February 22, 2012

Finance, Food & Force: How We Wound Up In This Mess

[This is not the first time Stan Goff's name had cropped up at Fire on the Mountain. What was perhaps his single greatest contribution to the anti-war movement is remembered here, for instance. This piece, reposted with Stan's permission from his own Feral Scholar blog gives a masterful overview of the deep roots of the ongoing economic meltdown.]

The Roles of Finance, Food, and Force in US Foreign Policy

by Stan Goff

The Text of a Lecture at Pennsylvania State University-School of International Affairs, February 2, 2012

Before I begin, I’d like to thank Jan Burnett and Casey Hilland of the School of International Affairs Student Government Association, as well as Dr. Tiyanjana Maluwa, Dr. Tineke Cunning, and John G. Hodgson, all of whom I understand were instrumental in organizing this gathering tonight.

It seems important at the outset to make a few disclaimers. First of all, I am by no means qualified as an expert, in the usual sense of that word, on foreign policy. My personal experience of it was as an instrument of policy within the military special operations community. Even within that community, I was an enlisted man who had gone in and out of the service, graduating through five of my pay grades two times each because of breaks in service. I was not a commissioned officer, nor was I ever a member of anyone’s staff. In fact, I can say that I felt about staff positions about the same way most of us would feel about avian flu; and I earnestly and successfully avoided those positions.

Nor am I am academic. I hold a bachelor's degree from an institution that I have never seen firsthand that specialized in awarding non-resident degrees for military people. My degree, moreover, was in liberal studies with an emphasis in English literature. I have looked into foreign policy and a host of other subjects on my own since 1996 when I separated once and for all from military service. But I have not been formally trained as a foreign policy intellectual.

My work since leaving the army has included non-profit organizing, policy research, security consulting, technical advice, writing, some public speaking, grocery bagging, pizza delivery, landscaping labor, stone masonry, and deconstruction. The latter was not in any way associated with post-modern studies, but was literally deconstructing houses--demolishing them by hand to recover building materials for re-use.

So if there is an appeal to authority raised against my remarks tonight, I have no defense that can be based on credentials.

My political genealogy may also raise a few questions, because I have at different times throughout my life counted myself a conservative, a libertarian, an anarchist, a nationalist pragmatist, a liberal, a Marxist, a pro-feminist; and now my political identity is Christian, though in a way more closely associated with Mennonites or Catholic Worker communities than evangelicals. I am neither conservative nor liberal, and I dislike the term “progressive.”

Again, if anyone objects to my remarks, they are welcome to infer that I have an agenda based on any portion of that political genealogy. I probably have several agendas, but I hope by the time I am finished that you will allow that I am not hiding them.

In 1983, I was in Guatemala. I was there when General Mejia-Victores led a coup d’etat against Efrian Rios-Montt’s regime. In 1985, I was in El Salvador, at the same time that President Duarte’s daughter Inez Guadalupe was kidnapped by the FMLN and exchanged for a number of prisoners. In neither case was I involved directly with those most notable events, but in both cases I was working directly out of the United States Embassy. While my actual role in these places is still classified, what I have to say about these experiences does not relate directly to the work but to my observations of the inner workings of a US Embassy, and those observations are general enough to avoid running afoul of the law.

Embassies, I discovered, were not much different than the military staffs I’d avoided. They were bureaucratic, simultaneously authoritarian and conformist, and there was great deal of superficial courtesy that papered over a red-toothed and Hobbesian struggle for career advancement. But more to the point of this talk, I was obliged to check the Ambassador’s itinerary each day.

As it turned out in both cases, Guatemala and El Salvador, where each of these governments was waging war against its own people, the Ambassador’s most frequent visits were not to the chief of state, or the chief of state’s staff, or even to the host nation’s military chief of staff. The most regular and frequent meetings were with the national Chambers of Commerce. This is when--for a soldier who hadn’t thought enough about it--I came to realize that politics is about business, and that the political class serves the interests of the business class.

It was around that time, in the early 80s, that macro-economic forces were shaping a new form of international economy and corresponding changes in US foreign policy.

In 1973, as a protest against the US rescue of Israel from an impending defeat by the Egyptians in the Yom Kippur War, Arab nations implemented an oil embargo against the US, creating day-long gas lines that broke up only when filling stations pumped out their last drop of gasoline.

Oil prices rose dramatically, creating a tremendous windfall profit for oil producing states. Oil was denominated in US dollars, and those additional dollars were invested at Wall Street by the same oil producers who were withholding gasoline from the US.

