ARGENTINA: FOREIGN DEBT AND EXTERNAL DEPENDENCE

Defaulted bonded debt, the US and the UN
Argentina has been a target of the international financial institutions, US government and G-7, multinational corporations, and the mainstream pro-business media in the last fifteen years. The reason is not because it opted to become Communist, but rather to embrace a nationalist solution to the domestic credit crisis, instead of submitting to an austerity regime that the US, International Monetary (IMF), Paris Club, European Central Bank and Wall Street and multinational corporations wanted. The issue is not the size of Argentina’s economy, because it is tiny in terms of the global GDP. 

The core of the issue is that Argentina did not submit to austerity as the markets demanded. Even if it paid the creditors every single dollar it owed, but it still opted for a multilateral foreign economic policy with a heavy dose of economic nationalism, the reaction from the US and the markets would have been just as condemnatory. Public debt is a pretext, because there are a lot more countries that owe a lot more than Argentina, but because they follow the dictates of the markets and neoliberal policies, there is no criticism.   
For many reasons, ranging from ideological to very practical and geopolitical, the US as well as the G-7 creditor nations cannot demonstrate any leniency toward a Latin American republic defaulting on its debt and deciding to break the traditional mechanisms of economic integration that link the national economy to the transnational banks and corporations under the terms the latter dictate. Clearly, the issue here from the Cuban Revolution onwards has been to prevent economic nationalism and multilateral foreign economic policy. 

Public debt is one of the most effective means to keep a country well integrated into the international political economy. This has been the case for Argentina that the US and the G-7 want to punish as severely as possible, sinking its economy into another economic crisis so that the world can learn a lesson of what not to do. The debt crisis of Argentina has been dragging on for more than a decade and a half (late 1990s to the present), and there seems to be no resolution to it, given that the courts in the US have become involved ruling in favor of creditors in a case that is as much financial as it is political.

The worst thing for the US and the G-7 creditors is if Argentina actually prevails with its nationalist path and terms that have allowed it to break off the tentacles of the IMF, New York and EU-based creditors. Argentina’s punishment means greater rewards for creditors in the future, and this is not just my opinion, but the conclusion of the United Nations Conference on Trade and Development agency.

·         First, by removing financial incentives for creditors to participate in orderly debt workouts, the rulings will make future debt restructuring even more difficult, in particular for outstanding bonds without a Collective Action Clause, the actual amount of which is unknown but is likely to be large.

·         Second, obligating third-party financial institutions to provide information about assets of sovereign borrowers will have a significant impact on the international financial system as it forces financial service institutions to provide confidential information on the sovereign borrower's global financial transactions to facilitate the enforcement of debt contracts for the creditors.

·         Third, the ruling will erode sovereign immunity.

http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=7

Besides the UN, even the IMF was astounded at the US Supreme Court decision, claiming that it poses problems in international financial relations. It appears that the IMF is concerned that a single Hedge Fund is allowed to prevail over a sovereign nation-state that has demonstrated willingness to negotiate with its creditors. After all, Argentina came to terms with the Paris Club, a long-standing international lender to governments, as well as the Spanish-based oil company REPSOL, thus proving that it is seeking negotiated solutions and not outright expropriations.

Hedge Funds, Public Debt  and Public Interest                                                                                        
There is an assumption in the mass media, on the part of businesspeople and mainstream politicians that anything good for business is good for society (1920s mentality in the US), and anything that is in the public domain is inherently evil, invariably associated with Communism. Therefore, the solution to all problems in society is to privatize everything from public transportation and utilities to public health and education. The assumption here is that private sector efficiency necessarily translates to social justice.

Obsolete after the Great Depression, this mindset prevailed in the Western World from the early 1980s and it really took off in the 1990s when the euphoria of the end of Communism was believed to be the vindication of neoliberalism. Does the fact that Communist regimes – bureaucratic Communism with an elite party class – failed in the Eastern bloc necessarily entail that unchecked capitalism under neoliberal policies and a corporate welfare state is a great thing for society as a whole? The answer is that this is the assumption of mainstream politicians from right to left-center, media, academia and hired-gun analysts interested in securing a salary. Argentina’s public debt problem took place against such a background.

In June 2014, the government in Buenos Aires requested that a US court hold its ruling in favor of creditors (mainly a single hedge fund), so that the country would avoid yet another default that would not be in anyone’s interest, least of all the people of Argentina on the receiving end of the crisis. The US court had decided that it was illegal for Buenos Aires to be paying bondholders who had not agreed to the debt restricting plan under such plan struck in 2005 and 2010.

Fearing a precedent that could spell disaster for debtor nations, the UN trade agency UNCTAD stated that the US court ruling is in violation of the US Sovereign Immunities Act, and it contributes to the erosion of Argentina’s sovereign immunity. The concern of the UN-UNCTAD is that the US court ruling strengthens the creditors and weakens the debtors who may not be solely responsible for the debt default. The IMF did not go as far as the UNCTAD, but it was troubled that the courts role intervenes in cases where international financial institutions historically negotiate with governments.

The concerns of UNCTAD as expressed above illustrate very clearly the sharp division between debtors and creditors, between rich and poor, between a predominantly northern hemisphere that is rich and southern hemisphere that is poor. At the heart of this issue is not only the world division of labor and fair practices on international loans, trade and investment, but whether 19^th century-style imperialist practices will continue to hold true in the 21^st century in democratic societies. 

