Monday, 28 April 2014


A diplomatic solution favoring Russia and at the expense of Ukraine is the only possible outcome in the crisis between Russia and the West over Ukraine created as a result of Western covert operations in 2013-2014 and Russia's refusal to accept a diminished strategic zone of influence around its southern border. Clearly, the US had been piling up anti-Russia baggage throughout 2013 over the Snwoden spy revelations; over the fact that US-Arab-Turkish-EU covert operations to bring down Assad in Syria did not work owing in large measure to Russia, but also China; over the fact that Russia held a key role in the Iran rapprochement with the West; and over the fact that China has sided with Russia to preserve the Asian balance of power against US-EU incursions. In short, Ukraine is only the tip of a large iceberg beneath which rests very aggressive imperialism on the part of the US and its G-7 partners, but also Russia and China realizing they have to play the same game.

The futility of US-Western policy over Ukraine is indicative that Russia is holding most of the cards in this poker game of Western vs. revived Russian imperialism. US and EU corporations have no stomach for huge loses in the Ukraine and Russian markets, just as the West has no stomach for destabilizing a world economy that is just now trying to return from the oblivion of recession. My prediction is there is absolutely nothing that the West will do over Ukraine, as long as Russia sticks to the Eastern provinces that it claims constitute a legitimate zone of influence and strategically vital for Moscow.

Moreover, the US and NATO appear weak and helpless over this issue, because their threats are hollow without much muscle to back them up, thus projecting the image that tough rhetoric and a massive propaganda campaign - just as massive as the one from the Russian side - could finally persuade the influential people around Putin to negotiate their way out of the crisis. Eventually, there will be a negotiated settlement, but not as long as the US and West are pumping millions into the pro-West Ukrainian elements in order to secure the mineral and agrarian rich country as a valuable satellite.

On April 27, 2014, US deputy National Security warned Russia that the US and its allies demand a resolution to the crisis over Ukraine because the sanctions would be escalated. Although Republican Sen. Bob Corker suggested the West target Russia's banking system to cripple its economy completely, the Obama team continues targeting individuals close to Putin and the Russian defense industry. Obama repeated the "targeted sanctions" strategy would continue, avoiding any type of a broad and general sanctions policy and certainly refusing a military solution for the ongoing Ukrainian crisis.  The best hope of the US is to secure G-7 cooperation on the targeted sanctions strategy, and hope it works as Russia's defense industry begins to feel the pain along with the pain that millionaires and billionaires around Putin would feel as well.

That the US refuses to accede to Ukraine's demands for military assistance or to put the military option combined with a general economic sanctions option on the table reveals how dangerous the US views the situation if it pushes Russia too far. Needless to say, Ukraine will not deter Russia from pursuing what it deems legitimate sphere of influence interests all around its border, and the US  with its NATO partners simply lack the will to place their own national interests on the line over Ukraine. Sending IMF and World Bank aid to Ukraine only means mortgaging the country and sinking it into deep debtor status for the next one hundred years, and without providing any guarantees that Russia will not get its way in the Eastern provinces or inside the country as it did in Crimea.

As China is becoming very powerful and likely to replace the US as the world' richest nation at some point in this century, the US needs Russia for the long term. The aggressive antagonistic relationship it has been pursuing over Syria, Snowden, Iran and Ukraine is shortsighted and fails to take into account larger longer term geopolitical and economic interests. Just as the US decided to strengthen China economically in order to weaken and break down the Soviet bloc, similarly, it may wish to strengthen Russia to counterbalance China in ten to twenty years from now. After all, the US worked very hard to end Communism and bring about the kind of open market system Russia has today. That Putin is trying to introduce a more nationalistic course in the economy to reflect his own political vision and ambitions does not mean that Russia will be closed to Western integration, assuming the West does not itself close the door on Russia.

The Asia trip by Obama in late April 2014 was intended to strengthen US ties with China's neighbors so that the US is not left out as a player in the next few decades. I understand that policymakers are immersed in Cold War thinking mode that prevents them from thinking outside the confines of the existing model. However, isolating and weakening Russia is to the detrimental longer term interests of the West that ought to be more concerned with China's might. The caveat here is simple; the US even with its allies assisting is simply unable to impose containment policies on both Russia and China as it is trying to do, as the US tried to do with some degree of success during the early Cold War. The days of the Cold War are long gone and, as I wrote in a recent article, the time has come to promulgate a new realistic foreign policy doctrine that takes into account the realities of the present and not the dreams of the past.

Finally, the shortsightedness of US policy is that while it need Russian cooperation on so many fronts, from diplomatic to economic, Washington is deliberately alienating Moscow and driving the Russian people closer to Putin and his regime that is indeed very corrupt and oligarchic. I wonder if it has really occurred to the State Department that it is really doing Putin a favor by making him more popular at home with an approval rating at 80% or about twice that of what Obama enjoys in the US. I wonder if the US realizes it has really become the best cheerleader for Putin and his government with his domestic popular base as well as the Russian power base - military, economic and social interests. If the intention was to undermine Putin and his regime, the exact opposite has been achieved by a shortsighted US policy.