Wall Street does not sit on money. Wall Street firms are rentier capitalists, that is, they use money to make more money; and so the glut of petrodollars from the Arab oil states was converted into vast development loans for poorer countries, especially in Latin America.

These loans, not unlike the subprime mortgages we know and love today, had adjustable rates. During the latter Carter years, the United States--for reasons we won’t elaborate here--suffered something the economists hadn’t anticipated: simultaneous lack of growth--stagnation--and rapid inflation, which came to be known as stagflation.

Federal Reserve Chair Paul Volcker responded to this with something called the Volcker Shock, that is, since inflation was the greater danger to the rentier capitalists, he raised the interest rate from 7.5% to 21.5%, doubling US unemployment rates, while making large creditors whole. These elevated interest rates were passed along, via Wall Street institutions, to those Latin American countries that had received the aforementioned development loans, creating a crisis in Latin America. This shock doctrine lasted from 1979 to 1982, and when Reagan was in office in 1982, Mexico announced that it was about to default on its Wall Street loans, stranding Wall Street with more than $100 billion in losses.

Not for the first time, and certainly not for the last, the US government stepped in to bail out Wall Street’s finance capitalists. This was a bailout loan to Mexico, but the intent and the urgency was to ensure that Wall Street didn’t take a bath on the Mexican default. The vehicle for loans to cover the previous loans to Mexico was the International Monetary Fund, an international institution formed in the latter years of World War II, in which the US exercises a very dominant role. But this time, the bailout loans had something attached to them in addition to interest, called “conditionalities.”

These conditions included several ultimatums--that Mexico’s internal markets be opened to US-based investors, including US multinational corporations, that labor and environmental standards be rolled back to increase the rate of profit in order to pay back the restructured loans, and that regressive tax structures be implemented – also to assist in the payback of the loans. A structural imperative, though not one of the specified conditions, was also that Mexican enterprises--in particular, agriculture--be converted from production for local consumption to export products to get more of the US dollars required to service the restructured but now vastly expanded external debt.

Using similar crises, the IMF proceeded over the next few years to impose these conditionalities--called structural adjustment programs--on the majority of nations of the global periphery, effectively undermining their national sovereignty inasmuch as the IMF, the World Bank, and the World Trade Organization, all US-dominated pre-market institutions that manage the so-called “free” market, came to dictate the economic policies of these structurally-adjusted nations.

While these were originally contingent measures used to take advantage of Mexico’s crisis, the Reagan administration soon realized that they had stumbled onto a model that could be used around the world to open home markets to US investment under conditions that were very advantageous to US investors. Moreover, it was a way to capture the political leadership of debtor nations in a dollar-dominated system, which would come to be known as neoliberalism.

I realize that this is a fly-over at several thousand feet, and that I am overlooking many of the details of this process, but I only want to establish a kind of historical context wherein neoliberalism is intelligible, in order to explain subsequent claims about US foreign policy, which has been largely formed by the imperatives of neoliberal policy.

Neoliberalism itself is now in a bit of a crisis, because the same financial establishment that was turned loose on the world by the emergence of neoliberalism has both worn out its welcome around the world--creating great popular resistance to its diktat--but it has created tens of trillions of dollars of fictional value from runaway speculation, threatening the very currency around which the entire system is based.

The US-dominated financial system, called the “Dollar-Wall Street regime” by Peter Gowan and Susan Strange, also found a way to exercise managerial control over first world economies like Western Europe and emerging market economies like China and Brazil. This power was exercised not in the US role as creditor, but in the US role as debtor.

This story actually begins at the end of World War II and continues to the present. The Soviet Union--itself savagely wounded by the war--attempted to secure a post-war partnership with its capitalist war allies in order to regroup. More than 27 million Soviet citizens had been killed, and cities were in ruins all the way to Stalingrad. When the Truman administration opted for the National Security State as an industrial strategy that could capitalize on the ramp-up for the war, it needed an enemy to justify the expenditures of what Eisenhower would christen the “military-industrial complex.” The overtures from the USSR for a post-war peace were rejected in favor of official hostility by Truman. This provocative posture locked Western Europe into a military alliance with the US, and put an official stamp on the US foreign policy of “containment.”

This inaugurated a long period of proxy war, the first in Korea, later in Vietnam. While the US was enjoying the fruit of post-war dollar dominance, Keynesian high employment, and a robust trade surplus, however, the militarization of US domestic and foreign policy created a mounting national debt. The US was indebting itself to other metropolitan nations. The US was borrowing money from Europeans to finance its military adventures in Asia, then running printing presses to make up the difference. Because the dollar’s value was fixed for redemption at 1/35th of an ounce of gold, the US could print money without fear of draining the dollar of its value, which was being used for capital investment in Europe.