Under restructuring, capital was reduced, interest capitalized, and time payments extended. Although 93% of the bondholders have accepted the government’s debt restructuring arrangement that entailed shaving off a third of the bonds’ original value, the US has been using the defaulted debt issue to engage in what President Cristina Fernadnez has called “vultures”, creating financial instability and driving the middle class into poverty by using the debt issue. Because the US Supreme Court refused to hear the case, the cost of borrowing and the value of the currency are tied to the court decision. Furthermore, investment decisions, the pace of the country’s economy and living standards are impacted immediately.

Argentina's government ran up against the powerful NML Capital, a subsidiary of Elliot Capital Management, run by billionaire Paul Singer who has experience in law suits against Third World governments (Republic of the Congo and Peru) for defaulted bonds. One could argue that no one forced these countries to borrow, let alone to spend loans unwisely until they fail to service the loans. True enough, though the lender knows the risks when making the loans.

Unlike the majority of creditors who accepted the bond swap Buenos Aires offered, Singer refused, knowing that the politicians, media and markets are on his side. Managing a $17 billion Hedge Fund, Singer is a Republican Party activist and according to news stories a very generous contributor to journalists who shape public opinion to suit his views. A true patriot interested in the US national interest in every respect, Mr. Singer is using the Cayman Islands as the base of his Hedge Fund operations. These are the same Cayman Islands well known for individuals interested in escaping paying taxes in their own countries and laundering money. 

Less than two years ago, the Cayman Islands, under Singer’s influence held an Argentine ship for two months in Ghana. The ship was finally released only after the UN International Tribunal for Law of Sea ordered the ship released. How did the mainstream news organizations report this story? Simple, Argentina is a debtor nation not paying its creditors seized the ship; a lesson for debtors everywhere. The media made no mention about Singer the Hedge Fund manager, about the infamous Cayman Islands. There was no mention about the manipulation of the legal system in the islands and Ghana by Hedge Funds firm. In short, the media only reported what obviously served Singer’s interests. 

How did the debt crisis originate and evolved?
From the Napoleonic era when the republics south of the Rio Grande began to secure their independence, until the early 21^st century, cyclical debt crises have been a part of Latin America’s political economy and an instrument of external hegemony of the national economies. Foreign debt has meant external trade dependence and uneven terms of trade inevitably forcing Argentina and its sister republics into cyclical debts.
In the mid 20^th century – from the 1940s until the 1960s – import substitution combined with a reliance on funding imports with receipts from raw materials exports ran its course as a growth and development strategy. 

Heavy borrowing financed by raw materials exports to modernize the economy while at the same time emphasizing the manufacturing sector was costly partly because financing came from external sources but also because the economy was not “inward-looking” with the goal of sustainability. Moreover, the vast value difference between raw materials exports and expensive imports and luxury items geared for the elite domestic market failed to make Argentina and its sister republics more self-sufficient. Raul Prebisch, the Keynesian advocate of Argentina’s and Latin America’s “inward development”, would be disappointed not because theory never matched reality, but because so much went wrong along the way owing to domestic and international political and economic obstacles. 

As far as many were concerned, Argentina’s vast natural resources, agriculture and animal husbandry provided the illusion of never ending prosperity, considering that other republics are not nearly as rich in such natural assets. After the era of military US-backed dictatorships in the 1970s, and the Falklands/Malvinas war ending in 1982, Argentina, like many Latin American economies, experienced hyperinflation because there was an interest to catch up with many economic and social development programs neglected by the pro-US dictatorship. The result of “easy money” was inflation, until the IMF advised Buenos Aires to “hold a dollar for every national currency unit” issued by the Central Bank. Inflation had started rising sharply under the military junta, but it reached very high levels at the end of 80s-early 90s.

Borrowing patterns reached a point during the Latin American debt crisis of the 1980s that the republics were securing new loans to finance servicing existing ones, a process that entailed draining of national capital and the eventuality of a major debt crisis. This was great as long as banks and investors were making money. However, hyperinflation meant that Argentina was under enormous pressure to accept IMF stabilization measures.

The decade of the 1990s was in many ways similar to that of the 1920s that some have described as "the dance of the millions" in terms of public loans and foreign investment. At the same time, that first decade of the post-Cold War global environment coincided with enthusiasm for neoliberal policies where the state took a back seat and permitted corporations to reap as many benefits with as low taxation as possible and without many conditions on reinvesting to strengthen the economy and secure jobs growth.

In October 1994, Argentina’s President Carlos Menem and Bankers Trust to issue sovereign debt in of New York entered into an agreement on the sovereign debt of $82 billion. In return for the agreement with the bank, Menem agrees to privatization and a series of neoliberal policies intended to attract foreign investment and presumably secure enough revenue for the government to service the debt. The Menem regime assumed that embracing neoliberal policies and handing over the debt issue to commercial bankers in New York would solve Argentina's problem and make it competitve with neighboring Brazil. On the contrary, the move was an unmitigated disaster.

Toward the end of the decade, much of the region south of the Rio Grande, including Argentina faced a deep crisis, created in large measure because creditors and International Financial Institutions, public and private decided to cut off credit and force the debtor nations into an austerity regime that entailed devaluation of all assets and massive capital outflows from the periphery to the core. For Argentina, the debt crisis started with a deep recession from 1999 until 2002 when the country could not possibly service $82 billion bonded debt, half of which was issued amid the deep recession. Argentina defaulted and de-linked the national currency from the US dollar as a reserve currency, largely to make sure that the needs of the domestic economy were met. In December 2001, Argentina declared a moratorium on foreign debt, and began arrangements for debt restructuring in the years thereafter. The Argentine government plan essentially asks the bondholders to take a substantial loss, something that a number of institutional investors agreed, ending the controversy with 93% of investors. 