Wednesday, 16 April 2014


The Cold War was over in the late 1980s-early 1990s, but the Cold War doctrines behind which institutional structures are maintained have not gone away. Is it time to leave the Cold War doctrines behind and carve out a new realistic US foreign policy doctrine, or does the US simply continue to re-baptize existing Cold War doctrines as occasion warrants by each president with "terrorism" as a core issue? 

From President Monroe in the 1820s until Obama in the2010s, there have been a number of foreign policy doctrines. Among the most significant for US history the Monroe Doctrine and the Truman Doctrine,
basically defined the perimeters of US national security interests by providing an ideological framework and became the basis for decision making whenever it became feasible to act and deemed in the greatest interests of those making policy. All other doctrines on foreign affairs were basically extensions of modifications of those two that essentially declared the state of Pax Americana, namely, the US as a Great Power competing with Europe from Monroe to FDR, and then a Global Power competing with USSR and China from Truman to Reagan. The downfall of Communism and the global economic integration of China and Russia into the capitalist system obviated all US foreign policy doctrines, at least in theory, so a new doctrine had to be invented to reflect the present and future aspirations of the country.

The new doctrine revolved around the US campaign on 'terrorism', a nebulous term with Muslim fanatics at  its core, but in essence a generic term applied to anyone carrying out an individual or group act through unconventional means of force. Accordingly, when the unelected Western-backed right-wing of Ukraine declared the pro-Russian Ukrainians "terrorists", it was following the rhetoric invented by the US so that the Ukrainian government could reinforce its own legitimacy, demonize the pro-Russian rebels, and at the same time secure US-Western backing for its crackdown against the minority prompted by the Russian government to agitate against the majority itself lacking legitimacy that political elections provide.  

Largely a crisis created with the considerable help of the US and Europeans interested in having a foothold at Russia's doorstep, the Ukrainian crisis has many analysts wondering if there is an Obama doctrine. The question of course is how to define a US foreign policy "doctrine". Is it just another foreign policy statement applied narrowly to the specific situation only, or does it have much broader implications to the degree that it tends to be all-encompassing and universal like the Truman Doctrine redefining Pax Americana?

FOX news insisted that the "Obama Doctrine" is either to ignore a problem like Ukraine, or simply go to war; amazing statement given its assumption that this constitutes a doctrine. Needless to say, the ultra-conservative FOX news would have the US engage in perpetual conflict and dismiss diplomacy as an option even when it is obvious the end result of the military solution toward what FOX regards as America's enemies would be extremely detrimental to US interests, while yielding great profits for defense contractors; a foreign policy that both Reagan and George W. Bush pursued to the near-bankruptcy of public finances. However, the question of "doctrine" is much larger that a mere interpretation of Pax Americana; it is a statement with universal applicability for the long-term than a foreign policy tactic applied to a particular situation in a limited time span.

Does Ukraine and the Russian reaction to the crisis present the opportunity for the US to promulgate a new doctrine that replaces or supplements all previous ones? Are US national security interests at stake in Ukraine and in all former Soviet republics to the degree that Obama must lay down a set of foreign policy principles that US must back politically, economically, and militarily? If so, then does the new US doctrine explicitly state that if Russia directly or indirectly interferes in any former Soviet republic the US and NATO reserve the right to have all options, including military intervention in those republics, on the table? Does this then redefine Russia's role and its limits on spheres of influence? Does the new doctrine go as far as plainly stating that war with Russia will be an option if it violates the sovereignty of any Soviet republic, regardless of the minorities of those countries wishes to have closer ties or be integrated with Russia?

On 18 March 2014, Putin outlined a number of foreign policy pronouncements that some maintain constitute a doctrine intended to send a signal to the West. Among the points of this doctrine are the following. a. Suspicion of the West whose policy is driven by opportunistic expansionism instead of a set of principles. For this reason, the Kremlin cannot trust the West as a reliable partner, given that the goal of the US is to systematically weaken Russia through various methods. b. The rejection of Western style democracy for Russia that considers itself more Eurasian and European power and the rejection of Western-style international law intended for the strengthening of the West at the expense of the East. c. Russia has established a set of national security principles that include a safety net zone of influence made up of former Soviet republics the West has targeted for its own purposes. d. Neither the Westphalian system of national sovereignty nor the Western-dominated international organizations are credible against the reality of the West defining them to suit its own expansionist aims. e. Against the background of the relative decline of the West and ascendancy of Asia, Russia must determine for itself what constitutes a realistic regional and global power balance.

Does the Putin set of foreign policy assumptions and principles necessarily mean that the US has to respond, or should the US promulgate its own doctrine to reflect the realities of the world balance of power, including what Russia has in mind for its neighbors? The first major foreign policy declaration of the US came in the aftermath of the Napoleonic Wars and the Congress of Vienna with President James Monroe declaring the famous Monroe Doctrine that essentially sent a message to Europe about the Western Hemisphere as a domain for non-interference by extra-continental  powers. In the mid-1820s. the US hardly had the military or economic ability to impose political, economic or military hegemony, but it would head in that direction in the mid-1840s during the US-Mexico War and again in the late 1890s during the Spanish-American War when America had fully industrialized and become one of the great powers that Europeans had to take seriously.The Monroe Doctrine, with modifications in the last two hundred years, has lasted in its applicability for two centuries because it simply states that the US reserves the right to be the protector power, thus hegemonic, in the Hemisphere. This doctrine has been 5the driving engine behind US-Latin American relations, much to the US advantage but not to the republics south of the Rio Grande.

