Category Archives: Trade

Neoliberalism Has Met Its Match in China

Ellen Brown chairs the Public Banking Institute and has written thirteen books, including her latest, Banking on the People: Democratizing Money in the Digital Age.  She also co-hosts a radio program on PRN.FM called It’s Our Money.

When the Federal Reserve cut interest rates on July 31 for the first time in more than a decade, commentators were asking why. According to official data, the economy was rebounding, unemployment was below 4%, and GDP growth was above 3%. If anything, by the Fed’s own reasoning, it should have been raising rates.

The explanation of market pundits was that we’re in a trade war and a currency war. Other central banks were cutting their rates and the Fed had to follow suit, in order to prevent the dollar from becoming overvalued relative to other currencies. The theory is that a cheaper dollar will make American products more attractive on foreign markets, helping our manufacturing and labor bases.

Over the weekend, President Trump followed the rate cuts by threatening to impose a new 10% tariff on $300 billion worth of Chinese products effective September 1. China responded by suspending imports of U.S. agricultural products by state-owned companies and letting the value of the yuan drop. On Monday, August 5, the Dow Jones Industrial Average dropped nearly 770 points, its worst day in 2019. The war was on.

The problem with a currency war is that it is a war without winners. This was demonstrated in the beggar-thy-neighbor policies of the 1930s, which just prolonged the Great Depression. As economist Michael Hudson observed in a June 2019 interview with Bonnie Faulkner, making American products cheaper abroad will do little for the American economy, because we no longer have a competitive manufacturing base or products to sell. Today’s workers are largely in the service industries – cab drivers, hospital workers, insurance agents and the like. A cheaper dollar abroad just makes consumer goods at Walmart and imported raw materials for US businesses more expensive. What is mainly devalued when a currency is devalued, says Hudson, is the price of the country’s labor and the working conditions of its laborers. The reason American workers cannot compete with foreign workers is not that the dollar is overvalued. It is due to their higher costs of housing, education, medical services and transportation. In most competitor countries, these costs are subsidized by the government.

America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. Typically, if the businesses cannot repay the loans, neither the banks nor the businesses are put into bankruptcy, since that would mean losing jobs and factories. The non-performing loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government, and the loans were created on the banks’ books in the first place (following standard banking practice globally).

As observed by Jeff Spross in a May 2018 Reuters article titled “China’s Banks Are Big. Too Big?”:

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever.…

It may sound weird to say that China’s banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor’s Woods Foundation, who explained, “China has committed itself to a high level of growth. And growth, very simply, is contingent on financing.” Beijing will “come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks … by any number of means that you and I would not see happen in the United States.”

To avoid political and labor unrest, Spross wrote, the government keeps everyone happy by keeping economic growth high and spreading the proceeds to the citizenry. About two-thirds of Chinese debt is owed just by the corporations, which are also largely state-owned. Corporate lending is thus a roundabout form of government-financed industrial policy – a policy financed not through taxes but through the unique privilege of banks to create money on their books.

China thinks this is a better banking model than the private Western system focused on short-term profits for private shareholders. But U.S. policymakers consider China’s subsidies to its businesses and workers to be “unfair trade practices.” They want China to forgo state subsidization an it’s d other protectionist policies in order to level the playing field. But Beijing contends that the demanded reforms amount to “economic regime change.” As Michael Hudson puts it:

This is the fight that Trump has against China.  He wants to tell it to let the banks run China and have a free market.  He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise.  In effect, he wants the Chinese to be as threatened and insecure as American workers.  They should get rid of their public transportation.  They should get rid of their subsidies.  They should let a lot of their companies go bankrupt so that Americans can buy them.  They should have the same kind of free market that has wrecked the US economy. [Emphasis added.]

Kurt Campbell and Jake Sullivan, writing on August 1 in Foreign Affairs (the journal of the Council on Foreign Relations), call it “an emerging contest of models.”

An Economic Cold War

In order to understand what is happening here, it is useful to review some history. The free market model hollowed out America’s manufacturing base beginning in the Thatcher/Reagan era of the 1970s, when neoliberal economic policies took hold. Meanwhile, emerging Asian economies, led by Japan, were exploding on the scene with a new economic model called “state-guided market capitalism.” The state determined the priorities and commissioned the work, then hired private enterprise to carry it out. The model overcame the defects of the communist system, which put ownership and control in the hands of the state.

The Japanese state-guided market system was effective and efficient – so effective that it was regarded as an existential threat to the neoliberal model of debt-based money and “free markets” promoted by the International Monetary Fund (IMF). According to William Engdahl in A Century of War, by the end of the 1980s Japan was considered the leading economic and banking power in the world. Its state-guided model was also proving to be highly successful in South Korea and the other “Asian Tiger” economies. When the Soviet Union collapsed at the end of the Cold War, Japan proposed its model for the former communist countries, and many began looking to it and to South Korea as viable alternatives to the U.S. free-market system. State-guided capitalism provided for the general welfare without destroying capitalist incentive. Engdahl wrote:

The Tiger economies were a major embarrassment to the IMF free-market model.  Their very success in blending private enterprise with a strong state economic role was a threat to the IMF free-market agenda.  So long as the Tigers appeared to succeed with a model based on a strong state role, the former communist states and others could argue against taking the extreme IMF course.  In east Asia during the 1980s, economic growth rates of 7-8 per cent per year, rising social security, universal education and a high worker productivity were all backed by state guidance and planning, albeit in a market economy – an Asian form of benevolent paternalism.