In the theoretical market, the value of a currency is determined by how it balances against an aggregate of commodities. Too few units of currency and prices fall. Too many units of currency and prices rise. The latter is inflation--the nemesis of loan sharks and bankers because it reduces the future purchasing power of collected principle and interest. So the dollar was losing purchasing power on the market, even as it remained exchangeable for European currencies at the same fixed rate.

The US was printing more money, but because the dollar was fixed to gold, the Europeans were watching their markets flooded with overvalued dollars, which they had to accept. The market may have been saying that a dollar should be redeemable for francs or marks or pounds at one rate, but the post-war currency-control regime determined that Europeans had to continue to give away purchasing power with every currency exchange for devalued dollars. The US was exporting its inflation to Europe by repaying its military expansion debts to Europeans in under-valued dollars.

So when the first Special Forces advisors went to Vietnam in 1957, the system that appeared so robust on the surface was already creating the conditions for its next crisis.

The Europeans, later buying gold elsewhere at well above the $35 per troy ounce, held onto their dollar denominated assets, hoping to redeem their dollars at something approaching their initial investment later. But by 1967, with the Vietnam War driving the US deficit to record levels, France started cashing dollars out for US gold, draining the US gold stock. The Keynesian system of tightly controlling finance capitalists, which included fixed currency exchange rates pegged to a gold-backed dollar, began to collapse in the face of the US decision to militarize its domestic and foreign policy.

On March 31, 1968, millions of Americans heard Lyndon Johnson announce on television that he would not run again for the presidency, and that he would not substantially escalate the Vietnam War, despite the strategic setback of the Tet offensive nearly two months earlier.

Unperceived by the public at large, the point finally had been reached at which depletion of the U.S. gold holdings had abruptly altered the country’s military policy. As financial historian Michael Hudson noted:

"The European financiers were forcing peace on us. For the first time in American history, our European creditors had forced the resignation of an American president."

But when the 1968 elections arrived, we saw a scenario that is familiar to us again. Democrats could not publicly argue for an end to the war, because withdrawal would mark the destruction of the myth of US military invincibility. The options available in response to the collapse of the US Gold Pool were (1) withdrawal from Vietnam, (2) continue the war and accept further losses of gold and with it the erosion of US global power, or (3) force the abandonment of the entire Bretton Woods regime beginning with the gold standard. Because the Democrats alienate a huge fraction of their base by refusing to oppose the war, Republican Richard Nixon was elected. In 1971, he selected Option 3. He abandoned the gold standard for the US dollar.

This was a staggering checkmate against the US’s alleged global allies. They had to do something with their trainloads of dollars to prevent their uncontrolled devaluation.

Quoting Hudson, "By going off the gold standard at the precise moment that it did, the United States obliged the world’s central banks to finance the U.S. balance-of-payments deficit by using their surplus dollars to buy US Treasury bonds, whose volume quickly exceeded America’s ability or intention to pay.

Twenty-five years [after WWII], the United States [discovered] the inherent advantage of being a world debtor. Foreign holders of any nation’s promissory notes are obliged to become a market for its exports as the means of obtaining satisfaction of their debts."

As the old saying goes, “if you owe the bank a thousand dollars, you have a problem. If you owe the bank a billion dollars, the bank has a problem.

Nixon had not only erased US debt held by allies and forced perpetual European support for US military expenditures with the threat of tearing everyone’s financial house down, he had opened the way for rentier capitalists to escape the limitations put on it during the New Deal. That is precisely why Peter Gowan referred to Nixon’s risky destruction of the Bretton Woods fixed currency exchange rates as the “global gamble.”

New system: debtor imperialism.

Susan Strange referred to the new system as “casino capitalism.” The rentier capitalists were free to speculate without constraints; but more importantly, the US government, in collusion with Wall Street, had a new weapon to use against recalcitrant nations. Domestic currencies could be speculatively attacked; which is exactly what the US did to several Asian countries in 1998, which unexpectedly almost crashed the world economy. The threat of attack on currencies obliged central banks abroad to hold US dollars--in the form of US Treasury Bonds--in reserve, as a defense against speculative attacks on their currencies. These nations then became US creditors; but they were the banks who--as in the banker joke--had the problem.

To this day, no one--including China, about which there is a great deal of financial fear-mongering--can afford to begin a run on the dollar. Too many nations hold too many dollars to sell the dollar down without cutting off their noses to spite their faces. And yet all these creditor nations know that the US has neither the capacity nor the intention of paying back those loans.