In 1947, President Harry S. Truman promulgated another major foreign policy measure (The Truman Doctrine) with universal long-term applicability that assumed global significance during the Cold War. Against the background of division of spheres of influence between East and West and the Communist revolutions in Greece and China, Truman stated in the doctrine that assumed his name that US foreign policy interests extend beyond the Western Hemisphere to include new spheres of influence - at the time Greece, Iran and Turkey - where Communism posed a threat - later Vietnam and Southeast Asia.

For an overview of the Truman Doctrine and its postwar implications see  Die Truman-Doktrin und der griechische Bürgerkrieg 1946-1949 - Jon Kofas  in Heiße Kriege im Kalten Krieg
Die Truman-Doktrin und der griechische Bürgerkrieg 1946-1949.  
Herausgeber:Greiner, Bernd; Müller, Christian Th.; Walter, Dierk
Verlag:Hamburger Edition, HIS Verlag 2006

The waning power of the US after the Vietnam War did not stop Reagan from promulgating his own doctrine as an extension of the Truman Doctrine, with greater focus on outspending the USSR militarily, while at the same time collaborating with China economically, which in essence strengthened Beijing militarily at the expense of its neighbor. The other side of the Reagan Doctrine was that the weakened USSR would automatically mean a much stronger US; something that was certainly true in limited respects after the collapse of Communist regimes, but hardly something lasting given the strong economic emergence of China.

In reinforcing the Cold War Truman Doctrine in the aftermath of the Vietnam War and the revolutions in Iran and Nicaragua, the Reagan Doctrine simply meant pouring everything the US could possibly afford into defense to eliminate its main military rival, only to rediscover, or rather recreate, another rival in the form of "global terrorism". Here too there was a need for a new doctrine under George W. Bush who presented a series of foreign policy that included preemptive strikes against America's real and potential enemies and unilateral foreign policy so that both the UN and US allies are bypassed when it comes to consultation, but not when it comes to asking them for help after the decision is made.

Given that the US created an entire institutional  domestic and foreign policy structure based on terrorism as the cornerstone of its domestic and foreign policy, largely a phantom considering that the US had collaborated with Islamic guerrilla warriors during the 1980s, and continued to collaborate with them in the Arab Spring uprisings, especially in Libya and Syria, the question is whether traditional foreign policy rivals like Russia and China take a back seat because they were good capitalists helping make billions for Western corporations? To differentiate his administration from Bush the interventionist and unilateralist, Obama made certain to publicize that he would be open to multilateral foreign policy and diplomatic solutions wherever possible. The global economic crisis combined with the massive debt Bush left for Obama to manage entailed that the US did not have the luxury of intervening freely in every part of the world to defend "national interests". Instead, the Obama team relied more on drone warfare that has been heavily criticized as causing war crimes by killing indiscriminately innocent people, but this did not require a special doctrine.

This brings us back to the Ukraine and the US and EU ambitions to integrate as much of the former Soviet territory as possible into the Western spheres of influence, largely because of their markets, energy and mineral resources. The wish list is one thing on the part of the US, but ability to achieve the goal with minimal damage to its interests and to its partners is another matter. Does the US have the ability to achieve the ambitious goal of integrating the former Soviet republics? Sending into the former Soviet republics mercenaries and others through NGOs as well as recruiting from extreme right wing groups opposing minorities may have worked in the Iran and other non-Western countries in the 1950s when the CIA was doing it, but it is much more difficult today in Ukraine, though not in Libya and Egypt.

Not just Russia but China and Iran stand in the way of US ambitions, and in the end it is these countries and not the US or EU that will prevail owing to both geographic proximity and geopolitical considerations like regional balance of power. Would it not be more realistic not to over-reach, given that intervention in Iraq and Afghanistan taught the US the bitter lesson of cost-benefit ratio was not worth the trouble just to strengthen Iran and China, while affording the US the symbolic political satisfaction of combating terrorism at its roots.

In the aftermath of the disintegration of Communist countries. the US hastily moved to promulgate an extension of the Truman Doctrine by shifting the "enemy focus" from Communists to terrorists, without ever examining if the country has the ability to carry out such an ambitious foreign policy amid decentralization of global economic power. Not taking into account the asymmetry between the vast military/intelligence spending and the declining civilian economy's ability to support such spending for the next fifty years only provides an illusion of military power and it leave the country with a much weaker middle class and working force at living standards of the 1970s.

This asymmetry can only be addressed  by seriously examining what is possible to afford as far as foreign policy ambitions. Otherwise, the US will be spending trillions and the beneficiaries will be the Chinese economy among others and a handful of US multinational corporations that hardly represent "American national security interests". Hastily putting together a "terrorism doctrine" to replace the Cold War in the absence of taking into account the shape of the economy today and in the next fifty years, without taking into account the entire social structure and not just what Eisenhower called the Military Industrial Complex dictating foreign affairs is very detrimental to the short-term and longer term US interests.

