4.19.05

Members of the SF Gray Panther War and Peace Committee have been investigating global economic and military issues. They have written two articles, “The Almighty Dollar: Is It Still Mighty?” and “Gunboat Democracy.” These pieces provide insight into the apparent decision of corporations and their government that non-productive populations — children, seniors, and the disabled — are not to be supported, and that Medicare, Medicaid, and Social Security must be contained and retrenched before 70 million new seniors arrive.

The Almighty Dollar: Is It Still Mighty?

In 1944, as World War II was ending, the U.S. was the leading power at a conference of 41 nations held in Bretton Woods, New Hampshire. It was there, in a luxurious hotel surrounded by the White Mountain National Forest, that the International Monetary Fund and the World Bank were established, and the dollar became the chief international currency. The U.S. backed the dollar with gold at the fixed amount of $35/ounce.

In 1971, under enormous economic pressure from a huge trade deficit, Vietnam War debts, and spending on social programs needed to quell domestic unrest, Richard Nixon ended the gold standard and allowed the dollar to "float." The U.S. made deals with the Saudis that oil would be sold only in dollars, according to David Spiro in The Hidden Hand of American Hegemony, so oil-importing countries had no choice but to keep a large reserve of dollars — all except the U.S., which needed neither gold nor another currency in reserve. Until 1999, when the 25 countries of the EU issued the euro as their common currency, the dollar remained supreme. Now, however, it is declining rapidly and more and more countries are looking at the euro as an alternative.

Economist John Miller writes in Dollars and Sense that the U.S. economy is held together by "imperial privilege" and by an aggressive military. How does this work? The U.S. current account deficit (the difference between the country's income and its consumption and investment spending) is currently about $610 billion, most of which stems from the trade deficit. The last time the current account deficit rose above 4% of the GDP was in 1816; now it stands at 5.78%. This deficit represents the amount of money the U.S. must attract from abroad each year. The money comes from foreign governments and individuals who loan the U.S. government money by investing in treasury bonds (Japan and European countries are no longer buying U.S. stocks). The United States borrows $2 billion a day. Because "foreigners have been happy to purchase the gobs of debt issued by the U.S. Treasury and corporate America" (Miller), U.S. interest rates have remained low. Although huge amounts of the U.S. budget go to servicing these debts, the borrowing gives the government money to maintain its huge military while simultaneously giving tax cuts to the rich.

How can the U.S. get away with running up debt at low rates? Until the euro entered the picture, the global currency was the dollar, and this allowed the U.S. to keep control. Most international trade is conducted in dollars, most central banks' reserves are held in dollars, and today oil is bought and sold only in dollars (Coilin Nunan, Feasta Review). In 2000, Iraq decided to sell oil in euros. Two years later the U.S. invaded, and the oil currency was quickly shifted back to dollars. In recent months, Iran, North Korea, and Venezuela have all discussed switching to the euro; all are threatened with "regime change" in some form.

What next? Since January 2002, the dollar has fallen more than 20%. To keep foreign investors interested in buying U.S. securities, the Fed will have to boost interest rates to make up for their declining value. Or foreign investors may just stop buying, causing a crash in the dollar and the stock market and a severe economic downturn with worldwide effects (Miller). A move to the euro as a second international currency, or even as an exclusive international currency, would force the U.S. to cut its trade deficit dramatically, as it, too, would need reserve currency. Will there be an equitable solution, or will the U.S. continue to rely on imperial privilege backed up by war? (top)

----------------

Gunboat Democracy

The President's proposed budget says it all: $419 billion for "defense" (up 38% in five years and not including the cost of wars in Iraq and Afghanistan), and less than half that amount for all other discretionary spending programs.

U.S. military installations (890 of them)¹ encircle our globe, more than those of any other country at any other time in history. What are they doing there? What purpose do they serve? Are they outposts of freedom, "standing watch on distant borders," as President Bush would have it? Or are they, as more and more people suspect, enforcers for the economic interests of the U.S. government and its friends?

"Once upon a time, you could trace the spread of imperialism by counting up colonies. America's version of the colony is the military base,"² writes Chalmers Johnson, President of the Japan Policy Research Institute and professor emeritus at UC, San Diego. And since the administration of George H.W. Bush, when the first Gulf War brought opportunities for permanent bases in Saudi Arabia and Kuwait, they have multiplied like invasive plants. Says geographer Zoltan Grossman:

Since 1990, each large-scale U.S. intervention has left behind a string of new U.S. military bases in a region where the U.S. had never before had a foothold. The U.S. military is inserting itself into strategic areas of the world and anchoring U.S. geopolitical influence in these areas, at a very critical time in history. Indeed, the establishment of new bases may in the long run be more critical to U.S. war planners than the wars themselves.³

Many analysts believe that the increased U.S. military presence, especially in the Middle East and Central Asia, is an effort to dominate the world's chief source of cheap energy, oil, and the pipelines which transport it. The U.S. imports only about 5% of the oil found in the Persian Gulf, with the rest going mainly to Europe and Japan. The European Union and East Asian economies pose a mounting threat to the economic wellbeing of the U.S., but control of their oil supply would allow the U.S. to dampen production of these competitors by limiting the supply or increasing the price. The increasing militarization of U.S. foreign policy may mirror the weakening U.S. economy.