China holds over a trillion dollars in US Treasury Bonds. Japan holds almost a trillion. The United Kingdom holds over 400 billion. Brazil holds more than 200 billion. The list goes on. If China were to initiate--as some China-phobes suggest--a cash-out of its t-bills, and that cash-out caused a run on the dollar destroying half its value, China would lose more than half a trillion dollars in purchasing power. This is a game of chicken that the US has, so far, won every time.

The key to dominance in the world of the late 20th and early 21st Centuries has been dependency... interdependency, but of a very unequal nature. We see this in really bad, really patriarchal marriages. A husband depends on his wife for the management of the household, for a lot of unpaid labor, and for the care of children, and the wife depends on the husband for economic security; but in the event of a divorce, we find that the wife comes out much worse than the husband, giving the husband a threat to hold over the head of the wife. They depend on one another, but that interdependence is not synonymous with equal status or parity of power.

This is how US foreign policy is constructed for the most part, as interdependences in which the US is the dominant partner. And there are few things that human beings depend on more urgently than food; which brings me to a subject that is imbricated with finance, but not the same as finance.

Money is not theoretically necessary for life. Human life sustained itself before general purpose money. Human life cannot be sustained, however, without its material basis in food.

If I might, I’d like to actually go deeper on the topic of food than we generally do, into the realms of chemistry and biology, for just a moment. I want to say a few things about energy and nitrogen.

If you touch your neighbor in the seats there, appropriately, of course, you will find that they are heaters. You are all warm. That heat is thermal energy that is part of the overall energy system that constitutes your existence as an organism, as a mammal, as a primate, and as an omnivore. You eat plants and animals that have energy stored in them. The plant energy that animals eat comes from the sun, whose energy is stored in the plants by photosynthesis.

One of the chemical components of our world that is necessary for most plant growth, therefore necessary for food, and therefore necessary for our survival, is nitrogen.

Oddly enough, after Timothy McVeigh blew up a federal office building in Oklahoma City, everyone--even non-farmers--came to know that fertilizer is made with nitrogen.

Yet nitrogen is the most abundant element in the atmosphere, so why should anyone have to “produce” it as a fertilizer? We live our entire lives literally swimming in the stuff.

As it turns out, atmospheric nitrogen, like atmospheric oxygen, is a Siamese twin. It consists of two, fused molecules: N2, as it were. Plants have to break this down into single molecules, then mix it with other stuff, in order to turn sunlight into food. The process is called biological nitrogen fixation. Prior to human intervention, this fixation process was accomplished by prokaryotes (or non-nucleated bacteria) and diazotrophs (or ammonia-making bacteria.)

During World War I, the introduction of new technology, i.e. the machinegun, and the adherence to pre-machinegun tactical doctrines, led to huge armies being first mowed down like grass, then trapped facing each other from pestilential trenches. One of the bright ideas for taking advantage of this horror-film stalemate was the idea of killing the enemy with poisonous gas.

During the war, Fritz Haber, a German-Jewish chemist, was appointed director of the Berlin-based Kaiser Wilhelm Institute for Physical Chemistry.

One of his jobs became the development of chemical weapons. He would eventually invent a gaseous chemical called Zyklon-B, a cyanide derivative, which would be used to wipe out millions of his own co-religionists; but during WWI he was preoccupied with chlorine and ammonia for the development of poisonous gases for the battlefield.

His other preoccupation was nitrogen fixation. He learned how to do that, synthetically, by combining hydrogen and N2 under heat and pressure, along with an iron isotope and aluminum oxide as catalysts. He had already patented this process before the war; but it would take Carl Bosch, the eventual co-founder of I. G. Farben (the company that marketed Zyklon-B) to commercialize the process… which laid the basis for a population explosion from 1.6 billion in 1900 to more than 7 billion today. What he’d made was chemical fertilizer, and it meant that even land that was unfit for agricultural cultivation could be rendered “productive.” The food that feeds that additional 5 billion people is largely produced with the assistance of chemical fertilizers and chemical poisons.

But “heat and pressure” are not some infinite essence like space, nor are they immediately available like atmospheric nitrogen. They are transient phenomena that must be created through some procedure; in this case, using fossil hydrocarbons... lots of them. Haber was looking at a crisis created by the depletion of guano--bat and bird droppings used as fertilizer--mostly collected from the islands off the coast of Chile; so he fell on a system that depended on another exhaustible resource: fossil fuel.

After WWII, American farmers were using prodigious quantities of chemical fertilizer across prodigious expanses of arable land, along with a new chemical weapon itself, nerve gas… or organophosphates, as insecticides, expanding their harvests far beyond the American public’s capacity to consume.