The immediate reaction to Argentina’s default was massive flight of capital, foreign and domestic, thus creating a massive gap in the banking system and fear spreading across the country. The nationalist solution that favors domestic producers and larger enterprises went along with the government’s plan to maintain assets under national control. As practical as the default option may have been, the question is whether the solution of economic nationalism was socially just and one that distributed the burden of the crisis evenly across all sectors of the population. On the other hand, what would have been the fare of the majority of the people if the IMF had come in to impose austerity?

Dr. Raul García Heras, Senior Research Fellow in economics at the University of Buenos Aires, has done extensive work and written in Buenos Aires newspapers and journals about the Argentine foreign debt, the IMF, and foreign creditors since the regime of Juan Domingo Perón. Reflecting majority opinion in his country, Raul's view is that the IMF, foreign creditors, the Argentine government, and local businesses are jointly responsible for the debt crisis. About half of the population has been living at poverty level during the past five years. Debt forgiveness means that someone has to pay, but Latin America paid more than twice the capital inflows in debt service during the 1980s debt crisis.

The result was a sharp drop in real wages, income redistribution from the bottom up and from the south to the north. Clearly, there is no socialism here just because a nationalist option was adopted in a country with a deep past of nationalism intertwined with Peron’s legacy. Billionaire George Soros, among other reform-minded enlightened capitalists, agrees that the International Financial Institutions (IFIs) have been part of the problem and not the solution with regard to managing the world economy under the Bretton Woods system that was established to benefit creditors. Should the Argentine workers and middle class suffer even sharper reduction in their living standards so that creditors recover their money right now? Should the US government bail out the creditors now?

The US and creditor countries, though not necessarily the individual creditors, will receive far more than the $100 billion that the Hagens Berman Law firm is demanding by virtue of re-integrating Argentina back into the hemispheric economy, strengthening its finances, and stabilizing the region by allowing Argentina to trade and to generate jobs and income growth. However, in a climate of neoliberal policies that the IMF, World Bank and G-7 central banks are pushing in order to strengthen capitalism in the core nations, the US court decision is hardly a surprise.  

ARGENTINA'S PROSPECTS

All the promises that the apologists make about following the orthodoxy of monetarist policies and neoliberalism are meaningless because history has demonstrated again and again in all corners of the earth where IMF-austerity has been imposed that these promises never ever come true. On the contrary, the only ones benefiting from austerity are the domestic business elites and foreign corporations.

It is short-sighted to demand such an amount of money at the risk of alienating the entire Third World watching the Argentine case, especially considering the record of capital inflows to the Third World versus outflows to the G-7 in the past 50 years. Yet, the IMF, with the US and the G-7 behind it, has no problem making Argentina an example for others to follow and never dare try to follow its nationalist example.
Unfortunately, the transfer of capital from the southern hemisphere to the north will continue for the next 50 years at the expense of perpetually low living standards and endemic poverty. One could argue that the population rise is a source of the economic problem. However, with the exception of Central America, the South American republics have not seen population growth much above one percent. 

A nation of 40 million and the agricultural capacity to feed more than half a million, Argentina also has a highly trained, low-cost labor force makes for a very attractive investment environment  once the default issue is settled. Therefore, the argument that population pressure vs. limited natural resources is at the root of the problem is not valid.Argentinians believe that their situation is unique, partly because in its modern history Argentines always believed they were unique among Latin Americans. In reality, their situation is symmptomatic of how global capitalism operates and how private and public institutions react when a government opts out of pre-existing mechanisms to repay its public debt. If there is something unique about Argentina at this juncture, it is that its provinces continue to borrow at double-digit interest rates, causing somewhat of an alarm among financial analysts and political observers.

Whereas it is true that investment has slowed to almost nil in the last fifteen years or so, domestic large enterprises have benefited, despite the numerous instability problems. The same has not been true for the middle class and labor that has paid the price of default while running up against the police, armed forces, and the Peronist-dominated trade union bureaucracy. Pro-market and pro-Western integration policies without many checks to account for fair income distribution among various social sectors were at the center of the debt question that exploded at the end of the 1990s. As long as creditors provided liquidity, there was no problem, but when they turned off the easy credit, that is when the problems began, as they have always with creditor-debtor relations. Moreover, the debtor is always at fault, regardless of what the UN-UNCTAD states about responsibility of creditors in part to blame for creating the debt crisis.

No economy can possibly survive, even the US with its nearly self-sufficient economic base, if it does not have support from trading partners. Even North Korea has China behind it to continue going along as it does.  Political and business leaders in Argentina realize that global interdependence holds true for their country and they realize that if it were not for Asian markets, the country would not be able to withstand the kind of pressure it has endured from the US and to some degree Europe in the last decade. China’s emergence as the world’s number two economy and its intense interest in Latin America has come at just the right time to give Argentina a breather until it settles the debt question with its American creditors. Therefore, this is not an issue of capitalism vs. Socialism, but international capitalism under old-style imperialist tactics vs. national capitalism.

Government collects taxes, which is a way of punishing and rewarding, redistributing income from one social group to the other, and it spends thus deciding how to run society and where to place priorities. A redistributive policy such as the one of Norway may be an extreme example, but it is one model under the market system. In the last decade and a half, Buenos Aires has followed a mixed policy that included some redistributive measures, but it is hardly anything radical. Moreover, given the failure of neiliberalism in Argentina in the 90s, the majority of the population does not have the stomach to return there and try its luck with unchecked integration into the global economy, regardless of the consequences to the middle class and workers. 