Just as the U.S. had engaged in a Cold War to destroy the Soviet communist model, so Western financial interests set out to destroy this emerging Asian threat. It was defused when Western neoliberal economists persuaded Japan and the Asian Tigers to adopt the free-market system and open their economies and their companies to foreign investors. Western speculators then took down the vulnerable countries one by one in the “Asian crisis” of 1997-98. China alone was left as an economic threat to the Western neoliberal model, and it is this existential threat that is the target of the trade and currency wars today.

If You Can’t Beat Them …

In their August 1 Foreign Affairs article, titled “Competition without Catastrophe,” Campbell and Sullivan write that the temptation is to compare these economic trade wars with the Cold War with Russia; but the analogy, they say, is inapt:

China today is a peer competitor that is more formidable economically, more sophisticated diplomatically, and more flexible ideologically than the Soviet Union ever was. And unlike the Soviet Union, China is deeply integrated into the world and intertwined with the U.S. economy.

Unlike the Soviet Communist system, the Chinese system cannot be expected to “crumble under its own weight.” The US should not expect or want to destroy China, say Campbell and Sullivan. Rather, we should aim for a state of “coexistence on terms favorable to U.S. interests and values.”

The implication is that China, being too strong to be knocked out of the game as the Soviet Union was, needs to be coerced or cajoled into adopting the neoliberal model. It needs to abandon state support of its industries and ownership of its banks. But the Chinese system, while obviously not perfect, has an impressive track record for sustaining long-term growth and development. While the U.S. manufacturing base was being hollowed out under the free-market model, China was systematically building up its own manufacturing base, investing heavily in infrastructure and emerging technologies; and it was doing this with credit generated by its state-owned banks. Rather than trying to destroy China’s economic system, it might be more “favorable to U.S. interests and values” for us to adopt its more effective industrial and banking practices.

We cannot win a currency war by competitive currency devaluations that trigger a “race to the bottom,” and we cannot win a trade war by competitive trade barriers that simply cut us off from the benefits of cooperative trade. More favorable to our interests and values than warring with our trading partners would be to cooperate in sharing solutions, including banking and credit solutions. The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers. Rather than seeing it as an existential threat, we could thank them for test-driving the model and take a spin in it ourselves.

Neoliberalism Has Met Its Match In China

Donald Trump and Chinese President Xi Jinping (Andy Wong/AP)

When the Federal Reserve cut interest rates last week, commentators were asking why. According to official data, the economy was rebounding, unemployment was below 4% and gross domestic product growth was above 3%. If anything, by the Fed’s own reasoning, it should have been raising rates.

Market pundits explained that we’re in a trade war and a currency war. Other central banks were cutting their rates, and the Fed had to follow suit in order to prevent the dollar from becoming overvalued relative to other currencies. The theory is that a cheaper dollar will make American products more attractive in foreign markets, helping our manufacturing and labor bases.

Over the weekend, President Trump followed the rate cuts by threatening to impose, on September 1, a new 10% tariff on $300 billion worth of Chinese products. China responded by suspending imports of U.S. agricultural products by state-owned companies and letting the value of the yuan drop. On Monday, the Dow Jones Industrial Average dropped nearly 770 points, its worst day in 2019. The war was on.

The problem with a currency war is that it is a war without winners. This was demonstrated in the beggar-thy-neighbor policies of the 1930s, which only deepened the Great Depression. As economist Michael Hudson observed in a June interview with journalist Bonnie Faulkner, making American products cheaper abroad will do little for the American economy, because we no longer have a competitive manufacturing base or products to sell. Today’s workers are largely in the service industries—cab drivers, hospital workers, insurance agents and the like. A cheaper dollar abroad just makes consumer goods at Walmart and imported raw materials for U.S. businesses more expensive.

What is mainly devalued when a currency is devalued, Hudson says, is the price of the country’s labor and the working conditions of its laborers. The reason American workers cannot compete with foreign workers is not that the dollar is overvalued. It is due to their higher costs of housing, education, medical services and transportation. In competitor countries, these costs are typically subsidized by the government.

America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. If the businesses cannot repay the loans, neither the banks nor the businesses are typically put into bankruptcy, since that would mean losing jobs and factories. The nonperforming loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government and the loans were created on the banks’ books in the first place (following standard banking practice globally). As observed by Jeff Spross in a May 2018 Reuters article titled “Chinese Banks Are Big. Too Big?”:

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever. …

It may sound weird to say that China’s banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor’s Woods Foundation, who explained, “China has committed itself to a high level of growth. And growth, very simply, is contingent on financing.” Beijing will “come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks … by any number of means that you and I would not see happen in the United States.”

Political and labor unrest is a major problem in China. Spross wrote that the government keeps everyone happy by keeping economic growth high and spreading the proceeds to the citizenry. About two-thirds of Chinese debt is owed just by the corporations, which are also largely state-owned. Corporate lending is thus a roundabout form of government-financed industrial policy—a policy financed not through taxes but through the unique privilege of banks to create money on their books.

