AFGHANISTAN TODAY (Jon Kofas - Greece)

Posted on September 21st, 2010

The occasion for last weekend’s elections in Afghanistan is a good opportunity to reflect on what the US and NATO are really accomplishing in that country. What has Obama accomplished? For about two years, I have argued in several WAIS postings that the US has lost the war in Afghanistan and that any resources that the US and NATO throw to that lost conflict are wasted in the sense that their goals will never be realized for the duration. It has been a remarkable journey to observe how that doomed war has gradually strengthened Iran, India and China, while weakening Pakistan and of course leaving Afghanistan in an increasingly chaotic mess from which it will require many decades to recover. The most recent public opinion poll CBS/NYT of 16 September 2010, indicates that only 38% support US involvement while 54% are opposed. Given that one in seven Americans is living below poverty (mostly minorities, women and children) and given that official unemployment is around 10%, given that 45 to 50 million (depending on the source) have no health coverage, given that prospects for a “jobs-growth economy” is not on the horizon even if Obama gets a number of bills through Congress, the Obama administration is continuing the lost war in Afghanistan to placate right-wing ideologues who have a mass following primarily in the South and rural areas throughout the states, and to appease disparate conservative groups that exercise immense influence through the media and campaign contributions. While the US and NATO are wasting precious resources on a lost war with the Taliban and Al-Qaeda, the real power struggle is heating up between China and India, both of which have ambitions to become economic, military, and political powerhouses of the 21st century. This is where the US should have been focused, not on mountain rebels whose religious fanaticism only complicates matters for US and EU security with Muslims everywhere seeking the excuse to randomly hit Western interests around the world. Because so many US and NATO officials as well as independent analysts are immersed in Cold War dichotomous thinking and because that is where their career and pocketbook interests rest, there is lack of realistic assessment in foreign affairs. The ubiquitous theme that “America is going soft” is very old and very Cold War, and yet it carries as big a punch today as it did during the early Cold War. In terms of geopolitical/strategic, economic, and political influence, is Afghanistan the belly of the beast for the US and NATO, or is it the new chosen Vietnam after Iraq because there must always be a Vietnam to validate American power (and its limits)?

Afghanistan: Ideology and Symbolism vs. Pragmatism (Jon Kofas, Greece)

Posted on December 3rd, 2009 
It is hardly a surprise to anyone who keeps up with US foreign policy that President Obama will send an additional 10,000 US troops to Afghanistan in 2010 and then consider withdrawal just in time for the 2012 presidential campaign. After all, in 2008 Obama campaigned on the “bad war in Iraq” vs. the “good war” in Afghanistan, a campaign that afforded him political “legitimacy” with right wingers and with domestic and foreign lobbies that profit economically and/or politically from perpetual conflict in the Middle East. Before the 2008 election, I wrote a piece on the futility of US involvement in Afghanistan, part of which asks questions about US goals:
* If the goal is to maintain a Karzai-type regime that controls only a part of the country while peasants grow heroin whose production has skyrocketed since the US invasion, then that goal has been achieved. Once again Afghanistan is the largest poppy producer in the world.
* If the goal is to allay the fears of the American people that the US “will continue to take the war to Al-Qaeda,” the question is whether this has yielded results other than psychological. After all, is Homeland Security taking care of this problem at an immense cost to taxpayers?
* If the goal is to appease the substantially vociferous right-wing elements entrenched throughout American society from media and business to politics, intelligence services to military, then the money and cost in every other respect is well worth it.
Only one-third of the US population supports the war in Afghanistan, and at least 55% are against. And the only reason NATO members have agreed to send an additional 5,000 troops in 2010 is because of Obama’s personal appeal and the realization that this too will come to an end soon along with the mass catastrophe in Iraq. The fact is that the US has already lost the war in Afghanistan and only blind ideologues, certain corporate interests profiting from war (charging $10 per bottle of water for the troops is just the least of such examples), and the Israeli lobby along with an assortment of right-wing think tanks refuse to see it. The war is taking place presumably to save face and to show that indeed a real effort has been made before withdrawal. Remnants of die-hard Cold War mindset, ideology and symbolism in foreign policy transcend pragmatism, and Afghanistan is proof. Even if Obama orders an additional 100,000 troops to Afghanistan in 2010 to the existing 50,000 troops on the ground today, the US will not keep Afghanistan in its sphere of influence once the troops withdraw two years later when Obama must once again face the voters and explain his failed foreign policy. Knowing that people are making comparisons with Vietnam and knowing that he could become captive to a disaster he inherited, Obama will in fact have to announce a political solution right before he goes on the campaign trail. Otherwise, as the economy improves, he will soften his multilateral foreign policy, and his administration will become much more hawkish, especially as pressures build for the US to “punish” Iran, and Israel continues its hard-line policy toward the Palestinians. Meanwhile, the persistence of ideology and symbolism combined with strong domestic and foreign lobbies that finance political campaigns always win over the pragmatic course that best serves broader US national interests as the majority of the American people see it. Even Jeffersonian democrats recognize the limits of pragmatism in a democracy and the long arm of ideology and symbolism that invariably represent minority domestic and foreign interests.