Is there a possibility that Argentina will someday become more self-reliant, follow a more inward development path with greater control over its own destiny as Raul Prebisch once envisioned? Is there a possibility that a billionaire with money to spread around for politicians, journalist and individuals in the judicial system would be checked by the state of a sovereign nation whose interests transcend those of a profiteer? For now at least, the road for Argentina is compromise with the "holdout creditors" and a development strategy that takes into account new powerful non-Western players in the world economy. Longer term, if another debt crisis hits in 20-30 years, there may be a revolution and that would entail structural changes.

US CLANDESTINE OPERATIONS: Pitfalls and Successes

Introduction
Clandestine operations are an integral part of a country’s foreign policy, although the heavy reliance on such operations is a reflection of the authoritarian nature of the government carrying out such operations. The larger and more powerful the country, and the less inclined to respect national sovereignty of other nations, the more elaborate the clandestine operations. Naturally, governments always justify their clandestine operations on the basis of “national security”. They also justify torturing prisoners held without due process in violation of the UN human rights covenant. This is as true of the US in the contemporary era, as it has been of more authoritarian countries. Aside from the fact that clandestine operations are antithetical to democracy the execution and consequences of such operations in most cases have proved an embarrassment if not a disaster for the government authorizing them.  

There are many pitfalls in clandestine operations, largely because anything can go wrong during the operation, but also afterwards because of unforeseen intermediate and long term consequences of such operations. Obviously, President Kennedy was not happy with the immediate and longer term consequences of the Bay of Pigs operation. By contrast, Kissinger was probably elated with the CIA-backed military coup in Chile that ended the regime and the life of Salvador Allende. Of course, there were longer term consequences in Chile, though not nearly as bad as those of Cuba. In short, clandestine operations are not always immediate unmitigated disasters like the Bay of Pigs. However, even when they achieve the goal of regime change, there is no guarantee of any long term stability, as the case of Panama proved where the CIA chose Manuel Noriega to work with from the 1950s until the end of the 1980s, but then the marines removed him and the US placed a new government in power.

The lesson here for the 21^st century is that such operations are problematic in a multi-polar world where China and Russia increasingly perceive a US-NATO threat as menacing to their interests, while they pursue cordial commercial relations. The best case demonstrating the disaster of clandestine operations gone seriously wrong is Iraq where the US and its NATO and Arab allies backed the rebels who have turned out to create a much larger problem than the regime of Assad they were trying to eliminate. The US and its allies created ISIS and then scrambled to apportion blame, including the Shia Iraqi government in the blame game for the Sunni ISIS Jihadists. Similarly, the Ukraine is another area of US-led clandestine operations gone seriously wrong with the potential of either a smooth political solution or a disaster. The question is whether the disasters of such operations really mean anything to the US, or do they simply see them as minor glitches, which is in essence the problem with the prevailing mindset in the US.     

The nature of clandestine operations
There is a big difference between intelligence collection and analysis that agencies, such as the CIA, and authorizing political assassinations through third parties, using economic or political blackmail to force individuals in a government to adopt a certain course of action. While everyone understands that foreign military aid and trade and investment are tools of influence over the aid/trade/investment recipient, it is a big leap of faith to comprehend how threatening heavy handed covert operations that would result in regime change is a legitimate part of a democratic country’s foreign policy.

Interference in elections, something the US did during the Cold War in many countries, including Italy, Greece, Vietnam, Chile, Colombia, among others. Destabilizing a country where there have been open and free elections, as has been the case in numerous areas, including Ukraine from autumn 2013 until spring 2014 constitutes foreign intervention that falls in the domain of imperialism because it demonstrate total disrespect for national sovereignty. Even worse than clandestine activity to subvert the electoral process, the use of influence with the military to bring about an end to civilian rule and install a military regime. This is something that was also common throughout the Cold War with US helping to overthrow elected regimes – among the more famous cases include not just CIA-backed coup in Iran and Guatemala in the early 1950s, but Greece in 1967 and Salvador Allende in 1973. 

Amid the frenzy of the early Cold War and the arms race, the Eisenhower administration authorized clandestine operations that were glaring violations of international law. For example, the assassination of Patrice Lumumba, Prime Minister of the then Republic of the Congo, was one of the most flagrant violations of international law that led to disaster for the people in central Africa. The dictatorship of Col. Joseph Mobuto proved one of the most corrupt in the continent, but the US had no problem with it because it did not ally itself to the USSR. That the dictatorship violated human rights and drove the country into bankruptcy was not a problem, as long as the regime was pro-US. 

There are many such examples of the US destabilizing a popular regime by clandestine activity and then backing a dictatorship in the name of freedom and democracy, often to discover that things are not working out as initially assumed. This happened with Manuel Noriega of Panama who was a CIA man, but then dared to strike out on his own, only to be arrested by US troops in what he believed was sovereign territory that cannot be violated. 

The latest such interference from behind the scenes is Egypt where the military overthrew Islamic Brotherhood’s President Morsi and proceeded to create a virtual one-party state backed by the US and its allies. In all such cases of course, there is a backlash that comes back to bite very hard simply because the absence of a popular mandate and imperial interference create multiple resentment in the broader population that realizes national and popular sovereignty have been surrendered.