China thinks this is a better banking model than the private Western system focused on short-term profits for private shareholders. But U.S. policymakers consider China’s subsidies to its businesses and workers to be “unfair trade practices.” They want China to forgo state subsidization and its other protectionist policies in order to level the playing field. But Beijing contends that the demanded reforms amount to “economic regime change.” As Hudson puts it: “This is the fight that Trump has against China. He wants to tell it to let the banks run China and have a free market. He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise. In effect, he wants the Chinese to be as threatened and insecure as American workers. They should get rid of their public transportation. They should get rid of their subsidies. They should let a lot of their companies go bankrupt so that Americans can buy them. They should have the same kind of free market that has wrecked the US economy. [Emphasis added.]”

Kurt Campbell and Jake Sullivan, writing on August 1 in Foreign Affairs (the journal of the Council on Foreign Relations), call it “an emerging contest of models.”

An Economic Cold War

To understand what is happening here, it is useful to review some history. The free market model hollowed out America’s manufacturing base beginning in the Thatcher/Reagan era of the 1970s and ’80s, when neoliberal economic policies took hold. Meanwhile, emerging Asian economies, led by Japan, were exploding on the scene with a new economic model called “state-guided market capitalism.” The state determined the priorities and commissioned the work, then hired private enterprise to carry it out. The model overcame the defects of the communist system, which put ownership and control in the hands of the state.

The Japanese state-guided market system was effective and efficient—so effective that it was regarded as an existential threat to the neoliberal model of debt-based money and “free markets” promoted by the International Monetary Fund (IMF). According to author William Engdahl in “A Century of War,” by the end of the 1980s, Japan was considered the leading economic and banking power in the world. Its state-guided model was also proving to be highly successful in South Korea and the other “Asian Tiger” economies. When the Soviet Union collapsed at the end of the Cold War, Japan proposed its model to the former communist countries, and many began looking to it and to South Korea’s example as viable alternatives to the U.S. free-market system. State-guided capitalism provided for the general welfare without destroying capitalist incentive. Engdahl wrote:

The Tiger economies were a major embarrassment to the IMF free-market model. Their very success in blending private enterprise with a strong state economic role was a threat to the IMF free-market agenda. So long as the Tigers appeared to succeed with a model based on a strong state role, the former communist states and others could argue against taking the extreme IMF course. In east Asia during the 1980s, economic growth rates of 7-8 per cent per year, rising social security, universal education and a high worker productivity were all backed by state guidance and planning, albeit in a market economy — an Asian form of benevolent paternalism.

Just as the U.S. had engaged in a Cold War to destroy the Soviet communist model, so Western financial interests set out to destroy this emerging Asian threat. It was defused when Western neoliberal economists persuaded Japan and the Asian Tigers to adopt a free-market system and open their economies and companies to foreign investors. Western speculators then took down the vulnerable countries one by one in the “Asian crisis” of 1997-8. China alone was left as an economic threat to the Western neoliberal model, and it is this existential threat that is the target of the trade and currency wars today.

If You Can’t Beat Them …

In their August 1 Foreign Affairs article titled “Competition without Catastrophe,” Campbell and Sullivan write that the temptation is to compare these economic trade wars with the Cold War with Russia; but the analogy is inapt:

China today is a peer competitor that is more formidable economically, more sophisticated diplomatically, and more flexible ideologically than the Soviet Union ever was. And unlike the Soviet Union, China is deeply integrated into the world and intertwined with the U.S. economy.

Unlike the Soviet communist system, the Chinese system cannot be expected to “crumble under its own weight.” The U.S. cannot expect, and should not even want, to destroy China, Campbell and Sullivan say. Rather, we should aim for a state of “coexistence on terms favorable to U.S. interests and values.”

The implication is that China, being too strong to be knocked out of the game as the Soviet Union was, needs to be coerced or cajoled into adopting the neoliberal model and abandoning state support of its industries and ownership of its banks. But the Chinese system, while obviously not perfect, has an impressive track record for sustaining long-term growth and development. While the U.S. manufacturing base was being hollowed out under the free-market model, China was systematically building up its own manufacturing base and investing heavily in infrastructure and emerging technologies, and it was doing this with credit generated by its state-owned banks. Rather than trying to destroy China’s economic system, it might be more “favorable to U.S. interests and values” for us to adopt its more effective industrial and banking practices.

We cannot win a currency war through the use of competitive currency devaluations that trigger a “race to the bottom,” and we cannot win a trade war by installing competitive trade barriers that simply cut us off from the benefits of cooperative trade. More favorable to our interests and values than warring with our trading partners would be to cooperate in sharing solutions, including banking and credit solutions. The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers. Rather than seeing it as an existential threat, we could thank them for test-driving the model and take a spin in it ourselves.

• First  published on Truthdig.com

The Japan-Korea Semiconductor Flap

South Korean companies (Samsung and SK Hynix) produce about 17% of the world’s semiconductors. To manufacture these, they’re dependent on imports of Japanese hydrogen fluoride gas, fluorinated polyimide, and photoresists. Japanese firms control 90% of the polyimide market needed for screen applications, so the relationship between these neighboring prosperous northeast Asian countries is crucial to the operation of global communications.