The Monroe Doctrine was not very realistic at the time it was promulgated, but it was very much so for the future as events in US-Latin American relations proved in the course of the 19th and early 20th century. The Truman Doctrine was very realistic in terms of aspirations and ability to execute for the time and for the next decade, until the Vietnam War proved the need for reexamination. The question today is whether there is any realism in the Bush doctrine that Obama has been following with some modifications.

I am not at all optimistic that this asymmetry will be addressed and a new realistic doctrine will be announced to finally replace Monroe and Truman and bring the country into the 21st century. The reason for this is that the few entrenched interests - everyone from defense contractors and Pentagon generals as well as think tanks making a living from the 'terrorism industry' - are interested in change that reflects realities of the present and realistic prospects for the future. Therefore, only a very deep crisis, economic, political, military or some combination of those will force the US to become a bit more realistic. Meanwhile, all we have is illusions feeding those who believe that Pax Americana can remain unchanged forever; illusions with incalculable costs to society  at home and to global stability.

Response to a reader about what specific doctrine would be best.

The question of what new doctrine to carve out is one that must not be drawn in haste, but after deliberation from various circles of experts who will take into account the realities of US military and economic strength right now and the projected US position in the world in the next fifty years. I deliberately stayed away from proposing anything specific,but noted some basic principles to follow, as well as what the global power structure is like currently and what it would look like in fifty years. Usually State Dept. and National Security staff work on such things, but I strongly believe it is time to consult people from various fields rooted in realism about the US role and its actual and potential power, instead of looking to ideologues to forge a new doctrine. If we merely have a repeat of the Bush doctrine, or rehashing of a previous one, there is no point to bother at all because there will be those who have an enormous stake in maintaining the status quo in its basic form.

Saturday, 5 April 2014


Introduction: A Question of Societal Values

In this very brief essay, I will compare and contrast corporate welfare and social welfare, focusing on some current trends that reflect fundamental values of a society. Analyzing how the mass media, politicians and institutions view corporate welfare vs. social welfare, the essay also examines the historical roots of both. In the end, there are only questions remaining about this topic, because ultimately a society’s value system is reflected in its choice whether to strengthen corporate welfare at the expense of social welfare. Each individual must decide what does it mean for a society when there is wide acceptance of corporate welfare and a rejection of social welfare?

Given that social welfare in the Western World emerged from within a culture of capitalism and individualistic values that are antithetic to secular collectivism or even Christian communitarianism, it is not at all surprising to see the degree of easiness with which Westerners reject social welfare, but readily accept corporate welfare. Socioeconomic hierarchy so readily accepted in the Western mindset, while egalitarianism so readily dismissed makes it easy for the mass media and politicians to stigmatize social welfare as parasitic while promoting corporate welfare as an integral part of economic progress.

The repugnance many in the West feel toward a social welfare system and the acceptance they have for corporate welfare is partly rooted in Social Darwinism that decried any institutional assistance for the weak and poor that must accept the fate accorded to them by the social evolutionary process. Therefore, the helpless child and her mother, the elderly man and his mentally ill son too poor to care for themselves must be punished for they contribute nothing to economic productivity. Whereas corporate welfare is identified with capitalism and that is widely viewed as a virtue, social welfare is seen as institutionalizing a Socialist-inspired program.

According to Social Darwinist thinking behind the opposition to social welfare, any intervention by the state to care for those unable to care for themselves would only reward parasitic elements lacking the Calvinist work ethic, individualistic values of material success, and the ambition it takes to become self-sufficient. Because a segment of those benefiting from social welfare are minorities in the modern Western World, opponents of social welfare could be motivated by ideological animosity toward Socialism, or perhaps by crypto- racism, ethnocentrism, and xenophobia.   

How humane, how compassionate, how democratic, and how civilized is a society that opts to shift resources to the wealthy from lower income groups, impoverished mothers and children, the elderly, and the mentally ill unable to care for themselves, while permitting the wretched of the earth to die of starvation, lack of medical care, housing, and the basic necessities of life, while at the same time celebrating the “success” of the rich becoming even richer because of corporate welfare? Beyond the question of societal values, there are the practical issues of the degree to which social welfare helps to maintain balance and harmony in a pluralistic society while corporate welfare upsets such institutional balances and precipitates polarization, antagonisms and instability.  

The legitimacy of corporate welfare vs. the stigma of social welfare

Most people are dismayed and shocked when they hear on TV or read about some welfare recipient cheating the system of a few thousand dollars or euro. By contrast, they easily brush aside news that hundreds of billions are given to bail out large banks and subsidies to corporations, or tax breaks as part of a corporate welfare system designed to support a capitalist economy insisting that it is still a “free enterprise” system, presumably standing on its own without government handouts. If one reads about or listens to political debates regarding the topic of social welfare in the advanced and semi-developed capitalist countries, the impression is that the economic ills and public debt problems have been caused by handouts to the poor who ought to go out and find work and become self sufficient. This means that in the minds of most people there is a lack of legitimacy for social welfare, indeed a stigma. By contrast, there is a sense of rightful ownership and legitimacy to public funds distributed to banks and corporations. When it comes time to reduce budgetary deficits, therefore, the target is not corporate welfare but social welfare.

If social welfare is the set of institutional activities resulting from government policies intended to address social problems of the lower strata of society, corporate welfare is a set of government policies intended to strengthen companies. In both cases public funds are needed to support the intended welfare program. Whereas in social welfare the goal is to provide the poor with a social safety net that included housing, food and medicine so that people do not die in the streets or turn to crime or contribute to social problems, the goal in corporate welfare is to strengthen the private sector by buttressing the strongest companies in their fields.