Besides paramilitary operations that are the heart of clandestine activity and have a direct impact, the use of mainstream media for propaganda purposes along with payoffs to politicians, military officers, trade unionists, and public officials are among the less innocuous forms of clandestine work. There is no doubt that propaganda to win the hearts and minds of a segment of the population is very important and deemed an acceptable part of foreign policy. The only question is the degree to which news organizations and reporters are no longer reporting news but rather delivering a point of view with the goal of convincing the public that “black is white”, for example. This practice goes back to the 19^th century when European imperialists used everyone from newspaper reporters to clergy to convince Africans and Asians  that it was best for them to be under colonial rule. 

As part of clandestine operations, molding public opinion in the 21^st century has become much more sophisticated, and not just because the NSA spies on millions of people around the world, as Snowden revealed to the world. For example, if the US government is interested in selling fighter planes to a government that is also looking to buy from the French, it will use its influence with the armed forces of the buyer but also plug in numerous paid stories in the media about the importance of buying the US-made planes. In additions, among the more sophisticated methods of molding public opinion are the NGO’s that present themselves as neutral parties, when in fact they could be funded from the government and carrying out its tasks, as the CIA clearly states in its web site.

NGOs and Clandestine Operations
While I expected the CIA web page to be recruiting personnel for clandestine operations worldwide, I was somewhat surprised when I saw a rather candid article about the agency’s use of high tech and NGO’s in intelligence operations, as the excerpt below reveals. “Over the past decade and a half, three phenomena have expanded dramatically: the availability of information through the diffusion of information technology; the role of nongovernmental organizations (NGOs) as important players in international affairs; and the demand for international engagement in failed or weak states, some having suffered from devastating conflicts. These three facts interact and raise a number of issues for US policymakers and for the Intelligence Community.”

As the CIA acknowledges, modern technology has meant radical changes in how clandestine operations are conducted, given that the web, cell phones and more sophisticated surveillance technology have created more possibilities for covert operations to be carried out by governments at the expense of other governments, businesses, private organizations, and individuals. Besides modern technology from satellites to drones, there is another vehicle that has been used to carry out clandestine operations, namely, hundreds of NGOs that are mere fronts for covert operations intended to destabilize a regime or to bring about regime change. This has been the case in Ukraine, Venezuela, Bolivia, Cuba, Egypt, Syria, among some of the more notable examples in news headlines. In fact, the covert role of NGOs in Bolivia, Ukraine, and Venezuela has been very controversial and an open secret to the degree that there is a great deal published on the subject.

Arguing that the only goal is to deliver “freedom and democracy”, as though these are commodities like tomatoes to be delivered from the producer to the reluctant consumer and not rights to come from the grass roots of the people involved, the US also argues that its actions are intended to fight terrorism in all its forms. Needless to say, the definition of terrorism is one that constantly shifts. For example, the freedom fighters that the US supported in Syria in the last two years are today’s terrorists known as ISIS and causing massive damage to Iraq. The same holds true for Ukraine where neo-Nazis become freedom fighters, while pro-Russia separatists are baptized terrorists because they oppose of pro-West regime in Kiev.

As a constructed political phenomenon with social and economic dimensions, ‘the war on terrorism’ fills the void left by the Cold War in the East-West confrontation needed to maintain the sociopolitical status quo and the existing economic order that relies to a certain extent on defense sector-related public spending.  That the US chose to make ‘terrorism’ the cornerstone of its policy was well planned and calculated in order to maintain the institutional structure that had been built since the Truman administration.  Moreover, the global anti-terrorism campaign provides the US with the rationale to keep the goal of Pax Americana, namely, an imperial foreign policy rooted in very large defense sector and intelligence operations spending.

Not to take away anything from the late great scholar Sam Huntington who developed the clash of civilizations theory, but there is no "clash of civilizations" objectively speaking, as though by nature or simply because cultures are different. After all, there is a very long history of Medieval Islam from the Iberia to the Ottoman Empire proving that harmonious co-existence between Muslims and non-Muslims were very fruitful. Indeed, the essence of progress in any society at any epoch in history is rooted in cultural diffusion and this is something that Muslims appreciated long before the Age of the Enlightenment in 18^th century France. 

There is no clash between Western Christendom and Islam today any more than it was during the crusades. Just as with the crusaders interested in land, trade routes, gold, and glory of power that conquest injects into disturbed minds, similarly today there are those who think like crusaders and must manufacture crises. If indeed there is no “class of civilizations”, other than a manufactured one, the question is how imperial regimes create such clashes to justify their policies and ambitious goals.
The national sovereignty issue along with social justice is also at the core of the global terrorism campaign. There is something very disturbing indeed when regimes use the terrorism card as a mass distraction from social, economic and political problems, but above all to crush all voices demanding national sovereignty.

US Clandestine Operations and the Web
From the disastrous Bay of Pigs operation in 1961 until today, the US has tried different ways to undermine the Cuban regime. This is hardly because the tiny island of Cuba poses a threat to the US as many varieties of ultra-right wingers who have lost claim to their senses claim. However, these fire-breathing ideologues have a point when they insist that Cuba is a symbol of resistance to the hegemonic vision of Pan-Americanism that Washington has imposed from Presidents Monroe to the present. In short, Cuba is a thorn, much more so than Venezuela recently, and the US simply wishes to impose its will on the island to complete the picture of a US-dominated Western Hemisphere.

In 2009, the U.S. government created a “Cuban Twitter” (dubbed ZunZuneo) intended to sabotage the whose money trail is difficult to trace, the project tried to circumvent Cuba’s control of the internet, appealing to young people interested in voicing dissent, but totally unaware that behind the scheme was the US State Department gathering data on users for political manipulation. The US set up this project after the Cuban government arrested and imprisoned Alan Cross for running a clandestine mission using highly sensitive web technology. The US-AID program for which Cross was working insisted that it was on a “humanitarian mission”, trying to deliver freedom and human rights to Cuba, the same island where the US has been hosting political prisoners without trial at Guantanamo Bay.