A TRIBUTE TO US DIPLOMAT GEORGE F. KENNAN

George F. Kennan, the great American diplomat and foreign policy scholar, died in March 2005 at the age of 101. In the early 1980s when I was conducting research in Washington and the Truman Library for a book on the Truman Doctrine and the Marshall Plan, I came across some of his correspondence with various officials. To his credit, Kennan understood the significance of pursuing a policy of containment of Stalin's USSR by emphasizing the economic and political options rather than the military option which many Cold Warriors seeking to build their careers advocated. Kennan expressed reservations about military and counter-insurgency operations in Greece during the Civil War (1946-1949), while he was an enthusiastic supporter and one of the architects of the Marshall Plan, which he believed is the best way to combat the spread of Communism and at the same time strengthen the U.S. politically and economically. By the end of the Vietnam War, Kennan had changed some of his earlier views regarding U.S.-USSR relations, stressing a policy of engagement to prevent not just a possible superpower conflict, but to resolve conflicts between the satellites of the U.S. and USSR.  Unlike many who viewed the Soviet invasion of Afghanistan as an offensive move coinciding with the Iranian and Nicaraguan revolutions, Kennan saw it from a defensive perspective, arguing that the Soviets often acted out of fear and anxienty, rather than a desire to acquire more spheres of influence so that they could antagonize the West. Nor was he encouraged that the U.S. resorted to counter-insurgency operations in Central America, especially when the revelations came out in 1986 about the illegal deals to funds the contras in Nicaragua by selling weapons to Iran, among other such short-sighted and reckless foreign policy adventures. Like McNamara, whose views also evolved since he was defense secretary, Kennan dropped the ideological rhetoric of the early Cold War, and became more pragmatic about U.S. foreign policy, earning respect among centrists and even leftists.  An advocate of constructive co-existence with the Communist bloc, Kennan was a reflective man with astute instincts about U.S. foreign policy which he viewed as an expression of the country's history, institutions, domestic and global interests, and always from a pragmatic perspective that earned him respect around the world. Kennan leaves a rich legacy with his many books, articles, interviews, having influenced countless scholars, journalists, and politicians since the 1930s. It is unfortunate that people of his towering intellect and sense of realism are absent from leadership positions in the State Department today. A new Kennan or perhaps several like are needed to deal with greater pragmatism and less ideological baggage.  Regional conflicts and balance of power issues like Israel-Palestine, Iraq, Iran, Afghanistan, and Pakistan have remained a dead weight on US foreign policy. US bilateral and multilateral relations with the Great Powers also require a new direction toward greater global cooperation to deal effectively with vital issues from debt insolvency for the Third World to degradation to ecosystem and energy needs for the 21st century.

