SOCIALLY-JUST SOLUTIONS vs. SPECIAL INTERESTS: the 'Death Bonds' scam

A former university colleague who was a former CIA analyst/agent used to tell me that that the 'golden rule' means he who has the gold rules. That may sound like an one-liner joke for a late-night comedy show, but it has folk wisdom and rings true. While it is true that there are very sound ideas about how to fix a broken political economy, dysfunctional as it is and causing the wretchedness of two billion people on the planet, the fact is that it is not profitable to alleviate the causes of poverty and to introduce a system that is socially just. Such a course of action would simply entail ending the privileges that the socioeconomic and political elites enjoy. Is ending the privileges of the elites worth the sacrifice so that two billion people do not suffer the indignity of famine and disease?

Even in a basket-case like Greece whose living standards had suffered a setback of at least decade (2012 living standards have reverted to 2001) and are likely to return to living standards of the 1970s or 1960s by 2014, there are socially-just solutions. However, socially-just solutions are not profitable for the socioeconomic and political class. A Greek politician recently proposed that the unexplored oil deposits of Greece could be used to strengthen the faltering social security system that has taken numerous blows and whose beneficiaries are likely to suffer greater reduction in the next few years. That seems like a good socially-just proposal, but there are special interests, from domestic and international bankers to the IMF that demand receipts must be used to pay foreign creditors.

I would propose that the proceeds should not be used to strengthen social security funds or used to pay foreign bondholder debt. The best use is to put the proceeds to work to raise productivity in a number of areas from domestic foodstuff production to greater exploitation of mineral deposits, and value added-products in light manufacturing. This would reduce unemployment (currently at 21%) and strengthen the social security funds, while the proceeds from the secondary productive sectors could be used to meet various needs from social security funds to health care and education. This proposal seems socially just, but it means that it is not putting money in the pockets of bankers and corporate investors, to say nothing of bribes to politicians and trade union bosses. Therefore, it will not fly.

The situation is not different for Portugal, Spain, Italy, Eastern Europe and the Balkans. The considerable natural and human resources can be utilized to serve the internal market, but in the age of globalization and neoliberalism the prevalence of national capitalism is impossible. Therefore, capital flows from the periphery to the core to strengthen the latter that has caused the global recession of 2008-present.

One small but glaring example of how international finance capitalism in the core countries has been gambling with the political economy is 'death bonds' or 'longevity swaps'. These latest financial products are swaps that cover company pension funds against the risk that their members will live longer than expected, affording investors a premium if they do not live as long and lesser return of they go passed the expected age. The "death bond practice" started in the 1980s with the AIDS awareness when companies bought policies from individuals and them sold them to investment banks and hedge funds.

Given that life expectancy has been on the rise, large international banks, most of them immersed in corrupt schemes, have engaged in practices that the common person associates with Las Vegas gambling or comedy motion pictures. Beyond the issue of morality - a person profiting by the death of the other - one could argue that the 'death bond' speculative business is pure capitalism at its best - or worst - but the question is the degree to which the state subsidizes these products at the expense of the taxpayers.

A Deutsche Bank spokesperson noted that “Deutsche will be structuring them as insurance policies through Abbey Life, rather than as derivative contracts, as some other banks do. This will be more appealing to pension scheme trustees.”Besides Deutsche bank, Credit Suisse, Godlman Sachs, JP Morgan, CITI, and others offer such longevity policies or derivatives to pension schemes. That these banks have received billions of government funds in direct bailouts or other forms such as tax breaks is not enough, big banks are now part of the insurance scam betting that more people die so financial institutions can cash in by investing bailout taxpayer money.

On the surface, there one may think that there is nothing wrong with a gambling-style investor wanting to bet on such financial products. However, this is as long as the banks in which the investor is sinking money do not expect the government to bail them out with taxpayer money, at the cost of slashing social security benefits, wages and benefits. In short, the gambling aspect of finance capitalism is such that it has global ramifications. 

The tragedy of such practices is that Deutsche bank is the most influential institution in Germany's political economy, just as Goldman Sachs, CITI and JP Morgan in the US. While these financial institutions are gambling, they expect the general taxpayer to bail them out, thus causing a global credit crises that impacts the real economy and the decline of middle class and workers' living standards. It is not that there is a shortage of socially-just solutions, only that it is not profitable to adopt them because they do not benefit the socioeconomic and political elites.

This is not an issue of banks with government standing behind them against the public interest, but a much deeper on of parasitic-style finance capitalism that is an obstacle to productive investment for the goal of public welfare. The only solution to such a systemic problem is political, but as long as politicians stand to benefit both in terms of their careers and financially, there can be no solution.

