Germany’s position in America’s New World Order

November 02, 2022

Source

by Michael Hudson

Germany has become an economic satellite of America’s New Cold War with Russia, China and the rest of Eurasia. Germany and other NATO countries have been told to impose trade and investment sanctions upon themselves that will outlast today’s proxy war in Ukraine. U.S. President Biden and his State Department spokesmen have explained that Ukraine is just the opening arena in a much broader dynamic that is splitting the world into two opposing sets of economic alliances. This global fracture promises to be a ten- or twenty-year struggle to determine whether the world economy will be a unipolar U.S.-centered dollarized economy, or a multipolar, multi-currency world centered on the Eurasian heartland with mixed public/private economies.

President Biden has characterized this split as being between democracies and autocracies. The terminology is typical Orwellian double-speak. By “democracies” he means the U.S. and allied Western financial oligarchies. Their aim is to shift economic planning out of the hands of elected governments to Wall Street and other financial centers under U.S. control. U.S. diplomats use the International Monetary Fund and World Bank to demand privatization of the world’s infrastructure and dependency on U.S. technology, oil and food exports.

By “autocracy,” Biden means countries resisting this financialization and privatization takeover. In practice, U.S. rhettoric means promoting its own economic growth and living standards, keeping finance and banking as public utilities. What basically is at issue is whether economies will be planned by banking centers to create financial wealth – by privatizing basic infrastructure, public utilities and social services such as health care into monopolies – or by raising living standards and prosperity by keeping banking and money creation, public health, education, transportation and communications in public hands.

The country suffering the most “collateral damage” in this global fracture is Germany. As Europe’s most advanced industrial economy, German steel, chemicals, machinery, automotives and other consumer goods are the most highly dependent on imports of Russian gas, oil and metals from aluminum to titanium and palladium. Yet despite two Nord Stream pipelines built to provide Germany with low-priced energy, Germany has been told to cut itself off from Russian gas and de-industrialize. This means the end of its economic preeminence. The key to GDP growth in Germany, as in other countries, is energy consumption per worker.

These anti-Russian sanctions make today’s New Cold War inherently anti-German. U.S. Secretary of State Anthony Blinken has said that Germany should replace low-priced Russian pipeline gas with high-priced U.S. LNG gas. To import this gas, Germany will have to spend over $5 billion quickly to build port capacity to handle LNG tankers. The effect will be to make German industry uncompetitive. Bankruptcies will spread, employment will decline, and Germany’s pro-NATO leaders will impose a chronic depression and falling living standards.

Most political theory assumes that nations will act in their own self-interest. Otherwise they are satellite countries, not in control of their own fate. Germany is subordinating its industry and living standards to the dictates of U.S. diplomacy and the self-interest of America’s oil and gas sector. It is doing this voluntarily – not because of military force but out of an ideological belief that the world economy should be run by U.S. Cold War planners.

Sometimes it is easier to understand today’s dynamics by stepping away from one’s own immediate situation to look at historical examples of the kind of political diplomacy that one sees splitting today’s world. The closest parallel that I can find is medieval Europe’s fight by the Roman papacy against German kings – the Holy Roman Emperors – in the 13^th century. That conflict split Europe along lines much like those of today. A series of popes excommunicated Frederick II and other German kings and mobilized allies to fight against Germany and its control of southern Italy and Sicily.

Western antagonism against the East was incited by the Crusades (1095-1291), just as today’s Cold War is a crusade against economies threatening U.S. dominance of the world. The medieval war against Germany was over who should control Christian Europe: the papacy, with the popes becoming worldly emperors, or secular rulers of individual kingdoms by claiming the power to morally legitimize and accept them.

Medieval Europe’s analogue to America’s New Cold War against China and Russia was the Great Schism in 1054. Demanding unipolar control over Christendom, Leo IX excommunicated the Orthodox Church centered in Constantinople and the entire Christian population that belonged to it. A single bishopric, Rome, cut itself off from the entire Christian world of the time, including the ancient Patriarchates of Alexandria, Antioch, Constantinople and Jerusalem.

This break-away created a political problem for Roman diplomacy: How to hold all the Western European kingdoms under its control and claim the right for financial subsidy from them. That aim required subordinating secular kings to papal religious authority. In 1074, Gregory VII, Hildebrand, announced 27 Papal Dictates outlining the administrative strategy for Rome to lock in its power over Europe.

These papal demands are strikingly parallel to today’s U.S. diplomacy. In both cases military and worldly interests require a sublimation in the form of an ideological crusading spirit to cement the sense of solidarity that any system of imperial domination requires. The logic is timeless and universal.

The Papal Dictates were radical in two major ways. First of all, they elevated the bishop of Rome above all other bishoprics, creating the modern papacy. Clause 3 ruled that the pope alone had the power of investiture to appoint bishops or to depose or reinstate them. Reinforcing this, Clause 25 gave the right of appointing (or deposing) bishops to the pope, not to local rulers. And Clause 12 gave the pope the right to depose emperors, following Clause 9, obliging “all princes to kiss the feet of the Pope alone” in order to be deemed legitimate rulers.

Likewise today, U.S. diplomats claim the right to name who should be recognized as a nation’s head of state. In 1953 they overthrew Iran’s elected leader and replaced him with the Shah’s military dictatorship. That principle gives U.S. diplomats the right to sponsor “color revolutions” for regime-change, such as their sponsorship of Latin American military dictatorships creating client oligarchies to serve U.S. corporate and financial interests. The 2014 coup in Ukraine is just the latest exercise of this U.S. right to appoint and depose leaders.

More recently, U.S. diplomats have appointed Juan Guaidó as Venezuela’s head of state instead of its elected president, and turned over that country’s gold reserves to him. President Biden has insisted that Russia must remove Putin and put a more pro-U.S. leader in his place. This “right” to select heads of state has been a constant in U.S. policy spanning its long history of political meddling in European political affairs since World War II.

The second radical feature of the Papal Dictates was their exclusion of all ideology and policy that diverged from papal authority. Clause 2 stated that only the Pope could be called “Universal.” Any disagreement was, by definition, heretical. Clause 17 stated that no chapter or book could be considered canonical without papal authority.

A similar demand as is being made by today’s U.S.-sponsored ideology of financialized and privatized “free markets,” meaning deregulation of government power to shape economies in interests other than those of U.S.-centered financial and corporate elites.

The demand for universality in today’s New Cold War is cloaked in the language of “democracy.” But the definition of democracy in today’s New Cold War is simply “pro-U.S.,” and specifically neoliberal privatization as the U.S.-sponsored new economic religion. This ethic is deemed to be “science,” as in the quasi-Nobel Memorial Prize in the Economic Sciences. That is the modern euphemism for neoliberal Chicago-School junk economics, IMF austerity programs and tax favoritism for the wealthy.

The Papal Dictates spelt out a strategy for locking in unipolar control over secular realms. They asserted papal precedence over worldly kings, above all over Germany’s Holy Roman Emperors. Clause 26 gave popes authority to excommunicate whomever was “not at peace with the Roman Church.” That principle implied the concluding Claus 27, enabling the pope to “absolve subjects from their fealty to wicked men.” This encouraged the medieval version of “color revolutions” to bring about regime change.

What united countries in this solidarity was an antagonism to societies not subject to centralized papal control – the Moslem Infidels who held Jerusalem, and also the French Cathars and anyone else deemed to be a heretic. Above all there was hostility toward regions strong enough to resist papal demands for financial tribute.

Today’s counterpart to such ideological power to excommunicate heretics resisting demands for obedience and tribute would be the World Trade Organization, World Bank and IMF dictating economic practices and setting “conditionalities” for all member governments to follow, on pain of U.S. sanctions – the modern version of excommunication of countries not accepting U.S. suzerainty. Clause 19 of the Dictates ruled that the pope could be judged by no one – just as today, the United States refuses to subject its actions to rulings by the World Court. Likewise today, U.S. dictates via NATO and other arms (such as the IMF and World Bank) are expected to be followed by U.S. satellites without question. As Margaret Thatcher said of her neoliberal privatization that destroyed Britain’s public sector, There Is No Alternative (TINA).

My point is to emphasize the analogy with today’s U.S. sanctions against all countries not following its own diplomatic demands. Trade sanctions are a form of excommunication. They reverse the 1648 Treaty of Westphalia’s principle that made each country and its rulers independent from foreign meddling. President Biden characterizes U.S. interference as ensuring his new antithesis between “democracy” and “autocracy.” By democracy he means a client oligarchy under U.S. control, creating financial wealth by reducing living standards for labor, as opposed to mixed public/private economies aiming at promoting living standards and social solidarity.

As I have mentioned, by excommunicating the Orthodox Church centered in Constantinople and its Christian population, the Great Schism created the fateful religious dividing line that has split “the West” from the East for the past millennium. That split was so important that Vladimir Putin cited it as part of his September 30, 2022 speech describing today’s break away from the U.S. and NATO centered Western economies.

The 12^th and 13^th centuries saw Norman conquerors of England, France and other countries, along with German kings, protest repeatedly, be excommunicated repeatedly, yet ultimately succumb to papal demands. It took until the 16^th century for Martin Luther, Zwingli and Henry VIII finally to create a Protestant alternative to Rome, making Western Christianity multi-polar.

Why did it take so long? The answer is that the Crusades provided an organizing ideological gravity. That was the medieval analogy to today’s New Cold War between East and West. The Crusades created a spiritual focus of “moral reform” by mobilizing hatred against “the other” – the Moslem East, and increasingly Jews and European Christian dissenters from Roman control. That was the medieval analogy to today’s neoliberal “free market” doctrines of America’s financial oligarchy and its hostility to China, Russia and other nations not following that ideology. In today’s New Cold War, the West’s neoliberal ideology is mobilizing fear and hatred of “the other,” demonizing nations that follow an independent path as “autocratic regimes.” Outright racism is fostered toward entire peoples, as evident in the Russophobia and Cancel Culture currently sweeping the West.

Just as Western Christianity’s multi-polar transition required the 16^th century’s Protestant alternative, the Eurasian heartland’s break from the bank-centered NATO West must be consolidated by an alternative ideology regarding how to organize mixed public/private economies and their financial infrastructure.

Medieval churches in the West were drained of their alms and endowments to contribute Peter’s Pence and other subsidy to the papacy for the wars it was fighting against rulers who resisted papal demands. England played the role of major victim that Germany plays today. Enormous English taxes were levied ostensibly to finance the Crusades were diverted to fight Frederick II, Conrad and Manfred in Sicily. That diversion was financed by papal bankers from northern Italy (Lombards and Cahorsins), and became royal debts passed down throughout the economy. England’s barons waged a civil war against Henry II in the 1260s, ending his complicity in sacrificing the economy to papal demands.

What ended the papacy’s power over other countries was the ending of its war against the East. When the Crusaders lost Acre, the capital of Jerusalem in 1291, the papacy lost its control over Christendom. There was no more “evil” to fight, and the “good” had lost its center of gravity and coherence. In 1307, France’s Philip IV (“the Fair”) seized the Church’s great military banking order’s wealth, that of the Templars in the Paris Temple. Other rulers also nationalized the Templars, and monetary systems were taken out of the hands of the Church. Without a common enemy defined and mobilized by Rome, the papacy lost its unipolar ideological power over Western Europe.

The modern equivalent to the rejection of the Templars and papal finance would be for countries to withdraw from America’s New Cold War. They would reject the dollar standard and the U.S. banking and financial system. that is happening as more and more countries see Russia and China not as adversaries but as presenting great opportunities for mutual economic advantage.

The broken promise of mutual gain between Germany and Russia

The dissolution of the Soviet Union in 1991 promised an end to the Cold War. The Warsaw Pact was disbanded, Germany was reunified, and American diplomats promised an end to NATO, because a Soviet military threat no longer existed. Russian leaders indulged in the hope that, as President Putin expressed it, a new pan-European economy would be created from Lisbon to Vladivostok. Germany in particular was expected to take the lead in investing in Russia and restructuring its industry along more efficient lines. Russia would pay for this technology transfer by supplying gas and oil, along with nickel, aluminum, titanium and palladium.

There was no anticipation that NATO would be expanded to threaten a New Cold War, much less that it would back Ukraine, recognized as the most corrupt kleptocracy in Europe, into being led by extremist parties identifying themselves by German Nazi insignia.

How do we explain why the seemingly logical potential of mutual gain between Western Europe and the former Soviet economies turned into a sponsorship of oligarchic kleptocracies. The Nord Stream pipeline’s destruction capsulizes the dynamics in a nutshell. For almost a decade a constant U.S. demand has been for Germany to reject its reliance on Russian energy. These demands were opposed by Gerhardt Schroeder, Angela Merkel and German business leaders. They pointed to the obvious economic logic of mutual trade of German manufactures for Russian raw materials.

The U.S. problem was how to stop Germany from approving the Nord Stream 2 pipeline. Victoria Nuland, President Biden and other U.S. diplomats demonstrated that the way to do that was to incite a hatred of Russia. The New Cold War was framed as a new Crusade. That was how George W. Bush had described America’s attack on Iraq to seize its oil wells. The U.S.-sponsored 2014 coup created a puppet Ukrainian regime that has spent eight years bombing of the Russian-speaking Eastern provinces. NATO thus incited a Russian military response. The incitement was successful, and the desired Russian response was duly labeled an unprovoked atrocity. Its protection of civilians was depicted in the NATO-sponsored media as being so offensive as to deserve the trade and investment sanctions that have been imposed since February. That is what a Crusade means.

The result is that the world is splitting in two camps: the U.S.-centered NATO, and the emerging Eurasian coalition. One byproduct of this dynamic has been to leave Germany unable to pursue the economic policy of mutually advantageous trade and investment relations with Russia (and perhaps also China). German Chancellor Olaf Sholz is going to China this week to demand that it dismantle is public sector and stops subsidizing its economy, or else Germany and Europe will impose sanctions on trade with China. There is no way that China could meet this ridiculous demand, any more than the United States or any other industrial economy would stop subsidizing their own computer-chip and other key sectors.^[1] The German Council on Foreign Relations is a neoliberal “libertarian” arm of NATO demanding German de-industrialization and dependency on the United States for its trade, excluding China, Russia and their allies. This promises to be the final nail in Germany’s economic coffin.

Another byproduct of America’s New Cold War has been to end any international plan to stem global warming. A keystone of U.S. economic diplomacy is for its oil companies and those of its NATO allies to control the world’s oil and gas supply – that is, to reduce dependence on carbon-based fuels. That is what the NATO war in Iraq, Libya, Syria, Afghanistan and Ukraine was about. It is not as abstract as “Democracies vs. Autocracies.” It is about the U.S. ability to harm other countries by disrupting their access to energy and other basic needs.

Without the New Cold War’s “good vs. evil” narrative, U.S. sanctions will lose their raison d’etre in this U.S. attack on environmental protection, and on mutual trade between Western Europe and Russia and China. That is the context for today’s fight in Ukraine, which is to be merely the first step in the anticipated 20 year fight by the US to prevent the world from becoming multipolar. This process, will lock Germany and Europe into dependence on the U.S. supplies of LNG.

The trick is to try and convince Germany that it is dependent on the United States for its military security. What Germany really needs protection from is the U.S. war against China and Russia that is marginalizing and “Ukrainianizing” Europe.

There have been no calls by Western governments for a negotiated end to this war, because no war has been declared in Ukraine. The United States does not declare war anywhere, because that would require a Congressional declaration under the U.S. Constitution. So U.S. and NATO armies bomb, organize color revolutions, meddle in domestic politics (rendering the 1648 Westphalia agreements obsolete), and impose the sanctions that are tearing Germany and its European neighbors apart.

How can negotiations “end” a war that either has no declaration of war, and is a long-term strategy of total unipolar world domination?

The answer is that no ending can come until an alternative to the present U.S.-centered set of international institutions is replaced. That requires the creation of new institutions reflecting an alternative to the neoliberal bank-centered view that economies should be privatized with central planning by financial centers. Rosa Luxemburg characterized the choice as being between socialism and barbarism. I have sketched out the political dynamics of an alternative in my recent book, The Destiny of Civilization.

This paper was presented on November 1, 2022. on the German e-site
https://braveneweurope.com/michael-hudson-germanys-position-in-americas-new-world-order. A video of my talk will be available on YouTube in about ten days.

1. See Guntram Wolff, “Sholz should send an explicit message on his visit to Beijing,” Financial Times, October 31, 2022. Wolff is the director and CE of the German Council on Foreign Relations. ↑

Macron Insulted Africans’ Intelligence by Claiming That Multipolar Powers Manipulate Them

Global Research, August 29, 2022

By Andrew Korybko

Region: Europe, sub-Saharan Africa

Theme: Intelligence

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The shameless ethno-nationalist supremacy associated with his hateful remark will result in Africans doubling down on their anti-imperialist and Pan-Africanism activism since no self-respecting person would ever capitulate in the face of such blatantly racist pressure and thus voluntarily submit themselves to being dominated by their abuser.

French President Macron claimed during his latest trip to Algeria that “Many of the (information) networks that are covertly pushed (in Africa) – … by Turkey… by Russia… by China – have an enemy: France.” This was a supreme insult to all Africans’ intelligence since it channeled the discredited racist trope that they’re supposedly so stupid as to be easily manipulated by multipolar powers. Instead of acknowledging the genuinely grassroots and politically legitimate reasons why many Africans are actively rebelling against French influence in its self-proclaimed “sphere of influence” in so-called “Françafrique” like Turkiye’s Foreign Ministry suggested that he do, Macron chose to once again spew unsubstantiated smears similar in spirit to those malicious ones that it earlier made against Mali.

The reality is that the global systemic transition to multipolarity that unprecedentedly accelerated since the latest US-provoked phase of the Ukrainian Conflict has served to inspire the entire BRICS-led Global South to push back against the US-led West’s Golden Billion at this pivotal moment in the New Cold War between those two polar opposite models of socio-economic and political development. Moreover, many Africans felt emboldened to further intensify their efforts after President Putin unveiled his global revolutionary manifesto in late July that was followed shortly thereafter by Foreign Minister Lavrov pledging that Russia will help Africa fully complete its decolonization processes ahead of his successful trip to the continent.

Video: Freedom Convoy Solidarity in Alberta. Agreement with RCMP

“Africa’s Role In The New Cold War” is destined to be that of a major battleground between the Golden Billion and the Global South precisely because its people refuse to be subjugated any longer by the former after having ruthlessly been exploited by them for half a millennium. France, which is among the most powerful of the Golden Billion’s hegemons in Africa and even surpasses the US’ influence in some parts of the continent, isn’t even hiding its neo-colonial intentions anymore after Macron ripped off his mask and started insulting Africans’ intelligence in the extremely racist way that he just did. The so-called “battle for hearts and minds” has already been won by the Global South’s multipolar Great Powers like Russia and China, who are helping to liberate all African countries with no strings attached.

They’d never dare disrespect their partners, let alone in the crude way that Macron just did, especially because they themselves have been victimized by similar forms of verbal abuse. Africans are well aware not only of those two and others’ proud anti-colonial histories, but also of just how sincerely they respect all others in contrast to the behavior exemplified by Western leaders like the French one and his peers. Macron’s racist insult of all Africans’ intelligence isn’t just rude, but also suggests that the Golden Billion is done “playing nice” after having abandoned all pretenses of their faux “politeness” that they unconvincingly attempted to practice in the past. As Western “thought leaders” never tire of reminding everyone, “might makes right” in their eyes, hence why they’re now sowing chaos across Africa.

This isn’t speculation either but documented fact after Mali recently accused France of supporting those Al Qaeda-connected terrorists that declared war on its Russian partner in late June and then the joint US- and Egyptian-led but TPLF-driven Hybrid War of Terror on Ethiopia resumed shortly thereafter on the other side of the continent. In fact, that second-mentioned conflict that first went hot in November 2020 after years of multilateral planning can be seen in hindsight as the new template that the West and its regional vassals like Egypt are employing since it was hatched as punishment for Ethiopia’s principled neutrality in the New Cold War between the US-led West’s Golden Billion and the BRICS-led Global South. It therefore follows that similarly multipolar states like Mali and others will be punished too.

Macron made a major mistake though by letting his mask slip after spewing his racist innuendo about Africans supposedly lacking the intelligence to not be manipulated by foreign powers. The shameless ethno-nationalist supremacy associated with his hateful remark will result in Africans doubling down on their anti-imperialist and Pan-Africanism activism since no self-respecting person would ever capitulate in the face of such blatantly racist pressure and thus voluntarily submit themselves to being dominated by their abuser. Far from helping the Golden Billion’s hegemonic cause like his twisted mind imagined that his crude insult would supposedly do, the French leader’s public embrace of racist tropes against Africans will only serve to accelerate the decline of the US-led West’s hegemony over that continent.

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This article was originally published on OneWorld.

Andrew Korybko is an American Moscow-based political analyst specializing in the relationship between the US strategy in Afro-Eurasia, China’s One Belt One Road global vision of New Silk Road connectivity, and Hybrid Warfare. He is a frequent contributor to Global Research.

He is a regular contributor to Global Research.

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The original source of this article is Global Research

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American Diplomacy as a Tragic Drama

July 29, 2022

By Michael Hudson and posted with the author’s permission

As in a Greek tragedy whose protagonist brings about precisely the fate that he has sought to avoid, the US/NATO confrontation with Russia in Ukraine is achieving just the opposite of America’s aim of preventing China, Russia and their allies from acting independently of U.S. control over their trade and investment policy. Naming China as America’s main long-term adversary, the Biden Administration’s plan was to split Russia away from China and then cripple China’s own military and economic viability. But the effect of American diplomacy has been to drive Russia and China together, joining with Iran, India and other allies. For the first time since the Bandung Conference of Non-Aligned Nations in 1955, a critical mass is able to be mutually self-sufficient to start the process of achieving independence from Dollar Diplomacy.

Confronted with China’s industrial prosperity based on self-financed public investment in socialized markets, U.S. officials acknowledge that resolving this fight will take a number of decades to play out. Arming a proxy Ukrainian regime is merely an opening move in turning Cold War 2 (and potentially/or indeed World War III) into a fight to divide the world into allies and enemies with regard to whether governments or the financial sector will plan the world economy and society.

What is euphemized as U.S.-style democracy is a financial oligarchy privatizing basic infrastructure, health and education. The alternative is what President Biden calls autocracy, a hostile label for governments strong enough to block a global rent-seeking oligarchy from taking control. China is deemed autocratic for providing basic needs at subsidized prices instead of charging whatever the market can bear. Making its mixed economy lower-cost is called “market manipulation,” as if that is a bad thing that was not done by the United States, Germany and every other industrial nation during their economic takeoff in the 19^th and early 20^th century.

Clausewitz popularized the axiom that war is an extension of national interests – mainly economic. The United States views its economic interest to lie in seeking to spread its neoliberal ideology globally. The evangelistic aim is to financialize and privatize economies by shifting planning away from national governments to a cosmopolitan financial sector. There would be little need for politics in such a world. Economic planning would shift from political capitals to financial centers, from Washington to Wall Street, with satellites in the City of London, the Paris Bourse, Frankfurt and Tokyo. Board meetings for the new oligarchy would be held at Davos’s World Economic Forum. Hitherto public infrastructure services would be privatized and priced high enough to include profits (and indeed, monopoly rents), debt financing and management fees rather than being publicly subsidized. Debt service and rent would become the major overhead costs for families, industry and governments.

The U.S. drive to retain its unipolar power to impose “America First” financial, trade and military policies on the world involves an inherent hostility toward all countries seeking to follow their own national interests. Having less and less to offer in the form of mutual economic gains, U.S. policy makes threats of sanctions and covert meddling in foreign politics. The U.S. dream envisions a Chinese version of Boris Yeltsin replacing the nation’s Communist Party leadership and selling off its public domain to the highest bidder – presumably after a monetary crisis wipes out domestic purchasing power much as occurred in post-Soviet Russia, leaving the international financial community as buyers.

Russia and President Putin cannot be forgiven for having fought back against the Harvard Boys’ “reforms.” That is why U.S. officials planned how to create Russian economic disruption to (they hope) orchestrate a “color revolution” to recapture Russia for the world’s neoliberal camp. That is the character of the “democracy” and “free markets” being juxtaposed to the “autocracy” of state-subsidized growth. As Russian Foreign minister Sergey Lavrov explained in a press conference on July 20, 2022 regarding Ukraine’s violent coup in 2014, U.S. and other Western officials define military coups as democratic if they are sponsored by the United States in the hope of promoting neoliberal policies.

Do you remember how events developed after the coup? The putschists spat in the face of Germany, France and Poland that were the guarantors of the agreement with Viktor Yanukovych. It was trampled underfoot the next morning. These European countries didn’t make a peep – they reconciled themselves to this. A couple of years ago I asked the Germans and French what they thought about the coup. What was it all about if they didn’t demand that the putschists fulfil the agreements? They replied: “This is the cost of the democratic process.” I am not kidding. Amazing – these were adults holding the post of foreign ministers.^[1]

This Doublethink vocabulary reflects how far mainstream ideology has evolved from Rosa Luxemburg’s description a century ago of the civilizational choice being posed: barbarism or socialism.

The contradictory U.S. and European interests and burdens of the war in Ukraine

To return to Clausewitz’s view of war as an extension of national policy, U.S. national interests are diverging sharply from those of its NATO satellites. America’s military-industrial complex, oil and agriculture sectors are benefiting, while European industrial interests are suffering. That is especially the case in Germany and Italy as a result of their governments blocking North Stream 2 gas imports and other Russian raw materials.