Economics: Debt Restructuring in EU (Jon Kofas, Greece)

Posted on September 20th, 2010 

In the last 10 months or so, there has been a great deal of analysis and commentary from different ideological perspectives devoted to the structural weakness of the EU. This is not only because of how the EU handled the 2008-2010 financial crisis and the bailout of Greece with IMF assistance, but largely because the global economic dislocation exposed flaws in the monetary union’s integration model. Last week, more reports surfaced that Portugal may be facing a financial crisis, and immediately that sparked the fear that Spain and Italy are becoming nervous after the austerity experiences of Ireland and Greece in 2010. Despite Germany’s very strong GDP growth and its prospects, the EU is in trouble unless it undertakes a new course of action that goes beyond bailing out banks. I have pointed out on numerous postings that the EU integration model was founded on “inter-dependency,” namely, the stronger northwestern EU countries would help with subsidies lift the weaker southern and Eastern members. Because of Maastricht Treaty’s (1992) rigid rules on members to keep annual fiscal deficits below 3%, the EU never had in place mechanisms to effectively 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. 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 decapitalize 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 EU is creating a two-tiered economy with the strong and thus hegemonic economies on the northwest tier and the weaker and “dependent” economies in the south and east. Especially amid this crisis, creditor countries demand from weaker EU members lower taxes for direct foreign investment, fewer restrictions on capital movement, 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, they extend loans with interest rates higher than most home mortgages, and they saddle the debtor countries with cumulative foreign debt that will keep them perpetually dependent in every respect, from finance and trade to technology and essential pharmaceuticals. Many analysts in the West, as well as die-hard advocates of what is euphemistically called “free” enterprise (instead of state-supported corporate welfare system) insist that debtor countries are solely responsible for their own problems and financial demise. Therefore, “they must get their own house in order,” as though it was ever their own house and not a rental from northwest EU’s powerful banking houses. And in this campaign to impose austerity on the weaker members, creditor countries have the IMF to provide legitimacy and to insist that “austerity”–under formalized agreements or simply as piecemeal policies–is the only solution. Unless creditor countries agree to loan restructuring that entails debt forgiveness for a percentage of the debt, EU member and associate members which are currently debtor countries and 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.

Die Truman-Doktrin und der griechische Bürgerkrieg 1946-1949 - JON KOFAS

Heiße Kriege im Kalten Krieg
Die Truman-Doktrin und der griechische Bürgerkrieg 1946-1949 - JON KOFAS 
 (chapter abstract)
Considering that there are hundreds of books and articles published on the Truman Doctrine and the Greek Civil War, my article analyzes the domestic dynamics of Greece, as well as U.S. regional and global foreign policy considerations in making the decision to use Greece as a prototype for the containment policy of the USSR. The article further demonstrates that besides multiple U.S. concerns regarding the USSR's regional role, the Truman administration was interested in redefining U.S. national security interests on a global scale as a prelude to integrating under its aegis as much of the non-Communist world as possible.

Titel:	Heiße Kriege im Kalten Krieg
Herausgeber:	Greiner, Bernd; Müller, Christian Th.; Walter, Dierk
Ort:	Hamburg
Verlag:	Hamburger Edition, HIS Verlag
Jahr:	2006
ISBN:	3-936096-61-9