Although some Senators expressed concern for such operations violating US laws, the Obama administration ostensibly more committed to respect of the law than Bush, did not back down from the clandestine activity. Setting the issue of legality aside, given that anything is legal including torturing prisoners held without due process, US Agency for International Development (USAID), which has a wide array of overt and covert projects under its umbrella, ran the program. It makes perfect sense that USAID would run the program, given that it has a longstanding history of running clandestine operations worldwide, everything from subverting trade unions to media outlets. It also makes sense that the money trail is almost untraceable, running from earmarked finds for Pakistan, but involving centers of operations in Spain and the Caribbean.

Ironically, the Obama administration that had presented itself as more open and democratic resorted to clandestine activities just as reminiscent of the early Cold War as Reagan and Bush. Former Secretary of State Hillary Clinton justified such clandestine activity, saying that the U.S. helps people in “oppressive Internet environments get around filters.” That she made a point to bring up Arab Spring, revealed the extent of US clandestine operations in those popular uprisings where the masses were manipulated, just like the Cubans, without knowing the source.

Conclusions

Will there be a pullback from clandestine operations because of the disasters in Ukraine where there is no military solution or Iraq under ISIS threat? My hope is that common sense and sanity may prevail in Washington, but that is optimistic. On the contrary, all evidence indcates that the contradictions in US foreign policy abound. For example, despite the massive problems that the Jihadist ISIS rebels are causing for the West, including rising oil prices, the Obama administration is actually increasing its financial assistance to Syrian rebels, further destabilizing the entire region. One could argue that the move makes sense because Syria relies on Russia for support and it seems that Iraq has also been looking to Moscow for military assistance; a move that apparently does not sit well with Washington. Although the logic here is to assist the enemies of my enemy, those enemies of my enemies can all turn against me as well in due course. This is a lesson apparently lost on US policy makers who rather not worry now about longer term consequences.

I see that the smooth-talking Obama administration projecting an image of multilateralism and legality to the world is in essence not very different than any Cold War administration Democrat or Republican. The polished façade of consultation with allies and seeking political solutions to crises conceals a long-standing policy of clandestine operations that include everything from USAID to NGOs and mysterious money trails that circumvent congressional oversight. 

Beyond the question of ethics that does not enter into the domain of clandestine operations, there is the question of risks/rewards. As long as the US was the number one superpower, it could engage in clandestine operations even if they went really badly as the Bay of Pigs. In the early 21st century, the world is not the same as it was in the early 1960s, but the US uses the same tactics as though nothing has changed. Just because the Communist bloc collapsed does not means that Russia and China are not rivals to be taken seriously. Nor is Latin America the same now as it was in the mid-20th century when regimes were in the backpocket of the US. As far as the Middle East goes, no matter what the US does other than to pursue multilateral policy and political solutions to conflicts, the end result will not be favorable for the US.  

In a wolrd flooded with information overflow, clandestine operations are risky affairs and there is a price to be paid, just as we see in Ukraine and the Middle East. Determined to escalate clandestine operations in the face of a declining Pax Americana and rising Asian economic influence in the world, Washington will actually resort to even more risky measures in the future as the reality of decline becomes clearer. After all, US-based multinational corporations have moved assets abroad and increasingly are seeking to avoid paying the IRS, thus contributing to the budgetary deficit. 

With the role of multinational corporations increasingly less rooted in the US where they would be contributing to the US economy, the government will be making desperate efforts to secure market share and influence, but toward what end?  While the US is engaged in all kinds of expensive and risky clandestine operations that would presumably strengthen the US economy and the dollar as a reverse currency, the enemy from within is undermining those efforts, to say nothing of the unpredictability of the clandestine operations themselves. The decline is already here for the US and the only question is the delusional manner that policymakers are handling it.

NARCOTICS, MONEY LAUNDERING AND THE GREEK POLITICAL ECONOMY

There is a relationaship between public sector corruption and private sector corruption, and both impact economic growth growth and development in so far as corruption is parasitic and does not add anything to the economy. Similarly, there is a relationship between endemic corruption and an economy's ability to function according to marketplace rules as publicly stated and obesrved by some entities. However, it would be misleading to conclude that corruption is the cause for lack of growth and development, considering that very corrupt countries, including China, Russia and India have enjoyed substantial growth and development in the last decade and a half, while the less corrupt Western economies have not perfmored as well.

Greece is indeed one of the most corrupt countries in the world, and the most corrupt in the European Union. It is also a country that has been an experiment for austerity measures in the EU in the past four years, an experiment that even by the criteria of the IMF and EU has not achieved the publicly stated goals of reaching public debt of under 120% - the real debt is at 175%, but actually 220% if all public enterprises are taken into account. Nor has Greece the ability to float long term bonds in the private sector because of high interest rates. Similarly, the IMF and EU were wrong that austerity would reduce unemployment because foreign investment would flow into the country. On the contrary, austerity has entailed real - as opposed to official - unemployment of one-third the entire labor force, while investment has been trickling in. A pro-market publication called CAPITAL, recently asked its readers if they won a large amount of money outside of Greece, would they bring it back to invest.