According to the opponents of social welfare, the same groups and individuals who are advocates of corporate welfare, the welfare state must reduce the social safety net for the poor who have sunk to the lower strata of society solely owing to their character flaws and not because the political economy is deficient. Because welfare recipients happen to be women and minorities in much of the Western World, there is inherent sexism, xenophobia, ethnocentrism and racism in the anti-social welfare debate that stigmatizes the lower classes on the margins of society and blames them for the problems of the economy and government budgets.  In the US the problem is the unwed black woman with children; in Germany it is the large Turkish family of nine milking the system; in the UK it is the Africans and more recently Bulgarians and Romanians.

Structural economic and political causes for slow growth and development, declining government revenues and rising public debt are defaulted to the poor, mostly women, children and minorities collecting welfare. The image that many politicians and media project regarding welfare has an underlying racist and xenophobic agenda. Behind the anti-social welfare politicians, media and other groups rests a deliberate effort to justify sharply curtailing social benefits and transferring funds to corporate welfare. This view emerged in the Reagan-Thatcher conservative decade of the 1980s when neoliberals and neoconservatives forged their views to argue for the gradual downsizing of social safety net, while transferring funds to corporate welfare that would presumably be productive for the economy instead of parasitic. By stigmatizing the social welfare system as parasitic, there was no longer a need to focus on the core issue of maintaining the social safety net and social justice or feel guilty about embracing a crypto-racist and crypto-xenophobic agenda that bordered on anti-democratic tendencies.

Markets over People: Neoliberal Demonization of Social Welfare and Advocacy for Corporate Welfare

Some may argue that the proponents of corporate welfare hiding behind neoliberalism and the market economy are in essence advocates of markets over people because they want a very weak social welfare system and social safety net. As the sentinel of international finance capitalism, the International Monetary Fund (IMF) subscribes to neoliberal anti-social welfare position when it goes around the world introducing austerity measures - monetary and fiscal reform policies - intended to lessen the role of the public sector and strengthen the strongest domestic and foreign capitalist elements where capital is concentrated. Most recently, this happened in Ireland, across Southern and Eastern Europe where the social safety net has shrunk substantially while corporate welfare expanded. Backed by neoliberal policies of the German and other EU governments, the IMF had no problem with tax breaks and subsidy policies to sustain the regime of corporate welfare, while strongly advocating reducing social welfare as contrary to free enterprise and economic growth, raising consumption taxes paid by the masses and reducing wages and benefits.

The IMF as well as neoliberals inside and outside of government want to leave the public with the impression that the cause for balance of payments problems and high public debt that diminishes the role of the private sector is not the parasitic corporate welfare system, but the social welfare state draining the budgets of governments that borrow in order to finance such programs for the poor who should be working and/or working more for lower wages and benefits to support all of their basic needs. Demonizing the social safety net under a welfare state is easy because neoliberals have the mainstream media to spread the word.

Reinforcing the neoliberal/neoconservative agenda, the mainstream media pursues isolated stories of some welfare mother that has been defrauding the government by collecting an additional paycheck on behalf of her dead husband, or for children she does not have - the welfare queen stereotype that is equated with the evils of the welfare state. The stereotypical story of the welfare queen or similar stories become the pretext to sharply downsize the demonized social welfare and permit the poor to stand on their own two feet in the iconic “free marketplace”, which is anything but free given the role of the state behind it. This is not to argue that there are no abuses in social welfare programs or that they are inherently good for chronic recipients who may have become fatalistic about never getting off welfare. However, this is a question of scale regarding the cost of the demonized social welfare system vs. the iconic corporate welfare system.

As damaging as social welfare abuses may be for the budget, depending on the country and specific programs that it categorizes as social welfare, statistically speaking social welfare costs are hardly a match for the immense costs of corporate welfare and tax dodging by the wealthy. Not only does government spend far greater amounts for corporate welfare, thus adding to budgetary deficits, but the wealthiest individuals benefiting transfer trillions of dollars in offshore accounts to escape paying taxes in their countries, thus contributing to the public debt problem and weakening the economy. This is a problem that both the US and EU have recognized as a serious problem that must be addressed.

Not just the mainstream media in the US, but in Europe as well as in Australia and Canada the focus is rarely on tax evasion and fraud combined with a fiscal policy and subsidies that redistribute wealth to the richest people in society, but rather on the single mother cheating the system of food stamps, on the illegal immigrants receiving free health care and possibly food and housing assistance, on the small farmer declaring losses where there are none so he can receive a government rebate. In short, the focus is always on the "small fish" in the social welfare pond, which do indeed cheat the system without question, but do not come even close to the levels of the corporate welfare sharks eating away at large chunks of the economic pie and massively bleeding government budgets.