 Ähnlich wie bei der Erforschung des Kolonialismus, wo sich schon vor einiger Zeit zunächst der Blick von den Zentren auf die Peripherie verlagerte, bis schließlich, in Umkehrung der Perspektive, gewissermaßen „das Imperium zurückschlug“, so hat sich auch die Geschichtsschreibung des Ost-West-Konflikts zwischen 1945 und 1989 neuerdings vom direkten Verhältnis der Supermächte und Europa als zentralem Schauplatz des Kalten Kriegs ab- und verstärkt anderen Regionen zugewandt – mit dem Ziel, ein genaueres Bild der gut 40 Jahre währenden „Teilung der Welt“ zu erhalten.[1]
Dies ist nicht allein dem Aufkommen des Schlagworts „Globalisierung“ seit Mitte der 1990er-Jahre geschuldet, sondern wohl auch der internationalen Entwicklung seit dem Ende des Ost-West-Konflikts, die bislang weit weniger friedlich verlief als nach Mauerfall und Untergang der Sowjetunion häufig erwartet. Die Betrachtung des Kalten Kriegs über die hochgerüstete, unter der Drohung atomarer Vernichtung stehende, aber ohne größeren militärischen Konflikt lebende nördliche Hemisphäre hinaus zeigt dann schnell, dass von einer Epoche des „langen Friedens“[2] kaum die Rede sein kann.
Mit einer Reihe der in der so genannten Dritten Welt geführten „heißen“ Kriege und ihrer Bedeutung im Kontext des Ost-West-Konflikts beschäftigt sich der von Bernd Greiner, Christian Th. Müller und Dierk Walter herausgegebene Sammelband, der auf eine Tagung des Hamburger Instituts für Sozialforschung (HIS) vom Mai 2004 zurückgeht.[3] In 13 Fallbeispielen soll „in erster Linie die Qualität und Struktur der Konfliktlogik im Einzelfall“ (S. 11) hinterfragt, also untersucht werden, welche Rolle die „Faktoren des Kalten Kriegs“ im Verhältnis zu anderen Determinanten in den jeweiligen militärischen Auseinandersetzungen gespielt haben.
Als Auswahlkriterium galt ein begründeter „Anfangsverdacht“, dass es sich tatsächlich um „Stellvertreterkriege“ handelte, wie es zeitgenössisch und auch historiografisch bis heute noch oft pauschal heißt, oder doch zumindest eine „Bedingtheit durch die globale Blockkonfrontation“ anzunehmen war. Näher untersucht werden in dem Band der griechische Bürgerkrieg 1946-1949 (Jon V. Kofas), die von der Kolonialmacht Großbritannien bekämpften „Emergencies“ in Malaya und Kenia 1948-1960 (Dierk Walter), der Koreakrieg 1950-1953 (Bruce E. Bechtol, Jr.), der „Abnutzungskrieg“ in Vietnam 1965-1973 (Bernd Greiner), der Wettbewerb der Supermächte in Südasien sowie die von Indien, Pakistan und China geführten Regionalkriege 1954-1972 (Amit Das Gupta), der Kalte Krieg in Südafrika (Elaine Windrich), die Hintergründe der sowjetischen Invasion in Afghanistan 1979 (David N. Gibbs), der Bürgerkrieg in El Salvador 1980-1992 (James S. Corum), der indonesische Kolonialkrieg in Osttimor 1975–1999 (Brad Simpson), der irakisch-iranische Krieg 1980-1988 (Henner Fürtig), Ägypten im Kalten Krieg (Thomas Scheben), die Nahostkriege zwischen Israel und seinen Nachbarn (Bruce Kuniholm) sowie die Interventionen Kubas in Afrika 1975-1991 (Piero Gleijeses).
Den einzelnen Untersuchungen gehen drei übergreifende Beiträge voran. Robert J. McMahon ordnet die „heißen Kriege“ allgemein in den Kalten Krieg ein und streicht heraus, dass sowohl aus amerikanischer als auch aus sowjetischer Sicht die Dritte Welt ab den 1950er-Jahren zum „wichtigsten“ oder gar „entscheidenden“ Schauplatz der Ost-West-Konfrontation wurde. McMahon betont dabei die Bedeutung von Faktoren wie politischer Glaubwürdigkeit und atomarem Gleichgewicht oder die Spielräume für die im Rückzug befindlichen europäischen Kolonialmächte einerseits und die Unabhängigkeitsbewegungen andererseits, die das „System des Kalten Kriegs“ geschickt für eigene Zwecke ausnutzten. Seine Feststellung allerdings, der Kalte Krieg habe „Verlauf, Richtung und Dauer fast jeder dieser Auseinandersetzungen machtvoll beeinflusst“ (S. 33), wird von den Einzeluntersuchungen des Bandes gelegentlich in Frage gestellt.