The American manufacturing base had also expanded during the war, and given that the US did not suffer the devastation that Europe and Asia did during the war, the US emerged from the war as a uniquely powerful actor. The other variable in the expansion of food production was the thoroughgoing mechanization of agriculture, another net consumer of fossil energy. The US began to build farm machinery; and as part of its goal of maximizing profit for farm machinery industries, as well as agricultural chemicals, it began to promote something called “developmentalism” for the so-called under-developed nations.

In 1943, the Rockefeller Foundation, Ford Motor Company, and the Mexican government established a joint venture called--in English--the International Center to Improve Corn and Wheat. Standard Oil--a Rockefeller company--was manufacturing fertilizer, and Ford was building tractors. This was the beginning of the organized effort by first world corporations, with the active support of the US government, to push agricultural commodities into these so-called underdeveloped nations. By 1959, they had opened rural development academies in Pakistan, and by 1963 in the Philippines. These academies were performing research and development on high-yielding cultivars of wheat, corn, and rice. By the time of the Nixon administration, 120 of the largest agribusiness multinationals had established a joint program with the United Nations Food and Agriculture Organization.

The transformation in agriculture that followed was called the Green Revolution, a term coined in 1968 by US Agency for International Development Director William Gaud.

If ever there were a revolution from above, this was it. And it did accomplish a great deal. Caloric intake from cereal grains worldwide increased 30 percent per capita by 1990, and the prices of grains fell. The availability of more staple grains also supported a doubling of world population between 1960 and 2000.

Yet these very general statistics don’t tell the whole story. There were a number of qualitative changes that accompanied these statistical quanta. One early condition of World Bank development loans was that recipient nations industrialize their agriculture.

Smallholders were pushed off land to make way for large monoculture fields. Mechanization cut the number of necessary field workers to a fraction, and a process began whereby millions of formerly rural people--who were monetarily poor, but capable of self-reliant subsistence agriculture--were pushed into cities, where they came to rely more directly on the mass-produced staple cereals, which they now had to buy, and where they provided a windfall to urban manufactories of desperately cheap labor.

Peripheral nation agricultural production was being exported, in order to get precious US dollars for use in international markets and to service external debts. The agri-barons of the periphery were not feeding their own countries, but engaging in monoculture for export, like coffee, sugar, and bananas (ergo the term, “banana republic”).

Urban hunger is a specter that most leaders understand only too well.

I witnessed two food riots when I was in Haiti, and I can say they were among the most memorable experiences of my life.

Political leaders know very well that mass urban hunger is a recipe for political destabilization, and they avoid it at all costs. Because many of these nations were exporting crops, they fell short in providing basic nutrition to their own growing urban populations.

The United States, however, was uniquely positioned to take advantage of this situation, because the agricultural subsidies of the New Deal, originally meant to rescue family farms, had been carried forward to the benefit of large agribusiness corporations that were pushing the American family farm into the dustbin of history. Price supports for US grains meant that agribusiness could produce as much grain as possible, and for every bushel produced the government would pay them a subsidy.

This, along with the arable land mass of the American Midwest, quickly led to massive overproduction of US grain in the face of periodic grain shortages around the world, which gave US agribusiness unprecedented pricing power in grain markets.

In 1973, Secretary of State Henry Kissinger said that the dominance of US grain production in the world was a foreign policy weapon that was more powerful than nuclear bombs.

Grain was on a lot of political minds those days. Hubert Humphrey, the 1968 Democratic challenger for the presidency, had received an illegal campaign contribution of $100,000--a fact that would emerge during the Watergate hearings. The same contributor would also give the Nixon administration $25,000 to assist in its cover-up of the Watergate break-in. These were not insubstantial sums then, as they seem now.

Not many people had then heard of this fountain of largesse, whose name was Dwayne Andreas. Andreas pushed through a historic grain sale to the Soviet Union for the Nixon administration, worth $700 million, with his company as the middleman. That company was named Archer Daniels Midland.

It was the next year, however, when Green Revolution food production was exposed to another vulnerability, the aforementioned Arab oil embargo.

It is here that we can see how the history of the Green Revolution as an instrument of US foreign policy interweaves with the history of neoliberal finance--which we covered earlier--that began its gestation with the Nixon administration.

By 1973, the US was running not a trade surplus but a deficit of $6.4 billion. Even more momentously and permanently, US domestic production of crude oil had peaked and was now known to be in a permanent and irreversible decline that would increase US dependence on imports of this commodity into the foreseeable future. Oil remained the principle feedstock of American domestic agriculture, and of the Green Revolution that was articulating the decolonizing periphery into a new, neo-colonial order. At the same time, the US would become increasingly dependent on fossil energy imported from abroad, not merely to power its machines and transport, but to eat and to maintain the power of the US over food markets worldwide.