WOMEN AND ISLAM

On 9 December 2010 a Sudanese woman was the victim of 40 lashes by a police officer in execution of his duties. Her crime was wearing pants inside the traditional long dress covering the pants. An audience of male observers were laughing while the woman was crying in a public display of how Sharia Law is enforced. Such lashings are daily occurrences and designed to teach women to “behave” in accordance with Sharia law, which means dressing properly, behaving properly, speaking properly, and of course more serious punishment reserved for adultery or running a brothel. The Sudanese judiciary is investigating the incident that dramatizes the medieval treatment of women. This incident has sparked a great deal of revulsion around the world as it should have. The question is why focus on this case and not the larger issue of the rights of women in all “traditional” societies, Islamic or not, pro-West and not, suffering under barbaric treatment in the name of tradition, religion, and archaic laws?   This is a complex topic that cannot be covered in a few lines. There are a couple of thousand books dealing with women and Islam, and many thousands of articles, mostly written by westerners or western-educated Muslims living in the west. There is the core issue of course of the degree to which Sharia law reflects the Quran, which was very progressive toward women for its time, far more humane than anything the Eastern of Western Christians had in the Middle Ages. To the degree that the law reflects Hadith, (sayings of the Prophet) collections of writings from 8th and 9th century dealing mostly with legal aspects of the faith, there is substantial criticism by critics of the treatment of women in Islamic countries. Simone de Beauvoir’s The Second Sex in my view remains the classic study in understanding gender relations in a historical context and against the background of a given culture (in its broadest possible context that includes religion) and class system. While the entire world should express in every method possible outrage at barbaric treatment of women in traditional societies, it is also important to consider cultural relativism. It is not possible to apply the same criteria of gender relations in contemporary Sweden and Norway as in contemporary Afghanistan and Sudan. Islamic feminism may not be acceptable as “real feminism” to Western feminists, but it is a form of feminism suitable for the cultural settings of Muslim countries and a step toward humane treatment of women. The totality of traditions, institutions, and social structure of the countries in comparison are very different, not merely the domain of gender relations.  The sense of social harmony and social justice in Islamic countries is not the same as it is in the secular West that has undergone Renaissance, Scientific Revolution and Enlightenment, intellectual revolutions that helped societies make the great leap forward from religious-based traditionalism rooted in patriarchy to secularism that only recently permitted human rights to include assertion of female identity. After all, Europeans under traditionalist religious-based cultures tortured and killed hundreds of thousands of women not only as part of the witchcraft craze, but also as infants to avoid the burden of dowry and in pursuit of male heirs to carry on the patriarchical tradition. While the legal system can change rapidly to permit for humane treatment of women in traditional societies, cultural and social changes are hardly something that can change overnight. It is also true that the treatment of women in Islamic societies has been used by the West to stigmatize countries with which the West has an antagonistic relationship in this epoch of terrorism that the West identifies with Islam. The treatment of women in a friendly Muslim country like Saudi Arabia is almost never an issue. By contrast, the same incident is front and center in western governments and press if the Muslim country, let us say Iran, is overtly anti-Western. The antagonistic US (and European) antagonistic relationship with Muslim countries since the collapse of the Communist bloc makes it very difficult for the West to preach to Islamic nations rights of women as an integral part of human rights. Nevertheless, it is difficult to defend the extraordinarily harsh treatment of women in a number of Islamic countries that rigidly apply Sharia law largely for political and cultural reasons than as an observance to religious tradition. To watch a young lady beaten in public, crying as she seems in horrible pain, humiliated by lashings and to simply not feel disgust at the absurdity of the barbarian legal system that permits such treatment of a human being is inhuman. While solutions for a society’s unjust institutions cannot be imposed from the outside, in the age of instant communications networks that link the entire world, it is difficult to hide the inhuman treatment of women justified by laws devised in the 8th and 9th century. Finally, there is something disturbing when the world expresses outrage about a Chinese dissident who receives the Nobel Peace Prize and he is the subject of so much public sympathy, while countless of women daily, some victims of brutal legal practices others of human trafficking receive very little sympathy and then only when it is politically advantageous to the West to do so. Raising the awareness level of women’s rights on a global scale is a first step. The United Nations, NGOs and private organizations have the proper role to advocate for women than any government, least of all any Western government currently at war with Islamic nations. There are many such organizations and they are easily accessible on the web, always seeking public support in any manner that it can be offered.

SARKOZY AND EU DEBT CRISIS

The EU debt crisis has already claimed its political victims - Brian Cowen in Ireland, Jose Socrates in Portugal, Jose Luis Zapatero in Spain, George Papandreou in Greece, Silvio Berlusconi in Italy - and it is about to claim French President Nicolas Sarkozy in the May 2012 presidential election, but very unlikely to bring down Angela Merkel in autumn 2013.

GDP growth will be sluggish not just across most of Southern and Eastern Europe, but also in northwest Europe, with the exception of Germany, Holland, Finland, and Sweden. Considering that economic sluggishness across Europe and Eurasia will result in political instability in a number of countries with serious debt problems, it is unlikely to expect voters to remain with the status quo and reelect the same governments. Therefore, Sarkozy will follow the fate of his Irish and Southern European counterparts owing to the larger trend in the political economy.
 
