bank is trying to encourage investment, and on Wednesday signed a new agreement on political risk insurance.

A year ago, the international community pledged $7.7 billion (¤6 billion) in aid to the Palestinians, to be paid through 2010. The idea was to make Palestinians increasingly less dependent on aid, as the Palestinian private sector recovers from years of Israeli-Palestinian fighting. However, this scenario has not become reality.

The Palestinian economy has remained stagnant, largely because of the sharp downturn in Gaza and Israel’s continued restrictions on Palestinian trade and movement in the West Bank.

Israel set up a network of roadblocks at the outbreak of the second Palestinian uprising in 2000, as a deterrent to Palestinian militants. The barriers have since become part of a complex closure regime that restricts Palestinian access to large areas of the West Bank.

David Craig, head of the World Bank in the West Bank and Gaza, said the Palestinian economy is down 30 percent from 2000. He said it has “incredible potential,” comparing it to a coiled spring waiting to take off.

“What it really takes is for movement and access restrictions to be lightened up progressively, in some way that is compatible with Israel’s security so that this takeoff can occur,” he said.

Israeli government spokesman Mark Regev said Israel is doing what it can. “We have every interest in working with the Palestinians in helping to create a more healthy economic situation,” he said.

World Bank officials and Palestinian economists, meanwhile, said there is growing concern that donor countries will fall short of pledges in coming months because of the global financial crisis.

Gressani said she doesn’t expect a dramatic decline in aid to the Palestinians, but added that “I do expect it will be comparatively more difficult to get the funds mobilized, disbursed in time.”

Palestinian Planning Minister Samir Abdullah said that even if donors were to scale back, there was still a cushion because they had pledged more than the $5.6 billion the Palestinians originally requested. So far in 2008, donor countries paid $1.6 billion of support the Palestinian budget, and $150 million for development projects, in line with Palestinian needs, he said.

Abdullah said the bank’s programs will help spur the economy, along with an increase in construction, but that lifting restrictions is key. “Hopefully, we will convince the Israelis, by pressure and bringing multinational organizations here … to dismantle the closure regime that makes no sense after many months of improvement in the security situation,” he said.

Ref: Haaretz

World Bank: Israel limits impact of aid to Palestinians

Despite $7.7 billion in aid pledged to Palestinians, economic growth in PA muted due to Israeli-imposed restrictions on travel and trade, new World Bank survey reveals. Figures show 96% of industrial operations in Gaza suspended

Billions of aid dollars pledged to the Palestinians to bolster peace talks with Israel are having a muted economic impact because of Israeli restrictions on travel and trade, the World Bank said on Sunday.

Confidence Crisis
Abbas doubts deal with Israel possible this year / Reuters
Palestinian leader skeptical following US visit but vows to ‘negotiate until very end’
Full Story
The lending agency told donor nations in a report that per capita income in the West Bank and the Gaza Strip in 2008 would be static, if not lower, despite the $7.7 billion in aid pledged to the Palestinians in December.

The World Bank said modest gains in economic growth in the occupied West Bank, where western-backed President Mahmoud Abbas’ government holds sway, were not sufficient to offset the “severe contraction” seen in Hamas-controlled Gaza.

Israel tightened its blockade of the Gaza Strip after the Islamist group’s takeover in June from more secular Fatah forces loyal to Abbas.

“While the PA (Palestinian Authority) has moved ahead with its economic reforms, albeit slowly, there has been little progress on relaxing movement and access constraints,” the bank said in the report, a copy of which was obtained by Reuters.

The World Bank said the impact of these restrictions, including hundreds of checkpoints and roadblocks in the West Bank, “cannot be overestimated.”

Industrial operations suspended
Western aid, frozen after Hamas won control of the Palestinian Authority in January 2006 elections, has since resumed to Abbas’ government to bolster final-status peace talks launched with Israel in November.

But those talks have shown little sign of progress and Israel has balked at removing major West Bank checkpoints and roadblocks, arguing that they are necessary to stop suicide bombers from reaching its cities. Palestinians call the obstacles collective punishment.

While the International Monetary Fund has projected growth of 3% in 2008, the World Bank said: “Taking into account population growth, it can be concluded that under the current movement and access restrictions, per capita incomes will drop or remain the same.”

The World Bank said Israel’s tightened cordon of the Gaza Strip has “considerably eroded whatever private sector backbone remained in the economy, and in a manner that is progressively more difficult to reverse.”

The bank, citing business associations in Gaza, said the current restrictions have led to the suspension of 96% of Gaza’s industrial operations.

Following a recent visit by Secretary of State Condoleezza Rice, Israel announced plans to remove 61 barriers in the West Bank. But a UN survey subsequently found that only 44 of the 61 obstacles had been removed and that most of them were of little to no significance.