Even the Soviet Union had been pulled into the American grain-trade orbit by Nixon, proving Kissinger’s thesis that food was more powerful than nukes.

The increasing dependency of peripheral nations on American agricultural goods, as well as American support for the industrial capitalist model being adopted for peripheral nation export agriculture, would lead to decreases in national per-capita food production as well as financial and ecological bankruptcy.

Nixon broke up the old order; but the new order was not firmly established except serendipitously by the Reagan administration. In the interim, after a period of three years stewardship of the White House by the immanently forgettable Gerald Ford, the next elected president would have a dual-resume: a Naval officer and an agribusiness CEO.

Jimmy Carter.

Under Jimmy Carter, a southern agribusiness plutocrat posing as a good ol’ boy (a peanut “farmer”), an interesting thing happened. Something we Southern folk used to call “white liquor” or “white lightning” became legal and began magnetizing massive cash flows from US taxpayers in the form of corn subsidies.

Corn liquor has been produced for many years by rural scofflaws. My own father did a short stretch in the hoosegow when he was discovered with a car trunk full of it in the 1930s.

When Nixon was taking money from Dwayne Andreas, the CEO of the sugar and corn conglomerate, Archer Daniels Midland, ADM was concocting a new scheme that would simultaneously justify more “farm” subsidies to agribusiness and claim to address the “energy crisis” of 1973, which was also such a windfall to Wall Street. The scheme was to make massive quantities of corn liquor, which is of course flammable, and re-christen it “ethanol.” This was proposed as an “energy independence” measure for the US. It is made, naturally, with sugar and corn.

ADM found a friend in Jimmy Carter.

Carter called the energy crisis the “moral equivalent of war,” and his administration exempted ethanol-spiked gasoline from a federal fuel tax.

Carter began a loan program to build ethanol plants, which was halted by the Reagan administration… for a while, until farm lobbyists paid serial visits to Capitol Hill, whereupon the Reagan administration recanted.

To this very day, neither party will challenge agribusiness subsidies; and to this day, both parties are avid ethanol boosters.

It was this influence, in conjunction with neoliberal “free trade” policies, that allowed US grain producers to begin a process called agricultural dumping. Dumping is introducing a surplus into a foreign market below market value, which results in local producers’ inability to compete. Taxpayer-subsidized US corn, for example, is still routinely dumped into foreign markets at prices often as little as 30 percent of market value. This leads to bankrupted local markets, and a growing and increasingly poor urban population that becomes hostage to an imperial food market.

A Mexican farmer who grows traditional corn is wiped out by genetically modified, chemical-industrial corn that is subsidized by a foreign power. His family loses their land to debt, moves to the city, where they may or may not find work to get money to feed themselves, and barring that, they may take the risk of illegal migration to the north to find work in the United States. One seldom hears about neoliberalism or agricultural dumping when the subject of illegal immigration comes up in the United States; but the connections are clear. US policies have created the conditions that make mass migration inevitable.

After many NAFTA provisions went into effect that allowed US dumping in Mexico, between 1997 and 2004, taxpayer-subsidized US corn exports increased by 413%, while Mexican corn production fell by 50% based on a 66% devaluation of Mexican corn. In the same period, US soybean production increased by 159%, and Mexican soybean production decreased by 83% based on a 67% devaluation. Mexican pork production fell by 40%, corresponding to a 707% increase in US exports. Pork itself is not directly subsidized, but the corn that feeds industrial pork is. It is not a coincidence that NAFTA corresponds to the most massive wave of Mexican immigration to the United States in history.

So the combination of developmental imperatives to mechanize and enclose agriculture for monocrop production, as well as agricultural dumping by the United States has created a situation where most of the rapidly urbanizing world is now dependent on US grain or US seeds and chemicals in order to eat. US foreign policy pertaining to food has become what the late Ivan Illich called “a war on subsistence.” The androcentric cliché for holding power over others as “having them by the balls,” might better be replaced by “having them by the bellies.”

US international power politics combines the neoliberal debt traps with food monopolization as an effective mechanism of indirect control over a good deal of the globe. This is not, however, sufficient to exercise the kind of total dominance the US would require to halt the very real decay of US power that results from various kinds of imperial over-reach. The debt system is not sustainable. The energy system upon which the current system depends is not sustainable. The material resources upon which economic expansion is based are finite. And the tolerance of others is reaching its limits.