In September 2011, the French Socialists, Communists and Green parties captured control of the Senate, indicative that Sarkozy would lose the presidential election. Although French President Nicolas Sarkozy and Angela Merkel are ideologically on the same side, it seems that their political fortunes may not converge, contrary to appearances. Of course, until recent months it appeared that France and Germany had convergence of political and economic interests, when it became very clear that Germany was in essence using the debt crisis as a vehicle to solidify its EU hegemony, thus bolstering Merkel's political standing and dwarfing Sarkozy's. Merkel's approval in public opinion polls rises when she is insists on rigid austerity measures toward Greece and the periphery eurozone members, while the popularity of her French counterpart dives, despite some very recent public opinion polls showing a slight upward trend.

Although the German Social Democrats are much softer on the EU debtor nations, it is highly unlikely that they would turn against national capitalism and German banking interests by adopting a more generous policy toward the debtor eurozone members. Merkel has everything to gain by adopting very harsh measures austerity measures toward debtor nations, largely because she appeals to a strong nationalist electorate that feels it is taxed to bailout Southern Europe, rather than German and northwestern European banks. Merkel is the symbol of a strong hegemonic Germany that can maintain a strong economy at a time that the rest of EU is weak and its living standards are declining.

Nevertheless, to continue on the road of German hegemony in Europe, Merkel needs a political partner like Sarkozy in Paris and not a Socialist like Francois Hollande who is likely to go along with some bailout and austerity measures, but refuse to go along with everything Germany demands regarding the integration model of the EU. Sarkozy has the difficult task of convincing the French people that the austerity a program was good for Southern Europe at a time that France is itself under voluntary or self-imposed austerity measures, its credit rating is cut, and its economy is recessionary. Although Sarkozy's campaign slogan "strong France" makes a good nationalist sound-byte, it is hollow because the real achievement of his presidency was to weaken the French middle class and laborers, while strengthening Germany by going along with its tough fiscal and monetary policies that actually do not benefit the French economy, save a few top corporate and banking interests.

Sarkozy's Socialist opponent Francois Hollande is on record opposing conservative fiscal and monetary measures that strangle economic growth. Hollande appeals to at least 50% of the French people - according to a public opinion poll - who fear that their country could face similar measures, a fear that many Europeans share, especially across Southern Europe. Fear that austerity of Southern Europe could take France along with it is a motivating factor of those backing Hollande. Hope that a more liberal fiscal and monetary policy, along with a friendlier social welfare agenda that could revive the economy and have a less devastating impact on the middle and lower classes is also a motivating factor for those backing Hollande.

This does not mean that the Socialist candidate who will most likely be the next French president will deviate very far from the Sarkozy-Merkel agenda. Hollande is using rhetoric that is much more to the left as a candidate when in reality he would have to govern from a position that caters to finance capital and corporate interests, and not to labor unions, to the poor, or even the weakening middle class that feels threatened by austerity and the debt crisis. In this respect, Sarkozy was correct to insist that Hollande is lying when he tells the foreign press that he is a pro-market economic Liberal, but at home he tells voters that he is a Socialist. Socialists ruled in Greece, Spain, Portugal, and French Socialist Dominique Strauss-Khan was head of the IMF, yet, austerity prevailed because markets largely determine policy, not political personalities in the era of neoliberalism and globalization.

The political dilemma of Sarkozy is that he must demonstrate the effectiveness of austerity measures at home and abroad. If austerity fails, as it has so far, across Southern Europe and Eastern Europe, especially if Greece leaves the euro, Sarkozy goes down with the debtor nations for having his political fate identified with the failed bailout policies. When the IMF warns about 'too much austerity' that can choke off growth, there is a serious problem. That Sarkozy has placed his political future with 'crisis containment' at home and across Southern Europe is key to his re-election bid. Can crisis containment bring results, or will it sink EU deeper in recession?

With a strong ultra-right wing appeal, Nationalist Front candidate Marine Le Pen, will help Hollande take out Sarkozy in the presidential election. The run-off election could afford Hollande a clear mandate, but the future of the delining French middle class is unlikely to change very much regardless of a Sarkozy or Hollande victory. French voters would have to decide if their future would be brighter with a conservative whose tenure has weakened the country economically and socially, while strengthening Germany; whether any of the reforms promised when Sarkozy ran for office have been implemented and of those that have made any improvements in peoples' lives, or whether the politically inexperienced Hollande who presents himself both as a pro-market neoliberal and a Socialist is worthy of governing a country whose economy will be facing both economic contraction and social downward mobility in the next six years.

The question not just for Sarkozy and Hollande, but for mainstream (bourgeois) politicians across Europe in this decade is who can best mange the recessionary economy and debt crisis, not who can best lead the economy toward robust growth and upward socioeconomic mobility. This picture becomes even clearer by the reality that the Socialist left is as neo-liberal as the traditional conservative camp, while the Communists remain weak and they are burdened with the legacy of 'Communist bloc failure'. Such a political situation across Europe permits the markets to impose neoliberal policies on governments, regardless of whether they are conservative or centrist.