Der gedankenreiche und konzeptionell hervorstechende Beitrag von Marc Frey über „Muster von Interaktionen“ zwischen den USA und der Dritten Welt weist unter anderem auf den dort – im Gegensatz zum bipolar organisierten Europa – vorherrschenden Polyzentrismus hin, insbesondere bei Dekolonisierungskonflikten. Dieser war innerhalb der „freien Welt“ anzutreffen, wo die Vereinigten Staaten und ihre europäischen Verbündeten häufig überkreuz lagen, und auch im „kommunistischen Lager“, wo der Sowjetunion in der Volksrepublik China schnell ein Konkurrent erwuchs. Frey verweist auch auf die Bedeutung ideologischer Grundvorstellungen und kultureller Vorprägungen bei Washingtoner Entscheidungsträgern, auf die Rolle von Geheimdiensten und bilateralen Polizeiausbildungsprogrammen.
Etwas unbefriedigend ist dagegen der spiegelbildliche Beitrag von Roger E. Kanet über „sowjetische Militärhilfe für nationale Befreiungskriege“. Abgesehen von seltsamen Begriffen wie „israelischer Imperialismus“ (S. 61), womit Kanet möglicherweise dem Duktus seiner Quellen folgt, ist sein Verständnis sowjetischer Außenpolitik vergleichsweise eindimensional und nicht immer leicht nachzuvollziehen. Nach Kanets Einschätzung war die Sowjetunion um 1979 aufgrund ihrer internationalen Interventionen auf dem Höhepunkt ihrer Macht, die dann aber doch recht abrupt zerfiel, ohne dass der von US-Präsident Ronald Reagan Anfang der 1980er-Jahre vollzogene „Rollentausch“ (nun unterstützten die USA, und nicht mehr die Sowjetunion, weltweit Guerillas gegen instabile und unpopuläre Regime) dabei ein „Hauptfaktor“ gewesen wäre (S. 78).
Unterschiedliche Qualität haben auch die Einzelstudien. Herausragend ist der brillante, quellenreiche, panoramaartige Essay Bernd Greiners über den Vietnamkrieg („Die Blutpumpe“). Greiner betont einerseits den exzeptionellen Charakter dieses Kriegs; andererseits nimmt er ihn als Ausgangspunkt für vergleichende Überlegungen. So verweist er auf den Zusammenhang zwischen asymmetrischem Krieg und entgrenzter Gewaltanwendung bzw. die Verwendung „symmetrischer Mittel“ höchst unterschiedlicher Kriegsgegner.
In anderen Untersuchungen wird dagegen auf eine eingehendere Betrachtung der Natur der jeweiligen „heißen Kriege“ oft verzichtet. Bemerkenswert sind viele Beiträge dennoch. Sie zeigen unter anderem, dass den Einflussmöglichkeiten der Supermächte, beispielsweise in den Fällen Nahost oder Indien/Pakistan, gelegentlich enge Grenzen gesetzt waren. Zu bedauern ist, dass mit der Ausnahme Großbritanniens, für das Dierk Walter globalpolitisches Denken und die Dauerhaftigkeit strategischer Elemente womöglich etwas überbetont, andere Mächte wie Frankreich oder China nicht als eigenständige Akteure beleuchtet werden. Generell hätte eine größere Einheitlichkeit der Aufsätze möglicherweise ein größeres Maß an vergleichenden Erkenntnissen erbracht.
Die in der „Wahrnehmung des Kalten Krieges [...] dominante Logik eines bilateralen globalen Konfliktes zweier nahezu monolithischer Blöcke aufzubrechen“ (S. 11) ist das Hauptanliegen der Herausgeber. Diesem Anspruch wird der insgesamt anregende Band ohne Zweifel gerecht. Er steckt ein faszinierendes, für künftige Forschungen noch sehr umfangreiches Feld der internationalen Geschichte ab.