Historical Roots of Corporate Welfare vs. the Social Welfare State

Long before government became involved in social welfare, the church and private charitable organizations helped the poor to the degree they did. The transformation of society from rural-agrarian to urban industrial necessarily entailed a large segment of uneducated and unskilled laborer finding themselves In the streets begging, stealing, prostituting, committing crimes, and making up the lowest echelons of society that disrupted harmony in urban centers. England tried to deal with this issue by passing the Poor Law reforms of 1834, intended to place otherwise wretched people of the street into workhouses. This form of semi-slavery criticized by many in the 19th century underwent changes so that the state appeared more humane toward the poor, and not as Charles Dickens and Henry Mayhew described it in their works.

The era of Progressivism in the US formally institutionalized the seeds of the social welfare state, although it would take another four decades before it would have an much of an impact. This is not to say that the manner social welfare has been administered provides any sense of hope, given that it only marginalized the poor permanently and kept them in a chronic state of dependence without offering opportunities for upward social mobility. As bad as those programs were in the housing and medical sectors where social welfare created ghettos, their total absence would have meant no medical care or housing for the recipients.

While it is true that social welfare does not foster personal responsibility values to recipients, neither does corporate welfare. Besides the tax system designed to favor wealth concentration, government giveaways can be traced to the Commercial Revolution in Europe when monarchies gave trading monopolies and route to certain companies. In the US, we have massive giveaways of land for railroads and mining operations in the 19th century as well logging companies, to mention a few of the early corporate welfare beneficiaries. Long before there was such a thing as social welfare (most coming with FDR’s New Deal and then with LBJ’s Great Society), the US government as well as all governments in Europe and Latin America as well persecuted trade unionists and deemed them a threat to business and society.

Can multinational corporations thrive without corporate welfare?
One area where governments spend to sustain corporate welfare is research and development in everything from pharmaceuticals to weapons systems. The taxpayer picks up the bill for research and development costs, while a large corporation reaps the profits by manufacturing and distributing the products. Even foreign aid - both civilian and military - uses taxpayer money to fund products given to aid recipients who in turn have an obligation to trade with the companies of the aid recipient. Similarly, direct subsidies go to the large agribusiness that easily out compete small and medium-sized farmers, given that the top ten percent receive the lion's share of government subsidies. This is at the expense of the taxpayer whether in the US or other parts of the world and the great farce about the so-called "free enterprise".

Also at the expense of the taxpayer are the massive bailouts for financial institutions and other private companies. There is nothing wrong with the state trying to save the financial structure, but to permit criminal activities such as money laundering and rate fixing, and to permit taxpayer funds for scandalous salaries for its executives and larger investors is a form of corporate welfare. The corporate welfare safety net simply means that financial institutions make money in good times in the marketplace and in bad times because the government uses taxpayer funds to bail them out. If this is what free enterprise is all about, then anyone can go into business because the government would assume all the risk and the financial institution would keep the profits in good times and bad.

When we consider the massive tax breaks and infrastructural development costs provided at the state and local levels to companies that state and local government tries to attract then we must add yet another layer of handouts to the many layered corporate welfare cake government provides to business. State and local governments compete to provide the most lucrative subsidies, justifying their actions on the basis that it is good for job creation. While there is no doubt that some jobs are created, it is at a massive cost to the taxpayer and not the company hiring the workers.

If US corporations actually paid the legally designated 35%, they would in fact be at the top of OECD countries in terms of tax liability. Because of endless loopholes, however, the effective rate is very low and most corporations including Boeing, General Electric, and Wells Fargo pay nothing while receiving federal funds in various forms. This is the essence of corporate welfare thanks to tax laws that the government has in the books with the kind and generous assistance of corporate lobbies.

How can GE that generates $10 billion in pretax income pay nothing in taxes and in addition receive a $1.1 billion in tax benefit? GE Capital writes off a paper loss in the US while it shows a huge overseas profit for which it defers paying taxes indefinitely to the IRS, and it receives a tax benefit for depreciation deductions for its capital assets as well as loan losses in the US. Making matters worse, GE along with other corporations keep a great deal of their cash outside the US where they earn much higher rates than American banks pay.

Depending what one includes in social welfare and in corporate welfare programs, the US government spends at least 50% more on corporate welfare benefiting the rich than it does on the social welfare benefiting the poor. State and local government spending on corporate welfare amounted to $110 billion, of which three-fourths went to the 1000 largest corporations such as General Electric, Dow Chemical, Ford, Boeing, etc. In 2013, the Joint Committee on Taxation estimates that $154 billion in special corporate tax breaks were part of the government giveback to the corporations as part of a generous package intended to keep them healthy. It costs the average American family $6870 per year for corporate welfare in the form of subsidies and tax breaks. It costs the average American family $42 per year to fund social welfare. If one includes unemployment benefits, health care and education among other items that are not in the domain of social welfare, then the cost goes higher. However, if one also considers the tax loopholes for corporations and the top ten percent of the income earners the net amount in the corporate welfare category also goes higher.

1.      Should a modern society under the existing state-supported market political economy have a credible social safety net to avoid cases of extreme poverty and people dying in the street benches where the homeless sleep, or should it simply focus on strengthening the corporate welfare system using taxpayer money with the hope that this will take care of all problems in society?
2.      Is greater economic growth and development achieved under the corporate welfare state vs. a weakened social welfare system, or does the trend of massive capital concentration with the state’s help lead to economic contractions that create deep structural economic problems?
3.      What engenders greater social and political harmony in society? A very strong corporate welfare system coexisting with a weak social welfare system, or a mix where the social safety net balances the massive capital concentration?
4.      Has the advocacy of corporate welfare and opposition to social welfare entailed that centrist and center left political parties and groups embraced the right wing (Social Darwinist)  agenda, elements of which include racism, ethnocentrism and xenophobia?  