The interruption of world energy, food and minerals supply chains and the resulting price inflation (providing an umbrella for monopoly rents by non-Russian suppliers) has imposed enormous economic strains on U.S. allies in Europe and the Global South. Yet the U.S. economy is benefiting from this, or at least specific sectors of the U.S. economy are benefiting. As Sergey Lavrov, pointed out in his above-cited press conference: “The European economy is impacted more than anything else. The stats show that 40 percent of the damage caused by sanctions is borne by the EU whereas the damage to the United States is less than 1 percent.” The dollar’s exchange rate has soared against the euro, which has plunged to parity with the dollar and looks set to fall further down toward the $0.80 that it was a generation ago. U.S. dominance over Europe is further strengthened by the trade sanctions against Russian oil and gas. The U.S. is an LNG exporter, U.S. companies control the world oil trade, and U.S. firms are the world’s major grain marketers and exporters now that Russia is excluded from many foreign markets.

A revival of European military spending – for offense, not defense

U.S. arms-makers are looking forward to making profits off arms sales to Western Europe, which has almost literally disarmed itself by sending its tanks and howitzers, ammunition and missiles to Ukraine. U.S. politicians support a bellicose foreign policy to promote arms factories that employ labor in their voting districts. And the neocons who dominate the State Department and CIA see the war as a means of asserting American dominance over the world economy, starting with its own NATO partners.

The problem with this view is that although America’s military-industrial, oil and agricultural monopolies are benefitting, the rest of the U.S. economy is being squeezed by the inflationary pressures resulting from boycotting Russian gas, grain and other raw-materials exports, and the enormous rise in the military budget will be used as an excuse to cut back social spending programs. That also is a problem for Eurozone members. They have promised NATO to raise their military spending to the stipulated 2 percent of their GDP, and the Americans are urging much higher levels to upgrade to the most recent array of weaponry. All but forgotten is the Peace Dividend that was promised in 1991 when the Soviet Union dissolved the Warsaw Pact alliance, expecting that NATO likewise would have little reason to exist.

Russia has no discernable economic interest in mounting a new occupation of Central Europe. That would offer no gain to Russia, as its leaders realized when they dissolved the old Soviet Union. In fact, no industrial country in today’s world can afford to field an infantry to occupy an enemy. All that NATO can do is bomb from a distance. It can destroy, but not occupy. The United States found that out in Serbia, Iraq, Libya, Syria and Afghanistan. And just as the assassination Archduke Ferdinand in Sarajevo (now Bosnia-Herzegovina) triggered World War I in 1914, NATO’s bombing of adjoining Serbia may be viewed as throwing down the gauntlet to turn Cold War 2 into a veritable World War III. That marked the point at which NATO became an offensive alliance, not a defensive one.

How does this reflect European interests? Why should Europe re-arm, if the only effect is to make it a target of retaliation in the event of further attacks on Russia? What does Europe have to gain in becoming a larger customer for America’s military-industrial complex? Diverting spending to rebuild an offensive army – that can never be used without triggering an atomic response that would wipe out Europe – will limit the social spending needed to cope with today’s Covid problems and economic recession.

The only lasting leverage a nation can offer in today’s world is trade and technology transfer. Europe has more of this to offer than the United States. Yet the only opposition to renewed military spending is coming from right-wing parties and the German Linke party. Europe’s Social Democratic, Socialist and Labour parties share American neoliberal ideology.

Sanctions against Russian gas makes coal “the fuel of the future”

The carbon footprint of bombing, arms manufacturing and military bases is strikingly absent from today’s discussion about global warming and the need to cut back on carbon emissions. The German party that calls itself Green is leading the campaign for sanctions against importing Russian oil and gas, which electric utilities are replacing with Polish coal and even German lignite. Coal is becoming the “fuel of the future.” Its price also is soaring in the United States, benefitting American coal companies.

In contrast to the Paris Club agreements to reduce carbon emissions, the United States has neither the political capability nor the intention to join the conservation effort. The Supreme Court recently ruled that the Executive Branch has no authority to issue nation-wide energy rules; only individual states can do that, unless Congress passes a national law to cut back on fossil fuels.

That seems unlikely in view of the fact that becoming head of a Democratic Senate and Congressional committee requires being a leader in raising campaign contributions for the party. Joe Manchin, a coal-company billionaire, leads all senators in campaign support from the oil and coal industries, enabling him to win his party’s auction for the Senate Energy and Natural Resources committee chairmanship and block any seriously restrictive environmental legislation.

Next to oil, agriculture is a major contributor to the U.S. balance of payments. Blocking Russian grain and fertilizer shipping threatens to create a Global South food crisis as well as a European crisis as gas is unavailable to make domestic fertilizer. Russia is the world’s largest exporter of grain and also of fertilizer, and its exports of these products have been exempted from NATO sanctions. But Russian shipping was blocked by Ukraine placing mines in the sea lanes through the Black Sea to close off access to Odessa’s harbor, hoping that the world would blame the world’s imminent grain and energy crisis on Russia instead of the US/NATO trade sanctions imposed on Russia.^[2] At his July 20, 2022 press conference Sergey Lavrov showed the hypocrisy of the public relations attempt to distort matters:

For many months, they told us that Russia was to blame for the food crisis because the sanctions don’t cover food and fertiliser. Therefore, Russia doesn’t need to find ways to avoid the sanctions and so it should trade because nobody stands in its way. It took us a lot of time to explain to them that, although food and fertiliser are not subject to sanctions, the first and second packages of Western restrictions affected freight costs, insurance premiums, permissions for Russian ships carrying these goods to dock at foreign ports and those for foreign ships taking on the same consignments at Russian harbours. They are openly lying to us that this is not true, and that it is up to Russia alone. This is foul play.

Black Sea grain transport has begun to resume, but NATO countries have blocked payments to Russia in dollars, euros or currencies of other countries in the U.S. orbit. Food-deficit countries that cannot afford to pay distress-level food prices face drastic shortages, which will be exacerbated when they are compelled to pay their foreign debts denominated in the appreciating U.S. dollar. The looming fuel and food crisis promises to drive a new wave of immigrants to Europe seeking survival. Europe already has been flooded with refugees from NATO’s bombing and backing of jihadist attacks on Libya and Near Eastern oil-producing countries. This year’s proxy war in Ukraine and imposition of anti-Russian sanctions is a perfect illustration of Henry Kissinger’s quip: “It may be dangerous to be America’s enemy, but to be America’s friend is fatal.”

Blowback from the US/NATO miscalculations

America’s international diplomacy aims to dictate financial, trade and military policies that will lock other countries into dollar debt and trade dependency by preventing them from developing alternatives. If this fails, America seeks to isolate the recalcitrants from the U.S.-centered Western sphere.

America’s foreign diplomacy no longer is based on offering mutual gain. Such could be claimed in the aftermath of World War II when the United States was in a position to offer loans, foreign-aid and military protection against occupation – as well as manufactures to rebuild war-torn economies – to governments in exchange for their accepting trade and monetary policies favorable to American exporters and investors. But today there is only the belligerent diplomacy of threatening to hurt nations whose socialist governments reject America’s neoliberal drive to privatize and sell off their natural resources and public infrastructure.

The first aim is to prevent Russia and China from helping each other. This is the old imperial divide-and-conquer strategy. Minimizing Russia’s ability to support China would pave the way for the United States and NATO Europe to impose new trade sanctions on China, and to send jihadists to its western Xinjiang Uighur region. The aim is to bleed Russia’s armaments inventory, kill enough of its soldiers, and create enough Russian shortages and suffering to not only weaken its ability to help China, but to spur its population to support a regime change, an American-sponsored “color revolution.” The dream is to promote a Yeltsin-like leader friendly to the neoliberal “therapy” that dismantled Russia’s economy in the 1990s.

Amazing as it may seem, U.S. strategists did not anticipate the obvious response by countries finding themselves together in the crosshairs of US/NATO military and economic threats. On July 19, 2022, the presidents of Russia and Iran met to announce their cooperation in the face of the sanctions war against them. That followed Russia’s earlier meeting with India’s Prime Minister Modi. In what has been characterized as “shooting itself in its own foot,” U.S. diplomacy is driving Russia, China, India and Iran together, and indeed to reach out to Argentina and other countries to join the BRICS-plus bank to protect themselves.

The U.S. itself is ending the Dollar Standard of international finance

The Trump Administration took a major step to drive countries out of the dollar orbit in November 2018, by confiscating nearly $2 billion of Venezuela’s official gold stock held in London. The Bank of England put these reserves at the disposal of Juan Guaidó, the marginal right-wing politician selected by the United States to replace Venezuela’s elected president as head of state. This was defined as being democratic, because the regime change promised to introduce the neoliberal “free market” that is deemed to be the essence of America’s definition of democracy for today’s world.

This gold theft actually was not the first such confiscation. On November 14, 1979, the Carter Administration paralyzed Iran’s bank deposits in New York after the Shah was overthrown. This act blocked Iran from paying its scheduled foreign debt service, forcing it into default. That was viewed as an exceptional one-time action as far as all other financial markets were concerned. But now that the United States is the self-proclaimed “exceptional nation,” such confiscations are becoming a new norm in U.S. diplomacy. Nobody yet knows what happened to Libya’s gold reserves that Muammar Gadafi had intended to be used to back an African alternative to the dollar. And Afghanistan’s gold and other reserves were simply taken by Washington as payment for the cost of “freeing” that country from Russian control by backing the Taliban. But when the Biden Administration and its NATO allies made a much larger asset grab of some $300 billion of Russia’s foreign bank reserves and currency holdings in March 2022, it made official a radical new epoch in Dollar Diplomacy. Any nation that follows policies not deemed to be in the interests of the U.S. Government runs the risk of U.S. authorities confiscating its holdings of foreign reserves in U.S. banks or securities.

This was a red flag leading countries to fear denominating their trade, savings and foreign debt in dollars, and to avoid using dollar or euro bank deposits and securities as a means of payment. By prompting other countries to think about how to free themselves from the U.S.-centered world trade and monetary system that was established in 1945 with the IMF, World Bank and subsequently the World Trade Organization, the U.S. confiscations have accelerated the end of the U.S. Treasury-bill standard that has governed world finance since the United States went off gold in 1971.^[3]

Since dollar convertibility into gold ended in August 1971, dollarization of the world’s trade and investment has created a need for other countries to hold most of their new international monetary reserves in U.S. Treasury securities and bank deposits. As already noted, that enables the United States to seize foreign bank deposits and bonds denominated in U.S. dollars.

Most important, the United States can create and spend dollar IOUs into the world economy at will, without limit. It doesn’t have to earn international spending power by running a trade surplus, as other countries have to do. The U.S. Treasury can simply print dollars electronically to finance its foreign military spending and purchases of foreign resources and companies. And being the “exceptional country,” it doesn’t have to pay these debts – which are recognized as being far too large to be paid. Foreign dollar holdings are free U.S. credit to the Unites States, not requiring repayment any more than the paper dollars in our wallets are expected to be paid off (by retiring them from circulation). What seems to be so self-destructive about America’s economic sanctions and confiscations of Russian and other foreign reserves is that they are accelerating the demise of this free ride.

Blowback resulting from US/NATO isolating their economic and monetary systems

It is hard to see how driving countries out of the U.S. economic orbit serves long-term U.S. national interests. Dividing the world into two monetary blocs will limit Dollar Diplomacy to its NATO allies and satellites.

The blowback now unfolding in the wake of U.S. diplomacy begins with its anti-Russia policy. Imposing trade and monetary sanctions was expected to block Russian consumers and businesses from buying the US/NATO imports to which they had become accustomed. Confiscating Russia’s foreign currency reserves was supposed to crash the ruble, “turning it into rubble,” as President Biden promised. Imposing sanctions against importing Russian oil and gas to Europe was supposed to deprive Russia of export earnings, causing the ruble to collapse and raising import prices (and hence, living costs) for the Russian public. Instead, blocking Russian exports has created a worldwide price inflation for oil and gas, sharply increasing Russian export earnings. It exported less gas but earned more – and with dollars and euros blocked, Russia demanded payment for its exports in rubles. Its exchange rate soared instead of collapsing, enabling Russia to reduce its interest rates.

Goading Russia to send its soldiers to eastern Ukraine to defend Russian speakers under attack in Luhansk and Donetsk, along with the expected impact of the ensuing Western sanctions, was supposed to make Russian voters press for regime change. But as almost always happens when a country or ethnicity is attacked, Russians were appalled at the Ukrainian hatred of Russian-language speakers and Russian culture, and at the Russophobia of the West. The effect of Western countries banning music by Russian composers and Russian novels from libraries – capped by England banning Russian tennis players from the Wimbledon tournament – was to make Russians feel under attack simply for being Russian. They rallied around President Putin.

NATO’s trade sanctions have catalyzed helped Russian agriculture and industry to become more self-sufficient by obliging Russia to invest in import substitution. One well-publicized farming success was to develop its own cheese production to replace that of Lithuania and other European suppliers. Its automotive and other industrial production is being forced to shift away from German and other European brands to its own and Chinese producers. The result is a loss of markets for Western exporters.

In the field of financial services, NATO’s exclusion of Russia from the SWIFT bank-clearing system failed to create the anticipated payments chaos. The threat had been so loudly for so long that Russia and China had plenty of time to develop their own payments system. This provided them with one of the preconditions for their plans to split their economies away from those of the US/NATO West.

As matters have turned out, the trade and monetary sanctions against Russia are imposing the heaviest costs on Western Europe, and are likely to spread to the Global South, driving them to think about whether their economic interests lie in joining U.S. confrontational Dollar Diplomacy. The disruption is being felt most seriously in Germany, causing many companies to close down as a result of gas and other raw-materials shortages. Germany’s refusal to authorize the North Stream 2 pipeline has pushed its energy crisis to a head. This has raised the question of how long Germany’s political parties can remain subordinate to NATO’s Cold War policies at the cost of German industry and households facing sharp rises in heating and electricity costs.

The longer it takes to restore trade with Russia, the more European economies will suffer, along with the citizenry at large, and the further the euro’s exchange rate will fall, spurring inflation throughout its member countries. European NATO countries are losing not only their export markets but their investment opportunities to gain from the much more rapid growth of Eurasian countries whose government planning and resistance to financialization has proved much more productive than the US/NATO neoliberal model.

It is difficult to see how any diplomatic strategy can do more than play for time. That involves living in the short run, not the long run. Time seems to be on the side of Russia, China and the trade and investment alliances that they are negotiating to replace the neoliberal Western economic order.

America’s ultimate problem is its neoliberal post-industrial economy

The failure and blowbacks of U.S. diplomacy are the result of problems that go beyond diplomacy itself. The underlying problem is the West’s commitment to neoliberalism, financialization and privatization. Instead of government subsidy of basic living costs needed by labor, all social life is being made part of “the market” – a uniquely Thatcherite deregulated “Chicago Boys” market in which industry, agriculture, housing and financing are deregulated and increasingly predatory, while heavily subsidizing the valuation of financial and rent-seeking assets – mainly the wealth of the richest One Percent. Income is obtained increasingly by financial and monopoly rent-seeking, and fortunes are made by debt-leveraged “capital” gains for stocks, bonds and real estate.

U.S. industrial companies have aimed more at “creating wealth” by increasing the price of their stocks by using over 90 percent of their profits for stock buybacks and dividend payouts instead of investing in new production facilities and hiring more labor. The result of slower capital investment is to dismantle and financially cannibalize corporate industry in order to produce financial gains. And to the extent that companies do employ labor and set up new production, it is done abroad where labor is cheaper.

Most Asian labor can afford to work for lower wages because it has much lower housing costs and does not have to pay education debt. Health care is a public right, not a financialized market transaction, and pensions are not paid for in advance by wage-earners and employers but are public. The aim in China in particular is to prevent the rentier Finance, Insurance and Real Estate (FIRE) sector from becoming a burdensome overhead whose economic interests differ from those of a socialist government.

China treats money and banking as a public utility, to be created, spent and lent for purposes that help increase productivity and living standards (and increasingly to preserve the environment). It rejects the U.S.-sponsored neoliberal model imposed by the IMF, World Bank and World Trade Organization.

The global economic fracturing goes far beyond NATO’s conflict with Russia in Ukraine. By the time the Biden administration took office at the start of 2021, Russia and China already had been discussing the need to de-dollarize their foreign trade and investment, using their own currencies.^[4] That involves the quantum leap of organizing a new payments-clearing institution. Planning had not progressed beyond broad outlines of how such a system would work, but the U.S. confiscation of Russia’s foreign reserves made such planning urgent, starting with a BRICS-plus bank. A Eurasian alternative to the IMF will remove its ability to impose neoliberal austerity “conditionalities” to force countries to lower payments to labor and give priority to paying their foreign creditors above feeding themselves and developing their own economies. Instead of new international credit being extended mainly to pay dollar debts, it will be part of a process of new mutual investment in basic infrastructure designed to accelerate economic growth and living standards. Other institutions are being designed as China, Russia, Iran, India and their prospective allies represent a large enough critical mass to “go it alone,” based on their own mineral wealth and manufacturing power.

The basic U.S. policy has been to threaten to destabilize countries and perhaps bomb them until they agree to adopt neoliberal policies and privatize their public domain. But taking on Russia, China and Iran is a much higher order of magnitude. NATO has disarmed itself of the ability to wage conventional warfare by handing over its supply of weaponry – admittedly largely outdated – to be devoured in Ukraine. In any case, no democracy in today’s world can impose a military draft to wage a conventional land warfare against a significant/major adversary. The protests against the Vietnam War in the late 1960s ended the U.S. military draft, and the only way to really conquer a country is to occupy it in land warfare. This logic also implies that Russia is no more in a position to invade Western Europe than NATO countries are to send conscripts to fight Russia.

That leaves Western democracies with the ability to fight only one kind of war: atomic war – or at least, bombing at a distance, as was done in Afghanistan and the Near East, without requiring Western manpower. This is not diplomacy at all. It is merely acting the role of wrecker. But that is the only tactic that remains available to the United States and NATO Europe. It is strikingly like the dynamic of Greek tragedy, where power leads to hubris that is injurious to others and therefore ultimately anti-social – and self-destructive in the end.

How then can the United States maintain its world dominance? It has deindustrialized and run up foreign official debt far beyond any foreseeable way to be paid. Meanwhile, its banks and bondholders are demanding that the Global South and other countries pay foreign dollar bondholders in the face of their own trade crisis resulting from the soaring energy and food prices caused by America’s anti-Russian and anti-China belligerence. This double standard is a basic internal contradiction that goes to the core of today’s neoliberal Western worldview.

I have described the possible scenarios to resolve this conflict in my recent book The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism. It has now also been issued in e-book form by Counterpunch Books.

1. “Foreign Minister Sergey Lavrov’s interview with RT television, Sputnik agency and Rossiya Segodnya International Information Agency, Moscow, July 20, 2022,” Russian Foreign Affairs Ministry, July 20, 2022. https://mid.ru/en/foreign_policy/news/1822901/. From Johnson’s Russia List, July 21, 2022, #5. ↑
2. International Maritime Organization, “Maritime Security and Safety in the Black Sea and Sea of Azov,” https://www.imo.org/en/MediaCentre/HotTopics/Pages/MaritimeSecurityandSafetyintheBlackSeaandSeaofAzov.aspx. See Yves Smith, Some Implications of the UN’s Ukraine Grain and Russia Fertilizer/Food Agreements,” Naked Capitalism, July 25, 2022, and Lavrov’s July 24 speech to the Arab League. ↑
3. My Super Imperialism: The Economic Strategy of American Empire (3^rd ed., 2021) describes how the Treasury-bill standard has provided America with a free ride and enabled it to run balance-of-payments deficits without constraint, including the costs of its overseas military spending. ↑
4. Radhika Desai and Michael Hudson (2021), “Beyond Dollar Creditocracy: A Geopolitical Economy,” Valdai Club Paper No. 116. Moscow: Valdai Club, 7 July, reprinted in Real World Economic Review (97), https://rwer.wordpress.com/2021/09/23. ↑

The Fed’s Austerity Program to Reduce Wages

June 21, 2022

By Michael Hudson and posted with the author’s permission

Preface:

The Federal Reserve Board’s ostensible policy aim is to manage the money supply and bank credit in a way that maintains price stability. That usually means fighting inflation, which is blamed entirely on “too much employment,” euphemized as “too much money.”[1] In Congress’s more progressive days, the Fed was charged with a second objective: to promote full employment. The problem is that full employment is supposed to be inflationary – and the way to fight inflation is to reduce employment, which is viewed simplistically as being determined by the supply of credit.

So in practice, one of the Fed’s two directives has to give. And hardly by surprise, the “full employment” aim is thrown overboard – if indeed it ever was taken seriously by the Fed’s managers. In the Carter Administration (1777-80) leading up to the great price inflation of 1980, Fed Chairman Paul Volcker expressed his economic philosophy in a note card that he kept in his pocket, to whip out and demonstrate where his priority lay. The card charted the weekly wage of the average U.S. construction worker.

Chairman Volcker wanted wages to go down, blaming the inflation on too much employment – meaning too full. He pushed the U.S. bank rate to an unprecedented 20 percent – the highest normal rate since Babylonian times back in the first millennium BC. This did indeed crash the economy, and with it employment and prosperity. Volcker called this “harsh monetary medicine,” as if the crash of financial markets and economic growth showed that his “cure” for inflation was working.

Apart from employment and wage levels, another victim of Volcker’s interest-rate hike was the Democratic Party’s fortunes in the 1980 presidential election. They lost the White House for twelve years. The party thus is taking great courage – or simply being ignorant – by entering on this autumn’s midterm election by emulating Mr. Volcker’s attempt to drive down wage levels by financial tightening, which already has crashed the stock market by 20 percent.

President Biden has thoroughly backed up Republican-appointed Federal Reserve Chairman Jerome Powell in endorsing a financial crash in hope that it will roll back U.S. wage levels. That is the policy of the Democratic Party’s donor class and hence political constituency.

……………

To Wall Street and its neoliberal policy backers … the solution to any price inflation is to reduce wages and public social spending. The orthodox way to do this is to push the economy into recession in order to reduce hiring. Rising unemployment will oblige labor to compete for jobs that pay less and less as the economy slows.

This class-war doctrine is the prime directive of neoliberal economics. It is a feature of the tunnel vision of corporate managers and the One Percent. The Federal Reserve and IMF are are the operating arms for impoverishing the masses. Along with Janet Yellen at the Treasury, public discussion of today’s U.S. inflation is framed in a way that avoids blaming the 8.2 percent rise in consumer prices on the Biden Administration’s New Cold War sanctions on Russian oil, gas and agriculture, or on oil companies and other sectors using these sanctions as an excuse to charge monopoly prices as if America has not continued to buy Russian diesel oil, as if fracking has not picked up and as if corn is not being turned into biofuel. There has been no disruption in supply. We are simply dealing with monopoly rent by the oil companies using the anti-Russian sanctions as an excuse that an oil shortage will soon develop for the United States and indeed for the entire world economy.

Covid’s shutdown of the U.S. and foreign economies and foreign trade also is not acknowledged as disrupting supply lines and raising shipping costs and hence import prices. The entire blame for inflation is placed on wage earners, and the response is to make them the victims of the coming austerity, as if their wages are responsible for bidding up oil prices, food prices and other prices resulting from the crisis. The reality is that they are too debt-strapped to be spendthrifts.

The Fed’s Junk Economics of What Bank Credit Is Spent On

The pretense behind the Fed’s recent increase in its discount rate by 0.75 percent on June 15 (to a paltry range of 1.50% to 1.75%) is that raising interest rates will cure inflation by deterring borrowing to spend on the basic needs that make up the Consumer Price Index and its related GDP deflator. But banks do not finance much consumption, except for credit card debt, which in the United States is now less than student loans and automobile loans.

Banks lend almost entirely to buy real estate, stocks and bonds, not goods and services. Some 80 percent of bank loans are real estate mortgages, and most of the remainder are loans collateralized by stocks and bonds. So raising interest rates will not lead wage-earners to borrow less to buy consumer goods. The main price effect of less bank credit and higher interest rates is on asset prices – deterring borrowing to buy homes, and arbitragers and corporate raiders from buying stocks and bonds. So the main price effect of less bank credit and higher interest rates is to reduce stock and bond prices and demand for home mortgages.

Rolling Back Middle-Class Home Ownership

The most immediate effect of the Federal Reserve’s credit tightening will be to reduce America’s home-ownership rate. This rate has been falling since 2008, from nearly 68 percent to just 61 percent today. The decline got underway with President Obama’s eviction of nearly ten million victims of junk mortgages, mainly black and Hispanic debtors. That was the Democratic Party’s alternative to writing down fraudulent mortgage loans to realistic market prices, and reducing their carrying charges to bring them in line with market rental values. The indebted victims of this massive bank fraud were made to suffer, so that Obama’s Wall Street sponsors could keep their predatory gains and indeed, receive massive bailouts. The costs of their fraud fell on bank customers, not on the banks and their stockholders and bondholders.

The effect of discouraging new home buyers by raising interest rates is to lower home ownership – the badge of being middle-class. The Fed’s policy of raising interest rates will greatly increase the interest charges that prospective new home buyers will have to pay, pricing the carrying charge out of reach for many families. The United States is turning into a landlord economy.

As the United States has become more debt-ridden, more than 50 percent of the value of U.S. real estate already is held by mortgage bankers. That means that homeowners are left with only a minority share in the value of their homes; most is owed to their banks. The remaining homeowners’ equity – what they own net of their mortgage debt – has fallen even faster than home ownership rates have declined.

Real estate is being transferred from “poor” hands to those of wealthy landlord corporations. Private capital companies – the funds of the One Percent – are going to pick up the pieces from the coming wave of foreclosures to turn homes into rental properties. Higher interest rates will not affect their cost of buying this housing, because they buy for all cash to make profits (actually, real estate rents) as landlords. Within another decade the nation’s home ownership rate may fall toward 50 percent (and homeowners’ equity even lower), turning the United States into a landlord economy instead of the promised middle-class home ownership economy.