Japan has begun restricting exports of these products to South Korea, in response to a South Korean Supreme Court decision in 2018 requiring Japanese firms to compensate involuntary Korean labor during the colonial period (1910-45). President Moon Jae-in is not responsible for the court decision but his nationalist Democratic Party supports it.

This is a big story, largely eclipsed by Trump-related stories in the U.S. media. It involves the 3rd and 11th largest economies in the world, and the countries which host the first and third largest number of U.S. troops abroad (56,000 in Japan, 25,000 in Korea; compare 35,000 Germany). The United States, Japan and South Korea are linked by a military alliance directed against North Korea, China, and Russia. They hold joint military operations regularly. These operations are threatened by this flap.

Tokyo points out that the 1965 treaty between the two countries settled any Korean outstanding claims for reparations—about $800 million at the time. Tokyo refuses to pay more, lest a precedent be set, and China also be prompted to make demands not already resolved in 1972. Tokyo has called for international arbitration in the wake of the court decision, but Seoul has refused. In response to the court ruling, which particularly targets Nippon Steel and Mitsubishi Heavy Industries, Tokyo has removed South Korea from its “white list” of 27 countries that receive expedited treatment in trade transactions. (There is no direct causal relationship, but it’s understood Japan wants to punish Seoul for the annoying court decision.)

This means that there will be months-long delays involving paperwork, and deliveries of the above-mentioned commodities from Japan to South Korea will not be guaranteed. Stock values in alternative microchip providers in the U.S.(Intel)  and Taiwan (Taiwan Semiconductor) has soared. Largely ignored by the western press, this is a serious trade conflict occurring while Korean nationalism on both sides of the DMZ is at an all-time high, along with sympathy for reunification.

Meanwhile Japanese public opinion is disturbingly anti-Korean. 56% of those polled say the economic retaliation to the court decision was appropriate. The Koreans are depicted as unreasonable, unable to accept multiple sincere, even abject apologies from Japanese prime ministers and emperors for the legacy of Japanese colonialism, insistent on focusing on the past, insatiable in their demands for Japanese compensation. They are just anti-Japanese. Shigataganai. It can’t be helped. (Such sentiments reflect the widespread ignorance, hence insensitivity, in Japan, regarding the painful impact of Japanese colonialism on Korea between 1910 and 1945.)

Trump’s threat to annihilate North Korea (and hence the entire peninsula) caused the two Korean leaders Kim Jong-un and Moon Jae-in to meet and sign a series of agreements lowering tensions on the peninsula. South Koreans were the intermediaries in preparing the Trump-Kim summits. The best way for the Koreans to obtain the “spiritual victory” over Japan they have proclaimed over the current standoff, is to reunify, withdraw from the tripartite military pact with the U.S. and Japan, and expel the 30,000 U.S. troops.

The threat to the South Korean economy posed by Japanese actions could impede Moon’s Korean reconciliation policy; if Moon falls, the plans for railway links and renewed trade ties could suffer. Or Japanese hostility could encourage Korean unity. Seoul and Pyongyang will always unite in condemning Japan.

One missing element in the evolving crisis is U.S. involvement. The State Department is understaffed, Trump ignorant and indifferent. John Bolton was dispatched to Seoul, not to discuss the Japan-Korea crisis, but to demand that South Korea pay more to support U.S. forces. Washington seems inclined to leave the quarrel alone, which means to encourage Abe Shinzo—the strongest, most durable prime minister ever—in his nationalist militarism, and Moon in his nationalist opportunism rooted in domestic politics.

Trump’s staff claims Moon Jae-in has requested Trump to mediate the dispute. But (aside from being an ignorant buffoon) Trump is not the sort to sympathize with the victims in any historical relationship, or show any sympathies for the subjects of colonialism. After his first meeting with Xi Jinping he declared that he’d learned Korea had once been part of China, a profoundly inaccurate and offensive statement.

Moon is likely to suffer some humiliation as Japan sticks to its guns and Seoul receives little support for its legal claims. Seoul will have to back down to maintain Samsung’s profitability. And if lack of any U.S. support inclines the South Koreans to distance themselves from their patrons, the better to cozy up with the north, well and good!

The point is not more Japanese reparations but the repair of the divided peninsula. There’s no way Mitsubishi’s going to compensate any survivors of wartime slave labor. There’s no point in Korean nationalists demanding endless apologies and concessions from the former colonial power. Japan is not the power preventing Korean reunification. Only the U.S. can do that.

Kim Jung-un’s acquisition of nuclear weapons has forced the U.S. to negotiate with North Korea, and facilitated a series of positive exchanges with the south. A Confederation of Goryeo (on the model of one country, two systems) realistically beckons. There is a Silicon Valley waiting somewhere in the lap of Mt. Paekchong.

Demanding more Japanese reparations at this time is to change the subject, distracting attention from the prospect at hand: Korean  reunification and the expulsion of the occupiers.

Why Would China and Huawei Commit Economic Self-Ruin?