And what of Iraq, and U.S. plans for freedom and democracy there? With the closing down of U.S. bases in Saudi Arabia after 9/11, Iraq offered an ideal situation for a large U.S. military presence in the Middle East. And despite denials from President Bush and Defense Secretary Rumsfeld that U.S. troops will remain in Iraq only until Iraqi security forces can take over, reports persist of the construction of 14 "enduring bases."⁴ In addition, the U.S. is building a permanent military communications system,⁵ and the largest U.S. embassy in the world, with a staff of more than 3,000 people.⁶

One of these bases, Camp Liberty (formerly Camp Victory North) near Baghdad Airport, is the largest overseas post built since the Vietnam War and when full will hold about 14,000 troops. Each of its three sections will have a chow hall, chapel, Morale Recreation and Welfare building, PX shoppette, barber shop, gym, internet café, basketball and volley ball courts, legal services center and courtroom, and more.

The communication system, known as the Central Iraq Microwave System, will "consist of up to 12 communications towers throughout the country and fiberoptic cables connecting Camp Victory…  to other coalition bases in the country." Senior defense analyst Thomas Donnelly of the American Enterprise Institute says, "This is the kind of investment that is reflective of the strategic commitment and intention to continue a military presence in Iraq."⁷

Whether continued resistance to U.S. occupation and the recent Iraqi elections will change U.S. plans remains to be seen, but in an article in the Toronto Star in March 2004, Linda McQuaig discusses an ultra-secret task force on energy headed by Vice President Cheney which as early as the spring of 2001 examined Iraq's assets and the foreign oil companies interested in them. McQuaig's interview with Fadel Gheit, an oil analyst for Oppenheimer & Co., gives a very clear picture of Wall Street's and U.S. oil's interest in the area:

Not only does Iraq have vast quantities of easily accessible oil, but its oil is almost untouched.

"Think of Iraq as virgin territory…. This is bigger than anything Exxon is involved in currently… .It is the superstar of the future." Gheit just smiles at the notion that oil wasn't a factor in the U.S. invasion of Iraq…. its location, nestled between Saudi Arabia and Iran, made it an ideal place for an ongoing military presence, from which the U.S. would be able to control the entire Gulf region. Gheit smiles again: "Think of Iraq as a military base with a very large oil reserve underneath…. You can't ask for better than that."⁸

The likelihood is that as the economic competition with China, India, Japan, and the EU heats up, the U.S. will continue trying to expand its military presence around the world, especially in oil-rich and strategically important areas. "Demand for oil in China is growing at a blistering rate, about 30% to 40% a year. Demand is coming not just from China, but also from India and the rest of the developing world," says Anne Korin of the Institute for the Analysis of Global Security.⁹ One has to wonder which will run out first, the oil or the money necessary to support the vast military web trying to control it.

The wars of the last two decades had little to do with the oft-repeated mantras of freedom, liberty, and human rights, nor were there serious efforts to resolve problems through negotiations. "Washington went to war not as a last resort," says Grossman, "but because it saw war as a convenient opportunity to further larger goals."¹⁰ As a people whose armed forces are inflicting misery throughout the world, whose economy is being bankrupted, and whose sons and daughters are dying in these wars, we must commit ourselves to opposing the militarism and imperialism, which drive our country's foreign policy. Another world is possible! (top)

1. Francis, David R. "US Bases in Iraq: Sticky Politics, Hard Math," Christian Science Monitor, 9-30-04. (back)

2.  Johnson, Chalmers. "America's Empire of Bases," posted on TomDispatch.com, January 30, 2004. Johnson writes extensively on this topic in two books, Blowback, and Sorrows of Empire. (back)

3. Grossman, Zoltan. "New U.S. Military Bases: Side Effects or Causes of War?" posted on ZNET, February 5, 2002. See also Grossman's power point presentation, New U.S. Military Bases: Side Effects or Causes of War? at http://www.uwec.edu/grossmzc/zoltantalks.html. (back)

4. Spolar, Christine. "14 'Enduring Bases' Set in Iraq: Long-term military presence planned," Chicago Tribune, March 23, 2004. (back)

5. Lake, Eli. "Amid Talk of Withdrawal, Pentagon Is Taking Steps for Longer Stay in Iraq," New York Sun, January 14, 2005. (back)

6. Wright, Robin. "U.S. Has Big Plans for Embassy in Iraq," Washington Post, January 2, 2004. (back)

7. Lake, “Amid Talk of Withdrawal.” (back)

8. McQuaig, Linda. "Crude Dudes. U.S. Oil Companies Just Happened to Have Billions of Dollars They Wanted to Invest in Undeveloped Oil Reserves," Toronto Star, September 20, 2004. (back)

9. Tsuruoka, Doug. "China's Ever-Growing Oil Needs May Result in a Global Shortage," Investor's Business Daily, January 26, 2005. (back)

10. Grossman, “New U.S. Military Bases.” (back)