The Coming Economic Austerity (Indeed, Debt-Burdened Depression) 

While home ownership rates have plunged for the population at large, the Fed’s “Quantitative Easing” has increased its subsidy of Wall Street’s financial securities from $800 billion to $9 trillion – of which the largest gain has been in packaged home mortgages. This has kept housing prices from falling and becoming more affordable for home buyers. But the Fed’s support of asset prices has saved many insolvent banks – the very largest ones – from going under. Sheila Bair of the FDIC singled out Citigroup, along with Countrywide, Bank of America and the other usual suspects. The working population is not considered to be too big to fail. Its political weight is small by comparison to that of Wall Street banks and other FIRE-sector beneficiaries.

Lowering the discount rate to only about 0.1 percent enabled the banking system to make a bonanza of gains by making mortgage loans at around 3.50 percent. The banks kept credit-card rates high – and made even more money on penalty fees for late payment than they “earned” on interest charges (in the range of 18 percent). And despite the stock market’s plunge of over 20 percent from nearly 36,000 to under 30,000 on June 17, America’s wealthiest One Percent, and indeed the top 10 Percent, have vastly increased their wealth in stocks, while the bond market has had the largest boom in history. But most Americans have not benefitted from this runup in asset prices, because most stocks and bonds are owned by only the wealthiest layer of the population. The Fed is all in favor of asset-price inflation. But For most American families, corporations and government at all levels, the financial boom since 2008 has entailed a growing debt burden. Many families face insolvency as Federal Reserve policy aims to create unemployment. Now that the Covid moratorium on the evictions of renters behind in their payments is expiring, the ranks of the homeless are rising.

The Biden Administration is trying to blame today’s inflation and related distortions on Putin, even using the term “Putin inflation.” The mainstream media follow suit in not explaining to their audience that Western sanctions blocking Russian energy and food exports will cause a food and energy crisis for many countries this summer and autumn. And indeed, beyond: Biden’s military and State Department officers warn that the fight against Russia is just the first step in their war against China’s non-neoliberal economy, and may last twenty years.

That portends a long depression. But as Madeline Albright would say, they think that the price is “worth it.” As seen by the Biden regime, the New Cold War is a fight between the “democratic” United States, with its privatized economic planning in the hands of the financial class, and “autocratic” China and Russia, where banking and money creation are treated as a public utility to finance tangible economic growth instead of serving the financialization of the economy.

There is no evidence that America’s neoliberal-neoconservative New Cold War can restore the nation’s former industrial and related economic power. The economy cannot recover as long as today’s debt overhead is left in place. Debt service, housing costs, privatized medical care, student debt and a decaying infrastructure have made the U.S. economy uncompetitive. There is no way to restore its economic viability without fundamental changes in economic policy. But there is little “reality economics” at hand to provide an alternative to the class war inherent in neoliberalism’s belief that the economy and living standards can prosper by purely financial means, by debt leveraging and corporate monopoly rent extraction while the United States has made its domestic manufacturing uncompetitive – seemingly irreversibly. To reduce their labor costs, U.S. corporations moved manufacturing offshore, thereby depriving the American work force of high value-added, high productivity jobs.

The Rentier Class Has Sought to Make America’s Neoliberal Privatization and Financialization Irreversible

It has succeeded to such a degree that there is no party or economic constituency promoting the policies needed for an industrial recovery. Yet the Democratic Party leadership, subjecting the economy to an IMF-style austerity plan, will make this November’s midterm elections unique. For the past half century, the Fed’s role has been to provide easy money for the economy, to give the ruling party at least the illusion of trickle-down prosperity to deter voters from electing the opposition party. But this time the Biden Administration is running on a program of financial austerity.

The Party’s identity politics address almost every identity except that of wage-earners and debtors. Advocating lower wages, more expensive financial charges for home mortgages and credit-card loans, and broken promises for student-debt writedowns does not look like a platform that can attract many voters, especially as the administration pours money into Ukraine. Republicans such as Tucker Carlson are appealing to the “deplorables” majority that the Democrats have left behind.

Addendum: Yves Smith of Naked Capitalism reminds me that: “Paul Volcker made it explicit that the Fed is in the business of crushing labor. As reported by William Greider in Secrets of the Temple, when Volcker was driving interest rates to the moon, he kept a note card in his pocket. It was a record of weekly average construction wages. Volcker wanted them to go down as proof his harsh medicine was working.”

M.K. Bhadrakumar, “West at inflection point in Ukraine war,” Indian Punchline, June 19, 2022

West at inflection point in Ukraine war

“Fundamentally, the Western economies are facing a systemic crisis. The complacency that the reserve-currency-based US economy is impervious to ballooning debt; that the petrodollar system compels the entire world to purchase dollars to finance their needs; that the flood of cheap Chinese consumer goods and cheap energy from Russia and Gulf States would keep inflation at bay; that interest rate hikes will cure structural inflation; and, above all, that the consequences of taking a trade-war hammer to a complex network system in the world economy can be managed — these notions stand exposed.”

Will the Global South break free from dollarized debt?

In his latest book, economist Michael Hudson pits socialism against finance capitalism and tears apart the ‘dream civilization’ imposed by the 1 percent.

June 09, 2022

By Pepe Escobar

Let’s jump straight into the fray. Hudson begins with an analysis of the “take the money and run” ethos, complete with de-industrialization, as 90 percent of US corporate revenue is “used to share buybacks and dividend payouts to support company stock prices.”

Michael Hudson’s new book on the world’s urgent global economic re-set is sure to ruffle some Atlanticist feathers.Photo Credit: The Cradle

With The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism, Michael Hudson, one of the world’s leading independent economists, has given us arguably the ultimate handbook on where we’re at, who’s in charge, and whether we can bypass them.

That represents the apex of “Finance Capitalism’s” political strategy: to “capture the public sector and shift monetary and banking power” to Wall Street, the City of London and other western financial centers.

The whole Global South will easily recognize the imperial modus operandi: “The strategy of US military and financial imperialism is to install client oligarchies and dictatorships, and arm-twist allies to join the fight against designated adversaries by subsidizing not only the empire’s costs of war-making (“defense”) but even the imperial nation’s domestic spending programs.” This is the antithesis of the multipolar world advocated by Russia and China.

In short, our current Cold War 2.0 “is basically being waged by US-centered finance capitalism backing rentier oligarchies against nations seeking to build up more widespread self-reliance and domestic prosperity.”

Hudson presciently reminds us of Aristotle, who would say that it is in the interest of financiers to wield their power against society at large: “The financial class historically has been the major beneficiary of empires by acting as collection agents.”

So inevitably the major imperial leverage over the world, a true “strategy of underdevelopment,” had to be financial: instrumentalizing IMF pressure to “turn public infrastructure into privatized monopolies, and reversing 20th century pro-labor reforms” via those notorious ‘conditionalities’ for loans.

No wonder the Non-Aligned Movement (NAM), established in Belgrade in 1961 with 120 nations and 27 observers, became such a threat to US global strategy. The latter predictably fought back with a slew of ethnic wars and the earliest incarnations of color revolution – fabricating dictatorships on an industrial scale, from Suharto to Pinochet.

The culmination was a cataclysmic Houston get-together in December 19, 1990 “celebrating” the dissolution of the USSR, as Hudson reminds us how the IMF and the World Bank “laid out a blueprint for Russia’s leaders to impose austerity and give away its assets – it didn’t matter to whom – in a wave of ‘shock therapy’ to let the alleged magic of free enterprise create a neoliberal free-for-all.”

Lost in a Roman wilderness of debt

To a large extent, nostalgia for the rape-and-pillaging of 1990s-era Russia fuels what Hudson defines as the New Cold War, where Dollar Diplomacy must assert its control over every foreign economy. The New Cold War is not waged only against Russia and China, “but against any countries resisting privatization and financialization under US sponsorship.”

Hudson reminds us how China’s policy “followed almost the same path that American protectionism did from 1865 though 1914 – state subsidy for industry, heavy public-sector capital investment…and social spending on education and health care to upgrade the quality and productivity of labor. This was not called Marxism in the United States; it was simply the logical way to look at industrialization, as part of a broad economic and social system.”

But then, finance – or casino – capitalism gained steam, and left the US economy mainly with “agribusiness farm surpluses, and monopolies in information technology (largely developed as a by-product of military research), military hardware, and pharmaceutical patents (based on public seed-money to fund research) able to extract monopoly rent while making themselves largely tax-exempt by using offshore banking centers.”

That’s the current State of Empire: relying only “on its rentier class and Dollar Diplomacy,” with prosperity concentrated in the top one percent of establishment elites. The inevitable corollary is US diplomacy imposing illegal, unilateral sanctions on Russia, China and anyone else who defies its diktats.

The US economy is indeed a lame post-modern remake of the late Roman empire: “dependent on foreign tribute for its survival in today’s global rentier economy.” Enter the correlation between a dwindling free lunch and utter fear: “That is why the United States has surrounded Eurasia with 750 military bases.”

Delightfully, Hudson goes back to Lactantius, in the late 3rd century, describing the Roman empire on Divine Institutes, to stress the parallels with the American version:

“In order to enslave the many, the greedy began to appropriate and accumulate the necessities of life and keep them tightly closed up, so that they might keep these bounties for themselves. They did this not for humanity’s sake (which was not in them at all), but to rake up all things as products of their greed and avarice. In the name of justice they made unfair and unjust laws to sanction their thefts and avarice against the power of the multitude. In this way they availed as much by authority as by strength of arms or overt evil.”

Socialism or barbarism

Hudson succinctly frames the central issue facing the world today: whether “money and credit, land, natural resources and monopolies will be privatized and concentrated in the hands of a rentier oligarchy or used to promote general prosperity and growth. This is basically a conflict between finance capitalism vs. socialism as economic systems.”

To advance the struggle, Hudson proposes a counter-rentier program which should be the Global South’s ultimate Blueprint for responsible development: public ownership of natural monopolies; key basic infrastructure in public hands; national self-sufficiency – crucially, in money and credit creation; consumer and labor protection; capital controls – to prevent borrowing or denominating debts in foreign currency; taxes on unearned income such as economic rent; progressive taxation; a land tax (“will prevent land’s rising rental value from being pledged to banks for credit to bid up real estate prices”); use of the economic surplus for tangible capital investment; and national self-sufficiency in food.

As Hudson seems to have covered all the bases, at the end of the book I was left with only one overarching question. I asked him how he analyzed the current discussions between the Eurasia Economic Union (EAEU) and the Chinese – and between Russia and China, further on down the road – as being able to deliver an alternative financial/monetary system. Can they sell the alternative system to most of the planet, all while dodging imperial financial harassment?

Hudson was gracious enough to reply with what could be regarded as the summary of a whole book chapter: “To be successful, any reform has to be system-wide, not merely a single part. Today’s western economies have become financialized, leaving credit creation in private hands – to be used to make financial gains at the expense of the industrial economy… This aim has spread like leprosy throughout entire economies – their trade patterns (dependency on US agricultural and oil exports, and IT technology), labor relations (anti-unionism and austerity), land tenure (foreign-owned plantation agriculture instead of domestic self-reliance and self-sufficiency in food grains), and economic theory itself (treating finance as part of GDP, not as an overhead siphoning off income from labor and industry alike).”

Hudson cautions that “in order to break free of the dynamic of predatory finance-capitalism sponsored by the United States and its satellites, foreign countries need to be self-sufficient in food production, energy, technology and other basic needs. This requires an alternative to US ‘free trade’ and its even more nationalistic ‘fair trade’ (deeming any foreign competition to US-owned industry ‘unfair’). That requires an alternative to the IMF, World Bank and ITO (from which Russia has just withdrawn). And alas, an alternative also requires military coordination such as the SCO [the Shanghai Cooperation Organization] to defend against the militarization of US-centered finance capitalism.”

Hudson does see some sunlight ahead: “As to your question of whether Russia and China can ‘sell’ this vision of the future to the Global South and Eurasian countries, that should become much easier by the end of this summer. A major byproduct (not unintended) of the NATO war in Ukraine is to sharply raise energy and food prices (and shipping prices). This will throw the balance of payments of many Global South and other countries into sharp deficit, creating a crisis as their dollar-denominated debt to bondholders and banks falls due.”

The key challenge for most of the Global South is to avoid default:

“The US raise in interest rates has increased the dollar’s exchange rate not only against the euro and Japanese yen, but against the Global South and other countries. This means that much more of their income and export revenue must be paid to service their foreign debt – and they can avoid default only by going without food and oil. So what will they choose? The IMF may offer to create SDRs to enable them to pay – by running even further into dollarized debt, subject to IMF austerity plans and demands that they sell off even more of their natural resources, forests and water.”

So how to break free from dollarized debt? “They need a critical mass. That was not available in the 1970s when a New International Economic Order was first discussed. But today it is becoming a viable alternative, thanks to the power of China, the resources of Russia and those of allied countries such as Iran, India and other East Asian and Central Asian countries. So I suspect that a new world economic system is emerging. If it succeeds, the last century – since the end of World War I and the mess it left – will seem like a long detour of history, now returning to what seemed to be the basic social ideals of classical economics – a market free from rent-seeking landlords, monopolies and predatory finance.”

Hudson concludes by reiterating what the New Cold War is really all about:

“In short, it is a conflict between two different social systems, each with their own philosophy of how societies work. Will they be planned by neoliberal financial centers centered in New York, supported by Washington’s neo-cons, or will they be the kind of socialism that the late 19th century and early 20th century envisioned – a ‘market’ and, indeed, society free from rentiers? Will natural monopolies such as land and natural resources be socialized and used to finance domestic growth and housing, or left to financial interests to turn rent into interest payments eating into consumer and business income? And most of all, will governments create their own money and steer banking to promote domestic prosperity, or will they let private banks (whose financial interests are represented by central banks) take control away from national treasuries?”

The views expressed in this article do not necessarily reflect those of The Cradle.

Is US/NATO (with WEF help) pushing for a Global South famine?

June 06, 2022

By Michael Hudson and posted with the author’s permission

Is the proxy war in Ukraine turning out to be only a lead-up to something larger, involving world famine and a foreign-exchange crisis for food- and oil-deficit countries?

Many more people are likely to die of famine and economic disruption than on the Ukrainian battlefield. It thus is appropriate to ask whether what appeared to be the Ukraine proxy war is part of a larger strategy to lock in U.S. control over international trade and payments. We are seeing a financially weaponized power grab by the U.S. Dollar Area over the Global South as well as over Western Europe. Without dollar credit from the United States and its IMF subsidiary, how can countries stay afloat? How hard will the U.S. act to block them from de-dollarizing, opting out of the U.S. economic orbit?

U.S. Cold War strategy is not alone in thinking how to benefit from provoking a famine, oil and balance-of-payments crisis. Klaus Schwab’s World Economic Forum worries that the world is overpopulated – at least with the “wrong kind” of people. As Microsoft philanthropist (the customary euphemism for rentier monopolist) Bill Gates has explained: “Population growth in Africa is a challenge.” His lobbying foundation’s 2018 “Goalkeepers” report warned: “According to U.N. data, Africa is expected to account for more than half of the world’s population growth between 2015 and 2050. Its population is projected to double by 2050,” with “more than 40 percent of world’s extremely poor people … in just two countries: Democratic Republic of the Congo and Nigeria.”^[1]

Gates advocates cutting this projected population increase by 30 percent by improving access to birth control and expanding education to “enable more girls and women to stay in school longer, have children later.” But how can that be afforded with this summer’s looming food and oil squeeze on government budgets?

South Americans and some Asian countries are subject to the same jump in import prices resulting from NATO’s demands to isolate Russia. JPMorgan Chase head Jamie Dimon recently warned attendees at a Wall Street investor conference that the sanctions will cause a global “economic hurricane.”^[2] He echoed the warning by IMF Managing Director Kristalina Georgieva in April that, “To put it simply: we are facing a crisis on top of a crisis.” Pointing out that the Covid pandemic has been capped by inflation as the war in Ukraine has made matters “much worse, and threatens to further increase inequality” she concluded that: “The economic consequences from the war spread fast and far, to neighbors and beyond, hitting hardest the world’s most vulnerable people. Hundreds of millions of families were already struggling with lower incomes and higher energy and food prices.”^[3]

The Biden administration blames Russia for “unprovoked aggression.” But it is his administration’s pressure on NATO and other Dollar Area satellites that has blocked Russian exports of grain, oil and gas. But many oil- and food-deficit countries see themselves as the primary victims of “collateral damage” caused by US/NATO pressure.

Is world famine and balance-of-payments crisis a deliberate US/NATO policy?

On June 3, African Union Chairperson Macky Sall, President of Senegal, went to Moscow to plan how to avoid a disruption in Africa’s food and oil trade by refusing to become pawns in the US/NATO sanctions. So far in 2022, President Putin noted: “Our trade is growing. In the first months of this year it grew by 34 percent.”^[4] But Senegal’s President Sall worried that: “Anti-Russia sanctions have made this situation worse and now we do not have access to grain from Russia, primarily to wheat. And, most importantly, we do not have access to fertilizer.”

U.S. diplomats are forcing countries to choose whether, in George W. Bush’s words, “you are either for us or against us.” The litmus test is whether they are willing to force their populations to starve and shut down their economies for lack of food and oil by stopping trade with the world’s Eurasian core of China, Russia, India, Iran and their neighbors.

Mainstream Western media describe the logic behind these sanctions as promoting a regime change in Russia. The hope was that blocking it from selling its oil and gas, food or other exports would drive down the ruble’s exchange rate and “make Russia scream” (as the U.S. tried to do to Allende’s Chile to set the stage for is backing of the Pinochet military coup). Exclusion from the SWIFT bank-clearing system was supposed to disrupt Russia’s payment system and sales, while seizing Russia’s $300 billion om foreign-currency reserves held in the West was expected to collapse the ruble, preventing Russian consumers from buying the Western goods to which they had become accustomed. The idea (and it seems so silly in retrospect) was that Russia’s population would rise in rebellion to protest against how much more Western luxury imports cost. But the ruble soared rather than sunk, and Russia quickly replaced SWIFT with its own system linked to that of China. And Russia’s population began to turn away from the West’s aggressive enmity.

Evidently some major dimensions are missing from the U.S. national-security think-tank models. But when it comes to global famine, was a more covert and even lager strategy at work? It is now looking like the major aim of the U.S. war in Ukraine all along was merely to serve as a catalyst, an excuse to impose sanctions that would disrupt the world’s food and energy trade, and to manage this crisis in a way that would afford U.S. diplomats an opportunity to confront Global South countries with the choice “Your loyalty and neoliberal dependency or your life – and, in the process, to “thin out” the world’s non-white populations that so worried Mr. Dimon and the WEF?

There must have been the following calculation: Russia accounts for 40% of the world’s grain trade and 25 percent of the world fertilizer market (45 percent if Belarus is included). Any scenario would have included a calculation that if so large a volume of grain and fertilizer was withdrawn from the market, prices would soar, just as they have done for oil and gas.

Adding to the disruption in the balance-of-payments of countries having to import these commodities, the price is rising for buying dollars to pay their foreign bondholders and banks for debts falling due. The Federal Reserve’s tightening of interest rates has caused a rising premium for U.S. dollars over euros, sterling and Global South currencies.

It is inconceivable that the consequences of this on countries outside of Europe and the United States were not taken into account, because the global economy is an interconnected system. Most disruptions are in the 2 to 5 percent range, but today’s US/NATO sanctions are so far off the historical track that price increases will soar substantially above the historic range. Nothing like this has happened in recent times.

This suggests that what appeared in February to be a war between Ukrainians and Russia is really a trigger intended to restructure the world economy – and to do so in a way to lock U.S. control over the Global South. Geopolitically, the proxy war in Ukraine has been a handy excuse for America’s to counter China’s Belt and Road Initiative (BRI).

The choice confronting Global South countries: to starve by paying their foreign bondholders and bankers, or to announce, as a basic principle of international law: “As sovereign countries, we put our survival above the aim of enriching foreign creditors who have made loans that have gone bad as a result of their choice to wage a new Cold War. As for the destructive neoliberal advice that the IMF and World Bank have given us, their austerity plans were destructive instead of helpful. Therefore, their loans have gone bad. As such, they have become odious.”

NATO policy has given Global South countries no choice but to reject its attempt to establish a U.S. food stranglehold on the Global South by blocking any competition from Russia, thereby monopolizing the world’s grain and energy trade. The major grain exporter was the heavily subsidized U.S. farm sector, followed by Europe’s highly subsidized Common Agricultural Policy (CAP). These were the main grain exporters before Russia entered the picture. The US/NATO demand is to roll back the clock to restore dependency on the Dollar Area and its eurozone satellites.

The implicit Russian and Chinese counterplan

What is needed for the world’s non-US/NATO population to survive is a new world trade and financial system. The alternative is world famine for much of the world. More people will die of the sanctions than have died on the Ukrainian battlefield. Financial and trade sanctions are as destructive as military attack. So the Global South is morally justified in putting its sovereign interests above those of the wielders of international financial and trade weaponry.

First, reject the sanctions and reorient trade to Russia, China, India, Iran and their fellow members of the Shanghai Cooperation Organization (SCO). The problem is how to pay for imports from these countries, especially if U.S. diplomats extend sanctions against such commerce.

There is no way that Global South countries can pay for oil, fertilizer and food from these countries and also pay the dollar debts that are the legacy of U.S.-sponsored neoliberal trade policy subject to U.S. and eurozone protectionism. Therefore, the second need is to declare a debt moratorium – in effect, a repudiation – of the debts that represent loans gone bad. This act would be analogous to the 1931 suspension of German reparations and Inter-Ally debts owed to the United States. Quite simply, today’s Global South debts cannot be paid without subjecting debtor countries to famine and austerity.

A third corollary that follows from these economic imperatives is to replace the World Bank and its pro-U.S. policies of trade dependency and underdevelopment with a genuine Bank for Economic Acceleration. Along with this institution is a fourth corollary in the form of the new bank’s sibling: a replacement for the IMF free of austerity junk economics and subsidy of America’s client oligarchies coupled with currency raids on countries resisting U.S. privatization and financialization takeovers.

The fifth requirement is for countries to protect themselves by joining a military alliance as an alternative to NATO, to avoid being turned into another Afghanistan, another Libya, another Iraq or Syria or Ukraine.

The main deterrent to this strategy is not U.S. power, for it has shown itself to be a paper tiger. The problem is one of economic consciousness and will.

1. “Bill Gates has a warning about population growth,” World Economic Forum/Reuters, September 19, 2018. https://www.weforum.org/agenda/2018/09/africas-rapid-population-growth-puts-poverty-progress-at-risk-says-gates. ↑
2. Lananh Nguyen, “‘It’s a hurricane.’ Bank chiefs warn of a weakening economy,” The New York Times, June 1, 2022. ↑
3. Kristalina Georgieva, IMF Managing Director, “Facing Crisis Upon Crisis: How the World Can RespondApril 14, 2022. https://www.imf.org/en/News/Articles/2022/04/14/sp041422-curtain-raiser-sm2022. ↑
4. “Putin meets with African Union Chairperson at Sochi, June 3, 2022.” President Sall was accompanied by Moussa Faki Mahamat, Chairperson of the African Union Commission. http://en.kremlin.ru/events/president/news/68564. For a elated discussion on the sanctions see https://www.nakedcapitalism.com/2022/06/sanctions-now-weapons-of-mass-starvation.html. ↑

Michael Hudson: Interview with the newly founded German magazine “ViER”

June 03, 2022

Source

By Michael Hudson

“Taken from an interview with the newly founded German magazine “ViER” which will be published in August 2022.” ViER (FOUR), stands for the media as fourth power in checks and balances.

(1.) Prof. Hudson, your new book “The Destiny of Civilization” is out now. This lecture series on finance capitalism and the New Cold War presents an overview of your unique geo-political perspective.
You talk about an ongoing ideological and material conflict between financialized and de-industrialized countries like United States against the mixed-economies of China and Russia. What is this conflict about and why is the world right now at a unique “point of fracture” as your book states?

Today’s global fracture is dividing the world between two different economic philosophies: In the US/NATO West, finance capitalism is de-industrializing economies and has shifted manufacturing to Eurasian leadership, above all China, India and other Asian countries in conjunction with Russia providing basic raw materials and arms.

These countries are a basic extension of industrial capitalism evolving into socialism, that is, into a mixed economy with strong government infrastructure investment to provide education, health care, transportation and other basic needs by treating them as public utilities with subsidized or free services for these needs.

In the neoliberal US/NATO West, by contrast, this basic infrastructure is privatized as a rent-extracting natural monopoly.

The result is that the US/NATO West is left as a high-cost economy, with its housing, education and medical expenses increasingly debt financed, leaving less and less personal and business income to be invested in new means of production (capital formation). This poses an existential problem for Western finance capitalism: How can it maintain living standards in the face of de-industrialization, debt deflation and financialized rent-seeking impoverishing the 99% to enrich the One Percent?

The first U.S. aim is to deter Europe and Japan from seeking a more prosperous future to lie in closer trade and investment ties with Eurasia and the Shanghai Cooperation Organization (SCO, a more helpful way of thinking about the global fracture from the BRICS). To keep Europe and Japan as satellite economies, U.S. diplomats are insisting on a new economic Berlin Wall of sanctions to block trade between East and West.

For many decades U.S. diplomacy has meddled in European and Japanese internal politics, sponsoring pro-neoliberal officials into government leadership. These officials feel that their destiny (and also their personal political fortunes) is closely allied with U.S. leadership. Meanwhile, European politics has now become basically NATO politics run from the United States.