Economics: IMF and EU/US Unemployment (Jon Kofas, Greece)

Posted on September 16th, 2010 
On 13 September 2010, at a meeting that the International Labor Organization (ILO) co-sponsored, IMF managing director Dominique Strauss-Khan warned that the global recession since 2008 has created “a wasteland of unemployment that is likely to leave scars on society for years to come, unless action is taken to address the jobs crisis.” Spanish Premier Zapatero added that “The crisis of unemployment is the worst one facing the world right now.” Given that the US and EU are facing “official unemployment” of 10%, the heads of state gathered in Oslo agreed with IMF and ILO leaders about the problem.
Absent from the Olso meeting was self-criticism. For its part, the IMF failed to mention that the monetarist policy recommendations the Fund has been making to all its members, whether they are receiving stabilization loans like Greece and other Eastern European countries or not, have exacerbated unemployment, shrunk the middle class, and made upward mobility a dream for the new generation of college graduates. Nor was there shortage of hypocritical rhetoric by heads of state like Greece’s Papandreou, who said: “We need to humanize this global economy”–this comment from a politician who has done everything the IMF, EU central bank and finance capital demanded to accommodate and strengthen finance capital that caused the crisis while dehumanizing the economy and creating much higher unemployment as a result.
On 11 January 2010, I wrote a piece for WAIS predicting that the world economy will actually perform much better than the IMF was claiming in December 2009. I added, such growth will be limited to corporate profits amid a jobless-growth economy that will not recover until 2011. I further noted that rising unemployment, wage stagnation, cuts in social benefits and social security will undermine the middle class and workers. The consequences will indeed be intense labor (urban and rural) and student unrest in 2010, as it becomes clear that governments will demand that the lower classes will pay for the banks’ bailout.
In January 2010 when I was making these predictions, I never imagined that the IMF, whose policies are designed to strengthen finance capital and the core within the capitalist world system, would participate in a conference where it is sounding the alarm about a lost generation of unemployed folks, a generation that includes not just unskilled workers but highly educated people with several degrees and no job prospects. Guardian of capital, the IMF realizes that the strength of a pluralistic society on which capitalism rests for the Western World must have a strong middle class. On several occasions I have written that the global recession will seriously undermine the middle class and consequently the liberal bourgeois social order. The Oslo meeting took place to send a message both to governments and private sector about that specter hanging over the capitalist Western World today. “If you lose your job,” Strauss-Kahn added, “you are more likely to suffer from health problems, or even die younger. If you lose your job, your children are likely to do worse in school. If you lose your job, you are less likely to have faith in public institutions and democracy.”
Considering that the IMF, central banks, private banks, and multinational corporations have demanded that governments force workers and the middle class to pay for the crisis of 2008-2010, and considering that more squeezing of labor the middle class is coming this fall and winter in most advanced capitalist countries and especially in less developed, the IMF is doing the right thing both from a PR and symbolic perspectives to warn markets and states that something must be done. But what is this panacea? The ILO and IMF will work together, and with them member governments, to promote “employment-creating growth,” no matter how wonderful yet nebulous that sounds.
The reality is that the financial and political elites are in panic mode because of what is coming ahead not just in “basket-case” countries like Greece (leader of the PIGS and remaining on the list of most corrupt countries on the planet), but in the UK, France, and US. Of course, there is always the possibility that “employment-creating growth” could come out of more defense spending that has not suffered cuts amid major trimming of the welfare state and downward pressures on wages and salaries. The US hopes to sell $60 billion worth of arms to the Saudis. I have no clue why the Saudis need to make such a monumental weapons purchase, unless it is to help the US economy for it will mean jobs for US arms manufacturers. After all, Kissinger made such deals with the Shah of Iran, arguing that Iran had made billions selling oil and it was time to pay something back!
France and Germany are no different from the US, and Russia and China of course are on the same road. A member of the EU parliament recently exposed the hypocrisy of EU politicians, who on the one hand insisted that Greece adopt austerity measures last winter, but this past August, the negotiations for major weapons sales by France and Germany to Greece went ahead. Those of us who have researched stabilization and development loans know that such loans are linked to contracts from creditor countries, and that includes weapons purchases.
The sad reality about all of this is that intelligent people who should know better shrug their shoulders and ask: what choice does government have but to make cuts in the bloated social welfare state and get rid of surplus public employees; what choice but to strengthen finance capital and weaken the bloated public sector; what choice but to agree to IMF-style austerity measures–whether it is receiving stabilization loans or not–and agree to link major contracts for arms purchases? What choice indeed but to remain apathetic in the face of adversity that even the IMF acknowledges undermines the bourgeois social order?