HOW TO UNDERDEVELOP A NATION: IMF-EU PRESCRIPTION FOR GREECE

There are signs not just in Greece and Portugal, but across Southern and Eastern Europe that popular uprisings may be inevitable in spring-to-summer 2012.  Following the second bailout package of Greece, it now seems inevitable that Portugal too will need one as well. Portugal's government has asked Germany for a second bailout, but the Merkel government is waiting to see what happens with Greece, assuming it survives politically to remain in the eurozone before the end of the year.

It is now obvious even to the most casual observer that the IMF-EU austerity measures have reduced Greece from a semi-developed to an underdeveloped country, given that under austerity in the past two years GDP declined by an astonishing 13%, and it is expected to drop an additional 5-8% in 2012, for a combined three-year total of more than 20%. Portugal will follow the footsteps of Greece, and considering that the rating agencies Moody's Fitch and Standard and Poor's have either downgraded or about to downgrade Spain, Italy, Slovakia, Malta, Belgium, Slovenia, Poland, UK, France, and Austria, Europe is in for a very rough year.

No one should be surprised that uprisings will erupt across Europe this spring and summer, unless there is a shift in the existing policy of impoverishing the debtor EU members, so that Germany may enjoy an easy ride toward regional hegemony. There are of course economists, politicians, journalists and university professors acting as apologists for neo-liberal capitalism that is creating wretchedness across Europe, and not just in southern Europe but across most of the continent. A close examination as the IMF-EU package for Greece exposes the criminal policies of the IMF-EU led by Germany as completely non-functioning policies that have the exact opposite result of what the IMF and Germany proclaim is the goal.

1. As a result of IMF-EU austerity, Greece has official unemployment rate at 21% in January 2012 (unofficially at 25%), or double what it was before the IMF-EU imposed austerity.

2. Poverty is officially at 27.7% (unofficially at one-third of the population), of ten percentage points higher than it was before the IMF-EU austerity.

3. Wages, benefits, and social security have dropped by 40%, including the cuts now imminent, and living standards have dropped by 50% owing to compensation cuts and higher taxes.

4. Public debt has risen from 120% of GDP before the IMF-EU austerity to 160% today and expected to rise at roughly 200% if austerity without economic development continues.

5. The three leftist political parties enjoyed around 15% of the vote before the IMF-EU austerity, while according to public opinion polls those parties now enjoy 40% of popular support.

6. Small businesses, which employ the vast majority of the labor force, will be closing at a rate of 5000 per month this year, on top of roughly 100,000 small businesses, employing 250,000 people, going bankrupt since the IMF-EU came in the country. This has resulted in everything from loan-sharking operations targeting businesspeople to skyrocketing mental illnesses and suicides.

7. Inflation rate was about 5% before IMF-EU austerity and despite massive cuts in wages, benefits, and social security, inflation remains at roughly 3.3% after two years of a sharp drop in GDP and living standards.

8. While tax collection has improved, the tax burden since IMF-EU austerity has fallen on the salaried sector and social security recipients, not on the tax evaders, especially the millionaires who owe billions to the government. Tax evasion continues unabated while tax receipts have dropped owing to the sharp drop in GDP, which went from $350 billion in 2008 to under $300 billion in 2011, and expected to drop an additional 5% to 8% in 2012, bring GDP to between $285 and $275 billion.

9. Greece currently ranks 170th in the world in terms of investment, and dropping, considering that the few thousand wealthy families and individuals have taken out of the country most of the capital estimated at around $800 billion. New investment is at a standstill, because investors are waiting for more sharp downturn in asset values and for greater incentives by the government to invest.

10. Budgetary deficit continues to remain at double-digit figures, hovering at just under 10% in 2011, despite the infamous "Greek statistics" manufactured to make the budget appear better than it is. The budgetary deficit will remain very high in 2012 as productivity remains low and horizontal taxes increase while taxes on those who owe and the wealthy remain an elusive goal.

11. Despite the austerity measures that are intended to achieve balance of payments equilibrium, Greek exports increased by $4 billion in 2011 over the previous year, but imports increased by $5 billion, thus adding to the balance of payments deficit.

12. Of the 130 billion euros in new loans, in addition to the previous 160 billion euros, roughly 80% goes back to creditors to service past debts, 15% for Greek banks, and 5% to pay existing government obligations to domestic and foreign creditors for purchases of everything from defense equipment to pharmaceuticals. Not one euro of the roughly 300 billion in bailout has gone for economic development or social programs.

13. Although IMF and EU promised that their policies were intended to lower costs, the exact opposite has taken place. The IMF-EU conditionality has entailed that Greece accept a minimum wage of roughly 400 euros and social security benefits averaging about 500 euros. Part of the reason is that asset values, including the telephone, electric, water, waste, oil, airport, off-track betting and lottery, and other public assets become much cheaper by lowering wages and benefits once foreign investors purchase them, as it is mandatory that they must be sold to private investors.

The above 13 points illustrate how the IMF and EU have underdeveloped Greece, depriving it of capital to develop its natural resources and take advantage of its highly-educated human labor resources. Greece was semi-developed, living off borrowed money, and enjoying the expansion of a middle class economy under the liberal credit system of the past three decades.