The problem is how to hold the Global South – Latin America, Africa and many Asian countries – in the US/NATO orbit. Sanctions against Russia have the effect of hurting the trade balance of these countries by sharply raising oil, gas and food prices (as well as prices for many metals) that they must import. Meanwhile, rising U.S. interest rates are drawing financial savings and bank credit into U.S.-dollar-denominated securities. This has raised the dollar’s exchange rate, making it much harder for SCO and Global South countries to pay their dollarized debt service falling due this year.

This forces a choice on these countries: either go without energy and food in order to pay foreign creditors – thereby putting international financial interests before their domestic economic survival – or defaulting on their debts, as occurred in the 1980s after Mexico announced in 1982 that it could not pay foreign bondholders

(2.) How do you see the ongoing war/special military operation in Ukraine? Which economic consequences do you foresee?

Russia has secured the Russian-speaking Eastern Ukraine and its southern Black Sea coastline. NATO will continue to “poke the bear” by sabotage and new ongoing attacks, especially by Polish fighters.

NATO countries have dumped their old and obsolete weapons into Ukraine, and now must spend immense sums modernizing their military hardware. The outflow of payments to the U.S. military-industrial complex will put downward pressure on the euro and British sterling – all coming on topo of their own rising energy and food deficits. So the euro and sterling are headed down toward parity with the U.S. dollar. The euro is almost there now (about $1.07). This means sharply rising price inflation for Europe.

I read and hear conflicting information on the new sanctions. Some experts in the East and West believe this will harm the national economy of the Russian Federation tremendously. Other experts tend to believe this will backfire or have a huge boomerang-effect on the Western countries indeed.

The overriding U.S. policy is to fight against China, hoping to break of the Western Uighur regions and divide China into smaller states. To do that, it is necessary to break away Russian military and raw-materials support for China – and in due course to break it up into a number of smaller states (the Western large cities, northern Siberia, a southern flank, etc.).

Sanctions were imposed in hopes of making living conditions so unpleasant for Russians that they would press for regime change. The NATO attack in Ukraine was designed to drain Russia militarily – by having the bodies of Ukrainians deplete Russia’s supply of bullets and bombs by giving their lives simply to absorb Russian arms.

The effect has been to increase Russian support for Putin – just the opposite of what was intended. There is a growing disillusion with the West, after seeing what the Harvard Boys did to Russia when the United States backed Yeltsin to create a domestic kleptocrat class that tried to “cash out” its privatizations by selling shares in oil, nickel and public utilities to the West, and then spurring military attacks from Georgia and Chechnya. There is a general agreement that Russia is making a long-term turn Eastward instead of Westward.

So the effect of U.S. sanctions and military opposition to Russia has been to impose a political and economic Iron Curtain locking in Europe to dependency on the United States, while driving Russia together with China instead of prying them apart. Meanwhile, the cost of European sanctions against Russian oil and food – much to the benefit of U.S. LNG gas suppliers and agricultural exporters – threatens to create long-term European opposition to U.S. unipolar global strategy. A new “Ami go home” movement is likely to develop.

But for Europe, the damage already has been done, and neither Russia nor China are likely to trust that European government officials can withstand the bribery and personal pressure brought to bear by U.S. interference.

Here in Germany I’m listening to the new Minister for Economy, Mr Robert Habeck from the Green Party, who talks about activating the federal “emergency gas” and asks the Emirates for resources (this “deal” seems to be failed already, news say). We see the end of North Stream II and huge dependency for Berlin and Brussels on Russian resources. How this will all sum up?

In effect, U.S. officials have asked Germany to commit economic suicide and bring on a depression, higher consumer prices and lower living standards. German chemical companies have already begun to shut down their fertilizer production, given Germany’s acceptance of trade and financial sanctions that prevent it from buying Russian gas (the raw material for most fertilizer). And German car companies are suffering from supply cut-offs.

These European economic shortages are a huge benefit to the United States, which is making enormous profits on more expensive oil (which is controlled largely by U.S. companies, followed by British and French oil companies). Europe’s replenishment of the arms that it donated to Ukraine also is a boon to the U.S. military-industrial complex, whose profits are soaring.

But the United States is not recycling these economic gains to Europe, which is looking like the big loser.

Arab oil producers already have rejected U.S. demands that they charge less for their oil. They look to be windfall gainers from the NATO attack on the Ukraine proxy battlefield.

It seems unlikely that Germany can simply give back to Russia Nord Stream 2 and the Gazprom affiliates that have conducted trade with Germany. Trust has been broken. And Russia is afraid to accept payments by European banks since the theft of $300 billion of its foreign reserves. Europe is no longer economically safe for Russia.

The question is just how soon Russia will simply stop supplying Europe altogether.

It looks like Europe is becoming an appendage of the U.S. economy, in effect bearing the fiscal burden of America’s Cold War 2.0, with no political representation in the United States. The logical solution is for Europe to join the United States politically, giving up its governments but at least getting a few Europeans in the U.S. Senate and House of Representatives.

(3.) Which role does the a) New Cold War and the b) neoliberal finance capitalism play in the current war between Russia and Ukraine? According to your recent research.

The US/NATO war in Ukraine is the first battle in what looks like a 20-year attempt to isolate the Dollar Area West from Eurasia and the Global South. U.S. politicians promise to keep the Ukraine war going indefinitely, hoping that this may become Russia’s “new Afghanistan.” But this tactic now looks like it may threaten to be America’s own Afghanistan. It is a proxy war, whose effect is to lock in Europe’s dependency on the United States as a client oligarchy with the euro as a satellite currency to the dollar.

U.S. diplomacy tried to disable Russia in three major ways. First, isolating it financially by blocking it from SWIFT bank clearing, system. Russia responded by smoothly moving over to China’s bank-clearing system.

The second tactic was to seizing Russian deposits in U.S. banks and holdings of U.S. financial securities. Russia responded by picking up U.S. and European investments in Russia on the cheap as the West dumped them.

The third tactic was to block NATO members from trading with Russia. The effect has been that Russian imports from the West have declined, while its exports of oil, gas and food are soaring. That has raised the ruble’s exchange rate instead of hurting it. And as sanctions block Russia’s imports from the West, President Putin has announced that his government will invest heavily in import substitution. The effect will be a permanent loss of Russian markets for European suppliers and exporters.

Meanwhile, the Trump tariffs against European exports to the United States remain in place, leaving European industry with shrinking business opportunities. The European Central Bank may continue to buy European stocks and bonds to protect the wealth of the One Percent, but if anything will cut back on domestic social spending so as to comply with the 3% limit of budget deficits that the eurozone has imposed on itself.

In the medium and long run, the US/NATO sanctions are therefore aimed mainly against Europe. And Europeans don’t even seem to see that they are the primary victims of this new U.S. economic war for self-serving energy, food and financial dominance.

(4.) In Germany the stopped energy project Nord Stream II is still a big political issue. In your recent online article “The Dollar Devours the Euro” you wrote: “It is now clear that today’s escalation of the New Cold War was planned over a year ago. America’s plan to block Nord Stream 2 was really part of its strategy to block Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.” Could you explain this to our readers?  source: https://michael-hudson.com/2022/04/the-dollar-devours-the-euro/

What you characterize as “blocking Nord Stream 2” is really a Buy-American policy. The United States has persuaded Europe not to buy in the lowest-price market, but to pay as much as seven times more for its gas from U.S. LGN suppliers, and to spend a reported $5 billion on expanding port capacity – that will not even be available for a year years.

This threatens a very uncomfortable interregnum for Germany and other European countries following U.S. dictates. Basically, national parliaments are now subservient to NATO, whose policies are run from Washington.

One price that Europe will pay, as noted above, is declining exchange rate against the U.S. dollar. European investors are likely to move their savings and investments out of Europe to the United States in order maximize their capital gains and simply avoid price declines for their stocks and bonds as measured in dollars.

(5.) Prof. Hudson, let’s take a look at further developments in Germany. In May the German parliament – Bundestag – passed a new bill: German lawmakers approved possible expropriation of energy companies. This could enable the Berlin government to put energy companies under trusteeship if they can no longer fulfil their tasks and if the security of supply is at risk. According to REUTERS, the renewed law – which still needs to pass the upper house of parliament – could be applied for the first time if no solution is found on the ownership of the PCK Refinery oil refinery in Schwedt/Oder (East Germany), which is majority-owned by Russian state-owned Rosneft.

It looks like Europe and America will confiscate Russian investments in their countries, and sell off (or have Russia confiscate) NATO-country investments in Russia. This means a de-linking of the Russian economy from the West, and a closer linking with China – which looks like the next economy to be sanctioned by NATO as it becomes an Eastern Pacific Treaty Organization involving Europe in tis confrontation in the China Sea.

I would be surprised if Russia resumes selling oil and gas to Europe without being reimbursed for what Europe (and also the United States) has seized. This demand would help bring European pressure on the United States to give back the $300 billion in foreign reserves that it has grabbed.

But even after such a give-back and reparations settlement, trade seems unlikely to be resumed. A phase change has occurred, a change in consciousness as to how the world is splitting up under U.S. diplomatic attacks on allies and adversaries alike.

My question would be: Socialism is a big topic in your new book. What’s your view on those “socialist” measures taken now by a capitalist country like Germany?

source: https://www.reuters.com/business/energy/german-lawmakers-approve-possible-expropriation-energy-companies-2022-05-12/

A century ago, the “final stage” of industrial capitalism was expected to be socialism. There were many different kinds of socialism: State socialism, Marxian socialism, Christian socialism, anarchist socialism, libertarian socialism. But what occurred after World War I was the antithesis of socialism. It was finance capitalism and a militarized Finance capitalism.

The common denominator of all socialist movements, from the right to the left of the political spectrum, was stronger government infrastructure spending. The transition to socialism was being led (in the United States and Germany) by industrial capitalism itself, seeking to minimize the cost of living (and hence the basic living wage) and the cost of doing business by government investment in basic infrastructure, whose services were to be provided freely, or at least at subsidized prices.

That aim would prevent basic services from becoming opportunities for monopoly rent. The antithesis was the Thatcher-neoliberal doctrine of privatization. Governments turned over public utilities to private investors. Companies were bought on credit, adding interest and other financial charges to profits and payments to management. The result has been to turn neoliberal Europe and America into high-cost economies unable to compete in production prices with countries pursuing socialist polities instead of financialized neoliberalism.

This opposition in economic systems is the key to understanding today’s world global fracture.

(6.) Especially Russian oil and gas are in the focus right now. Moscow demands payments in Rouble only and is expanding their field of buyers filling it with China, India or Saudi-Arabia. But it seems Western buyers can still pay in Euro or US Dollar. What is your take on this ongoing war on resources? The Rouble appears to be a winner.

The rouble certainly is rising. But this does not make Russia a “winner” if its economy is disrupted by the sanctions blocking its own imports needed for its supply chains to operate smoothly.

Russia will end up the winner if it can mount an industrial import-substitution program, and re-create public infrastructure to replace what has been privatized under U.S. direction by the Harvard Boys in the 1990s.

Do we see the end of the petro-dollar and a rise of a new financial architecture in the East accompanied by a strengthening of BRICS and Shanghai Cooperation Organization (SCO)?

There will still be petrodollars, but also a variety of currency-area blocs as the world de-dollarizes its international trade and investment arrangements. In late May, Foreign Secretary Lavrov said that Saudi Arabia and Argentina want to join BRICS. As Pepe Escobar recently noted, BRICS+ may expand to include MERCOSUR and the South African Development Community (SADC)

These arrangements probably will call for a non-U.S. alternative to the IMF to create credit and provide a vehicle for official foreign-exchange reserves for the non-NATO countries. The IMF will still survive to impose austerity on U.S. satellite countries while subsidizing capital flight from Global South countries and creating SDRs to finance U.S. military spending abroad.

Summer 2022 will be a testing ground as Global South countries suffer a balance-of-payments crisis from the rising oil and food deficits alongside the higher domestic-currency costs of carrying their foreign dollar debts. The IMF may offer new SDRs for them to pay US dollar bondholders to keep the illusion of solvency going. But the SCO countries can offer oil and food – IF countries give assurances of repaying credit by repudiating their dollar debts to the West.

This financial diplomacy promises to introduce “interesting times.”

(7.) In your recent interview with Michael Welch (“Accidental Crisis?”) you have a specific analysis on the current events in Ukraine/Russia:
“The war isn’t against Russia. The war isn’t against Ukraine. The war is against Europe and Germany.” Could you please elaborate on that?

source: https://michael-hudson.com/2022/03/accidental-crisis/

As I explained above, the U.S. trade and financial sanctions are locking in Germany to dependency on U.S. exports of LNG, and purchases of US military arms to upgrade NATO into the de facto European Governing Authority.

The effect is to destroy any European hopes for mutual trade and investment gains with Russia. It is being turned into the junior partner (very junior) in its new trade an investment relations with the increasingly protectionist and nationalistic United States.

(8.) The real problem for United States seems to be this: “The only way of maintaining prosperity if you can’t create it at home is to get it from abroad.” What is Washington’s strategy in there?

My book Super Imperialism has explained how, for the past 50 years, ever since the United States went off gold in August 1971, the U.S. Treasury Bill standard has given the United States a free ride at foreign expense. Foreign central banks have recycled their dollar inflow resulting from the U.S. balance-of-payments deficit into loans to the U.S. Treasury – that is, to buy U.S. Treasury securities to hold their savings. This arrangement has enabled the United States to undertake foreign military spending for its nearly 800 military bases around Eurasia without having to depreciate the dollar or tax its own citizens. The cost has been borne by countries whose central banks have built up their dollar loans to the U.S. Treasury.

But now that it has become unsafe for countries to hold dollar-denominated U.S. bank deposits or government securities or investments if they “threaten” to defend their own economic interests or if their policies diverge from those dictated by U.S. diplomats, how can America continue to get a free ride?

In fact, how can it import basic materials from Russia to fill parts of its industrial and economic supply chain that is being broken down by the sanctions?

That is the challenge for U.S. foreign policy. One way or another, it aims to tax Europe and make other countries into economic satellites. The exploitation may not be as blatant as the U.S. grabbing of Venezuelan, Afghan and Russian official reserves. It is likely to involve undercutting foreign self-sufficiency to force other countries into economic dependency on the United States, so that the U.S. can threaten these countries with disruptive sanctions if they seek to put their own national interests over what U.S. diplomats want them to do.

(9.) How will all this affect Western Europe’s (Germany / France / Italy) balance of payments and hence the euro’s exchange rate against the dollar? And why do you think the European Union is on a path to become new “Panama, Puerto Rico and Liberia”?

The euro already is a satellite currency to the United States. Its member countries cannot run domestic budget deficits to cope with the coming inflationary depression resulting from the U.S.-sponsored sanctions and resulting Global Fracture.

The key is turning out to be military dependency. This is “cost sharing” for the U.S. sponsored Cold War 2.0. That cost sharing is what has led U.S. diplomats to realize that they need to control domestic European politics to prevent its populations and businesses from acting in their own interests. Their economic squeeze is “collateral damage” to today’s New Cold War.

(10.) A philosopher from Switzerland wrote a critical essay in mid of March for the German socialist newspaper „Neues Deutschland“, a former news outlet for the GDR government. Ms Tove Soiland criticized the international Left for current behaviours regarding Ukraine crisis and covid management. The Left, she says, is too much pro authoritarian government/state – and thereby copying methods of the traditional right-wing parties. Do you share this view? Or is it too harsh?

How would you answer this question, esp. regarding the thesis in your new book: “… the alternative path is broadly mixed-economy industrial capitalism leading to socialism …”. source: https://www.nd-aktuell.de/artikel/1162247.die-linke-und-corona-ein-postideologischer-totalitarismus.html

The State Department and CIA’s “mighty Wurlitzer” has focused on gaining control of Europe’s Social Democratic and Labour parties, anticipating that the great threat to U.S.-centered finance capitalism will be socialism. That has included the “green” parties, to the point where their pretense of opposing global warming is shown to be hypocritical in light of the vast carbon footprint and pollution of the NATO military warfare in Ukraine and related air force and naval exercises. You can’t be pro-environment and pro-war at the same time!

This has left the right-wing nationalist parties less influenced by U.S. political meddling. That is where the opposition to NATO is coming from, as in France and Hungary.

And in the United States itself, the only votes against the new $30 billion contribution to military spending against Russia came from Republicans. The entire “left wing” Democratic Party “squad” voted for the war spending.

The Social Democratic parties are basically bourgeois parties whose supporters have hopes of rising into the rentier class, or at least becoming stock and bond investors in miniature. The result is that neoliberalism has been led by Tony Blair in Britain and his counterparts in other countries. I discuss this political alignment in The Destiny of Civilization.

U.S. propagandists call governments that keep natural monopolies as public utilities “autocratic.” To be “democratic” means to let U.S. firms by control of these commanding heights, being “free” of government regulation and taxation of finance capital. So “left” and “right,” “democracy” and “autocracy,” have become an Orwellian Doublespeak vocabulary sponsored by America’s oligarchy (which it euphemizes as “democracy”).

(11.) Could the war in Ukraine be a landmark to show a new geopolitical map in the world? Or is the neoliberal New World Order on its rise? How do you see it?

As I explained in your Question #1, the world is being split into two parts. The conflict is not merely national by the West against the East, but is a conflict of economic systems: predatory finance capitalism against industrial socialism aiming at self-sufficiency for Eurasia and the SCO.

The non-aligned countries were not able to “go it alone” in the 1970s because they lacked a critical mass to produce their own food, energy and raw materials. But now that the United States has de-industrialized its own economy and outsourced its production to Asia, these countries have an option not to remain in dependency on U.S. Dollar Diplomacy.

Michael Hudson on RT CrossTalk Show : World under sanctions

June 01, 2022

Rumble link: https://rumble.com/v16anio-crosstalk-world-under-sanctions.html

RT link: https://www.rt.com/shows/crosstalk/556134-wreaking-havoc-business-russia/

Everything’s Getting Messy Again In Afghanistan

15 MAY 2022

Source

By Andrew Korybko

Afghanistan’s internal insecurity, border tensions, and the potentially Pakistani-backed US military factor are combining to create yet another storm in the New Cold War that threatens to destabilize the region.

Russia’s ongoing special military operation in Ukraine and the US-led West’s unprecedented response to it have distracted the international community from Afghanistan, which is once again becoming an issue of regional concern. The foreign occupiers’ chaotic evacuation from that country last August and the Taliban’s return to power in the aftermath haven’t stabilized the situation all that much. The group is still designated as terrorists by most of the world and their leadership remains unrecognized despite all stakeholders – including Russia — still interacting with them for pragmatism’s sake.

Afghanistan somehow avoided the full-scale humanitarian crisis that many were worried about but its people’s most basic needs still aren’t being adequately met. Observers also feel very uncomfortable about the Taliban returning to its old ways by once again banning women from showing their uncovered faces in public. The comparatively more secular and ethnically cosmopolitan northern part of the country that’s majority inhabited by Tajiks and other Central Asian people might not take too kindly to this decree, which could fuel anti-government movements there.

In fact, it was reported just this weekend that the “National Resistance Front” (NRF) has returned to fighting against the Taliban in the Panjshir Valley. Russian Foreign Minister Sergey Lavrov was asked about this on Friday following the CIS Foreign Ministers Council meeting in Dushanbe where he reiterated Moscow’s stance that the only sustainable political solution is to form an ethno-regionally inclusive government. He also expressed optimism that “our allies in Tajikistan with serious influence in Afghanistan, primarily the country’s north, will also keep helping us achieve our common goals.”

That former Soviet Republic is a key stakeholder in Afghanistan since it exerts influence over its co-ethnics across the border and was previously suspected of supporting anti-Taliban forces there. President Putin also spoke to his Tajik counterpart Rahmon on Friday, during which time the two discussed Afghanistan and confirmed that they’ll “continue to cooperate to ensure security on the Tajikistan-Afghanistan border.” This is especially important following reports that ISIS-K terrorists from Afghanistan recently claimed credit for a cross-border attack that Tajik officials nonetheless denied.

On the topic of cross-border terrorism emanating from Afghanistan, neighboring Pakistan reportedly carried out several strikes there in the middle of last month against TPP terrorists who martyred several of their soldiers days prior. Islamabad also reportedly just handed over two top TPP commanders to the Afghan Taliban, who’ve been mediating peace talks between them. Amidst all of this, Pakistan remains mired in political uncertainty following its scandalous change of government in early April that former Prime Minister Khan claims was orchestrated by the US as punishment for his independent policies.

While its internal security situation is expected to remain stable considering the world-class professionalism of its military and intelligence services, speculation abounds about the trajectory of its foreign policy. Newly inaugurated Foreign Minister Bhutto’s upcoming trip to the US is inconveniently occurring at the exact moment that its political, economic, and international uncertainties are converging. The relevance of this to Afghanistan is the US’ recent reaffirmation that it retains the capabilities to strike terrorists in Afghanistan if it so chooses, perhaps with speculative Pakistani support.  

Former Prime Minister Khan claimed that the alleged US-orchestrated regime change plot against him first started when he publicly said that his country will “absolutely not” host any American bases in the wake of the US’ withdrawal from neighboring Afghanistan. Critics of the new authorities who replaced him suspect that they might be secretly negotiating some sort of military arrangement with the US to facilitate American anti-terrorist strikes there, which could possibly target ISIS-K but also the TTP that Washington also officially regards as terrorists just like Islamabad does.

While there’s nothing of tangible substance to base this speculation on, it’s still a matter of public record that the US said on multiple occasions that it’s actively seeking out regional bases to facilitate its so-called “over-the-horizon” strikes in Afghanistan. Russia was concerned that its American rival might poach one of the Central Asian Republics from its informal “sphere influence” into this scheme, though that hasn’t materialized, at least not yet. Even so, Moscow must be watching Washington’s reported $20 million unarmed Puma drone deal with Dushanbe with suspicion to see where it might lead.

On the topic of cross-border attacks, it also deserves mentioning that reports came in a few weeks back alleging that tensions were boiling along the Afghan-Iranian border. Tehran denied that any clashes took place but most observers still consider ties between it and the Taliban to be very complicated, to say the least. Taking stock of the overall situation, Afghanistan’s domestic stability has been rocked by ISIS-K suicide bombings and the latest reported “NRF” offensive while international tensions are dangerously growing between the Taliban and its Iranian, Pakistani, and Tajik neighbors.

Against the backdrop of the Taliban imposing its strict socio-religious standards onto the rest of the population in spite of the risk that this will only worsen resentment from some minorities against it, as well as the country’s humanitarian crisis being far from resolved even though it hasn’t yet exploded, it can be concluded that everything risks spiraling out of control if all these counterproductive trends aren’t soon reversed. Pakistan’s crossing of the Rubicon by kinetically defending its objective national security interests through reported anti-TTP strikes also adds an unpredictable dimension to this too.

The same can be said for the pivot towards the US that the new authorities’ critics suspect is unfolding and which might manifest itself through those two unofficially teaming up to occasionally fight terrorism in Afghanistan. The US is still actively searching for a regional base, which can only realistically be in Pakistan if it ever comes to pass since its new Tajik partner can’t legally host one without Russia’s approval due to its legal commitments through the CSTO mutual defense pact. Any enhanced Pakistani-American anti-terrorist and/or military cooperation could greatly reshape regional dynamics.

All the while, there’s also some positive news too even though it pales in comparison to the negative. Foreign Minister Lavrov spoke at the beginning of the month about the need for mutually beneficial economic engagement with Afghanistan, which he repeated on Friday after the CIS meeting that was hyperlinked to earlier in this analysis. New Taliban-appointed Afghan charge d’affairs to Russia Jamal Nasir Garwal, who also reportedly attended the Victory Day parade in Moscow, publicly reciprocated this interest by emphasizing how much his country needs Russian energy resources right now.

These signals prompted speculation that a Taliban delegation might soon travel to Moscow to discuss such deals, though Russian Special Presidential Envoy to Afghanistan Zamir Kabulov denied that anything of the sort was in the cards at this moment. Still, that would represent a positive development if it comes to pass and would complement the Taliban’s planned economic cooperation with China. The larger trend seems to be that while Afghanistan’s ties with Iran, Pakistan, and Tajikistan become more complicated, its ties with Russia and China are becoming more comprehensive.

To be absolutely clear, correlation doesn’t mean causation so nobody should think that regional stakeholders are dividing into pro- and anti-Taliban blocs, but it’s still an important trend to pay attention to since it suggests that Russia and China might soon be able to exert more influence over the Taliban than previously expected. In the event that Pakistan strikes some sort of anti-terrorist or military deal with the US as part of its speculative plans to repair ties with it through such arrangements that critics might describe as concessions, then those two might become more suspicious of its intentions.

After all, Pakistan has unofficially frozen talks with Russia over what former Prime Minister Khan insists were his previously active negotiations to purchase fuel from Moscow, including at a 30% discount, but which the new Energy Minister claimed had never happened. The latter said this in spite of there being documented evidence from credible sources confirming that his statement was factually incorrect, including Foreign Minister Lavrov revealing while in Islamabad on 7 April 2021 that there was “mutual interest” in this, “appropriate proposals have been put forward”, and Russia is “waiting for a response”.

The scandal over Russian-Pakistani energy talks concerns much more than just those two countries since all interested observers can now see that the new authorities are publicly distancing themselves from their predecessors’ negotiations with the Kremlin for whatever reason, even going as far as to share factually incorrect information with the public about this. The impression that they’re probably left with is that this might be done under American pressure, which in turn adds credence to former Prime Minister Khan’s narrative about the US being behind his ouster and now influencing his replacements.

This insight is pertinent for Afghanistan since it also adds credence to suspicions that Pakistan and the US might be secretly negotiating some anti-terrorist or military deals focused on that war-torn country, with Islamabad possibly even conceding on some issues that its prior government never would have in pursuit of clinching such an agreement in the hopes of repairing its troubled ties with Washington. The reintroduction of US forces to the region, even clandestine ones such as CIA drone teams, could be very destabilizing and thus contribute to even more uncertainty about Afghanistan’s overall situation.