The fallback position of any imperial power, when indirect controls are no longer effective, is direct control in the form of violence. That is one of the reasons the United States--with some of the best naturally defensible borders in the world, and an impossibly large land mass for any would-be invader--maintains a military force that is more expensive than the combined military forces of the rest of the world. Calling the War Department the Department of Defense is perhaps the most ironic example of PR-speak you might encounter The US military is almost exclusively dedicated to missions of aggression abroad.

Moreover, the force component of US foreign policy is not merely the uniformed services, it includes a shadowy and well-financed covert operations component that allows military actions by US-directed surrogates to provide an element of plausible deniability to US actions that might undermine ideological claims of commitment to principles like “freedom,” “human rights,” and “democracy.”

Neoliberal theology asserts the primacy of the private, the value of small government; but neoliberal practice has been massively underwritten by the state. The assurance of the market economy--as Karl Polanyi pointed out almost 70 years ago--requires a network of regulatory institutions. Without the state’s affirmative actions on behalf of the international business class, the system would collapse. Begin by thinking about how six battle groups from the US Navy are required to ensure the flow of fossil hydrocarbons into the industrialized metropolis, and you can extrapolate from there.

The failed attempt to conquer Iraq in 2003, while it certainly involved oil, was also part of an effort to maintain a forward deployed US military capable of strategic intervention far from home. The Cold War had ended, and the disposition of US military forces had become obsolete. They needed to be redeployed from positions that were calculated to contain the USSR into positions that would give the United States more capacity to intervene in energy-rich Southwest Asia, to put the imperial hand--as it were--on the spigots of global energy.

The goal of the Iraq invasion was permanent bases; but instead the Bush administration managed to win the Iran-Iraq war on behalf of Iran. The Obama administration has decided that the next best thing is to forward base near the Middle East and in the Asia-Pacific Theater to prepare to contain China; and the Obama administration has vastly expanded the role of the covert operations forces, as well as armed mercenaries, in its expansion of the Afghanistan War into Pakistan and increased covert operations against Iran. For myself, I believe Obama’s military moves in Southwest and South Asia will prove as disastrous as those of his predecessor.

Obama’s administration was instrumental in the execution and consolidation of the coup against the democratically elected president of Honduras in 2009, just as the Bush administration was in the failed coup against the democratically elected president of Venezuela in 2002, and its successful coup against the democratically elected government of Haiti in 2004. In two cases, the offending parties--President Chavez of Venezuela and President Zelaya of Honduras--were guilty of defying the Washington Consensus, that is, of opposing neoliberalism. President Aristide had merely criticized neoliberalism.

More than strategic interests drive the reliance on military operations. In the United States, the Department of Defense has become a substitute export market for US industries. The reason the taxpayers are not bailing out Lockheed Martin, Northrup Grumman, Boeing, General Dynamics, Raytheon, KBR, L3 Communications, SAIC, Dyncorp, Hewlett-Packard, and a host of other major American corporations, including General Electric, Motorola, Goodrich, and Westinghouse, is that the margin of earnings that ensure their continued viability as capitalist enterprises comes from DOD contracts. If war spending were ended tomorrow, the US would experience a dramatic loss of jobs across a wide spectrum of Congressional districts that have hitched to the DOD pork wagon.

American foreign policy is amphibious. It operates through both the wet depths of public institutions and the dry lands of private institutions, and it has an integrated public-private perception management apparatus.

One of the key advantages of the public-private partnership is that foreign policy is insulated from accountability to those below those institutions on the social hierarchy. The boundaries are blurred, via contracts and memoranda of understanding, between the US public sector--with its administrative apparatus, and its military and intelligence establishment with their vast budgets--and the private sector, composed of publicly funded “non-governmental organizations,” think tanks, foundations, and an army of horizontally-integrated perception managers.

Those perception managers use mass media as a conformity-producing web of influence that reaches right into the living rooms of a US culture that has 2.24 television sets per household, running an average of six hours and 47 minutes a day, 2,476 hours a year. To appreciate the latent power of television, realize that the average college class has a student in tow for three hours a week, approximately 45 hours for an entire course, excluding out-of-classroom study.

The limits of public discourse are established de facto by a media that operates on the same liberal market principles as the people who own them and exercise hegemony within the government and in those sectors sometimes called civil society. The media, the governing apparatus, and civil society are in fact three faces of the same dominant interests in the same epoch.