Failing to invest assets productively, the utterly corrupt Greek political class in collaboration with the Greek capitalists and middle class diverted resources from production to consumption and parasitic investments. Taking advantage of the considerable wealth in the Greek middle class, foreign financial institutions, mostly German and French, sought to absorb the capital from the Greek middle class to strengthen the core economies, a strategy that has been around for more than two centuries of imperialism.

The lessons learned here are not whether Greece remains or leaves the eurozone, for that is not significant, as is the reality that capital has been drained by the domestic and foreign capitalists, leaving the country roughly at the same underdeveloped status as it was in the 1960s. The lesson here is that Greece is the canary in the mine, and that other countries should fly as far away from austerity as they can to save their people.

GERMANY'S QUEST FOR HEGEMONY

From the eruption of the southern and Eastern European public debt crisis in 2009 until the present, there have been very clear signs that Germany is planning to remain continental Europe's hegemonic economic power that would be able to compete globally with other Great Powers - US, China, Japan, UK, and Russia, as well as the newly-emerging economic powers India and Brazil - in the 21st century.

There is nothing sinister about the desire of the German political and socioeconomic elites to want their country to secure a place as a significant world power in the 21st century, but the method that German government and banks have been using to achieve the goal is indeed very sinister and has the distasteful aroma of imperialism. With the unification of Germany and the fall of Communism that created a huge power gap in Eastern Europe, scholars inside and outside of Germany asked whether the country would pursue a quest for hegemony.

Largely because scholars, journalists and politicians were in Cold War thinking (dichotomous) mode, the idea was readily dismissed because: 1. of the reality that Germany went to war twice and destroyed; 2. the US is the world's sole military and economic superpower that could easily contain Germany that would also have to heed the geopolitical roles of Russia, France and UK; and 3. the new unified Germany was only interested in economic power within the rules of global capitalism, rather than pursuing national capitalism as a tool of political and military power.

In short, a unified Germany was a triumph for the capitalist West and defeat for the vanquished East. After all, a strong central Europe would keep the balance of power between Russia to the east and UK and France to the West. As a NATO and EU member, Germany would serve US geopolitical goals.

To some degree, Germany served the US strategic, political, and economic goals, but that was until it became sufficiently powerful to impose its will on the eurzone during the global recession of 2008-present followed by the public debt crisis. Germany's ascendancy corresponded with the relative economic decline of the US and China's rise, compelling Germany to look down the 21st century and secure its sources for raw materials and markets, exactly as it was doing between 1870 and 1914 during the Age of Imperialism.

Contracting global economic conditions, combined with the public debt crisis in southern and Eastern Europe, afforded Germany the opportunity to use its dominant role in the eurozone as a springboard for European preeminent economic influence, including imposing trade, investment, monetary and fiscal policies on the rest of the eurozone members. If Germany manages to impose its patron-client model of integration in the eurozone, then it will also manage to secure a place as one of the world's prominent Great Power.

Until the public debt crisis of 2009-present erupted across southern and Eastern Europe, the European Union integration model was based on inter-dependency relationship - elevating the weaker members closer to the stronger ones through subsidies, so that the socioeconomic gap between northwest Europe and the rest of the EU members is not as wide as it is between US and Mexico. Closing the gap somewhat in labor and asset values was at the heart of the inter-dependent integration model that set it apart from the patron-client model that the US has been relying on to integrate Latin America.

Deviating from the historic integration model was easy because monetary policy rested in the hands of the strong core countries. Instead of pursuing a liberal monetary policy and weakening the euro to help the struggling debtor nations amid the global recession, Germany opted for a tight monetary policy that has in essence converted the eurozone integration model into an imperial system based on client-patron relationship, a model similar to what the US has been pursuing in the past one hundred years in Latin America. Employing the patron-client integration model, Germany can coast into eurozone hegemony and secure its place as a Great Power in the 21st century by absorbing capital from the eurozone periphery (southern and Eastern Europe) to keep the core (northwest Europe) strong.Where is the precedent for German desire to use integration as a tool of imperialism?

Before the unification of Germany in 1870, the Prussian determination to create a customs union - Zollverein - and unify the German-speaking territories led to the creation of the German nation that was founded as a result of the war with France (1870-1871). The German nation predicated its existence on Otto von Bismark's policy of maintaining European hegemony by industrializing, neutralizing Great Britain and Russia, Germany's big enemies, and pursing a colonialist/imperialist foreign policy during the race for raw materials and markets.

Like Japan at roughly the same time, Germany achieved Great Power status very quickly, but its boundless ambition to remain a global power combined with high risk foreign policy resulted in diplomatic conflicts and indirect military confrontations in Africa, especially the Boer War that signaled how imperialist competition could sink the Great Powers into a major war.