The scenario of Pakistan’s new authorities, who rose to power through scandalous circumstances that the ousted premier attributed to a US-orchestrated conspiracy, facilitating the American military’s and/or intelligence’s return to the region would certainly be frowned upon by all regional stakeholders. No matter what’s said between their diplomats, it’s doubtful that they place much trust in that country’s new leadership after its Energy Minister passionately insisted that former Prime Minister Khan was lying about his energy negotiations with Russia in spite of the official facts contradicting him.

The uncertainty about Pakistan’s grand strategic trajectory after its recent change of government and the credible concerns that its new leadership is preparing to decisively pivot towards the US contribute to the larger uncertainty about everything associated with Afghanistan right now. The overall situation is negative and there’s too much “fog of (hybrid) war” to confidently predict where everything is headed. Afghanistan’s internal insecurity, border tensions, and the potentially Pakistani-backed US military factor are combining to create yet another storm in the New Cold War that threatens to destabilize the region.

The Dollar Devours the Euro

April 08, 2022

By Michael Hudson and posted with the author’s permission

It is now clear that today’s escalation of the New Cold War was planned over a year ago, with serious strategy associated with America’s plan to block Nord Stream 2 as part of its aim of blocking Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.

As President Biden and U.S. national-security reports announced, China was seen as the major enemy. Despite China’s helpful role in enabling corporate America to drive down labor’s wage rates by de-industrializing the U.S. economy in favor of Chinese industrialization, China’s growth was recognized as posing the Ultimate Terror: prosperity through socialism. Socialist industrialization always has been perceived to be the great enemy of the rentier economy that has taken over most nations in the century since World War I ended, and especially since the 1980s. The result today is a clash of economic systems – socialist industrialization vs. neoliberal finance capitalism.

That makes the New Cold War against China an implicit opening act of what threatens to be a long-drawn-out World War III. The U.S. strategy is to pry away China’s most likely economic allies, especially Russia, Central Asia, South Asia and East Asia. The question was, where to start the carve-up and isolation.

Russia was seen as presenting the greatest opportunity to begin isolating, both from China and from the NATO Eurozone. A sequence of increasingly severe – and hopefully fatal – sanctions against Russia was drawn up to block NATO from trading with it. All that was needed to ignite the geopolitical earthquake was a casus belli.

That was arranged easily enough. The escalating New Cold War could have been launched in the Near East – over resistance to America’s grabbing of Iraqi oil fields, or against Iran and countries helping it survive economically, or in East Africa. Plans for coups, color revolutions and regime change have been drawn up for all these areas, and America’s African army has been built up especially fast over the past year or two. But Ukraine has been subjected to a U.S.-backed civil war for eight years, since the 2014 Maidan coup, and offered the chance for the greatest first victory in this confrontation against China, Russia and their allies.

So the Russian-speaking Donetsk and Luhansk regions were shelled with increasing intensity, and when Russia still refrained from responding, plans reportedly were drawn up for a great showdown to commence in late February – beginning with a blitzkrieg Western Ukrainian attack organized by U.S. advisors and armed by NATO.

Russia’s preemptive defense of the two Eastern Ukrainian provinces and its subsequent military destruction of the Ukrainian army, navy and air force over the past two months has been used as the excuse to start imposing the U.S.-designed sanctions program that we are seeing unfolding today. Western Europe has dutifully gone along whole-hog. Instead of buying Russian gas, oil and food grains, it will buy these from the United States, along with sharply increased arms imports.

The prospective fall in the Euro/Dollar exchange rate

It therefore is appropriate to look at how this is likely to affect Western Europe’s balance of payments and hence the euro’s exchange rate against the dollar.

European trade and investment prior to the War to Impose Sanctions had promised a rising mutual prosperity between Germany, France and other NATO countries vis-à-vis Russia and China. Russia was providing abundant energy at a competitive price, and this energy was to make a quantum leap with Nord Stream 2. Europe was to earn the foreign exchange to pay for this rising import trade by a combination of exporting more industrial manufactures to Russia and capital investment in developing the Russian economy, e.g. by German auto companies and financial investment. This bilateral trade and investment is now stopped – and will remain stopped for many, many years, given NATO’s confiscation of Russia’s foreign reserves kept in euros and British sterling, and the European Russophobia being fanned by U.S. propaganda media.

In its place, NATO countries will purchase U.S. LNG – but they will need to spend billions of dollars building sufficient port capacity, which may take until perhaps 2024. (Good luck until then.) The energy shortage will sharply raise the world price of gas and oil. NATO countries also will step up their purchases of arms from the U.S. military-industrial complex. The near-panic buying will also raise the price for arms. And food prices also will rise as a result of the desperate grain shortfalls resulting from a cessation of imports from Russia and Ukraine on the one hand, and the shortage of ammonia fertilizer made from gas.

All three of these trade dynamics will strengthen the dollar vis-à-vis the euro. The question is, how will Europe balance its international payments with the United States? What does it have to export that the U.S. economy will accept as its own protectionist interests gain influence, now that global free trade is dying quickly?

The answer is, not much. So what will Europe do?

I could make a modest proposal. Now that Europe has pretty much ceased to be a politically independent state, it is beginning to look more like Panama and Liberia – “flag of convenience” offshore banking centers that are not real “states” because they don’t issue their own currency, but use the U.S. dollar. Since the eurozone has been created with monetary handcuffs limiting its ability to create money to spend into the economy beyond the limit of 3 percent of GDP, why not simply throw in the financial towel and adopt the U.S. dollar, like Ecuador, Somalia and the Turks and Caicos Islands? That would give foreign investors security against currency depreciation in their rising trade with Europe and its export financing.

For Europe, the alternative is that the dollar-cost of its foreign debt taken on to finance its widening trade deficit with the United States for oil, arms and food will explode. The cost in euros will be even greater as the currency falls against the dollar. Interest rates will rise, slowing investment and making Europe even more dependent on imports. The eurozone will turn into an economic dead zone.

For the United States, this is Dollar Hegemony on steroids – at least vis-à-vis Europe. The continent would become a somewhat larger version of Puerto Rico.

The dollar vis-à-vis Global South currencies

The full-blown version of the New Cold War triggered by the “Ukraine War” risks turning into the opening salvo of World War III, and is likely to last at least a decade, perhaps two, as the U.S. extends the fight between neoliberalism and socialism to encompass a worldwide conflict. Apart from the U.S. economic conquest of Europe, its strategists are seeking to lock in African, South American and Asian countries along similar lines to what has been planned for Europe.

The sharp rise in energy and food prices will hit food-deficit and oil-deficit economies hard – at the same time that their foreign dollar-denominated debts to bondholders and banks are falling due and the dollar’s exchange rate is rising against their own currency. Many African and Latin American countries – especially North Africa – face a choice between going hungry, cutting back their gasoline and electricity use, or borrowing the dollars to cover their dependency on U.S.-shaped trade.

There has been talk of IMF issues of new SDRs to finance the rising trade and payments deficits. But such credit always comes with strings attached. The IMF has its own policy of sanctioning countries that do not obey U.S. policy. The first U.S. demand will be that these countries boycott Russia, China and their emerging trade and currency self-help alliance. “Why should we give you SDRs or extend new dollar loans to you, if you are simply going to spend these in Russia, China and other countries that we have declared to be enemies,” the U.S. officials will ask.

At least, this is the plan. I would not be surprised to see some African country become the “next Ukraine,” with U.S. proxy troops (there are still plenty of Wahabi advocates and mercenaries) fighting against the armies and populations of countries seeking to feed themselves with grain from Russian farms, and power their economies with oil or gas from Russian wells – not to speak of participating in China’s Belt and Road Initiative that was, after all, the trigger to America’s launching of its new war for global neoliberal hegemony.

The world economy is being enflamed, and the United States has prepared for a military response and weaponization of its own oil and agricultural export trade, arms trade and demands for countries to choose which side of the New Iron Curtain they wish to join.

But what is in this for Europe? Greek labor unions already are demonstrating against the sanctions being imposed. And in Hungary, Prime Minister Viktor Orban has just won an election on what is basically an anti-EU and anti-U.S. worldview, starting with paying for Russian gas in roubles. How many other countries will break ranks – and how long will it take?

What is in this for the Global South countries being squeezed – not merely as “collateral damage” to the deep shortages and soaring prices for energy and food, but as the very objective of U.S. strategy as it inaugurates the great splitting of the world economy in two? India has already told U.S. diplomats that its economy is naturally connected with those of Russia and China. Pakistan finds the same calculus at work.

From the U.S. vantage point, all that needs to be answered is, “What’s in it for the local politicians and client oligarchies that we reward for delivering their countries?”

From its planning stages, U.S. diplomatic strategists viewed the looming World War III as a war of economic systems. What side will countries choose: their own economic interest and social cohesion, or submission to local political leaders installed by U.S. meddling like the $5 billion that Assistant Secretary of State Victoria Nuland bragged of having invested in Ukraine’s neo-Nazi parties eight years ago to initiate the fighting that has erupted into today’s war?

In the face of all this political meddling and media propaganda, how long will it take the rest of the world to realize that there’s a global war underway, with World War III on the horizon? The real problem is that by the time the world understands what is going on, the global fracture will already have enabled Russia, China and Eurasia to create a real non-neoliberal New World Order that does not need NATO countries and which has lost trust and hope for mutual economic gains with them. The military battlefield will be littered with economic corpses.

Iran on Ukraine: opposes war, but backs Russia’s red line against NATO expansionism

Iran’s call for restraint in the Ukraine conflict also comes amid stronger ties with Russia and mutual security concerns.

March 04 2022

By Zafar Mehdi

As the Ukraine crisis escalates, it would be naive to claim that the Russian military operation in a former Soviet Republic unfolded without any provocation. Even prominent US foreign policy analysts concede events were driven in great part by Kiev’s dangerous drift toward the western military bloc.

But this provocation came less from Kiev than from the US and its NATO allies, which, since 2014, have egged on Ukraine’s confrontational stances toward its Russian neighbor. Today, the world has been split in two: those who support Russia’s military intervention and those who oppose it on a myriad of grounds.

Iran’s position on what looks like a precursor to a new Cold War — wherein western powers use Ukraine as a pawn to challenge Russia’s regional dominance — is defined by political pragmatism and strategic interests.

The developments over the past few months on the Ukrainian border show how the US-led military alliance set the stage for Russia’s military action in its neighborhood, barely six months after NATO’s botched exit from Afghanistan, where millions are now teetering on the brink of death and starvation.

Iran’s foreign minister, Hossein Amir-Abdollahian, in a 24 February statement, made it abundantly clear when he blamed the simmering crisis in Ukraine on “NATO’s provocative acts” while asserting that war was “not a solution.”

“We do not see resorting to war as a solution,” Iran’s top diplomat asserted. “Establishing a ceasefire and focusing on a political and democratic solution is a necessity.”

NATO expansionism

The remarks outlined Tehran’s stance on the recent turn of events in Ukraine — NATO must stop fanning the flames of war, and Russia and Ukraine must show restraint and not fall into the vicious trap of descending into further violence and potentially widening the conflict.

Iran’s foreign ministry spokesman, Saeed Khatibzadeh, in a separate statement, also referred to the US-led NATO’s “provocations,” while noting that the Eurasia region was on the verge of “entering a pervasive crisis.”

He said Iran calls on the warring parties to “end hostilities” through dialogue, and reiterated the “need to observe international and humanitarian law in military conflicts.”

Iranian government spokesperson, Ali Bahadori Jahromi, also issued a statement in late February, reacting to the developments in Ukraine, and echoed the same concerns of a “growing and provocative trend of NATO’s eastward expansion.”

Notably, Iran’s relations with the western military alliance — which has been overtly complicit in the US “economic terrorism” against the Islamic Republic — have been marked by hostility and bitterness for years.

On Tuesday, in agreement with Moscow’s position, the Leader of the Islamic Revolution Ayatollah Sayyed Ali Khamenei blamed the conflict on US policies, while also calling for an end to the war. “The root cause of the Ukraine crisis is the US and the west’s policies,” he said during a televised speech.

“In my opinion, today Ukraine is also the victim of such policy. Today, the Ukraine situation is related to this US policy. The US has dragged Ukraine to this point,” he added.

Iran and Russia’s strategic alignment

At the same time, Tehran’s ties with Moscow have scaled new heights in recent years, partly due to the west’s hard-nosed policies toward the two countries, and partly due to rapidly changing geopolitical and geoeconomic dynamics.

The political transition in Tehran last year – from reformists to conservatives – did not affect these changing equations. In fact, the new Iranian administration, led by former judiciary chief, Ebrahim Raisi, has made regional eastern powers like Russia and China the focus of his foreign policy.

Raisi was one of the first world leaders on Thursday to contact Russian President Vladimir Putin, several hours after the military operation was announced. In their brief conversation, Iran’s president termed NATO’s eastward expansion “a serious threat to the security of independent countries.”

He also expressed hope that the unfolding events would “benefit countries in the region,” suggesting that Iran was not in principle opposed to Russia’s bid to put an end to foreign meddling in Ukraine — where western footprints have alarmingly increased since the February 2014 western-backed unconstitutional takeover — but it was also not in favor of war and bloodshed.

For his part, Putin told his Iranian counterpart that the current situation was “a legitimate response to decades of violations of security treaties and Western efforts to undermine Russia’s security.”

What has brought Iran and Russia closer in recent years are growing hostilities between the two countries and the west. Moscow has presented itself as an all-weather-ally for Iran, passionately advocating Iran’s causes in international forums, in particular the 2015 nuclear deal. The two countries have also found themselves on the same side, as in Syria, resisting forces backed by hostile states.

This friendship was on full display during Raisi’s maiden visit to Moscow last month. In a power-packed speech to Russia’s State Duma, he read the obituary of America’s global hegemony, and indicted NATO for “threatening the interests of independent countries.” The standing ovation from Russian lawmakers demonstrated that the two nations were on the same page.

During the visit, the Iranians and Russians agreed to finalize their long-term strategic agreement, increase their bilateral trade to $10 billion, and work together on developing new nuclear power plants in Iran. They also vowed to cooperate in regional matters, including Afghanistan, Yemen and Syria.

Iran’s independent foreign policy

That, however, doesn’t imply Iran is ready to outsource its foreign policy to Moscow. Iran’s cooperation with Russia is inherently and primarily tied to its strategic interests. In his speech to the Gas Exporting Countries Forum (GECF) summit in Doha recently, President Raisi declared his country’s readiness to supply natural gas to the world, including Europe, as Iran has one of the largest natural gas reserves in the world.

He hastened to add that sanctions imposed by “hegemonic powers” on “free nations” have been rendered ineffective, while calling for closer cooperation among gas exporting countries to nullify the impact of sanctions.

Raisi’s remarks arguably displayed an example of statesmanship and a fiercely independent foreign policy — trying to calm tensions in the global energy market while sending a clear and powerful message to arch-foes.

His oil minister, Javad Ojhi, later repeated the call, saying Iran has the “necessary capacity” to offer gas to regional countries, even Europe.

An opportunity in Vienna?

With Iran offering to be a possible substitute for Russia — at least in the short-term — to prevent the disruption in global energy markets, this gives it some hefty leverage in nuclear talks in Vienna, as they enter the final stretch.

There is already speculation about the possibility of the Ukraine crisis impacting Vienna talks. The complicit role of US-led NATO in pitting Ukraine and Russia against each other, and its failure to rein in Moscow, shows the power center moving from west to east.

Western sanctions against Moscow, also make Russia more reluctant to cooperate with the Europeans and the US over reviving the nuclear deal. This in turn also gives Iran an added advantage in Vienna.

The crisis in Ukraine will only further embolden Tehran in its nuclear ambitions and reinforce decades of distrust and skepticism of pledges by the US. “Western powers’ support of puppet regimes and governments is a mirage, it is not real,” Khamenei insisted during this week’s address.

As Amir-Abdollahian said last Saturday, Iran has made its red lines clear to western parties, and is ready to conclude a “good deal,” provided the other parties show “real (political) will.”

Sources in Vienna told The Cradle on Thursday that in the past few days, the US has been forced to deliver those goods, with only minor — but important — details left to be ironed out.

So the ball is in the west’s court: to make a deal in Vienna and peace in Kiev.

The views expressed in this article do not necessarily reflect those of The Cradle.

America Defeats Germany for the Third Time in a Century: The MIC, OGAM and FIRE Sectors Conquer NATO

February 28, 2022

Source

By Michael Hudson

My old boss Herman Kahn, with whom I worked at the Hudson Institute in the 1970s, had a set speech that he would give at public meetings. He said that back in high school in Los Angeles, his teachers would say what most liberals were saying in the 1940s and 50s: “Wars never solved anything.” It was as if they never changed anything – and therefore shouldn’t be fought.

Herman disagreed, and made lists of all sorts of things that wars had solved in world history, or at least changed. He was right, and of course that is the aim of both sides in today’s New Cold War confrontation in Ukraine.

The question to ask is what today’s New Cold War is trying to change or “solve.” To answer this question, it helps to ask who initiates the war. There always are two sides – the attacker and the attacked. The attacker intends certain consequences, and the attacked looks for unintended consequences of which they can take advantage. In this case, both sides have their dueling sets of intended consequences and special interests.

The active military force and aggression since 1991 has been the United States. Rejecting mutual disarmament of the Warsaw Pact countries and NATO, there was no “peace dividend.” Instead, the U.S. policy executed by the Clinton and subsequent administrations to wage a new military expansion via NATO has paid a 30-year dividend in the form of shifting the foreign policy of Western Europe and other American allies out of their domestic political sphere into their own U.S.-oriented “national security” blob (the word for special interests that must not be named). NATO has become Europe’s foreign-policy-making body, even to the point of dominating domestic economic interests.

The recent prodding of Russia by expanding Ukrainian anti-Russian ethnic violence by Ukraine’s neo-Nazi post-2014 Maiden regime was aimed at (and has succeeded in forcing a showdown in response the fear by U.S. interests that they are losing their economic and political hold on their NATO allies and other Dollar Area satellites as these countries have seen their major opportunities for gain to lie in increasing trade and investment with China and Russia.

To understand just what U.S. aims and interests are threatened, it is necessary to understand U.S. politics and “the blob,” that is, the government central planning that cannot be explained by looking at ostensibly democratic politics. This is not the politics of U.S. senators and representatives representing their congressional voting districts or states.

America’s three oligarchies in control of U.S. foreign policy

It is more realistic to view U.S. economic and foreign policy in terms of the military-industrial complex, the oil and gas (and mining) complex, and the banking and real estate complex than in terms of the political policy of Republicans and Democrats. The key senators and congressional representatives do not represent their states and districts as much as the economic and financial interests of their major political campaign contributors. A Venn diagram would show that in today’s post-Citizens United world, U.S. politicians represent their campaign contributors, not voters. And these contributors fall basically into three main blocs.

Three main oligarchic groups that have bought control of the Senate and Congress to put their own policy makers in the State Department and Defense Department. First is the Military-Industrial Complex (MIC) – arms manufacturers such as Raytheon, Boeing and Lockheed-Martin, have broadly diversified their factories and employment in nearly every state, and especially in the Congressional districts where key Congressional committee heads are elected. Their economic base is monopoly rent, obtained above all from their arms sales to NATO, to Near Eastern oil exporters and to other countries with a balance-of-payments surplus. Stocks for these companies soared immediately upon news of the Russian attack, leading a two-day stock-market surge as investors recognized that war in a world of cost-plus “Pentagon capitalism” (as Seymour Melman described it) will provide a guaranteed national-security umbrella for monopoly profits for war industries. Senators and Congressional representatives from California and Washington traditionally have represented the MIC, along with the solid pro-military South. The past week’s military escalation promises soaring arms sales to NATO and other U.S. allies, enriching the actual constituents of these politicians. Germany quickly agreed to raise is arms spending to over 2% of GDP.

The second major oligarchic bloc is the rent-extracting oil and gas sector, joined by mining (OGAM), riding America’s special tax favoritism granted to companies emptying natural resources out of the ground and putting them mostly into the atmosphere, oceans and water supply. Like the banking and real estate sector seeking to maximize economic rent and maximizing capital gains for housing and other assets,, the aim of this OGAM sector is to maximize the price of its energy and raw materials so as to maximize its natural-resource rent. Monopolizing the Dollar Area’s oil market and isolating it from Russian oil and gas has been a major U.S. priority for over a year now, as the Nord Stream 2 pipeline threatened to link the Western European and Russian economies more tightly together.

If oil, gas and mining operations are not situated in every U.S. voting district, at least their investors are. Senators from Texas and other Western oil-producing and mining states are the leading OGAM lobbyists, and the State Department has a heavy oil-sector influence providing a national-security umbrella for the sector’s special tax breaks. The ancillary political aim is to ignore and reject environmental drives to replace oil, gas and coal with alternative sources of energy. The Biden administration accordingly has backed the expansion of offshore drilling, supported the Canadian pipeline to the world’s dirtiest petroleum source in the Athabasca tar sands, and celebrated the revival of U.S. fracking.

The foreign-policy extension is to prevent foreign countries not leaving control of their oil, gas and mining to U.S. OGAM companies from competing in world markets with U.S. suppliers. Isolating Russia (and Iran) from Western markets will reduce the supply of oil and gas, pushing up prices and corporate profits accordingly.

The third major oligarchic group is the symbiotic Finance, Insurance and Real Estate (FIRE) sector, which is the modern finance-capitalist successor to Europe’s old post-feudal landed aristocracy living by land rents. With most housing in today’s world having become owner-occupied (although with sharply rising rates of absentee landlordship since the post-2008 wave of Obama Evictions), land rent is paid largely to the banking sector in the form of mortgage interest and debt amortization (on rising debt/equity ratios as bank lending inflates housing prices). About 80 percent of U.S. and British bank loans are to the real estate sector, inflating land prices to create capital gains – which are effectively tax-exempt for absentee owners.

This Wall Street-centered banking and real estate bloc is even more broadly based on a district-by-district basis than the MIC. Its New York senator from Wall Street, Chuck Schumer, heads the Senate, long supported by Delaware’s former Senator from the credit-card industry Joe Biden, and Connecticut’s senators from the insurance sector centered in that state. Domestically, the aim of this sector is to maximize land rent and the “capital’ gains resulting from rising land rent. Internationally, the FIRE sector’s aim is to privatize foreign economies (above all to secure the privilege of credit creation in U.S. hands), so as to turn government infrastructure and public utilities into rent-seeking monopolies to provide basic services (such as health care, education, transportation, communications and information technology) at maximum prices instead of at subsidized prices to reduce the cost of living and doing business. And Wall Street always has been closely merged with the oil and gas industry (viz. the Rockefeller-dominated Citigroup and Chase Manhattan banking conglomerates).

The FIRE, MIC and OGAM sectors are the three rentier sectors that dominate today’s post-industrial finance capitalism. Their mutual fortunes have soared as MIC and OGAM stocks have increased. And moves to exclude Russia from the Western financial system (and partially now from SWIFT), coupled with the adverse effects of isolating European economies from Russian energy, promise to spur an inflow into dollarized financial securities

As mentioned at the outset, it is more helpful to view U.S. economic and foreign policy in terms of the complexes based on these three rentier sectors than in terms of the political policy of Republicans and Democrats. The key senators and congressional representatives are not representing their states and districts as much as the economic and financial interests of their major donors. That is why neither manufacturing nor agriculture play the dominant role in U.S. foreign policy today. The convergence of the policy aims of America’s three dominant rentier groups overwhelms the interests of labor and even of industrial capital beyond the MIC. That convergence is the defining characteristic of today’s post-industrial finance capitalism. It is basically a reversion to economic rent-seeking, which is independent of the politics of labor and industrial capital.

The dynamic that needs to be traced today is why this oligarchic blob has found its interest in prodding Russia into what Russia evidently viewed as a do-or-die stance to resist the increasingly violent attacks on Ukraine’s eastern Russian-speaking provinces of Luhansk and Donetsk, along with the broader Western threats against Russia.

The rentier “blob’s” expected consequences of the New Cold War

As President Biden explained, the current U.S.-orchestrated military escalation (“Prodding the Bear”) is not really about Ukraine. Biden promised at the outset that no U.S. troops would be involved. But he has been demanding for over a year that Germany prevent the Nord Stream 2 pipeline from supplying its industry and housing with low-priced gas and turn to the much higher-priced U.S. suppliers.

U.S. officials first tried to stop construction of the pipeline from being completed. Firms aiding in its construction were sanctioned, but finally Russia itself completed the pipeline. U.S. pressure then turned on the traditionally pliant German politicians, claiming that Germany and the rest of Europe faced a National Security threat from Russia turning off the gas, presumably to extract some political or economic concessions. No specific Russian demands could be thought up, and so their nature was left obscure and blob-like. Germany refused to authorize Nord Stream 2 from officially going into operation.

A major aim of today’s New Cold War is to monopolize the market for U.S. shipments of liquified natural gas (LNG). Already under Donald Trump’s administration, Angela Merkel was bullied into promising to spend $1 billion building new port facilities for U.S. tanker ships to unload natural gas for German use. The Democratic election victory in November 2020, followed by Ms. Merkel’s retirement from Germany’s political scene, led to cancellation of this port investment, leaving Germany really without much alternative to importing Russian gas to heat its homes, power its electric utilities, and to provide raw material for its fertilizer industry and hence the maintenance of its farm productivity.

So the most pressing U.S. strategic aim of NATO confrontation with Russia is soaring oil and gas prices, above all to the detriment of Germany. In addition to creating profits and stock-market gains for U.S. oil companies, higher energy prices will take much of the steam out of the German economy. That looms as the third time in a century that the United States has defeated Germany – each time increasing its control over a German economy increasingly dependent on the United States for imports and policy leadership, with NATO being the effective check against any domestic nationalist resistance.