Given the dim prospects of an economy that increasingly resembles those of its northern Balkan neighbors, exactly as Germany stated where Greece ought to be in terms of its status within the EU, the question is what are the domestic political abd business elites doing about reviving the national economy. The answer even greater corruption and more illegal activity than existed before the crisis of 2009.This is not to say that Greece has an economy where narcotics production and trafficking plays a major role as in Afghanistan, Colombia and Mexico. However, it has similarities with economies that rely on the "informal" and illegal economy for roughly one-third of GDP, perhaps even higher given the elaborate money laundering operations.

In early June 2014, the Greek police, under the direction of US narcotics agents, raided the home of a wholesale diamond dealer where they found half a ton of heroin. The same day they raided the villa of a Greek shipping tycoon in whose house agents found over half ton of the illegal drug, for a total of 1.2 tons. The arrests included two Turkish nationals that the US agents had been tracking in the Middle East - Afghanistan is the origin - through Turkey and then Greece where the shipment of narcotics was headed for Western Europe.

The Greek tycoon was on a list for tax evasion, including the infamous ‘Christine La Garde list’ of more than two thousand names of the Greek socioeconomic elite that has been engaged in massive tax evasion among other financial crimes that the Greek government has yet to prosecute. The alleged narcotics traffickers were well known for their lavish lifestyles, but they were beyond the reach of the law, and the only reason they were arrested is because US narcotics agents provided information about a precise shipment of heroine, including names and addresses.

Holding the number one maritime spot in the world, Greek shipping companies are the major traffickers of narcotics, linking Turkish, Greek, Iranian and Albanian heroin traffickers from the East as well as Colombian, Spanish and Dutch traffickers in the West. There are many ways to transport narcotics without detection, including the latest of hiding the heroin bags inside larger bags containing marble dust used in construction. Additionally, if the tanker ship copntains petrol or crude oil and other chemicals, detection with trained dogs becomes even more difficult. In the specific case of the massive horein shipment onboard a Greek tanker and on the properties ofa shipping tycoon and diamond dealer, an inside informant provided details to authorities of the narcotics shipment.

The only way to get the narcotics trade flowing in Greece as well as other parts of the world is to secure that customs officials, coast guard, police, judges and/or politicians are all on the payroll. For example, it has been an open secret that the island of Crete is a major supplier of hashish to Western Europe (mostly Holland) simply because public officials, including prominent politicians provide cover and facilitate the drug trade. Everyone knows exactly where the cannabis is growing because there have been periodic raids in the areas, just as they know it is transported in large quantities onboard trucks and ships. Despite the publicity of this issue, the drug trade continues uninterrupted.  

According to the UN, "Balkan and northern routes are the main heroin trafficking corridors linking Afghanistan to the huge markets of the Russian Federation and Western Europe. The Balkan route traverses the Islamic Republic of Iran (often via Pakistan), Turkey, Greece and Bulgaria across South-East Europe to the Western European market, with an annual market value of some $20 billion. The northern route runs mainly through Tajikistan and Kyrgyzstan (or Uzbekistan or Turkmenistan) to Kazakhstan and the Russian Federation. The size of that market is estimated to total $13 billion per year."

Just a few days after the heroin drug bust in the Greek shipping tycoon's home and the diamond dealer's property, another ton of heroin apparently was confiscated by Greek police, again with US-DEA assistance, and based on an insider informant's details of the shipment. Once again, the shipment size required large ship as well as large trucks for transport, indicating major organization behind it involving very well connected people. The combined confiscated heroin for the month of June amounts to 2.2 tons, the largest amount confiscated in the history of Europe and it may be one of the largest confiscations in the world valued at least 400 million euros. 

As nice as the news sounds about the DEA-Greek capture of 2.2 tons of heroin seized in June, the problem is the nature of the Greek political economy rooted in the subterranean sector that represents at least a third of the entire GDP. There is the whole question of whether governments ought to measure GDP by including illegal actities, such as drugs, sex trade, etc. After Nigeria decided to include such illegal activities in its economy adding 90% to its GDP, a number of EU countries said they would do the same, while the US said it had "no imediate plans" to count illegal activity money in the GDP. This in indicative of how governments turn a blind eye to illegal economic activity, and provide a sense of legitimacy to it after the fact. If large international banks are laundering drug money, why should the government leave the illegal economic activity out of the picture?

Greek prosecutors have been trying to go after the elites of Greece, all well known because the country is so small and the sudden wealth of many of these people cannot possibly be explained. Politicians of the two ruling parties – neo-conservative New Democracy and the neoliberal PASOK – have been protecting the elites directly through legislative measures by also by intervening in the justice system, often threatening to prosecute the prosecutors, especially when they have gone after the very corrupt top politicians in the current government with cases involving massive bribery scandals from domestic and foreign companies. 

Because there are laws providing amnesty for ministers, they cannot be prosecuted. When a current case came from the prosecutors involving the Vice Premier Evangelos Venizelos and his involvement in a massive corruption scandal regarding submarine contracts during his tenure as defense minister, the government immediately shut down parliament, so that the case can be legally “written off” and not be allowed to be heard and pursued in judicial channels. Because government ministers and politicians of the ruling parties are so immersed in corruption, they try through back channels to protect the elites that prosecutors are hunting down.

Several prominent businessmen, among them Dimitris Kontominas, owner of TV station and insurance company and well know for his role in scandals involving banks and government officials, and Angelos Filippidis, former head of Hellenic Postbank, and several of his colleagues, have been indicted over loan scandals that cost the former state-owned bank an estimated $700 million. Along with a number of others receiving loans without any guarantees and never repaying the loans to the state-owned bank, there are the charges of money laundering operations against top businesspeople closely linked to the ruling parties. These scandals involving top businesspeople would not be possible in the absence of top government officials giving the green light on the loans, which leaves the question of the motive of government officials.  