Despite all signs that the risks for pursuing imperialism would entail a major conflict, mainly between Great Britain and Germany, the resolve on the part of the military, political, and business establishment was unshaken. For Germany under conservative Junker (Prussian aristocrats) leadership, the goal was to continue prospering and strengthening the national economy at any cost, including war for which Germany had been preparing ten years before WWI erupted.

A decade or so before WWI, German political and socioeconomic elites embraced the vision of 'World Power or Decline' doctrine, that is, becoming a super power that competes globally or facing mediocrity among European nations competing amid the second industrial revolution. This vision entailed that Germany had to accept certain risks in order to become a great power, including the risk of becoming a more aggressive imperialist nation in order to build a strong economy and defense network.

In the 1960s, German historian Fritz Fischer revolutionized interpretations regarding the causes of the Great War when he published Griff nach der Weltmacht: Die Kriegzielpolitik des kaiserlichen Deutschland 1914–1918, a book followed by others with a similar thesis regarding the expansionist schemes of the German Empire and the conviction that the alternative to becoming a Great Power, able to compete in the 20th century, was decline. This vision of greatness - in essence hegemony over continental Europe - entertained even before Prussia unified the Germanic-speaking states in 1870 remains deeply ingrained in the German culture and it is the pursuit of the 21st century under the guise of globalization.

In 2012, German political and economic ambitions are to use the Eurozone as the basis to achieve regional hegemony and ensure greatness on the global stage, so that Germany would be able to compete effectively with the other Great Powers. Whether the German goal of altering the integration model on which the EU was founded works or not is not important. In either case, German corporations gain both in the short term as well as longer term. With a lower euro value owing to the public debt crisis of the EU periphery, German exporters have been gaining ground in the non-euro areas as the balance of payments and GDP growth stats indicate. 

There is a recent report that Germany has gained an estimated 45 billion euros in 2010 and 2011 as a result of the sovereign debt crisis in southern Europe, while one of the most corrupt banks in the world, Deutsche Bank, has made huge profits trading bonds. In a previous posting about Deutsche Bank, I noted that the fact that the voice of this bank matters more than does the voice of the German Finance Ministry is scary, or at least it should scare Germans and Europeans alike, just as the voice of German bankers was of paramount significant in the pre-WWI era.

Should the integrity of the European Union and the euro as a reserve currency be based on the narrow interests of a few banks like Deutsche Bank, and if so, should German and EU citizens not have the right to full disclosure about the extensive operations of this bank, on which the US government has imposed more than one billion dollars in fines? Is capitalism to be saved or sacrificed so that Deutsche Bank and a few other financial institutions and corporations are saved because they have become one and the same as contemporary international capitalism fully backed by the German state?

In the 19th and early 20th century, there were very important German banks and industrial companies supporting and advocating imperialist policies so risky that they led to the Great War, exactly as Fritz Fischer and many others have argued. In short, that Deutsche Bank among other corporations like Siemens, MANN, etc. are backing the patron-client integration model should not be surprising for it is not unprecedented. After all, the same holds true for finance and corporate capital standing behind policies that US, UK, and other countries where governments have used trillions of taxpayer money to strengthen these institutions.

Therefore, this is a much larger issue about how capital determines the EU monetary union's future, and Germany's role in the global economic balance of power. Moreover, there is the question of the degree that such policies have already weakened parliamentary democracy in the periphery, and the degree to which such policies may be placing democracy in jeopardy as the periphery becomes poorer so that core countries like Germany may become richer by exploiting the former.

It is true that the Maastricht Treaty’s (1992) imposed rigid rules on members to keep annual fiscal deficits below 3%. However, the EU never had in place effective mechanisms to deal with countries that experienced default-like conditions in case of global recession, any more than it had mechanisms for countries that simply lied about exceeding the treaty’s terms. This was deliberate because there was a liberal credit regime intended to stimulate growth. However, the creditor nations led by Germany could at any time demand strict adherence to Maastricht and use the same treaty as a mechanism to converter the inter-dependent integration model into a patron-client one.

It is now public knowledge that EU officials were allowing the weaker countries in the union to spend at much higher levels than Maastricht permitted and to illegally strike swaps deals with Goldman Sachs. Banks and multinational corporations like Siemens, MANN, Deutsche Bank, Hypo Real Estate, etc., in the stronger countries de-capitalize the weaker EU members through direct and portfolio investment; a situation made worse by the much higher level of official corruption in EU’s debtor countries concentrated in the south and east.

In essence this means that the German-dominated EU is creating a two-tiered economy with hegemonic economies on the northwest tier and the weaker and “dependent” economies in the south and east. Especially amid this crisis, Germany and strong creditor countries demand from weaker EU members lower taxes for direct foreign investment, fewer restrictions on capital movement, lower wages, social security,and social benefits, liberalization of all vital sectors of the economy, including privatization of public enterprises so that foreign investment penetrates and eventually dominates such sectors.

In return for austerity concessions that debtor countries must make, they receive loans with interest rates higher than most home mortgages in order to pay interest on past debt, not to develop the economy in order to generate job growth and new wealth. Thus, the creditors saddle the debtor countries with cumulative foreign debt that will keep them perpetually dependent in every respect and much weaker economically within the eurozone; in essence serving as quasi-colonies for the core countries led by Germany.