Higher gasoline, heating and other energy prices also will hurt U.S. consumers and those of other nations (especially Global South energy-deficit economies) and leave less of the U.S. family budget for spending on domestic goods and services. This could squeeze marginalized homeowners and investors, leading to further concentration of absentee ownership of housing and commercial property in the United States, along with buyouts of distressed real estate owners in other countries faced with soaring heating and energy costs. But that is deemed collateral damage by the post-industrial blob.

Food prices also will rise, headed by wheat. (Russia and Ukraine account for 25 percent of world wheat exports.) This will squeeze many Near Eastern and Global South food-deficit countries, worsening their balance of payments and threatening foreign debt defaults.

Russian raw-materials exports may be blocked by Russia in response to the currency and SWIFT sanctions. This threatens to cause breaks in supply chains for key materials, including cobalt, palladium, nickel and aluminum (the production of which consumes much electricity as its major cost – which will make that metal more expensive). If China decides to see itself as the next nation being threatened and joins Russia in a common protest against the U.S. trade and financial warfare, the Western economies are in for a serious shock.

The long-term dream of U.S. New Cold Warriors is to break up Russia, or at least to restore its Yeltsin/Harvard Boys managerial kleptocracy, with oligarchs seeking to cash in their privatizations in Western stock markets. OGAM still dreams of buying majority control of Yukos and Gazprom. Wall Street would love to recreate a Russian stock market boom. And MIC investors are happily anticipating the prospect of selling more weapons to help bring all this about.

Russia’s intentions to benefit from America’s unintended consequences

What does Russia want? Most immediately, to remove the neo-Nazi anti-Russian core that the Maidan massacre and coup put in place in 2014. Ukraine is to be neutralized, which to Russia means basically pro-Russian, dominated by Donetsk, Luhansk and Crimea. The aim is to prevent Ukraine from becoming a staging ground of U.S.-orchestrated anti-Russian moves a la Chechnya and Georgia.

Russia’s longer-term aim is to pry Europe away from NATO and U.S. dominance – and in the process, create with China a new multipolar world order centered on an economically integrated Eurasia. The aim is to dissolve NATO altogether, and then to promote the broad disarmament and denuclearization policies that Russia has been pushing for. Not only will this cut back foreign purchases of U.S. arms, but it may end up leading to sanctions against future U.S. military adventurism. That would leave America with less ability to fund its military operations as de-dollarization accelerates.

Now that it should be obvious to any informed observer that (1) NATO’s purpose is aggression, not defense, and (2) there is no further territory for it to conquer from the remains of the old Soviet Union, what does Europe get out of continued membership? It is obvious that Russia never again will invade Europe. It has nothing to gain – and had nothing to gain by fighting Ukraine, except to roll back NATO’s proxy expansion into that country and the NATO-backed attacks on Novorossiya.

Will European nationalist leaders (the left is largely pro-US) ask why their countries should pay for U.S. arms that only put them in danger, pay higher prices for U.S. LNG and energy, pay more for grain and Russian-produced raw materials, all while losing the option of making export sales and profits on peaceful investment in Russia – and perhaps losing China as well?

The U.S. confiscation of Russian monetary reserves, following the recent theft of Afghanistan’s reserves (and England’s seizure of Venezuela’s gold stocks held there) threatens every country’s adherence to the Dollar Standard, and hence the dollar’s role as the vehicle for foreign-exchange savings by the world’s central banks. This will accelerate the international de-dollarization process already started by Russia and China relying on mutual holdings of each other’s currencies.

Over the longer term, Russia is likely to join China in forming an alternative to the U.S.-dominated IMF and World Bank. Russia’s announcement that it wants to arrest the Ukrainian Nazis and hold a war crimes trial seems to imply an alternative to the Hague court will be established following Russia’s military victory in Ukraine. Only a new international court could try war criminals extending from Ukraine’s neo-Nazi leadership all the way up to U.S. officials responsible for crimes against humanity as defined by the Nuremberg laws.

Did the American blob actually think through the consequences of NATO’s war?

It is almost black humor to look at U.S. attempts to convince China that it should join the United States in denouncing Russia’s moves into Ukraine. The most enormous unintended consequence of U.S. foreign policy has been to drive Russia and China together, along with Iran, Central Asia and other countries along the Belt and Road initiative.

Russia dreamed of creating a new world order, but it was U.S. adventurism that has driven the world into an entirely new order – one that looks to be dominated by China as the default winner now that the European economy is essentially torn apart and America is left with what it has grabbed from Russia and Afghanistan, but without the ability to gain future support.

And everything that I have written above may already be obsolete as Russia and the U.S. have gone on atomic alert. My only hope is that Putin and Biden can agree that if Russia hydrogen bombs Britain and Brussels, that there will be a devil’s (not gentleman’s) agreement not to bomb each other.

With such talk I’m brought back to my discussions with Herman Kahn 50 years ago. He became quite unpopular for writing Thinking about the Unthinkable, meaning atomic war. As he was parodied in Dr. Strangelove, he did indeed say that there would indeed be survivors. But he added that for himself, he hoped to be right under the atom bomb, because it was not a world in which he wanted to survive.

Donbas people describe living under Kiev-US-NATO shelling for 8 years

The school behind this apartment building was hit, and two teachers killed, purely for punishment

 -February 27, 2022

By  Jim W. Dean, Managing Editor

…from Patrick Lancaster, US Navy veteran, war correspondent

First published February 27, 2022

[ Editor’s Note: This is the longest interview, about 16 minutes, as we hear from these people whom the US media has never interviewed. We hear what it is like to endure random shelling from a US and NATO backed Kiev government that was hoping to drive these people out of their towns and cities.

Patrick Lancaster got to the scene after the morning shelling, often done to break everybody’s windows to make everybody suffer more in the winter. So even as the Russian military is pushing into the interior, Ukrainian artillery units have the time and ammunition to continue shelling non-combatants just for spite.

So far, the western news correspondents are with the Kiev Ukrainians covering their valiant defense of their homeland. I have not seen any of them interviewing those who have been targeted as unwanted citizens.

The school behind this apartment building was hit, and two teachers killed, purely for punishment. Granny says that Kiev only wants the land and wants to drive them all out of the country, hence the shelling.

I do not remember Obama or Trump and now Biden lifting a finger to stop this. Biden never posed that, if the endless shelling of Donbas did not stop, the US aid to Ukraine would end. Did anyone even propose to put UN peacekeepers here to stop the Kiev shelling?

By their non-action, NATO and its main country backers signed their names to the thousands of civilians killed here for the purpose of wanting to move NATO forces to the Russian border.

As the US, even under Biden, has avoided any United Nations peacekeeping here, as even good ole’ Joe wanted to cut off visibility of what was going on with full US approval under Democrat and Republican administrations.

This is a dark stain on the US military, diplomatic and political systems, as they all looked to profit from this as a new Cold War.

The Dems had no problem in seeing the autocratic Trumpers as a serious threat to the US. But Biden’s team has been blind to the threat the US has posed to these Donbas people, who are trying to eke out a living without becoming a new Cold War toy for warmongers to play with… Jim W. Dean ]

First published February 27, 2022

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Sergey Karaganov: Russia’s new foreign policy, the Putin Doctrine

23 Feb, 2022

Moscow’s confrontation with NATO is just the start

By Professor Sergey Karaganov, honorary chairman of Russia’s Council on Foreign and Defense Policy, and academic supervisor at the School of International Economics and Foreign Affairs Higher School of Economics (HSE) in Moscow

Russian President Vladimir Putin speaks during his address to the nation at the Kremlin in Moscow on February 21, 2022. © AFP / Alexey NIKOLSKY

It seems like Russia has entered a new era of its foreign policy – a ‘constructive destruction’, let’s call it, of the previous model of relations with the West. Parts of this new way of thinking have been seen over the last 15 years – starting with Vladimir Putin’s famous Munich speech in 2007 – but much is only just becoming clear now. At the same time, lackluster efforts to integrate into the western system, while maintaining a doggedly defensive attitude, has remained the general trend in Russia’s politics and rhetoric.

Constructive destruction is not aggressive. Russia maintains it isn’t going to attack anyone or blow them up. It simply doesn’t need to. The outside world provides Russia with more and more geopolitical opportunities for medium-term development as it is. With one big exception. NATO’s expansion and formal or informal inclusion of Ukraine poses a risk to the country’s security that Moscow simply won’t accept.

For now, the West is on course to a slow but inevitable decay, both in terms of internal and external affairs and even the economy. And this is precisely why it has started this new Cold War after almost five hundred years of domination in world politics, the economy, and culture. Especially after its decisive victory in the 1990s to mid-2000s. I believe [1] it will most likely lose, stepping down as the global leader and becoming a more reasonable partner. And not a moment too soon: Russia will need to balance relations with a friendly, but increasingly more powerful China.

Read more  Sergey Karaganov: It’s not really about Ukraine

Presently, the West desperately tries to defend against this with aggressive rhetoric. It tries to consolidate, playing its last trump cards to reverse this trend. One of those is trying to use Ukraine to damage and neuter Russia. It’s important to prevent these convulsive attempts from transforming into a full-fledged standoff and to counter the current US and NATO policies. They are counterproductive and dangerous, though relatively undemanding for the initiators. We are yet to convince the West that it is only hurting itself.

Another trump card is the West’s dominating role in the existing Euro-Atlantic security system established at a time when Russia was seriously weakened following the Cold War. There’s merit in gradually erasing this system, primarily by refusing to take part in it and play by its obsolete rules, which are inherently disadvantageous to us. For Russia, the western track should become secondary to its Eurasian diplomacy. Maintaining constructive relations with the countries in the western part of the continent may ease the integration into Greater Eurasia for Russia. The old system is in the way, though, and so it should be dismantled.

The critical next step to creating a new system (aside from dismantling the old one) is ‘uniting the lands’. It’s a necessity for Moscow, not a whim. 

It would be nice if we had more time to do this. But history shows that, since the collapse of the USSR 30 years ago, few post-Soviet nations have managed to become truly independent. And some may never even get there, for various reasons. This is a subject for a future analysis. Right now, I can only point out the obvious: Most local elites don’t have the historical or cultural experience of state-building. They’ve never been able to become the core of the nation – they didn’t have enough time for this. When the shared intellectual and cultural space disappeared, it hurt small countries the most. The new opportunities to build ties with the West turned out to be no replacement. Those who have found themselves at the helm of such nations have been selling their country for their own benefit, because there’s been no national idea to fight for.

The majority of those countries will either follow the example of the Baltic states, accepting external control, or continue to spiral out of control, which in some cases may be extremely dangerous.

The question is: How to ‘unite’ the nations in the most efficient and beneficial way for Russia, taking into account the tsarist and Soviet experience, when the sphere of influence was extended beyond any reasonable limits and then kept together at the expense of core Russian peoples?

Let’s leave the discussion about the ‘unification’ that history is forcing on us for another day. This time, let’s focus on the objective need to make a tough decision and adopt the ‘constructive destruction’ policy.

The milestones we passed

Today, we see the inception of the fourth era of Russia’s foreign policy. The first one started in the late 1980s, and it was a time of weakness and delusions. The nation had lost the will to fight, people wanted to believe democracy and the West would come and save them [2]. It all ended in 1999 after the first waves of NATO expansion, seen by Russians as a backstabbing move, when the West tore apart what was left of Yugoslavia.

READ MORE: EU to sanction 350 Russian MPs – media

Then Russia started to get up off its knees and rebuild, stealthily and covertly, while appearing friendly and humbled. The US withdrawing from the ABM Treaty signaled its intention to regain its strategic dominance, so the still broke Russia made a fateful decision to develop weapon systems to challenge American aspirations. The Munich speech, the Georgian War, and the army reform, conducted amid a global economic crisis that spelled the end of the western liberal globalist imperialism (the term coined by a prominent expert on international affairs, Richard Sakwa) marked the new goal for Russian foreign policy – to once again become a leading global power that can defend its sovereignty and interests. This was followed by the events in Crimea, Syria, the military build-up, and blocking the West from interfering in Russia’s domestic affairs, rooting out from the public service those who partnered with the West to the disadvantage of their homeland, including by a masterful use of the West’s reaction to those developments. As the tensions keep growing, looking up to the West and keeping assets there becomes increasingly less lucrative.

China’s incredible rise and becoming de-facto allies with Beijing starting in the 2010s, the pivot to the East, and the multidimensional crisis that enveloped the West led to a great shift in political and geoeconomic balance in favor of Russia. This is especially pronounced in Europe. Only a decade ago, the EU saw Russia as a backward and weak outskirts of the continent trying to contend with major powers. Now, it is desperately trying to cling to the geopolitical and geoeconomic independence that is slipping through its fingers.

The ‘back to greatness’ period ended around 2017 to 2018. After that, Russia hit a plateau. The modernization continued, but the weak economy threatened to negate its achievements. People (myself included) were frustrated, fearing that Russia once again was going to “snatch defeat from the jaws of victory.” But that turned out to be another build-up period, primarily in terms of defense capabilities.

Russia has gotten ahead, making sure that for the next decade, it will be relatively invulnerable strategically and capable of “dominating in an escalation scenario” in case of conflicts in the regions within its sphere of interests.

The ultimatum that Russia issued to the US and NATO at the end of 2021, demanding they stop developing military infrastructure near the Russian borders and expansion to the east, marked the start of the ‘constructive destruction’. The goal is not simply to stop the flagging, albeit really dangerous inertia of the West’s geostrategic push, but also to start laying the foundation for a new kind of relations between Russia and the West, different from what we settled on in the 1990s.

Russia’s military capabilities, the returning sense of moral righteousness, lessons learned from past mistakes, and a close alliance with China could mean that the West, which chose the role of an adversary, will start being reasonable, even if not all the time. Then, in a decade or sooner, I hope, a new system of international security and cooperation will be built that will include the whole Greater Eurasia this time, and it will be based on UN principles and international law, not unilateral ‘rules’ that the West has been trying to impose on the world in recent decades.

Correcting mistakes

Before I go any further, let me say that I think very highly of Russian diplomacy – it’s been absolutely brilliant in the past 25 years. Moscow was dealt a weak hand but managed to play a great game nevertheless. First, it didn’t let the West ‘finish it off’. Russia maintained its formal status of a great country, retaining permanent membership in the UN Security Council and keeping nuclear arsenals. Then it gradually improved its global standing by leveraging the weaknesses of its rivals and the strengths of its partners. Building a strong friendship with China has been a major achievement. Russia has some geopolitical advantages that the Soviet Union didn’t have. Unless, of course, it goes back to the aspirations of becoming a global superpower, which eventually ruined the USSR.  

However, we shouldn’t forget the mistakes we’ve made so we don’t repeat them. It was our laziness, weakness, and bureaucratic inertia that helped create and keep afloat the unjust and unstable system of European security that we have today.

The beautifully-worded Charter of Paris for a New Europe that was signed in 1990 had a statement about freedom of association – countries could choose their allies, something that would’ve been impossible under the 1975 Helsinki Declaration. Since the Warsaw Pact was running on fumes at that point, this clause meant that NATO would be free to expand. This is the document everyone keeps referring to, even in Russia. Back in 1990, however, NATO could at least be considered a “defense” organization. The alliance and most of its members have launched a number of aggressive military campaigns since then – against the remnants of Yugoslavia, as well as in Iraq and Libya.  

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After a heart-to-heart chat with Lech Walesa in 1993, Boris Yeltsin signed a document where it stated that Russia “understood Poland’s plan to join NATO.” When Andrey Kozyrev, Russia’s foreign minister at the time, learned about NATO’s expansion plans in 1994, he began a bargaining process on Russia’s behalf without consulting the president. The other side took it as a sign that Russia was OK with the general concept, since it was trying to negotiate acceptable terms. In 1995, Moscow stepped on the brakes, but it was too late – the dam burst and swept away any reservations about the West’s expansion efforts. 

In 1997, Russia, being economically weak and completely dependent on the West, signed the Founding Act on Mutual Relations, Cooperation and Security with NATO. Moscow was able to compel certain concessions from the West, like the pledge not to deploy large military units to the new member states. NATO has been consistently violating this obligation. Another agreement was to keep these territories free of nuclear weapons. The US would not have wanted it anyway, because it had been trying to distance itself from a potential nuclear conflict in Europe as much as possible (despite their allies’ wishes), since it would undoubtedly cause a nuclear strike against America. In reality, the document legitimized NATO’s expansion.  

There were other mistakes – not as major but extremely painful nevertheless. Russia participated in the Partnership for Peace program, the sole purpose of which was to make it look like NATO was prepared to listen to Moscow, but in reality, the alliance was using the project to justify its existence and further expansion. Another frustrating misstep was our involvement in the NATO-Russia Council after the Yugoslavia aggression. The topics discussed at that level desperately lacked substance. They should’ve focused on the truly significant issue – restraining the alliance’s expansion and the buildup of its military infrastructure near the Russian borders. Sadly, this never made it to the agenda. The Council continued to operate even after the majority of NATO members started a war in Iraq and then Libya in 2011.  

READ MORE: Ukraine asks for help and mulls retaliation against Russia: Six key takeaways from Zelensky’s speech

It is very unfortunate that we never got the nerve to openly say it – NATO had become an aggressor that committed numerous war crimes. This would’ve been a sobering truth for various political circles in Europe, like in Finland and Sweden for example, where some are considering the advantages of joining the organization. And all the others for that matter, with their mantra about NATO being a defense and deterrence alliance that needs to be further consolidated so it can stand against imaginary enemies. 

I understand those in the West who are used to the existing system that allows the Americans to buy the obedience of their junior partners, and not just in terms of military support, while these allies can save on security expenses by selling part of their sovereignty. But what do we gain from this system? Especially now that it’s become obvious that it breeds and escalates confrontation at our western borders and in the whole world. 

NATO feeds off forced confrontation, and the longer the organization exists, the worse this confrontation will be. 

The bloc is a threat to its members as well. While provoking confrontation, it doesn’t actually guarantee protection. It is not true that Article 5 of the North Atlantic Treaty warrants collective defense if one ally is attacked. This article doesn’t say that this is automatically guaranteed. I am familiar with the history of the bloc and the discussions in America regarding its establishment. I know for a fact that the US will never deploy nuclear weapons to “protect” its allies if there is conflict with a nuclear state. 

The Organization for Security and Cooperation in Europe (OSCE) is also outdated. It is dominated by NATO and the EU that use the organization to drag out the confrontation and impose the West’s political values and standards on everyone else. Fortunately, this policy is becoming less and less effective. In the mid-2010s I had the chance to work with the OSCE Panel of Eminent Persons (what a name!), which was supposed to develop a new mandate for the organization. And if I had my doubts about the OSCE’s effectiveness before that, this experience convinced me that it is an extremely destructive institution. It’s an antiquated organization with a mission to preserve things that are obsolete. In the 1990s, it served as an instrument of burying any attempt made by Russia or others to create a common European security system; in the 2000s, the so-called Corfu Process bogged down Russia’s new security initiative.

Practically all UN institutions have been squeezed out of the continent, including the UN Economic Commission for Europe, its Human Rights Council and Security Council. Once upon a time, the OSCE was viewed as a useful organization that would promote the UN system and principles in a key subcontinent. That didn’t happen. 

Read more EU may ban mining & trade with Donbass – media

As for NATO, it is very clear what we should do. We need to undermine the bloc’s moral and political legitimacy and refuse any institutional partnership, since its counterproductivity is obvious. Only the military should continue to communicate, but as an auxiliary channel that would supplement dialogue with the DOD and defense ministries of leading European nations. After all, it’s not Brussels that makes strategically important decisions. 

The same policy could be adopted when it comes to the OSCE. Yes, there is a difference, because even though this is a destructive organization, it never initiated any wars, destabilization, or killings. So we need to keep our involvement in this format to a minimum. Some say that this is the only context that provides the Russian foreign minister with a chance to see his counterparts. That is not true. The UN can offer an even better context. Bilateral talks are much more effective anyway, because it is easier for the bloc to hijack the agenda when there is a crowd. Sending observers and peacekeepers through the UN would also make a lot more sense.  

The limited article format does not allow me to dwell on specific policies for each European organization, like the Council of Europe for example. But I would define the general principle this way – we partner where we see benefits for ourselves and keep our distance otherwise. 

Thirty years under the current system of European institutions proved that continuing with it would be detrimental. Russia doesn’t benefit in any way from Europe’s disposition towards breeding and escalating confrontation or even posing military threat to the subcontinent and the whole world. Back in the day, we could dream that Europe would help us bolster security, as well as political and economic modernization. Instead, they are undermining security, so why would we copy the West’s dysfunctional and deteriorating political system? Do we really need these new values that they have adopted? 

We will have to limit the expansion by refusing to cooperate within an eroding system. Hopefully, by taking a firm stand and leaving our civilization neighbors from the West to their own devices, we will actually help them. The elites may return to a less suicidal policy that would be safer for everyone. Of course, we have to be smart about taking ourselves out of the equation and make sure to minimize the collateral damage that the failing system will inevitably cause. But maintaining it in its current form is simply dangerous. 

Policies for tomorrow’s Russia

As the existing global order continues to crumble, it seems that the most prudent course for Russia would be to sit it out for as long as possible – to take cover within the walls of its ‘neo-isolationist fortress’ and deal with domestic matters. But this time, history demands that we take action. Many of my suggestions with respect to the foreign policy approach I have tentatively called ‘constructive destruction’ naturally emerge from the analysis presented above.

There is no need to interfere or to try to influence the internal dynamics of the West, whose elites are desperate enough to start a new cold war against Russia. What we should do instead is use various foreign policy instruments – including military ones – to establish certain red lines. Meanwhile, as the Western system continues to steer towards moral, political, and economic degradation, non-Western powers (with Russia as a major player) will inevitably see their geo-political, geo-economic and geo-ideological positions strengthen. 

READ MORE: UK sanctions Putin’s ‘inner circle’ over Donbass

Our Western partners predictably try to squelch Russia’s calls for security guarantees and take advantage of the ongoing diplomatic process in order to extend the lifespan of their own institutions. There is no need to give up dialogue or cooperation in matters of trade, politics, culture, education, and healthcare, whenever it’s useful. But we must also use the time we’ve got to ramp up military-political, psychological, and even military-technical pressure – not so much on Ukraine, whose people have been turned into cannon fodder for a new Cold War – but on the collective West, in order to force it to change its mind and step back from the policies it has pursued for the past several decades. There is nothing to fear about the confrontation escalating: We saw tensions grow even as Russia was trying to appease the Western world. What we should do is prepare for a stronger pushback from the West; also, Russia should be able to offer the world a long-term alternative – a new political framework based on peace and cooperation.

The West can try to intimidate us with devastating sanctions – but we are also capable of deterring the West with our own threat of an asymmetrical response, one that would cripple Western economies and disrupt whole societies.

Naturally, it is useful to remind our partners, from time to time, that there exists a mutually beneficial alternative to all that.

If Russia carries out reasonable but assertive policies (domestically, too), it will successfully (and relatively peacefully) overcome the latest surge of Western hostility. As I have written before, we stand a good chance of winning this Cold War.

What also inspires optimism is Russia’s own past record: We have more than once managed to tame the imperial ambitions of foreign powers – for our own good, and for the good of humanity, as a whole. Russia was able to transform would-be empires into tame and relatively harmless neighbors: Sweden after the Battle of Poltava, France after Borodino, Germany after Stalingrad and Berlin.

We can find a slogan for the new Russian policy toward the West in a verse from Alexander Blok’s ‘The Scythians’, a brilliant poem that seems especially relevant today: “Come join us, then! Leave war and war’s alarms, / And grasp the hand of peace and amity. / While still there’s time, Comrades, lay down your arms! / Let us unite in true fraternity!”

Read more Russia discloses plans for Donbass military bases

While attempting to heal our relations with the West (even if that requires some bitter medicine), we must remember that, while culturally close to us, the Western world is running out of time – in fact, it has been for two decades now. It is essentially in damage control mode, seeking cooperation whenever possible. The real prospects and challenges of our present and future lie with the East and the South. Taking a harder line with Western nations must not distract Russia from maintaining its pivot to the East. And we have seen this pivot slow down in the past two or three years, especially when it comes to developing territories beyond the Ural Mountains.

We must not allow Ukraine to become a security threat to Russia. That said, it would be counterproductive to spend too many administrative and political (not to mention economic) resources on it. Russia must learn to actively manage this volatile situation, keep it within limits. Most of Ukraine has been neutered by its own anti-national elite, corrupted by the West, and infected with the pathogen of militant nationalism.

It would be much more effective to invest in the East, in the development of Siberia. By creating favorable working and living conditions, we will attract not only Russian citizens, but also people from the other parts of the former Russian Empire, including the Ukrainians. The latter have, historically, contributed a great deal to the development of Siberia.

Let me reiterate a point from my other articles: It was the incorporation of Siberia under Ivan the Terrible that made Russia a great power, not the accession of Ukraine under Aleksey Mikhaylovich, known under the moniker ‘the most peaceful’. It is high time we stopped repeating Zbigniew Brzezinski’s disingenuous – and so strikingly Polish – assertion that Russia cannot be a great power without Ukraine. The opposite is much closer to the truth: Russia cannot be a great power when it is burdened by an increasingly unwieldy Ukraine – a political entity created by Lenin which later expanded westward under Stalin.