Rune Fisker for the Washington Post

It could be construed as a badge of professional honor that a news broadcaster is open to presenting a wide range of views. This might especially be considered so when the corporate-state media is parochially aligned to portraying an unskeptical right-wing, warmongering bizzaro worldview where left-wing (defined as socialist, communist, anarchist… not Democrats or Liberals who frequently bang the drums of war and toe the neoliberal line), pro-peace types are absent or marginalized to the fringes.

A recent segment with RT America anchor Rick Sanchez led me to question again whether Sanchez is doing the news again or opining again? He opens by discussing the friendly, deepening relations between president Vladimir Putin’s Russia and chairman Xi Jinping’s China. He asks:

Here’s the question really, right? Is this a union of strength, convenience, of necessity, of revenge, or somehow all of the above?

Of convenience, of necessity, of revenge? Are these among the best speculations of Sanchez?

Rick Sanchez interviewed John Jordan, a frequent guest on RT America. Sanchez asked Jordan: “Can you, can you, can we, can anybody blame Russia for jumping into China’s … loving arms?” Really, where does a news anchor come up with such questions?

Jordan presented his bona fides. He stated he was an American patriot on air to present the American viewpoint. He said he has “studied Russian history and culture in excruciating detail” and that he speaks Russian. Such a background does, indeed, confer gravitas. But gravitas can be nullified by the bias of patriotism.

Jordan stated “that as a friend of Russia that Russia will rue the day it did this [more closely ally with China through accepting Huawei’s 5G].” Jordan provides as a rationale that the Chinese government, legally, has a right to access all made in China technology. Thus he fears that this will be “an enormous intelligence gathering tool for China.” He adds that this could have “a chilling effect of investment into Russia.”

Jordan points out that other countries need not be dependent on Huawei for 5G and neither on American 5G; there are companies in other countries besides the United States that sell 5G. This is a crucial point since, as revealed by ex-NSA official William Binney, ex-CIA employee Edward Snowden, and by WikiLeaks, the US is deeply involved in intelligence gathering, as are American companies like Google, Microsoft, Apple, and social media such as Facebook.

Time to do news? What is the evidence — beyond mere conjecture — that Huawei would be an intelligence gathering instrument? Have US corporations ever offered a no-spying pact with foreign governments as Huawei has done?

It is too easy to tear apart any thread of rationality to what Jordan says. Jordan professes to be an American patriot. First, it reeks of a double standard to demonize China for what the US, as is well-known by Jordan, also does. Second, why is it even necessary to wave a flag of patriotism? My country right or wrong? Does love of a geo-political entity triumph love of humanity? Love of morality? Love of truth?

And why shouldn’t Russia and China be close partners? That often happens when countries, like Russia and China, are neighbors that share a long border where transportation and communication are easier. First, it makes good economic sense to trade with a neighbor who has goods you want and who also wants your goods. Second, being populous countries, economies of scale also come into advantageous play. Third, the China-Russia union connects both to Europe and Asia. Fourth, both these countries find themselves surrounded by American military bases, navy ships, and weaponry. As such, it also makes clear military sense to create strength through a union.

The overarching question that Sanchez and Jordan do not deal with is why Huawei would shoot itself in its economic foot? 5G technology is poised to be a financial windmill in the near future for Huawei and China, and it seems the US is far behind in this technology. As far as speculation goes, this would be a strong motive for a hyper-American patriot to jump to the defense of US interests by demonizing an economic competitor that is outpacing US economic growth.

Germany, Japan, Iran and Trump: Will Reason and Harmony Triumph in the World?

Japan used to be the number one foreign consumer of Iranian oil, slipping to number two as China increased its purchases. Now, obliged to defer to the U.S., Japan purchases none. Germany has been Iran’s largest European trade partner, and was hoping for major deals following the conclusion of the Iran Deal in 2015. These plans have been sabotaged by the U.S. using its control over the international banking system, one of its main weapons to use against free market principles and free trade, to inflict pain on people who do not submit, and to (try to) assert its global hegemony.

Both Japan and Germany (whom you recall were the U.S. two greatest adversaries in World War II and who emerged soon after the war as close U.S. allies, the third and fourth largest economies, after the U.S. and USSR.  Both not coincidentally were occupied by tens of thousands of U.S. troops from their defeat in 1945, politically controlled by the U.S. and incorporated into its military alliance network, as they remain 74 years later.

(Notice by the way how the Soviets, who defeated the Nazis on the all-important Eastern Front, losing as many as 30 million in that effort, and who occupied what had been Nazi-occupied parts of eastern Europe, withdrew from Finland and Austria while the U.S. consolidated its grip on postwar western Europe, while shaping the emergence of pro-Soviet client states in Poland, Czechoslovakia, Hungary, East Germany (after the U.S. unilaterally declared West Germany an independent state), and Bulgaria. Other ostensibly socialist states (Albania, Yugoslavia, Romania) always retained a high degree of independence vis-à-vis the Soviets. The U.S. meanwhile pronounced the Truman Doctrine (justifying any means necessary to defeat communism, from electoral interference to assassination to coups and wars) and in 1949 created NATO as a ferocious anti-Soviet military alliance. The Soviets responded seven years later with their own much smaller Warsaw Pact alliance that, of course, was dissolved in 1991, when NATO should have been. The U.S. remains tied by expensive military alliances with the now-reunited Germany and Japan, and continues to station more soldiers in those two countries than anywhere else. They are followed by South Korea (part of the Japanese Empire during the Second World War) and Italy, showing that the U.S. is still in a perverse deluded way fighting that war.