In the campaign to impose austerity on the weaker members, creditor countries in collaboration with the IMF and European Central Bank are imposing monetary, fiscal, trade, investment, and labor policies on the periphery as part of an effort to make them 'more competitive' by reducing their national labor and asset values.  EU member and associate debtor members under some formal or informal austerity program will be reduced to “Third World” status and they will suffer cyclical debt crises like Latin America and Africa, to the benefit of core countries, especially Germany that is hegemonic in the eurozone.

It is obvious that Germany under Angela Merkel has seized the opportunity presented by the public debt crisis to prevail in imposing its political will on the rest of the eurozone, just as it is obvious that it has done so with the help of the IMF, World Bank that is not helping any debtor country with development loans unless it first implements austerity, and with the help of the large banks. This prescription appears to be popular inside Germany, according to public opinion polls, partly because the German public believes it is paying to bail out debtor countries, when in reality it is paying interest payments to the large banks, including German banks.

The so-called "New World Order" created after the fall of Communism has some similarities with the pre-1914 world, but it is hardly the same, no matter how much some scholars try to stress the similarities. And just as in the pre-1914 world order, it was not Germany alone, but imperialism that caused smaller and large wars along with the systematic exploitation of the periphery by core countries. In short, Germany is only taking advantage of an international order and political economy, and it is not doing anything that the US is not doing without using military intervention.

Unlike the pre-WWI era when Germany was intent on the road to world power or decline basing its strength mostly on national corporations and banks, in the early 21st century capital is much more international. Deutsche Bank, Siemens and other German multinational corporations' shares are traded around the world, but the strong German state stands behind these corporations, working to make certain that they remain strong so they can in turn keep the core strong.

Germany has been using globalization as well as the international organizations like the IMF as tools of hegemony, tools that did not exist before 1914, but it has failed to appreciate that just as the Allies imposed ruinous financial conditions that contributed to the Great Depression and Hitler's rise to power, Germany is now doing the exact same thing with periphery countries. Is the risk worth taking when Germany must remain competitive with China, US, Japan, and other Great Powers?

If you are a German politician and businessman the answer is that all risks are worth taking; the exact same answer that German politicians and businessmen gave in their pursuit to global dominance before 1914. But what if you are a German middle class professional or factory worker who assumed that your taxes is going to bail out the periphery? About two thirds of the Germans actually support the current policies that have transformed the eurozone into a German-dominated zone. Just as in the pre-1914 era when a segment of the German middle class and workers saw imperialism as a growth stimulant, similarly today's German society has no qualms about neo-imperialism under the guise of austerity and neoliberalism imposed on the rest of Europe.

US IRAN-FOR-SYRIA DEAL - 2012

On 3 February 2012, Russia denied that it was considering a US deal to permit an American-sponsored hit on Iran in exchange for non-Western intervention in Syria. Moscow insisted that it would not engage in backroom deals to back stab its Middle Eastern allies. This announcement came one day after Russia called the UN Security Council resolution to condemn Syria for its long-standing internal violence an act of hasty diplomacy. Along with China, Russia did not vote for the UN resolution that the US wanted passed on the grounds that it constituted a blatant violation of Syrian sovereignty.

Needless to say, that Syria has a very serious political problem, but it is an internal one. Russia and China held the same view as they do about Syria about when US-UK-French intervention in Libya began. While China does not wish to alienate any of the Arab countries with which it does business, it has been reluctant to go along with the pro-US Arab League that demands peacekeeping troops on the ground; essentially one step before full Western military intervention to overthrow Assad. At the same time, China does not wish to be blamed for social unrest spreading from Syria to Lebanon and Jordan, as the US will accuse Beijing that tries to avoid the difficult decision impacting Syria and by extension Iran.

The Syrian situation is complicated by the persistent reports of Western intelligence interference in the Syrian opposition, as well as al-Qaeda support for the rebels. That the US has found itself on the same side as al-Qaeda in Syria, as it did in Libya has raised a great deal of discussion around the world, especially by conspiracy theorists who charge that al-Qaeda has become a very convenient foreign policy for the US. Now that there has been some confirmation that Israel has been working with a terrorist organization to assassinate Iranian scientists, the question is the degree to which the US has been involved as well with 'Islamic' terrorists trying to destabilize Islamic countries.

Both Beijing and Moscow were interested in regime change in Libya where a post-Gaddhafi government could offer better terms and greater cooperation to them, even if it were already known that French and Italian companies would demand their share of the market. Libya was not in Russia's or China's sphere of influence, thus open for Western intervention and backroom deals. Neither China nor Russia could go along with the US-backed proposal for Western intervention in Syria, or in Iran, for the two go together and they are not Western or 'open' spheres of influence.