Economics: China, US and the Currency Debate (Jon Kofas, Greece)

Posted on September 15th, 2010 

 

Just a few thoughts on one of the many complex and significant issues that Tor Guimaraes raised on his posting of 14 September. There have been repeated calls in the mass media, the latest one by popular economist Paul Krugman in a NYT article entitled “China, Japan, America,” to pressure the Chinese government to stop manipulating its currency, thereby undercutting the economies and balance of power of the developed countries with which it does business. China is currently holding a reported $2.5 trillion in foreign reserves, of which as Tor Guimaraes notes about $1 trillion is US. Krugman and others like-minded commentators who have called for China to stop manipulating its currency leave the impression that the US, EU, Japan and other countries are not playing politics with their currencies like China, but permit the “invisible hand” to do its magic! This “populist” game that certain academics, journalists and politicians are playing very opportunistically is designed to apportion blame to external forces for the domestic economic problems in advanced capitalist countries, especially the US. Krugman is an intelligent economist and he knows that governments for centuries since the Roman Empire have manipulated currencies, just as he knows the US has engaged in this practice. Chinese currency manipulation is a complex political issue with serious multifaceted consequences if Washington upsets the delicate inter-dependency it has with Beijing. Krugman and like-minded individuals have further complained about Chinese subsidies. Again populist critics know that the US, EU, Japan, Korea, Taiwan also provide subsidies in varying forms to strengthen certain domestic sectors or specific industries for the “good of the national economy.” All of this noise about China has been around for many years. It assumed momentum after a January 2007 report to Congress warned that “China’s Trade with the US and the World” posed threats to US, EU & Japan national industries and employment.
The US, EU and Japan have been concerned for many years about intellectual property rights violations and dumping by China. Beijing has deliberately kept its currency low and it is guilty of intellectual property rights violations and dumping; all issues that the World Trade Organization can help resolve with China as a member. However, it seems that journalists, consultants, and even academics are falling into the politicians’ perfidious mold of writing/saying what people want to hear, just so that they can be accepted by the public that responds to cryptic or overt nationalist rhetoric. The key question for the US economy is whether the solution rests a tariff war of some sort limited or extended. Reducing this issue into populist protectionist rhetoric to appease the public, only helps the few companies crying out for government help and does nothing to address structural problems in the US. The “economic nationalists”–at least those like Krugman currently playing the card for popular consumption–know that the US has an inter-dependent relationship with China, that the currency issue has many facets beyond economic, and that abrupt and direct pressure would hurt the US much more than China.
Besides, the US has imposed “select tariffs” on those Chinese products, including steel, copper, tires, and automotive parts, that the Commerce Department deems part of a “dumping campaign.” Moreover, the US and EU have intervened to prevent China from buying bonds from EU members and associate members beyond a certain amount. In short, the US and EU do not want China to create a “dependency” relationship with countries traditionally under the Western sphere of influence. The solution for the US and EU is to get their own public finances and economy in order, starting with a progressive fiscal policy and restructuring the economy on a jobs-growth basis as the IMF and ILO recommended during Olso meeting a few days ago. China is hardly responsible for the fact that the US and EU are over-consuming and under-producing to the detriment of their own socio-economic and political harmony.
Like the Latin-speaking half of the Roman Empire after the death of Marcus Aurelius, the US, the EU is right behind it, has chosen the road to wealth concentration in the hands of a small percentage, a runway culture of wasteful spending and over-consumption, and refusal to undertake systemic changes to alter the current course that will yield cyclical crises down the road. By contrast, China with a Communist regime–such as it is practicing capitalist economics–has opted for productivity oriented route and very slowly it is allowing consumption to filter down to the masses.
History will judge in a few decades if the Chinese or the US-EU models of development will best serve their respective populations. The Chinese model–detrimental as it is to hundreds of millions of cheap laborers working under unsafe and unhealthy conditions–is focused on exported-oriented growth strategy with low domestic consumption. The US-EU model rests on perpetual debt-by-growth strategy, using the reserve currencies and political power to maintain global market advantages, weakening the welfare state and focusing on strengthening finance capital while hoping that will somehow filter down to benefit the middle class needed to maintain the existing social order.