The most promising path for Russia lies with the development and strengthening of ties with China. A partnership with Beijing would multiply the potential of both countries many times over. If the West carries on with its bitterly hostile policies, it wouldn’t be unreasonable to consider a temporary five-year defense alliance with China. Naturally, one should also be careful not to get ‘dizzy with success’ on the China track, so as not to return to the medieval model of China’s Middle Kingdom, which grew by turning its neighbors into vassals. We should help Beijing wherever we can to keep it from suffering even a momentary defeat in the new Cold War unleashed by the West. That defeat would weaken us, too. Besides, we know all too well what the West transforms into when it thinks it is winning. It took some harsh remedies to treat America’s hangover after it got drunk with power in the 1990s.

Read more Russia will defend Donetsk and Lugansk – Moscow

Clearly, an East-oriented policy must not focus solely on China. Both the East and the South are on the rise in global politics, economics, and culture, which is partly due to our undermining of the West’s military superiority – the primary source of its 500-year hegemony.

When the time comes to establish a new system of European security to replace the dangerously outdated existing one, it must be done within the framework of a greater Eurasian project. Nothing worthwhile can be born out of the old Euro-Atlantic system.

It is self-evident that success requires the development and modernization of the country’s economic, technological, and scientific potential – all pillars of a country’s military power, which remains the backbone of any nation’s sovereignty and security. Russia cannot be successful without improving the quality of life for the majority of its people: This includes overall prosperity, healthcare, education, and the environment. 

The restriction of political freedoms, which is inevitable when confronting the collective West, must by no means extend to the intellectual sphere. This is difficult, but achievable. For the talented, creatively-minded part of the population who are ready to serve their country, we must preserve as much intellectual freedom as possible. Scientific development through Soviet-style ‘sharashkas’ (research and development laboratories operating within the Soviet labor camp system) is not something that would work in the modern world. Freedom enhances the talents of Russian people, and inventiveness runs in our blood. Even in foreign policy, the freedom from ideological constraints that we enjoy offers us massive advantages compared to our more close-minded neighbors. History teaches us that the brutal restriction of freedom of thought imposed by the Communist regime on its people led the Soviet Union to ruin. Preserving personal freedom is an essential condition for any nation’s development.

READ MORE: Global stocks sink on fears of full-blown conflict between Russia, Ukraine

If we want to grow as a society and be victorious, it is absolutely vital that we develop a spiritual backbone – a national idea, an ideology that unites and shines the way forward. It is a fundamental truth that great nations cannot be truly great without such an idea at their core. This is part of the tragedy that happened to us in the 1970s and 1980s. Hopefully, the resistance of the ruling elites to the advancement of a new ideology, rooted in the pains of the communist era, is beginning to fade. Vladimir Putin’s speech at the October 2021 annual meeting of the Valdai Discussion Club was a powerful reassuring signal in that respect.

Like the ever-growing number of Russian philosophers and authors, I have put forward my own vision of the ‘Russian idea’[3]. (I apologize for having to reference my own publications again – it is an inevitable side effect of having to stick to the format).

Questions for the future

And now let’s discuss a significant, yet mostly overlooked aspect of the new policy that needs to be addressed. We need to dismiss and reform the obsolete and often harmful ideological foundation of our social sciences and public life for this new policy to get implemented, let alone succeed.

READ MORE: Ukraine could sever ties with Russia – Zelensky

This doesn’t mean we have to reject once again the advancements in political science, economy, and foreign affairs of our predecessors. The Bolsheviks tried to dump the social ideas of tsarist Russia – everybody knows how this played out. We rejected Marxism and were happy about it. Now, fed up with other tenets, we realize we were too impatient with it. Marx, Engels, and Lenin had sound ideas in their theory of imperialism we could use.

Social sciences that study the ways of public and private life have to take into account national context, however inclusive it wants to appear. It stems from the national history and ultimately is aimed to help the nations and/or their government and elites. The mindless application of solutions valid in one country to another are fruitless and only create abominations.

We need to start working towards intellectual independence after we achieve military security and political and economic sovereignty. In the new world, it’s compulsory to achieve development and exert influence. Mikhail Remizov, a prominent Russian political scientist, was the first, as far as I know, to call this ‘intellectual decolonization’.

Having spent decades in the shadow of imported Marxism, we’ve begun a transition to yet another foreign ideology of liberal democracy in economics and political science and, to certain extent, even in foreign policy and defense. This fascination has done us no good – we’ve lost land, technology, and people. In the mid-2000s, we started to exercise our sovereignty, but had to rely on our instincts rather than clear national (again – it cannot be anything else) scientific and ideological principles.

We still don’t have the courage to acknowledge that the scientific and ideological worldview we’ve had for the last forty to fifty years is obsolete and/or was intended to serve foreign elites.

To illustrate this point, here are a few randomly picked questions from my very long list.

I’ll start with existential issues, purely philosophical ones. What comes first in humans, the spirit or the matter? And in the more mundane political sense – what drives people and states in the modern world? To common Marxists and liberals, the answer is the economy. Just remember that until recently Bill Clinton’s famous “It’s the economy, stupid” was thought to be an axiom. But people seek something greater when the basic need for food is satisfied. Love for their family, their homeland, desire for national dignity, personal freedoms, power, and fame. The hierarchy of needs has been well known to us since Maslow introduced it in the 1940–50s in his famous pyramid. Modern capitalism, however, twisted it, forcing ever-expanding consumption via traditional media at first and all-encompassing digital networks later – for rich and poor, each according to their ability.

What can we do when the modern capitalism deprived of moral or religious foundations incites limitless consumption, breaking down moral and geographic boundaries and comes into conflict with nature, threatening the very existence of our species? We, Russians, understand better than anybody that attempts to get rid of entrepreneurs and capitalists who are driven by the desire to build wealth will have disastrous consequences for society and the environment (the socialist economy model wasn’t exactly environmentally friendly).

What do we do with the latest values of rejecting history, your homeland, gender, and beliefs, as well as aggressive LGBT and ultra-feminist movements? I respect the right to follow them, but I think they’re post-humanist. Should we treat this as just another stage of social evolution? I don’t think so. Should we try to ward it off, limit its spread, and wait till society lives through this moral epidemic? Or should we actively fight it, leading the majority of humanity that adheres to so-called “conservative” values or, to put it simply, normal human values? Should we get into the fight escalating an already dangerous confrontation with the Western elites?

Read more Germany makes decision on Nord Stream 2

The technological development and increased labor productivity have helped feed the majority of people, but the world itself has slipped into anarchy, and many guiding principles have been lost at the global level. Security concerns, perhaps, are prevailing over the economy once again. Military instruments and the political will might take the lead from now on.

What is military deterrence in the modern world? Is it a threat to cause damage to national and individual assets or foreign assets and information infrastructure to which today’s Western elites are tied so closely? What will become of the Western world if this infrastructure is brought down?

And a related question: What is strategic parity we still talk about today? Is it some foreign nonsense picked by Soviet leaders who sucked their people into an exhausting arms race because of their inferiority complex and June 22, 1941 syndrome? Looks like we are already answering this question, even though we still churn out speeches about equality and symmetrical measures.

And what is this arms control many believe to be instrumental? Is it an attempt to restrain the expensive arms race beneficial to the wealthier economy, to limit the risk of hostilities or something more – a tool to legitimize the race, the development of arms, and the process of unnecessary programs on your opponent? There’s no obvious answer to that.

But let’s go back to the more existential questions.

Is democracy really the pinnacle of political development? Or is it just another tool that helps the elites control society, if we are not talking about Aristotle’s pure democracy (which also has certain limitations)? There are many tools that come and go as society and conditions change. Sometimes we abandon them only to bring them back when the time is right and there’s external and internal demand for them. I’m not calling for boundless authoritarianism or monarchy. I think we have already overdone it with centralization, especially at the municipal government level. But if this is just a tool, shouldn’t we stop pretending that we strive for democracy and put it straight – we want personal freedoms, a prosperous society, security, and national dignity? But how do we justify power to the people then?

Is the state really destined to die off, as Marxists and liberal globalists used to believe, as they dreamed of alliances between transnational corporations, international NGOs (both have been going through nationalization and privatization), and supranational political bodies? We’ll see how long the EU can survive in its current form. Note that I don’t want to say there’s no reason to join national efforts for the greater good, like bringing down expensive custom barriers or introducing joint environmental policies. Or isn’t it better to focus on developing your own state and supporting neighbors while disregarding global problems created by others? Aren’t they going to mess with us if we act this way?

Read more  Ukrainian president reveals chances of war with Russia

What is the role of land and territories? Is it a dwindling asset, a burden as was believed among political scientists only recently? Or the greatest national treasure, especially in the face of the environmental crisis, climate change, the growing deficit of water and food in some regions and the total lack of it in others?

What should we do then with hundreds of millions of Pakistanis, Indians, Arabs, and others whose lands might soon be uninhabitable? Should we invite them now as the US and Europe began to do in the 1960s, drawing migrants to bring down the cost of local labor and undermine the trade unions? Or should we prepare to defend our territories from the outsiders? In that case, we should abandon all hope to develop democracy, as Israel’s experience with its Arab population shows.

Would developing robotics, which is currently in a sorry state, help compensate for the lack of workforce and make those territories livable again? What is the role of indigenous Russian people in our country, considering their number will inevitably keep shrinking? Given that Russians have historically been an open people, the prospects might be optimistic. But so far it’s unclear.

I can go on and on, especially when it comes to the economy. These questions need to be asked and it’s vital to find answers as soon as possible in order to grow and come out on top. Russia needs a new political economy – free from Marxist and liberal dogmas, but something more than the current pragmatism our foreign policy is based on. It must include forward-oriented idealism, a new Russian ideology incorporating our history and philosophical traditions. This echoes the ideas put forward by the academic Pavel Tsygankov.

READ MORE: Oil pushes toward $100 as Donbass tensions rise

I believe that this is the ultimate goal of all our research in foreign affairs, political science, economics and philosophy. This task is beyond difficult. We can continue contributing to our society and our country only by breaking our old thinking patterns. But to end on an optimistic note, here’s a humorous thought: Isn’t it time to recognize that the subject of our studies – foreign affairs, domestic policies, and the economy – is the result of a creative process involving masses and leaders alike? To recognize that it is, in a way, art? To a large degree, it defies explanation and stems from intuition and talent. And so we are like art experts: We talk about it, identify trends and teach the artists – the masses and the leaders – history, which is useful to them. We often get lost in the theoretical, though, coming up with ideas divorced from reality or distorting it by focusing on separate fragments.

Sometimes we do make history: think Evgeny Primakov or Henry Kissinger. But I’d argue they didn’t care what approaches to this art history they represented. They drew upon their knowledge, personal experience, moral principles, and intuition. I like the idea of us being a type of art expert, and I believe it can make the daunting task of revising the dogmas a little easier.

This article was first published online by the Russia in Global Affairs journal.

Remarks by Ambassador Zhang Jun at the UN Security Council Briefing on Ukraine

February 17, 2022

(Source here, emphasis added by me, Andrei)

Mr. President,

I thank you for presiding over today’s meeting. My thanks also go to Under-Secretary-General Rosemary DiCarlo, Special Representative of the OSCE Ambassador Mikko Kinnunen, and Chief Monitor of the OSCE Special Monitoring Mission in Ukraine Ambassador Yaşar Halit Çevik for the briefings. I also listened carefully to the remarks made by Ms. Tetiana Montian.

February 12 this year marked the seventh anniversary of the Minsk agreements. Consideration of the implementation of the Minsk agreements is the subject of this Council meeting. The Minsk agreements is recognized by all as a fundamental and binding political document for the settlement of the Ukraine issue, and was unanimously endorsed by Security Council Resolution 2202. Therefore, it deserves complete and effective implementation by all parties concerned. Regrettably, however, to date, the majority of the agreements’ provisions have yet to be truly implemented. New ceasefire violations have reportedly occurred on the lines of contact. China believes that the effort to resolve the Ukraine issue must after all go back to the starting point, that is, the implementation of the Minsk agreements. We hope that all parties concerned will take a constructive attitude, resolve through dialogue and consultation whatever differences that may arise in the implementation of the agreements, and draw up a roadmap and timetable to implement the Minsk agreements to the letter without delay, so as to pave the way for a political solution to the Ukraine crisis.

Mr. President,

As to the tensions on the eastern frontier of Ukraine, China believes that in the current context, all parties concerned should let reason prevail, adhere to the general direction of political solution, and refrain from any act that may provoke tensions or hype up the crisis. The parties should fully consider each other’s legitimate security concerns, and show mutual respect, and on such a basis, properly resolve their differences through equal-footed consultations. China supports all efforts conducive to easing the tensions, and notes the recent diplomatic engagement between the Russian Federation with France, Germany and other European countries at the leaders level. A negotiated, balanced, effective and sustainable European security mechanism will serve as a solid foundation for lasting peace and stability across Europe. We trust that European countries will take decisions with strategic autonomy in line with their own interests. In his most recent public statement, Secretary-General Guterres said there is no alternative to diplomacy and all issues, including the most intractable, can and must be addressed and resolved through diplomatic frameworks. We subscribe to the Secretary-General’s views and support his good offices aimed at reducing tensions.

Mr. President,

Everything happens for a reason. NATO enlargement is an issue that cannot be overlooked when dealing with the current tensions related to the Ukraine. NATO’s continuous expansion in the wake of the Cold War runs counter to the trend of our times, that is to maintain common security. One country’s security cannot be at the expense of the security of others. By the same token, regional security should not rely on muscling up or even expanding military blocs. This applies as much to the European region as to other regions of the world. There is one country that refuses to renounce the Cold War mentality. It says one thing and does another, in order to seek absolute military superiority. It has been ganging up in the Asia Pacific region, creating trilateral and quadrilateral small cliques, and bent on provoking confrontation. What it is doing will only throw the Asia Pacific into division and turmoil, and seriously threaten the region’s peace and stability to the detriment of the countries in the region, while getting nothing for itself either. China urges the countries concerned to learn from history, subscribe to the notion of common, comprehensive, cooperative and sustainable security, adhere to the approach of enhancing mutual trust and settling disputes through dialogue and consultation, and do more to contribute to world peace and regional stability.

Thank you, Mr. President.

High probability of a major false flag PSYOP in the Ukraine

JAN 31, 2022

A senior LDNR military official, Col. Edward Basurin, the Deputy Head of the DPR People’s Militia Department, has confirmed that a false flag PSYOP operation was prepared by western special services (please make sure to also check the article Lilia Shumkova wrote about this).  According to Basurin, we are talking about three separate video productions which will be prepared for release by the AngloZionist propaganda machine (aka “the free and democratic press”) and on social media.  The three videos will have the following topics:

• First video: it will show how the Russians hordes will attack the noble Ukrainian forces which, of course, will heroically repel the assaults of the barbaric vodka soaked Snow Niggers.
• Second video: the heroic Ukrainian forces, armed with Javelins, will mount a successful counter attack and will penetrate deep inside the territory of the LDNR.
• Third video: LDNR civilians will welcome the Ukronazi forces as European liberators from the Asiatic Russian yoke.

Any civilians killed in the process will, of course, be declared “terrorists”.

The purpose of these videos will be to demoralize both the civilians and the soldiers defending the LDNR.  This is what I call the “Borg message” (“surrender, resistance is futile, you shall be assimilated“) from the Star Trek Next Generation series.

When analyzing information, it is a common practice to separately evaluate the source and the actual contents of this information.  Nothing personal against Col Basurin (whom I like), but since he is a top level official, I cannot credit him as a source anywhere higher than “B”.  That means that he is a pretty decent source, but not only to be categorically trusted.  In terms of the actual info, I would rate the above it as a “1” with no hesitation whatsoever: that means that the contents of the information provided by Basurin fully agrees/”fits” with all the other information I have access to.

Therefore, with an overall rating of B-1 this is info we most definitely cannot ignore.

Now, it goes without saying, that Basurin’s purpose in releasing this info is to preempt that PSYOP, just like Russia recently did with the planned false flag chemical attacks.  Hopefully this will happen again.

But we need to understand two crucial facts:

• The US and UK are absolutely desperate for war.
• PSYOPS and false flags cost money and resources, the West simply cannot afford canceling them over and over again “just” because the Russians revealed what is being planned.

Finally, on all sides, except in Russia proper, it the overall situation is extremely unstable.

Something must give, and something will give.  Probably within weeks, possibly within days.

Today the US tried to engage in some “preparation of the informational battlefield” at the UNSC.  It was a waste of time, especially since both Russia and China could veto any decision anyway.  But remember, past behavior is the best predictor of future behavior.

Colin Powell anybody?

BTW – I want to remind everybody the reason for all this panic: it appears that the West won’t be able to force Russia to send forces into the Ukraine.  The only likely Russian move would be to recognize the LDNR and bring in peacekeepers, which would be totally insufficient for western PSYOPs to declare that the Russian hordes are invading the peace loving Ukraine and are about to “loot Kiev” and all of the European continent.

These are the folks who not only did MH-17, the Skripals or even the fake chemical attacks in Syria, these are the folks who also did 9/11 murdering 3000 of their own innocent civilians.  For them to fight Russia down the the last Ukie is a totally viable and reasonable plan.  So blowing up, say, a Ukie nuclear plant or releasing a “dirty bomb” in downtown Kiev is a no-brainer for them.

I don’t know if Basurin’s very specific warning will preempt this latest PSYOPs and whether the filming and release of these three videos will happen or not, but I would be amazed if we did not see a major, dramatic, false flag taking place somewhere in the Ukraine (either in Banderastan proper or in the LDNR) in the next couple of weeks.

Andrei

Address by Chinese President Xi Jinping at the 2022 World Economic Forum Virtual Session

January 17, 2022

Forge Ahead with Confidence and Fortitude to Jointly Create a Better Post-COVID World

Special Address by H.E. Xi Jinping

President of the People’s Republic of China

At the 2022 World Economic Forum Virtual Session

17 January 2022

Professor Klaus Schwab,

Ladies and Gentlemen,

Friends,

Greetings to you all! It is my pleasure to attend this virtual session of the World Economic Forum.

In two weeks’ time, China will celebrate the advent of spring in the lunar new year, the Year of the Tiger. In Chinese culture, tiger symbolizes bravery and strength, as the Chinese people often refer to spirited dragon and dynamic tiger, or soaring dragon and leaping tiger. To meet the severe challenges facing humanity, we must “add wings to the tiger” and act with the courage and strength of the tiger to overcome all obstacles on our way forward. We must do everything necessary to clear the shadow of the pandemic and boost economic and social recovery and development, so that the sunshine of hope may light up the future of humanity.

The world today is undergoing major changes unseen in a century. These changes, not limited to a particular moment, event, country or region, represent the profound and sweeping changes of our times. As changes of the times combine with the once-in-a-century pandemic, the world finds itself in a new period of turbulence and transformation. How to beat the pandemic and how to build the post-COVID world? These are major issues of common concern to people around the world. They are also major, urgent questions we must give answers to.

China Xinhua News

As a Chinese saying goes, “The momentum of the world either flourishes or declines; the state of the world either progresses or regresses.” The world is always developing through the movement of contradictions; without contradiction, nothing would exist. The history of humanity is a history of achieving growth by meeting various tests and of developing by overcoming various crises. We need to move forward by following the logic of historical progress, and develop by riding the tide of development of our times.

Notwithstanding all vicissitudes, humanity will move on. We need to learn from comparing long history cycles, and see the change in things through the subtle and minute. We need to foster new opportunities amidst crises, open up new horizons on a shifting landscape, and pool great strength to go through difficulties and challenges.

First, we need to embrace cooperation and jointly defeat the pandemic. Confronted by the once-in-a-century pandemic, which will affect the future of humanity, the international community has fought a tenacious battle. Facts have shown once again that amidst the raging torrents of a global crisis, countries are not riding separately in some 190 small boats, but are rather all in a giant ship on which our shared destiny hinges. Small boats may not survive a storm, but a giant ship is strong enough to brave a storm. Thanks to the concerted efforts of the international community, major progress has been made in the global fight against the pandemic. That said, the pandemic is proving a protracted one, resurging with more variants and spreading faster than before. It poses a serious threat to people’s safety and health, and exerts a profound impact on the global economy.

Strong confidence and cooperation represent the only right way to defeat the pandemic. Holding each other back or shifting blame would only cause needless delay in response and distract us from the overall objective. Countries need to strengthen international cooperation against COVID-19, carry out active cooperation on research and development of medicines, jointly build multiple lines of defense against the coronavirus, and speed up efforts to build a global community of health for all. Of particular importance is to fully leverage vaccines as a powerful weapon, ensure their equitable distribution, quicken vaccination and close the global immunization gap, so as to truly safeguard people’s lives, health and livelihoods.

China is a country that delivers on its promises. China has already sent over two billion doses of vaccines to more than 120 countries and international organizations. Still, China will provide another one billion doses to African countries, including 600 million doses as donation, and will also donate 150 million doses to ASEAN countries.

China Xinhua News

Economic globalization is the trend of the times. Though countercurrents are sure to exist in a river, none could stop it from flowing to the sea. Driving forces bolster the river’s momentum, and resistance may yet enhance its flow. Despite the countercurrents and dangerous shoals along the way, economic globalization has never and will not veer off course. Countries around the world should uphold true multilateralism. We should remove barriers, not erect walls. We should open up, not close off. We should seek integration, not decoupling. This is the way to build an open world economy. We should guide reforms of the global governance system with the principle of fairness and justice, and uphold the multilateral trading system with the World Trade Organization at its center. We should make generally acceptable and effective rules for artificial intelligence and digital economy on the basis of full consultation, and create an open, just and non-discriminatory environment for scientific and technological innovation. This is the way to make economic globalization more open, inclusive, balanced and beneficial for all, and to fully unleash the vitality of the world economy.

A common understanding among us is that to turn the world economy from crisis to recovery, it is imperative to strengthen macro-policy coordination. Major economies should see the world as one community, think in a more systematic way, increase policy transparency and information sharing, and coordinate the objectives, intensity and pace of fiscal and monetary policies, so as to prevent the world economy from plummeting again. Major developed countries should adopt responsible economic policies, manage policy spillovers, and avoid severe impacts on developing countries. International economic and financial institutions should play their constructive role to pool global consensus, enhance policy synergy and prevent systemic risks.

Third, we need to bridge the development divide and revitalize global development. The process of global development is suffering from severe disruption, entailing more outstanding problems like a widening North-South gap, divergent recovery trajectories, development fault-lines and a technological divide. The Human Development Index has declined for the first time in 30 years. The world’s poor population has increased by more than 100 million. Nearly 800 million people live in hunger. Difficulties are mounting in food security, education, employment, medicine, health and other areas important to people’s livelihoods. Some developing countries have fallen back into poverty and instability due to the pandemic. Many in developed countries are also living through a hard time.

No matter what difficulties may come our way, we must adhere to a people-centered philosophy of development, place development and livelihoods front and center in global macro-policies, realize the UN’s 2030 Agenda for Sustainable Development, and build greater synergy among existing mechanisms of development cooperation to promote balanced development worldwide. We need to uphold the principle of common but differentiated responsibilities, promote international cooperation on climate change in the context of development, and implement the outcomes of COP26 to the United Nations Framework Convention on Climate Change. Developed economies should take the lead in honoring their emissions reduction responsibilities, deliver on their commitment of financial and technological support, and create the necessary conditions for developing countries to address climate change and achieve sustainable development.

Last year, I put forward a Global Development Initiative at the UN General Assembly to draw international attention to the pressing challenges faced by developing countries. The Initiative is a public good open to the whole world, which aims to form synergy with the 2030 Agenda for Sustainable Development and boost common development across the world. China stands ready to work with all partners to jointly translate the Initiative into concrete actions and make sure that no country is left behind in this process.

China Xinhua News

Fourth, we need to discard Cold War mentality and seek peaceful coexistence and win-win outcomes. Our world today is far from being tranquil; rhetorics that stoke hatred and prejudice abound. Acts of containment, suppression or confrontation arising thereof do all harm, not the least good, to world peace and security. History has proved time and again that confrontation does not solve problems; it only invites catastrophic consequences. Protectionism and unilateralism can protect no one; they ultimately hurt the interests of others as well as one’s own. Even worse are the practices of hegemony and bullying, which run counter to the tide of history. Naturally, countries have divergences and disagreements between them. Yet a zero-sum approach that enlarges one’s own gain at the expense of others will not help. Acts of single-mindedly building “exclusive yards with high walls” or “parallel systems”, of enthusiastically putting together exclusive small circles or blocs that polarize the world, of overstretching the concept of national security to hold back economic and technological advances of other countries, and of fanning ideological antagonism and politicizing or weaponizing economic, scientific and technological issues, will gravely undercut international efforts to tackle common challenges.

The right way forward for humanity is peaceful development and win-win cooperation. Different countries and civilizations may prosper together on the basis of respect for each other, and seek common ground and win-win outcomes by setting aside differences.

We should follow the trend of history, work for a stable international order, advocate common values of humanity, and build a community with a shared future for mankind. We should choose dialogue over confrontation, inclusiveness over exclusion, and stand against all forms of unilateralism, protectionism, hegemony or power politics.

Ladies and Gentlemen,

Friends,

Last year, the Communist Party of China (CPC) celebrated the 100th anniversary of its founding. Through a century of tenacious struggle, the CPC has rallied and led the Chinese people in accomplishing remarkable achievements in the advancement of the nation and betterment of people’s lives. We have realized a moderately prosperous society in all respects and won the battle against poverty, both according to plan, and found a historic solution to ending absolute poverty. Now, China is marching on a new journey of building a modern socialist country in all respects.

— China will stay committed to pursuing high-quality development. The Chinese economy enjoys a good momentum overall. Last year, our GDP grew by around eight percent, achieving the dual target of fairly high growth and relatively low inflation. Shifts in the domestic and international economic environment have brought tremendous pressure, but the fundamentals of the Chinese economy, characterized by strong resilience, enormous potential and long-term sustainability, remain unchanged. We have every confidence in the future of China’s economy.