If the Assad regime is to collapse, as it most certainly will unless  there is a very radical change from within the current government, then it must do so not as the result of NATO bombs delivered by drone aircraft, at least as far as China and Russia are concerned. Russia has a long-standing relationship with Syria and Iran and it is not about to yield its traditional spheres of influence to the US. Even more significant, China needs Iran's oil more than any other country, and Chinese economic growth, which is expected to slow at around 8% in 2012, will slow even more if energy prices rise because of US intervention either in Syria or Iran. 

In mid-January 2012, the US tried to convince both Moscow and Beijing to back a new round of sanctions on Iran and to go along with anti-Assad measures to replace him with what will most certainly be a pro-US regime, given that the CIA has been active with Syrian opposition groups for a long time. The best that Russia and China could do for the US is to pressure Iran to accept the UN International Atomic Energy Agency (IAEA), which has never found any evidence of nuclear weapons now or in the pipeline.

Nevertheless, US Defense Secretary Leon Panetta, who warned Israel not to act alone against Iran and to keep the rhetoric at low tones, insisted that Iran may not have weapons now, but it will in a year or so, thus it poses a threat to the US which holds the world's largest nuclear arsenal! Israel, which possesses nuclear weapons now, came out and called Iran a security threat, although the brief history of Israel is one of perpetual militaristic aggression toward its neighbors and permanent occupation of Palestinian lands.

By contrast, Iran responded that it will only act militarily to defend itself against aggressors and countries providing military bases and support to the aggressors- US and Israel, possibly France and UK - if a strike emanates against Iranian sovereign land. Iran has implied in the past and it did so again this month, that it will strike regional Western allies if they provide military support for US and Israel intended to hit Iran, a threat intended for Turkey and America's Arab allies in the Gulf.

On 5 February 2012, President Obama finally stated that his administration had decided against a military solution in Iran and in favor of a political/diplomatic one. He stated that the risks for a military solution were too great, something the US knew last month, last year, and all along when Washington was issuing military threats, partly so that it could force Iran to accept US terms for economic integration with the West - force Iran's markets to open to Western capital, products and services, so that it would be reduced to the kind of dependency it was under the Shah.

That the Obama team decided against a military strike in Iran is largely because of resistance from Moscow and Beijing to go along with the US to remain neutral in the process of the ongoing aggression. To appease Israel and the American right wingers for proposing a 'political solution', Obama has proposed even more sanctions against Iran.

By far more significant in Obama's decision is the absence of a deal between the US, China and Russia on their respective influence in Iran after a possible strike by the Israelis. It may very well be that Iran has agreed with China and Russia to negotiate with the US for gradual opening of its national economy to the West, in addition to playing a lesser role in the Middle East, including Iraq and Afghanistan where Iran has been active and stands to benefit longer term once the US is no longer a major factor.

Meanwhile, Turkey that would not mind having Assad removed, thereby strengthening its position even more in the region, was also a factor in the US decision. Given that Ankara and Israel have not enjoyed cordial relations in the last three years, it would be very difficult for Ankara to justify allowing US military operations from their soil against Iran, to say nothing of the risks of Iranian military retaliation that would put an end to Turkey's ambitions of becoming the second most powerful Islamic nation after Iran.

There are many facets to Obama's decision to ameliorate relations with Iran, from the volatility to the EU economy to the fact that Iran is very powerful and not at all like Iraq, to the reality that the US achieved absolutely nothing but debt in both Iraq and Afghanistan. I could continue on explaining the roles of Saudi Arabia, Iraq, and Pakistan as essential factors in the US decision for a diplomatic solution, but I would rather focus on one salient factor in the US that has to do with the presidential election that Obama has almost locked up and does not really need to fear the Jewish lobby as he has in the past.

Prominent Jewish Americans are already contributing heavily to Obama's Republican opponents, including to Tea Party movement candidates that seem to have retreated into the background for now. Obama will secure the Liberal-Democrat Jewish vote and campaign contributions, largely because most experts expect him to win; and who does not want to be on the side of the winner? Therefore, the diplomatic solution he is now putting on the table will not cost him politically with the right-wing that will not back him any more than it will cost him with the Jewish vote and money. From a domestic political perspective as well as a foreign policy one, the risks for the Obama team are too great if he did not place a diplomatic solution on the table.

The only caveat is that the diplomatic solution is a bluff, namely, Obama may have done so with preconditions that are too rigid for Iran to accept, and to buy time until Israel prepares to hit Iran nuclear energy program installations. Even if as a diplomatic approach is on the table, the cat-and-mouse game over the Straits of Hormuz where the US and Iran both demand to maintain control. Nor does a diplomatic solution mean that at any time there may not be an issue that may give the US and Israel the pretext to bomb Iran.

If this is indeed a genuine proposal, a diplomatic resolution to the long-standing US-Iran cold war may be a first step toward a reexamination of the 'war on terror', the inane equivalent to the 'war on drugs'. Furthermore, it may be a first step toward a solution to the endless Israeli-Palestinian conflict. Above all, amelioration of US-Iranian relations may actually result in Iranian reformers actually having a real chance to be heard and to make a difference on significant human rights, including women's issues.