Thursday, 3 April 2014


Economic nationalism - protection of the national economic interests against foreign ones - manifested itself more clearly after the crisis between Russia and Ukraine over the annexation of Crimea in the aftermath of a pro-West Ukrainian group seizing power in a provisional government hostile to Moscow. However, Russia's is only the latest example of nationalist expression in what has been a long-term effort to assert greater national control over the economy rather than permit greater integration with the West under the guise of the free enterprise system. We also see evidence of economic nationalism in other parts of the world, including Europe among the so-called Euro-skeptics who come from both the right wing and left wing political camps and decry integration as a tool of multinational corporations and finance capital to erase national identity and social justice.

Similar expressions of economic nationalism intertwined with politics is found in several Latin American countries, most notably Venezuela struggling against pro-business and pro-US elements trying to change regime and reintroduce close integration with the US. China is probably the most famous cases of economic nationalism, a case where the Communist regime has been managing the economy to permit state-directed integration with the purpose of maximizing the national economy by taking advantage of foreign markets under its own rules of integration, whether in Latin America or Africa.
In contrast to Adam Smith's economic ideology based on individual initiative, Friedrich List (1789-1846) argued that the state has a responsibility to promote the interests of the entire society. Moreover, List understood that the system of free trade that Smith promoted favored England as the most industrialized nation that would easily out compete all others that were only starting to industrialize and needed government protection. Hence, economic nationalism was a method of promoting national economic development, otherwise accepting the fate of an externally dependent economy.

Is economic nationalism a reaction to global integration, which in essence means cooptation and domination of national markets by the strongest multinational corporations of the richest nations? Neoliberal insist on the forces of the free market operating without government interference to protect the national capitalist class and workers. Naturally, neoliberals advocating global integration have come out against the tide of economic nationalism in any form. However, the same advocates of neoliberalism have no problem supporting corporate welfare in their own countries, a system that is a form of economic nationalism. When governments use taxpayer money to bail banks and subsidize corporations that is a form of economic nationalism, just as when they lobby to have products and services of their industries marketed in countries competing with similar products and services.

Because nationalism is generally identified with the individual's identification with the nation-state, economic nationalism is generally viewed as a political economy aimed to promote the national economy by excluding foreign competitors that can undermine the domestic producers and national interest as the government defines it. Throughout history nationalism has undergone many phases from that defined by Absolutism where the Monarch was the nation-state (15th to 18th centuries), the entire population identified with the nation-state (French Revolution), a certain class–workers or peasants–are identified with the nation-state (Communist Revolutions in Russia and China), a certain ethnicity or race identified with the nation-state (Nazi Germany, Imperial Japan and Fascist Italy). Therefore, nationalism is an umbrella under which variety of ideologies have found shelter, from extreme right wing to left wing.

Arising from the ashes of the feudal/manorial structure, nationalism as a societal and political structure–a form of political, economic and social life–arose concurrently with capitalism and became identified with the emerging commercial/banking class that looked to the state (invariably absolutism until the Glorious Revolution) for support. Nationalism spread globally with the spread of capitalism during the nascent stage of the Commercial Revolution (1450-1650) when Portugal, Spain, Holland, England, France pursued overseas markets and began the race for colonies that culminated with the wars of imperialism in the late 19th-early 20th century.
 Awakened by the deep recession of 2008-2013, combined with the race for geopolitical influence by the major powers amid intense competition for global markets, the lingering specter haunting the world economy is nationalism that may manifest itself in various phases and stages and in countries as different as Russia and Venezuela, as Argentina and China. Russia under Putin representing oligarchic capitalism is pursuing a form of economic nationalism but so is Cuba that has had a long-standing commitment to social justice and opposed accumulation of capital in the hands of a few individuals at home or operating from abroad and exploiting the national economy. For the Kremlin, energy and the primary sector of production in general is the tool of statecraft in both domestic policy as well as foreign affairs. Government uses natural gas and oil not just to pursue a degree of social engineering, but as foreign policy tools in Europe and Eurasia.

China too is pursuing a road of quasi-statism where the state retains a dominant role to manage and direct the course of the economy, thus of society, but also permits a level of private domestic and foreign enterprise to accumulate and concentrate massive wealth. The US opposes all countries pursuing any form of economic nationalism because it wants its products and services to penetrate all markets around the world and to enjoy the protection of the host government. For a long time, the US has repeatedly threatened to punish China’s export trade because Beijing has been pursuing and undervalued currency during the recent crisis, a ploy the Chinese have been using to secure greater world market share as they expect to face mounting social pressures to raise domestic consumer demand in the future. But how much leverage does the US have with China, given that Beijing owns and continues to purchase America’s foreign public debt (US bonds)? And do such threats drive China and other countries ever so closer toward economic nationalism largely because everyone knows US interest rate policy impacts the rest of the world currencies?