Both Japan and Germany—the third and fourth largest economies in the world, whose combined GDPs equal about half the U.S. figure—oppose the Trump administration’s decision to withdraw from, and seek to destroy, the Joint Comprehensive Plan of Action signed with Iran four years ago. They want normal ties with Iran. They fear the real prospect that crazies around the U.S. president—known, rapid war-mongering, fanatically Zionist, pathological liars, bible-toting nutcases, smug psychos and wild-eyed brutes like Jared Kushner, John Bolton and Mike Pompeo—will arrange a war to bring on the apocalypse they so crave.

They are surely indignant that a man as obviously as moronic as Tillerson intimated is ordering them, in their maturity, and their nations, in their dignity, to obey U.S. orders to isolate and provoke Iran. And worried about the possible consequences of Trump’s madness and vulnerability to the arguments of evil advisors. They will surely be trying through flattery and patient argument to promote talks with the Iranians.

Trump says he doesn’t want war. He says he wants to talk, but leaves it to the Iranians to call him, to show their respect. He says he doesn’t want regime change (although Bolton surely does and says so continuously). He says President Rouhani is probably a “lovely man.” He just doesn’t want Iran to have nuclear weapons.

The Germans and Japanese know Trump likes others to come to him. So they will get on the phone and urge Iranian Foreign Minister Zarif to stoke Trump’s ego and call him. And they will say, just repeat what you have many times, guarantee him that Iran does not want and will not build nuclear weapons. Give him a way to back down, like the Mexicans just did. Let him claim a better deal, if that allows trade to get going…

Trump is a profoundly ignorant if not stupid human. He genuinely might not know that U.S. intelligence services have been saying since 2003 that Iran does not have an active nuclear weapons program. The IAEA has ascertained this. The Iranian supreme leader has issued a fatwa banning the production or use of nuclear weapons. The leading western authority on Iran’s nuclear program, Gareth Porter, has exhaustively documented the fact that Iran has never had a serious program to produce nuclear weapons, at least not since the Islamic Revolution.

Anyway, by suggesting that his only demand is that Iran not acquire nukes, Trump allows the Iranians to say, “Fine. We agree. What more assurances do you want?” And then, if his advisors are in the room, Trump will say, actually, we want more than no nukes, we need to you to obey us in all these other areas Pompeo has announced. You have to stop missile tests, and end aid to Hizbollah, Hamas, Iraqi Shiite militias, Houthis and the Syrian government. Only then will we let Japan, Germany and all the countries we indirectly control trade with you.

The German foreign minister Heiko Maas has visited Tehran to meet with his dignified, level-headed counterpart. Japanese Prime Minister Abe Shinzo is heading to Iran Wednesday to attempt to mediate between his U.S. bosses and the Iranian leadership. He is perhaps in a good position to do so. Abe has been Japanese prime minister since 2012—a very long time for a Japanese leader. He is an extremely reactionary figure, proud grandson of an accused war criminal who also served as prime minister (1957-60), advocate of constitutional revision (to legalize the huge Japanese military), promoter of a view of history in which Japan once led Asia in sloughing off colonialism. He has deliberately provoked the Koreas and China by statements, actions and threats involving contested claims over islands. His tax hikes and austerity measures have produced much pain for the Japanese. I have no fondness for the man.

But I would like to suggest what he might, speaking from his own point of view perhaps, say to the Iranian president.

He could begin by pointing out that Japan, as a close U.S. ally due to its post-war fate, must follow its leadership on foreign policy. However, he might add that for years Japan was Iran’s number one oil purchaser nation, before it was overtaken by China. Now it buys no oil from Iran; it is not allowed to, due to U.S. secondary sanctions. But for a time Japan, which has towed the U.S. line on virtually all global matters from the time of the Occupation to the present, did have a strong trade relationship with Iran, receiving special permission from the boss-nation to do so due to its complete dependence on foreign oil. (South Korea received this too.) So there is precedent for Japan playing a slightly independent role.

Moreover, there are reports that in the current situation Abe wants to play less the role of messenger than mediator, which makes sense from the point of view of his nationalist agenda.

Abe could further note that Japan and Iran (Persia) have had a trading relationship (since at least the eighth century CE, actually); have until recently enjoyed scholarly exchanges (such as Japanese archeologists’ work with their Iranian counterparts in exploring likely ancient Buddhist sites); and share a history of avoiding western colonization. Both cultures value etiquette, patience, calm and reason.

Abe and Rouhani no doubt share a common contempt for Trump as an ignorant, rude, unpredictable, dangerous, posturing buffoon. This would be how most world leaders see him. But they also no doubt grasp that his vanity can be used to defuse him. So Abe will say, as friend to friend, why not call him? Say that you are contacting him in response to his public invitation and whatever private communications there have surely been, because you have made statements that suggest you want to ease the “tensions” the U.S. claims have gotten higher recently. These statements include a perhaps facetious statement that you, Rouhani, are a “lovely man;” that he is not calling for regime change in Iran; that he wants to make a deal with the present government; even that he wants Iran to thrive under the present regime. All he wants, he insists, is that Iran not get nuclear weapons.