“The wealth of a country is measured by the abundance of its people.” Thanks to considerable economic growth, the Chinese people are living much better lives. Nonetheless, we are soberly aware that to meet people’s aspiration for an even better life, we still have much hard work to do in the long run. China has made it clear that we strive for more visible and substantive progress in the well-rounded development of individuals and the common prosperity of the entire population. We are working hard on all fronts to deliver this goal. The common prosperity we desire is not egalitarianism. To use an analogy, we will first make the pie bigger, and then divide it properly through reasonable institutional arrangements. As a rising tide lifts all boats, everyone will get a fair share from development, and development gains will benefit all our people in a more substantial and equitable way.

— China will stay committed to reform and opening-up. For China, reform and opening-up is always a work in process. Whatever change in the international landscape, China will always hold high the banner of reform and opening-up. China will continue to let the market play a decisive role in resource allocation, and see to it that the government better plays its role. We will be steadfast in consolidating and developing the public sector, just as we are steadfast in encouraging, supporting and guiding the development of the non-public sector. We will build a unified, open, competitive and orderly market system, where all businesses enjoy equal status before the law and have equal opportunities in the marketplace. All types of capital are welcome to operate in China in compliance with laws and regulations, and play a positive role for the development of the country. China will continue to expand high-standard opening-up, steadily advance institutional opening-up that covers rules, management and standards, deliver national treatment for foreign businesses, and promote high-quality Belt and Road cooperation. With the entry into force of the Regional Comprehensive Economic Partnership Agreement (RCEP) on 1 January this year, China will faithfully fulfill its obligations and deepen economic and trade ties with other RCEP parties. China will also continue to work for the joining of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA), with a view to further integrating into the regional and global economy and achieving mutual benefit and win-win results.

— China will stay committed to promoting ecological conservation. As I have said many times, we should never grow the economy at the cost of resource depletion and environmental degradation, which is like draining a pond to get fish; nor should we sacrifice growth to protect the environment, which is like climbing a tree to catch fish. Guided by our philosophy that clean waters and green mountains are just as valuable as gold and silver, China has carried out holistic conservation and systematic governance of its mountains, rivers, forests, farmlands, lakes, grasslands and deserts. We do everything we can to conserve the ecological system, intensify pollution prevention and control, and improve the living and working environment for our people. China is now putting in place the world’s largest national parks system. Last year, we successfully hosted COP15 to the Convention on Biological Diversity, contributing China’s share to a clean and beautiful world.

Achieving carbon peak and carbon neutrality are the intrinsic requirements of China’s own high-quality development and a solemn pledge to the international community. China will honor its word and keep working toward its goal. We have unveiled an Action Plan for Carbon Dioxide Peaking Before 2030, to be followed by implementation plans for specific sectors such as energy, industry and construction. China now has the world’s biggest carbon market and biggest clean power generation system: the installed capacity of renewable energy has exceeded one billion kilowatts, and the construction of wind and photovoltaic power stations with a total installed capacity of 100 million kilowatts is well under way. Carbon peak and carbon neutrality cannot be realized overnight. Through solid and steady steps, China will pursue an orderly phase-down of traditional energy in the course of finding reliable substitution in new energy. This approach, which combines phasing out the old and bringing in the new, will ensure steady economic and social development. China will also actively engage in international cooperation on climate and jointly work for a complete transition to a greener economy and society.

Ladies and Gentlemen,

Friends,

Davos is known as a heaven for winter sports. The Beijing Olympic and Paralympic Winter Games will open soon. We are confident that China will present a streamlined, safe and splendid Games to the world. The official motto for Beijing 2022 is “Together for a Shared Future”. Indeed, let us join hands with full confidence, and work together for a shared future.

Thank you.

Another Nail in the U.S. Empire’s Coffin… Biden Signs $770 Billion War Budget

December 31, 2021

Source

 Photo: REUTERS/Carlos Barria

Three decades after the Cold War officially ended, the U.S. is setting a new record high for annual expenditure on its armed forces.

As this year ends, U.S. President Joe Biden signed into law military spending of $770 billion. That’s just for the next year alone. The scale of wastefulness and bloated corruption is eye-watering. It eclipses what the United States is willing to invest for overhauling its badly neglected civilian infrastructure and for combating the coronavirus pandemic that has killed far more people in the U.S. than in any other nation.

If there is one thing that portends a historic collapse of U.S. global power it is its pathological addiction to militarism that is hemorrhaging vital resources.

What is also amazing is how this gargantuan deformity in economic planning is presented as somehow rational and normal by the Western media.

Three decades after the Cold War officially ended, the U.S. is setting a new record high for annual expenditure on its armed forces.

Biden’s budget – his first as president – exceeds the record set by the previous Trump administration for military largesse of $740 billion.

So much for wishing humanity peace and prosperity – as is the international tradition at this time of year – when the U.S. allocates such a grotesque amount of resources to the means of war and annihilation.

This obscene expenditure is not in any way conceivably a “defense budget” as it is termed in Orwellian newspeak. It is a dreadful and despicable war budget.

The United States spends more on its military than the next 11 top nations combined. Compared with China ($250bn) the U.S. budget is nearly three times bigger. The U.S. spends over 12 times more than Russia ($60bn) on its armed forces.

Those figures alone tell beyond any doubt which nation is the ultimate aggressor. Yet, farcically, the Western corporate media in Orwellian fashion portray China and Russia as the aggressors against whom the United States is “defending’ the rest of the world.

Biden’s 2022 National Defense Authorization Act (NDAA), as it is formally titled, devotes billions more to devising new nuclear weapons and to provoke China and Russia. Camouflaged with Orwellian rhetoric, there is some $7 billion for the “Pacific Deterrence Initiative” and $4 billion for the “European Defense Initiative”.

The Biden administration has committed a further $300 million in military support for Ukraine over the next year. This is on top of the $2.5 billion in arms that Washington has plowed into Ukraine since the CIA-backed coup d’état in Kiev in 2014 which brought to power a Russophobic regime.

Next week, U.S. and Russian officials are to hold negotiations in Geneva to deescalate tensions over Ukraine and Europe generally. It is blindingly obvious that the crisis over security has been created by the United States pushing a policy of militarizing Europe against Russia in the form of expanding the NATO alliance all the way to Russia’s borders.

With twisted logic, Moscow is accused of “threatening” Ukraine and European security even though its troops are on Russian soil and it is American weapons that are encroaching on Russia’s territory.

The inordinate military spending by the United States year after year is proof of the source of international tensions.

When the Cold War supposedly ended in 1991 following the demise of the Soviet Union, there was a reasonable expectation around the world for a “peace dividend” to ensue. That is, whereby Cold War militarism would at last give way to peaceful economic development and cooperation. How lamentable the disappointment!

The inescapable fact is that the U.S. economy is a war-driven system. The military-industrial complex at the heart of American capitalism is dependent on massive taxpayer-funded financial subvention. If an economy is driven for war, then it follows that conflicts and wars are inevitable. This is why, 30 years after the supposed end of the Cold War, the United States is closer to starting a war with Russia and China than ever before.

In an insightful interview this week, former United Nations diplomat Alfred Maurice de Zayas condemned what he called the “universal provocation” of the US “war budget”. De Zayas points out that the United States is preeminently guilty of undermining global peace and security. Its relentless militarism compels other nations to spend excessively on defense in order to counter the threat posed by the United States. Both China and Russia have long-proposed multilateralism and “win-win” cooperation. Neither of these nations has threatened the United States. It is always the U.S. with its mixture of paranoia and hubris that constantly portrays others as enemies and existential dangers. Again, that is due to the need for justifying the abomination of American military orgy year after year.

The truth is the United States has been at war against the rest of the world since at least the end of the Second World War. For most of that period, the Cold War, Washington cited the threat of Soviet and Chinese communism. It waged wars in dozens of countries on every continent killing tens of millions of people purportedly in the “defense of democracy and the free world”. How godawful ridiculous is that?

The Cold War was supposed to have ended, yet the U.S. continues its remorseless warmongering. It retreated from Afghanistan this year after two decades of futile war, only to now wind up tensions with Russia and China. The pretexts and excuses change over the decades, but the fundamental story remains the same: the United States is at war with the rest of the world in the vain ambition of exerting hegemonic domination. Arguably, that’s an essential definition of fascism.

But it’s not just against the rest of the world that the U.S. rulers are waging war. They are waging war against their own American citizens. The Washington elite of both parties (comprising the de facto War Party) whistle through a military budget funded by taxpayers that dwarves anything the federal government is prepared to spend on societal infrastructure and decent human development.

Far above any other nation, the U.S. has a pandemic killing nearly 850,000 people so far and there is no end in sight. U.S. rulers refuse to allocate more financial help to the population to defeat the pandemic yet they are planning to spend billions on offensive weapons systems to threaten Russia and China.

The hideously perverse priorities of the United States as demonstrated by its wanton militarism are a portent and ultimate cause of its historic failure. It is a vile disgrace that the apparent solution to its inherent contradictions is to start a catastrophic war. Fortunately, Russia and China are strong enough militarily to not let that happen. And so the outcome we will witness more of over the coming year will be the United States cratering from its own internal corruption.

ديمقراطية أميركا بمثابة سلاح دمارٍ شاملٍ

الخميس 16 كانون الأول

المصدر: الميادين نت

لقد بشَّر بايدن الأميركيين والعالم بأنَّ “أميركا عائدة” في فترته الرئاسية

عمرو علان

كاتب وباحث سياسي في العديد من المنافذ الإخبارية العربية ، ومنها جريدة الأخبار ، وقناة الميادين الإخبارية الفضائية ، وعربي 21 ، وراي اليوم

في ظلِّ انشغال الأوروبيين بقضاياهم الداخلية الضّاغطة، إضافةً إلى تزامن قمة بايدن “للديمقراطية” مع المؤتمر الشعبي المؤتمر عن مستقبل أوروبا، تراجَع بشكلٍ عام الاهتمام الأوروبي بالقمة.

في مقاله الشَّهير “لماذا يجب على أميركا أن تقود مجدداً؟”، الذي نُشِر في آذار/مارس 2020 قبيل خوضه السباق الرئاسي، والذي رسم فيه جو بايدن معالم سياسته الخارجية في حال انتخابه، كان بايدن قد ركّز على فكرة كون العالم يخوض معركة “الديمقراطية” ضد “الأوتوقراطية”، بحسب فهمه. وكان من أبرز ما طرحه في مقاله ذاك، عزمه على عقد مؤتمر دولي بقيادة أميركا لدعم “الديمقراطية” وتعزيزها حول العالم.

ولعلّ القمة من أجل “الديمقراطية” التي عقدها في 9 و10 كانون الأول/ديسمبر 2021 هي ذاك المؤتمر الذي بشَّر به في مقاله المذكور، فهل جاءت قمة “الديمقراطية” ونتائجها كما بشَّر بها العالم إبان انتخابه؟

دعت الإدارة الأميركية أكثر من 100 دولة إلى قمة بايدن، لكننا نجد غياباً كاملاً لأي معايير في توجيه الدعوات، فحتى لو سلَّمنا للأميركي بمعاييره المفترضة وشهادات حسن السلوك التي خوّل نفسه توزيعها في “الديمقراطية” والحُكْم الرشيد من خلال مؤسسة “فريدام هاوس”، فإننا نجد تناقضاً واضحاً في قائمة المدعوين، فقد تمت دعوة العراق وباكستان والهند وأكرانيا مثلاً، بينما لم تتم دعوة سنغافورة، ولا تركيا وهنغاريا الأطلسيتين، ناهيك بعدم دعوة روسيا وإيران، رغم تنظيمهما انتخابات دورية وحقيقية. 

ولهذا، كان واضحاً من قائمة المدعوّين أنَّ الأميركي يتغطّى مجدداً بقضية “الديمقراطية” و”حقوق الإنسان” من أجل أهدافٍ جيوسياسيةٍ تتعلق بمواجهة الصين. أكّد هذا الاستنتاج الذي ذهب إليه غالبية المتابعين، دعوة تايوان إلى القمة، رغم أنها ليست دولةً مستقلةً. 

على الأرجح، كان هذا الاستنتاج هو ما دفع باكستان إلى الاعتذار عن حضور قمة بايدن، إذ قال رئيس الوزراء الباكستاني عمران خان، في 9 كانون الأول/ديسمبر 2021، إنَّ باكستان غير راغبةٍ في الانضمام إلى أيّ تجمعٍ سياسيٍ ضد أحدٍ، وإنَّ العالم عانى الكثير من الحرب الباردة، وإن دولته لا ترغب في أن تجد نفسها جزءاً من حربٍ باردةٍ جديدةٍ. 

وجاء موقف روسيا والصين حازماً تجاه قمة بايدن، إذ قالت المتحدثة باسم وزارة الخارجية الروسية، ماريا زاخاروفا: “تقوم الولايات المتحدة بتدمير نظام العلاقات الدولية المؤسسة على القانون الدولي والدور المركزي للأمم المتحدة، وذلك من أجل إنشاء منطقة راحة خاصة بها تنوي واشنطن أن تهيمن فيها بانفراد…”. ولهذا السبب بالذات، تنظّم الولايات المتحدة هذه الفعالية الجماعية في شكل “قمة الديمقراطية”، التي ستمنح المشاركين فيها شرف حق خدمة المصالح الأميركية.

أما الصين، فقال المتحدث باسم وزارة خارجيتها إن الديمقراطية أصبحت منذ فترةٍ طويلةٍ سلاح دمارٍ شاملٍ تستخدمه الولايات المتحدة للتدخل في الدول الأخرى، مشيراً إلى الثورات الملونة التي أثارتها أميركا في الخارج، وتابع كلامه بالقول: “إن القمّة نُظّمت لرسم خطوط تحاملٍ أيديولوجيةٍ، واستغلال الديمقراطية… والتحريض على الانقسام والمواجهة”.

إذاً، ما كان الهدف الحقيقي من قمة بايدن – كما بات واضحاً للقاصي والداني في دول العالم – إلا مواجهة صعود الصين في الدرجة الأولى، والتصدي لعودة روسيا إلى الساحة الدولية في الدرجة الثانية. 

عندها، لا حرج إذا قيل إنَّ القمة لم تحقق الكثير على هذا الصعيد، فاستبعاد دول مثل سنغافورة، التي تقع في المجال الحيوي للصين، والتي يمكن أن يكون لها دور كبير ضمن استراتيجية أميركا لمواجهة الصين، لا يبدو خطوةً أميركيةً في الاتجاه الصحيح.

ولعلَّ استبعاد سنغافورة كان في الأساس بسبب رفض رئيس الوزراء السنغافوري الدخول في تحالف من أجل “الديمقراطية”، يكون الهدف الحقيقي منه الدخول في حربٍ باردةٍ جديدةٍ ضد الصين، ولا يبدو كذلك استبعاد تركيا ومصر، الدولتين الإقليميتين المهمتين، خطوة أميركية محسوبة، فكما قال ستيفن وولت في مقاله بعنوان “قمة بايدن للديمقراطية يمكن أن تأتي بنتائج عكسية”: “إذا ما كانت الصين تعدّ التحدي المركزي للولايات المتحدة الأميركية في هذه المرحلة، فإن التركيز على الديمقراطية يمكن ألّا يكون الطريق الأمثل لمواجهة هذا التحدي”.

أما عن حضور أوروبا في هذه القمة، فرغم تصريحات ممثل السياسات الخارجية للاتحاد الأوروبي، جوسيب بوريل، التي حثَّت الدول الأوروبية على المشاركة البنَّاءة في قمة بايدن، فإنَّ مصالح أوروبا لا تبدو متطابقة مع الولايات المتحدة الأميركية تجاه الصين في هذه المرحلة، ولا سيما في ظل جائحة “كوفيد-19” والتغيّر المناخي، إضافة إلى صعود الصين كقطب اقتصادي مهم لدول العالم، فكما أوضحت إيرين جونز وإليسا ليدو في مؤسسة كارنيغي للأبحاث: “تسود أوروبا تحفّظات على عودة أميركا لقيادة العالم، إذ يشير مصطلح “الاستقلال الاستراتيجي” الذي يُعد الأكثر رواجاً في أوروبا في هذه الحقبة إلى مَنحى أوروبيّ للخلاص من الخيار بين قيادة واشنطن أو بكين”.

وأضافت جونز وليدو أنَّ البعض في أوروبا يرى أنَّ تقسيم بايدن لدول العالم بين دول “ديمقراطية” يمكن التعامل معها، وأخرى “غير ديمقراطية” لا تصلح للتعامل معها، لا يأخذ بالحسبان تعقيدات العالم في هذه الحقبة.

وفي ظلِّ انشغال الأوروبيين بقضاياهم الداخلية الضّاغطة، إضافةً إلى تزامن قمة بايدن “للديمقراطية” مع المؤتمر الشعبي المؤتمر عن مستقبل أوروبا، تراجَع بشكلٍ عام الاهتمام الأوروبي بالقمة، في إشارةٍ إلى تراجع أهمية هذه القمة على المستوى العالمي.

لقد بشَّر بايدن الأميركيين والعالم بأنَّ “أميركا عائدة” في فترته الرئاسية، وكان العمل على تعزيز ما سمّاه “الديمقراطية” في العالم ومواجهة “الأوتوقراطية”، من خلال عقد قمّة عالمية لهذا الغرض، بحيث تكون فاتحةً لمسار جديد تقوده الولايات المتحدة الأميركية، وكلنا يدرك أنَّ هذه العبارات تخفي وراءها هدف مواجهة صعود الصين كقطب عالميّ، واستعادة روسيا مكانتها كقطب دولي آخر، فإذا بنا نجد بايدن يعقد قمة عن بُعد، رأى فيها الكثيرون مجرد استعراض لقيادةٍ أميركيةٍ عالميةٍ لم تَعُدْ موجودةً بالفعل، وظهر أنها كانت موجهةً إلى الداخل الأميركي أكثر من الخارج، وذلك، كما يبدو، في محاولةٍ لطمأنة الداخل الأميركي إلى موقع أميركا العالمي.

ولكنَّ المفارقة كانت في عقد أميركا مؤتمراً من أجل “الديمقراطية” عقب شهورٍ قليلةٍ فقط على إعلانها فشل مشروعها المزعوم لترسيخ ديمقراطيتها في أفغانستان، وعقب تزايد الحديث عن تراجع “الديمقراطية” في الداخل الأميركي ذاته، وذلك في ظلِّ عدم اعتراف قطاعٍ واسعٍ من بين الجمهوريين بنتائج الانتخابات الرئاسية الأميركية الأخيرة.

في ظلِّ تراجع الإمبراطوريات، يبدو أنَّنا سنبدأ بسماع الكثير من الجعجعة من دون رؤية الطحين. ولا أريد المبالغة كثيراً، لكنَّ قمة بايدن الأخيرة هذه تذكِّر بالقمم العربية التي لم يكن ينتج منها سوى البيانات، من دون أية نتائج عمليةٍ على أرض الواقع.إن الآراء المذكورة في هذه المقالة لا تعبّر بالضرورة عن رأي الميادين وإنما تعبّر عن رأي صاحبها حصراً

Putin and Xi plot their SWIFT escape

Russia and China’s announcement of an independent financial trading platform will free nations under US sanctions from western intrusion into their commercial activities.

December 17 2021

Russian President Vladimir Putin and Chinese President Xi Jinping’s December video summit could mark the start of some major global financial shiftsPhoto Credit: The Cradle

By Pepe Escobar

Vladimir Putin got straight to the point. At the opening of his one hour and fourteen minute video conversation with Xi Jinping on 15 December, he described Russia-China relations as “an example of genuine inter-state cooperation in the 21st century.”

Their myriad levels of cooperation have been known for years now – from trade, oil and gas, finance, aerospace and the fight against Covid-19, to the progressive interconnection of the Belt and Road Initiative (BRI) and the Eurasia Economic Union (EAEU).

But now the stage was set for the announcement of a serious counter-move in their carefully coordinated ballet opposing the relentless Hybrid War/Cold War 2.0 combo deployed by Empire.

As Assistant to the President for Foreign Policy Yuri Ushakov succinctly explained, Putin and Xi agreed to create an “independent financial structure for trade operations that could not be influenced by other countries.”

Diplomatic sources, off the record, confirmed the structure may be announced by a joint summit before the end of 2022.

This is a stunning game-changer in more ways than one. It had been extensively discussed in previous bilaterals and in preparations for BRICS summits – mostly centered on increasing the share of yuan and rubles in Russia-China settlements, bypassing the US dollar, and opening new stock market options for Russian and Chinese investors.

Now we’ve come to the crunch. And the catalyzing event was none other than US hawks floating the – financially nuclear – idea of expelling Russia from SWIFT, the messaging network used by 11,000+ banks in over 200 countries, as well as financial institutions, for rapid money transfers worldwide.

Cutting off Russia from SWIFT would be part of a harsh new sanctions package developed in response to an ‘invasion’ of Ukraine that will never happen – mainly because the only ones praying for it are professional NATO warmongers.

Profiting from a strategic blunder

Once again, an American strategic blunder offers the Russia-China self-described “comprehensive strategic partnership” the chance to advance their coordination.

Ushakov put it very diplomatically: it’s time to bypass a SWIFT mechanism “influenced by third countries” to form “an independent financial structure.”

That amounts to a serious game-changer for the entire Global South – as scores of nations yearn to be released from a de facto US dollar dictatorship, complete with recurring Fed quantitative easing circus packages.

Russia and China have been experimenting with their alternative payment systems for quite a while now: the Russian SPFS (System for Transfer of Financial Messages) and the Chinese CIPS (Cross Border Interbank Payment System).

It won’t be easy, as the most powerful Chinese banks are deep into SWIFT and have expressed their reservations about SPFS. Yet, they will have to inevitably integrate prior to the launch of the new mechanism, possibly in late 2022.

Once the most important Russian and Chinese banks – from Sberbank to the Bank of China – adopt the system, the path opens for other banks across Eurasia and the Global South to join in.

In the long run, SWIFT, prone to non-stop American political interference, will be increasingly marginalized, or restricted to Atlanticist latitudes.

Bypassing the US dollar, on trade and all sorts of financial settlements, is an absolutely central plank of the ever-evolving Russia-China notion of a multipolar world.

The road will be long, of course, especially when it comes to offering a solid counterpoint to the US-controlled global financial system, a maze that includes the humongous investment houses of the BlackRock, Vanguard and State Street variety, with their interlocking shareholding of virtually every major multinational company.

Yet a SWIFT escape will rapidly gain momentum, because it is inextricably linked to a series of developments that Putin-Xi touched upon in their conversation, the most important of which are:

1. The progressive interconnection of BRI and EAEU, offering expanding roles to the BRICS-run New Development Bank (NDB) as well as the Asia Infrastructure Investment Bank (AIIB).

2. The increasing geopolitical and geo-economic reach of the Shanghai Cooperation Organization (SCO), especially after the admission of Iran in October.

3. And crucially, the upcoming Chinese presidency of the BRICS in 2022.

China in 2022 will invest deeply in BRICS+. This expanded BRICS club will be linked to a development process that includes:

1. The consolidation of the Regional Comprehensive Economic Partnership (RCEP) – a massive East Asia trade deal uniting China, the ASEAN 10 and Japan, and South Korea, as well as Australia and New Zealand.

2. The African Continental Free Trade Area (ACFTA).

3. And the memoranda of understanding signed between the EAEU and MERCOSUR and between the EAEU and ASEAN.

Anchoring West Asia  

Yaroslav Lissovolik, one of the world’s leading experts on BRICS+, argues that it’s now time for BRICS+ 2.0, operating in a system that opens “the possibility for bilateral and plurilateral agreements to complement the core network of regional alliances formed by BRICS countries and their respective regional neighbors.”

So if we’re talking about a major qualitative jump in terms of economic development across the Global South, the question is inevitable. What about West Asia?

All these interconnections, plus an escape from SWIFT, will certainly profit the China-Pakistan Economic Corridor (CPEC), arguably the flagship BRI project, to which Beijing plans to annex Afghanistan.

CPEC will be progressively connected to the future Iran-China corridor via Afghanistan, part of the 20 year Iran-China strategic deal in which BRI projects will be prominently featured. Iran and China already trade in yuan and rials, so settlements between Iran and China in a non-SWIFT mechanism will be a given.

What happened to Iran is a classic example of SWIFT becoming hostage of imperial political manipulation. Iranian banks were expelled from SWIFT in 2012, because of pressure from the usual suspects. In 2016, access was restored as part of the JCPOA, clinched in 2015. Yet in 2018, under the Trump administration, Iran was once again cut off from SWIFT.

None of that will ever happen with Iran joining the new Russia-China mechanism.

And that leads us to the interconnection of China’s BRI expansion in Iran, Iraq, Syria, Lebanon and Yemen. The reconstruction of Syria may be largely financed via the non-SWIFT mechanism. Same for China buying Iraqi energy. Same for the reconstruction of a Yemen possibly hosting a Chinese-owned port, part of the “string of pearls.”

Saudi Arabia, the Emirates and Israel may remain in the US financial sphere of influence, or lack thereof. And even if there is no BRICS nation anchoring West Asia, and no regional integration economic agreement on the horizon, the role of the economic integrator is bound to be eventually played by China.

China will play a similar role to Brazil anchoring MERCOSUR, Russia anchoring the EAEU and South Africa anchoring the SADC/SACU.

Both BRI and the EAEU will get a tremendous boost by bypassing SWIFT. You simply can’t go multipolar if you trade using (devalued) imperial legal tender.

BRI, EAEU and those interlocking economic development agreements, combined with digital technology, will be integrating billions of people in the Global South.

Think of a possible, auspicious future spelling out cheap telecom delivering financial services and world market access, in a non-dollar environment, to all those who have been so far cut off from a truly globalized economy.

The views expressed in this article do not necessarily reflect those of The Cradle.