In saying this, I am obliged to clear up a common misunderstanding of what this means and what I mean to say. It is easy to jump from the very general outline I have presented of three aspects of US foreign policy--finance, food, and force--to the conclusion that I mean to say, or that these facts tend to support the idea that, there is a conscious group of the conspiring powerful who direct the world. On the contrary, I want to emphasize that this system has evolved through a series of contingencies, and that its stability is maintained precisely because it is what some systems theorists call self-organized. It’s most powerful actors are in many ways as constrained, or more constrained, by neo-neo-liberalism – or whatever you choose to call this particular period – than most of us are. President Obama is far less free, for example, to say the kinds of things I can say here as an unemployed grandfather.

I, on the other hand, do not have the legal power to send US troops to war, or to call them home.

We each play our parts, and while some conspiracies have always been part of the terrain of politics, they are generally reactive, and far less determinative of large-scale outcomes than, say, changes in the built environment, demographic shifts, or institutional inertia. Many of the most pivotal events in history emerge unexpectedly from long-standing trends that have gone unnoticed or ignored until they reach a breaking point--the 2008 housing bubble crash being a good recent example.

Remember, in our saga about the birth of neoliberalism, there was no straight line, but a confluence of events and contingent decisions: French buying US gold, Nixon dropping the gold standard, the Egyptian war for the Sinai, the American decision to airlift TOW missiles to the Israelis, the decision of Arab oil producers to embargo oil to the US, the US balance of payments deficit, Nixon drops fixed currency exchange rates, rising oil prices creating petrodollars, the petrodollar tsunami being converted into opportunistic development loans, the Mexican threat of default, and so it goes. These were not plots, but actions and reactions, each producing a number of unintended or unanticipated consequences, which stimulated new actions and reactions.

The belief in a conspiratorial view of history seems to me to be a psychological reaction to the fear of chaos. If the world is not as one would like it, at least a conspiratorial view of history suggests that history as a process is still subject to human control, and that once we wrest control from the unjust conspirators, the world can be made right again.

This unpredictability, this sense of instability that compels some of us to reach for order in chaos with a history of conspiracy, ironically, has been produced by the current political milieu, one wherein neoliberalism has disembedded economies from local control and re-embedded them in national and transnational institutions, and those institutions are themselves now experiencing a loss of control in the face of unanticipated changes.

Structural adjustment programs have become political lightning rods that are igniting mass unrest around the world. Green Revolution agriculture has spawned megacities that are entropic black holes, teeming with desperation and crime. The US military, long considered the guarantor of last instance for the world order, has proven to be both the least cost effective institution on the planet and a perennial source of new resistance and unintended outcomes. In Iraq and Afghanistan, the myth of US military invincibility was shattered; and the costs of the Southwest Asia wars have bled the US Treasury white. Offshoring of US industry and the political empowerment of rentier capitalists--Wall Street--that was accomplished through foreign policy, has transformed much of the US domestic population not merely into wage workers, but debt slaves.

There is a bumper sticker that sums it up: “I owe, I owe, so off to work I go.”

Consumer debt in the United States is above $2.4 trillion. In 2010, consumer indebtedness amounted to $7,800 for every man, woman, and child in the United States. 33% of that debt is in revolving credit, that plastic you carry in your pockets. The rest is in mortgages, student loans, automobile loans, and other non-revolving credit schemes. You students collectively owe $556 billion dollars. Good luck with that.

US household leverage, the ratio of debt to disposable income, was 55% in 1960. By 1985, that number was 65%. Today, household debt is 133% of household disposable income.

Yet when the crisis of fictional value created by Wall Street came home to roost, trillions in bailout money were awarded to Wall Street, while Main Street was left holding its debts. Wall Street, according to the experts who work the Wall Street-Washington nexus, was too big to fail. Generations into the future are now saddled with paying for these bailouts. We are being structurally adjusted, which has always been a euphemism for privatizing the gains and socializing the losses.

Meanwhile, far away, in response to US and EU attempts to form an economic blockade against Iranian oil, rumors have begun to circulate that China and India, both on steep industrialization gradients and thirsty for oil, are figuring out how to pay for Iranian oil with gold. These two countries already constitute 40% of Tehran’s oil market; and they are not prepared to cut back consumption in support of an American belligerence in which neither of them have any vested interest. India flatly refuses to abide by the sanctions, and is working with the Russians to act as middle-men for Tehran to New Delhi oil transactions; and China knows that the efficacy of the sanctions depends completely on whether China participates or not. The US has no capacity as a unilateral actor any longer, still smarting from its defeat in Iraq and its interminable and expensive entanglement in Afghanistan. The threats against Iran’s oil exports, however, are likely to drive up the price of oil, which will drive up the price of grain, which will drive up the price of food. And so we see, even today, the interaction of forces between finance, food, and military force in foreign affairs.

With that, I will say that I have held you hostage quite long enough, and I thank you for your kind attention.

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