Call him and call his bluff. Remind him that the Iran Deal virtually prevents Iran from getting nuclear weapons any time soon, and that the IAEA knows that, and the UN knows that, and the signatory nations except for Trump’s know that. Offer him even more iron clad assurances; he won’t know what you’re talking about. Dangle before him the prospect of the Nobel Peace Prize. Let him announce that trust has been achieved and the U.S. now looks forward to investing in Iran, which like North Korea, has awesome prospects.

The current head of the IAEA happens to be a Japanese flunky of the U.S.  (He was elected in July 2009 to succeed the Egyptian, Mohammad ElBaradei, a Nobel Peace Prize laureate in part due to his refusal to bow to U.S. disinformation about Iran’s nuclear program provided by the likes of Bolton. There were six rounds of voting, the U.S. each time opposing the favored South African candidate. Amano was more suitable because a diplomatic cable released by the invaluable Wikileaks indicated that Amano “was solidly in the U.S. court on every key strategic decision, from high-level personnel appointments to the handling of Iran’s alleged nuclear weapons program.”)

The other day as he opened a meeting of the IAEA’s board of governors, Amano stated blandly, “I… hope that ways can be found to reduce current tensions through dialogue.”  In other words, he faults both sides for such “tensions” and is probably saying: “Meet with Trump, President Rouhani, to reduce these tensions!” May the Iranians respond to Trump’s clueless provocations with a mix of calculated taqiyya and principled insistence on established international law, putting the bullying Wizard of Oz in his place, daring him to please Natanyahu, Jared and MbS by provoking war. And may Trump back down, agreeing on some formula allowing him to claim some victory that had eluded Obama.

Why is the Ruling Class Putting Up With the Idiot-King?

Mass complicity

Wilhelm Reich, in both The Mass Psychology of Fascism and The Function of the Orgasm argued that socialists do not understand mass psychology. He said that the biggest problem in Germany was not Hitler or even the economic system of capitalism. Rather he asked what is it about the masses of people who supported Hitler? His answer was that Hitler wouldn’t have existed if there wasn’t a little bit of Hitler in a whole lot of people. The problem is why masses of people are so passive. He gave answers to these questions, but his answers aren’t as important to me as the question he posed. Even in his later books (Listen Little Man and The Murder of Christ), when Reich was clearly paranoid, he remained lucid when it came to insisting that masses of people are ultimately responsible for whatever political body has power.

Group Complicity

In my experience teaching courses in group dynamics, I ask my students to discuss problems they are having in the groups they are members of outside of school. My greatest problem is to get them to go beyond a) blaming the leader of the group or b) identifying some jerk in the group who is obnoxious, crabby, recalcitrant, needy and then blaming them. The assumptions of both blaming leaders and individual group members is that: a) if only we got a good group leader, everything would be fine; b) if only we could get rid of a couple of pain-in- the neck group members, the group would be fine; or c) the rest of the group members are neutral witnesses with little responsibility. What this doesn’t take into account is that when the majority group members are passive, they are producing both bad group leaders and obnoxious individual members. Again, the most interesting question to me is the complicity of most group members.

Don’t follow the bouncing ball

Another way to describe this ignored perspective is to use an analogy from football. The easiest and most self-evident way to watch a football game is to follow the ball. The quarterback gives the ball to the running back, we follow the running back. The quarterback passes to the wide receiver, we follow the wide receiver. But what neither the cameraman nor the fans do is follow a) what is going in the offensive defensive lines away from the ball and b) what is going on between the defensive secondary and the offensive ends when they are not part of the immediate action. What is going on away from the ball might hold the key to understanding which team may ultimately prevail.

But what does this mass and group complicity and watching football have to do with the subject of the relationship between the ruling class and the Idiot King?

The political economy of ruling class complicity

My questions do not have to do with mass psychology, group dynamics or watching football. My question is why the ruling class in the United States is putting up with the Idiot King. To use the analogies in the previous sections, blaming the Idiot King for the state of the political economy in Yankeedom is like blaming Hitler alone for fascism or blaming only the leader for problems in group dynamics. In the football analogy, it is like following Trump’s tweets or actions (the ball in football) and thinking that counts as following politics. What is missing is why the ruling class, that has had power long before the Idiot King and will have power after he is gone, has put up with him for 2 ½ years.

In this article I ask some very simple questions. They are questions that have bothered me for over two years now. I have not found any articles that answer my questions, so I will pose them to you in the hopes you may have some answers. I am not an expert in ruling class machinations, though I have studied the work of William Domhoff, Robert Michaels and Gaetano Mosca. Hopefully a few good answers will lead us to deeper, more penetrating questions.