The biggest scandals involve the defense sector where it seems that Greece has been paying for tanks, helicopters and submarines that do not work properly, but it has been paying a much higher price than the market price. The bribery scandals in this sector have one former defense minister and other former government officials serving prison terms, but some of the politicians involved in corruption are currently in government. The infamous Siemens scandal that involved a number of New Democracy politicians remains unsolved, but the well known corrupt politicians who cannot possibly account for their millionaire status are in government enforcing austerity measures.    

While the political and business elites have bee stealing from the public treasury, they have had no difficulty insisting that austerity imposed on the middle class and workers must go one. This despite the reality that reality that the public debt is unsustainable at 175% of GDP, that it would probably come down to 120% of GDP in 2022 and unemployment will remain above 15% for the next ten years, with very low wage scales. 
Official reports from various international organizations about labor conditions indicate that Greek has some of the most archaic labor policies and conditions. 

The IMF/EU used austerity to impose this new system with which the PASOK and New Democracy right-wing government imposed largely because the domestic financial elites go along with this policy so that the masses pay for the public debt. Ironically, these are the same elites that are tax evaders, and smugglers of illegal cigarettes, narcotics, guns, and petrol; the same elites that launder money through real estate and professional athletic clubs, the elites that have taken out most of their money to stash it into offshore accounts, the elites that paid very little taxes while receiving massive benefits from the state through their businesses, these elites now present themselves as the best hope for the revival of the country from the current crisis.

About one-third of employers owe their employees back wages of a few months to a year.  There are currently workers who receive no payment other than that in kind – food, clothing, shelter. This is not only for foreign workers in the agricultural fields, but also Greeks who exchange labor services so they can live. According to the laws of the land, it is illegal to have anyone working in return for in-kind compensation rather than money wages. The government has put an end to any powers that trade unionist enjoyed, including collective bargaining. Using the austerity regime as a pretext, the government introduced a labor policy that resembles 19^th century conditions. Even when workers take their case to court and even when courts rule in their favor, the government simply ignores the court ruling, or engages in endless delays using the legal system.  

Given that the country is swimming in corruption because political and business elites know of no other way to conduct policy or business, what is the prospect of Greece for the next few decades? The role of Greece in the world economy is bound to remain as an intermediary strategic area in the following domains. 

1. Main entry port for China's COSCO Corporation. This means that the Greek ports and some railroad operations will be under Chinese control in the 21st century, unless something changes drastically in the geopolitical map. The beneficiary here is China that has ready cheap access to a strategic port/railroad operation base. In exchange, Greece secures a few thousand jobs and the promise that China will be buying bonds in the future to demonstrate confidence in the public sector. The government provided very low cost operations for the Chinese leasing operations so that it can attract roughly five billion in investment, or 2% of GDP. Because Greek shipping companies secure financing from Chinese banks to build their ships in Chinese shipyards, the quid pro quo is that Greece must make concessions to the Chinese on port and rail infrastructural systems. After all, the Greek shipping tycoons have always had a preponderate influence in the direction of the economy and on public policy, although shipping accounts for a lower percentage of GDP than tourism and shipping tycoons keep their assets outside of Greece.  

2. A major intermediary for natural gas coming from Azerbaijan, Russia and the Black Sea/trans-Caucasus area in the future. This is a capital-intensive investment area that brings few sustainable benefits for the economy, if we exclude the initial investment in infrastructure and the relatively low cost of energy. Solar panel and wind power are other areas of investment, but those are also capital-intensive with dim prospects for offering anything but huge profits mainly to the German manufacturers of these sustainable energy systems and to large investors. Smaller investors are so highly taxed that they cannot compete in this market, given the considerable capital required for the upstarts.

3.  Gulf States investment in tourist-related real estate development that helps the tourism and gambling industries. However, profits are taken out just as in shipping, and the investment is not at the level that it would make much difference is absorbing a portion of the 28% unemployed. 

4. Varieties of operations ranging from legal state owned gambling (lottery) operations offered to billionaires linked to the ruling party. That the average taxpayer is well aware of how government subsidizes business elites closely linked to the ruling parties accounts for widespread cynicism and political polarization.

5.  Capital-intensive enterprises in select areas from computer system to banking are areas that will attract some investment as the political and economic climate becomes more stable. However, there is no possibility of Greece developing a diversified economy that is capable of serving the basic domestic needs. This means that it will rely on imports not only in the domain of capital and intermediary goods, but even agricultural products competing with domestically-produced ones. The result will be a perpetually low-wage environment because tourism accounts for about 15% of GDP at best and is not capable of sustaining the rest of the economy.

Because small and medium-sized businesses account for the absorption of the labor force, the prospects of unemployment below five percent is not in the horizon. The best prospect for college-educated people in Greece is to leave the country, given that Germany and the domestic political and economic elites agree that Greece is relegated to a status much closer to the northern Balkans where living standards are much lower than those in Western Europe. Meanwhile, the government, business analysts and Western apologists of austerity and neoliberalism as well as the media eulogize the success story of Greece that is now deeper in debt, with its future resembling the early Cold War years of socioeconomic and political polarization. How likely is it that there will be a change in the nature of "baksheesh capitalism"? Because this is as much a political economy issue as it is a cultural one it is dirfficult to say that there will be any change in the near future.A cultural and political revolution is unlikely in order to bring about change.