One of the hard lessons from the Great Depression era was that economic nationalism exacerbated the crisis for all countries, although economic nationalism seemed the only logical and practical course of action for governments that look at the immediate economic, social, and political consequences instead of calculating the long-term impact. The other factor that prolonged and deepened the Great Depression was the absence of global leadership at a time it was needed the most amid Sterling bloc, dollar bloc, and German bloc (Schacht’s Clearing System) trading zones and individual countries scrambling for solutions at the national level to stimulate production and export trade. There will be great grass roots pressure from manufacturing workers, farmers, and other groups on governments to take care of the ‘folk at home first’, the kind of pressure that could have a xenophobic backlash and lead toward aspects of economic nationalism with reverberations across social and class lines.

If an American auto worker is unemployed, why permit more illegal aliens to cross the border or buy foreign-made products that cost jobs in Cleveland? The same holds true for an unemployed British, German, or French worker, despite the reality that the world economy is so intertwined. The issue of jobs protection, behind which governments hide a form of economic nationalism through subsidies to companies to "keep the jobs at home" is actually stronger in the advanced countries than it is in the weaker ones. When the US or Germany argues in favor of keeping jobs at home by having lower taxes for the companies involved and workers accepting cuts in wages and benefits to remain competitive with low-paid Third World workers that is a hypocritical position because the same government expects other countries to remain open to foreign products and services without their governments providing subsidies.

At the same time we will see inter-sector competition intensifying. As prices of the primary sector of production, especially agriculture but also mining, decline rapidly and as manufacturing led by auto industry slows even more substantially given the large inventories for the current depressed market, there will be social pressures on the state for subsidies and/or more equitable income distribution by sector, fiscal tinkering to benefit one group over the other, etc.

Inter-sector, intra-national and international competition has intensified owing to massive wealth concentration and increasingly fewer opportunities. This means that social and political instability will continue, depending how governments handle such vital issues as strengthening the middle class and protecting labor rights that neoliberals want weakened if not totally eliminated. Economic nationalism is the greatest threat to globalization and neoliberal policies intended to concentrate capital both geographically and socioeconomically within the borders of each nation. One reason that Putin’s Russia remains a potential threat to the West is not its military role in the world and resolve to use it regionally to preserve its spheres of influence, but the road toward economic nationalism. Interestingly enough, many anti-EU political groups from the right and the left are on the same path of Putin regarding the rejection of the globalization model of integration, favoring instead economic nationalism.

As I have commented in the past, much depends on how Keynesian, how quasi-statist, the US program will be and to what degree there will be economic multilateralism and nationalism against the pressures from the strongest countries with the most powerful multinational corporations. As global financial retrenchment took place during the recent global recession and capital was drained from the underdeveloped and semi-developed countries at the same time that terms of trade are becoming increasingly unfavorable for them and in favor of advanced capitalist nations, the prospect of economic nationalism is even greater in the absence of international trade agreements through the World Trade Organization and capital injections from the G-20 into the Third World. Declining export revenue, declining wages, declining investment, declining domestic and foreign credit, combined with mounting private and foreign public debt could very well lead to social and political instability, if not uprisings sporadic or sustained and therein rests the specter of economic nationalism.

Because economic nationalism cannot be separated so cleanly from politics, there are the advocates of xenophobia and racism behind some policies of nationalism whether in Russia or France. Conservative regimes that otherwise support globalization and neoliberalism, just as centrist and center-leftist regime do, invariably try to placate economic nationalist elements so they would not drift toward the leftist or right-wing political parties. Because economic nationalism is a mean to exercise national and international influence, regimes find it appealing, assuming they are able to pursue it if their countries are sufficiently strong to withstand pressures from core countries demanding global integration.

While the strongest and wealthiest nations have the luxury to pursue global integration because it suits their national interest, weaker and poorer nations have an interest to protect their domestic markets from foreign predatory economic giants that would further weaken if not eliminate smaller competitors. How can a small grocery store possibly compete with a multinational grocery chain, for example? While France wants its home-based multinational grocery chain to penetrate world markets, is that in the interest in smaller countries trying to protect the shopkeepers who benefit from economic nationalism and view globalization as the end of their way of life?

Economic nationalism goes to the heart of some very serious problems that globalization has created. Those include the dilution of indigenous culture owing to commercial influences from the core countries. Preservation of cultural heritage under globalization can only be done at the superficial level because the essence of the dominant culture will be the imported commercial-materialistic Western one that replaces the native.

As a theory to counteract the perceived injustices and insecurities caused by globalization, economic nationalism has emerged as a popular and powerful theory that is supported by wide and diverse constituencies looking to preserve their cultural heritage and expand their state’s international power. Nation-states must concentrate on building economic prowess in order to maintain or strengthen their international influence. However, the consequences of encouraging economic nationalism can involve the radicalization of politics and the persecution of segments of the national population, which can lead to fragmentation and eventual political and, hence, economic instability within a state. How this will play out in Russia and other countries where economic nationalist policies are being implemented is yet to be seen.

Global integration for the poorer countries entails a weak state and public sector that cannot possibly provide domestic growth stimulus and use it to improve social and economic conditions, as it relies heavily on powerful foreign enterprises enjoying the backing of their strong government. The result of not having the ability to pursue economic nationalism for poor countries means that its living standards will remain very low under extreme socioeconomic polarization, while the natural resources and markets would be exploited by large multinationals.