Network Revisited

About three-quarters of the way through the great film 1976 Network by Paddy Chayefsky, there is a showdown between Mr. Jensen, representing the forces of global capitalism, and Howard Beale who in some ways resembles Trump in his instability and economic nationalism. Here is the exchange:

Jensen: You have meddled with the primal forces of nature, Mr. Beale, and I won’t have it!! Is that clear? You think you’ve merely stopped a business deal. That is not the case. The Arabs have taken billions of dollars out of this country, and now they must put it back! It is ebb and flow, tidal gravity! It is ecological balance!

You are an old man who thinks in terms of nations and peoples. There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no west. There is only one holistic system of systems, one vast and immanent, interwoven, interacting, multivariate, multinational dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, reichsmarks, rins, rubles, pounds, and shekels.

It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic and subatomic and galactic structure of things today! And YOU have meddled with the primal forces of nature, and YOU WILL ATONE!

Am I getting through to you, Mr. Beale?

You get up on your little twenty-one inch screen and howl about America and democracy. There is no America. There is no democracy. There is only IBM and ITT and AT&T and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today.

What do you think the Russians talk about in their councils of state – Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do.

We no longer live in a world of nations and ideologies, Mr. Beale. The world is a college of corporations, inexorably determined by the immutable bylaws of business. The world is a business,

Assuming that Mr. Jensen is the ruling class of today, how well have his predictions turned out? For well over two years, Howard Beale (Donald Trump) has gotten the better of the Mr. Jensen and the ruling class. The purpose of this article is to explore why.

The ruling class has no clothes

For the last two and a half years much has been written about the psychology of the Idiot King, his immorality, his crassness, his lack of impulse control, his political reversals and his inability to follow normal political procedures. Others have written about the failings of the capitalist economy and the rise of strikes. To write about those things make sense. But my purpose is to draw your attention to the absence of articles on how the ruling class has allowed the Idiot King to go on and on.

Why are the Christian Fundamentalists putting up with him?

Mike Pence, Christian fundamentalist must at least be partly sickened by Trump. Faithless in religion, patron of prostitutes, a squanderer of money, how can Pence stand next to this guy? He takes it – and he smiles. The Christian fundamentalists who are the base of Pence’s following must do cognitive compartmentalization handstands trying to square the Idiot King with their Christian beliefs. But they are managing. Why don’t they rebel?

Is Trump doing the will of the ruling class?

For some, the answer to my question is that the idiot king is simply doing the will of the ruling class. After all, some may say fascism is the last stage of capitalism. The ruling class is frightened that more people are calling the economic system “capitalism,” and a new generation is interested in socialism. They need fascism to rule by a visible fist rather than an invisible hand. I don’t buy this and I’ll explain why.

When I bring up the ruling class, I am talking about the Council of Foreign Relations, the Trilateral Commission and the whole Rockefeller apparatus. I am thinking about Kissinger, Brzezinski, the CIA, NSA and the military elites. I am talking about the liberal think tanks, the foundations and the media. I’m thinking of the New York Times, the Guardian , CNN, MSNBC. All these groups have a stake in the long-term success of capitalism and Yankee world domination. They all like to have a long-term plan and they don’t like surprises. Trump is full of surprises. Why are they putting up with him?

Maybe the Neocons have gained power at the expense of the Neoliberals?

It is a mistake to think that Trump was simply a creature of the neocons. Before the elections, the neocons, any more than anyone else, knew what Trump was going to do. It was only after the elections that they seized the opportunity. One possible exception to this is Steve Bannon who, even before the elections, saw the political possibilities. The presence of Tillerson, Bolton and Abrams affecting policy must have involved the hand of Bannon. The neocons can give the Rockefeller ruling class a run for its money. After all Cheney ruled for eight years. But so what?

A corresponding concern for the ruling class has to be Trump’s rabid followers. I suspect that many workers who voted for Trump might not vote for him again because he has not instituted policies that have improved their lives. We must remember the research done by labor historian Kim Moody, that many working-class people who voted for Trump in 2016 voted for Obama in 2008. They switched sides after they found out Obama didn’t give a hoot about the working class. They could shift again or simply not bother to vote at all. However, there are rabid racists among Trump supporters who will not go quietly if the Idiot King is not crowned. The ruling class does not want a civil war on their hands.

Ruling class incompetence before the elections

What is far more important than Trump winning the election is that Hillary Clinton lost. The queen of the Council of Foreign Relations, hand-picked, “It’s my-turn” Clinton, lost to a reality TV host and bad businessman. All the money of the ruling class was put on Clinton and she lost anyway. How can that be? What is the ruling class doing wrong?

Ruling class incompetence after the elections

As we know, the Idiot King is full of surprises. If you were a member of the ruling class would you be pleased with his performance? In the space of less than two years Trump has alienated Europe as Italy, Germany and even England are turning towards Russia and China for resources. He has wrecked relations with China. The Yankee ruling classes have Israel, Saudi Arabia, Australia, England and perhaps India on their side, along with assorted dictators they’ve installed on the periphery of the world-system. However, the number of countries they can count on is dwindling. It this what Rockefeller and Kissinger wanted? Why hasn’t the idiot King been stopped? The CIA has tried assassinations all over the world. The CIA works for the Rockefellers. Draw your own conclusions.

Look at the neoliberal press. They work for the ruling class. Yet day after day they respectfully report on his escapades, treat him with respect in public even though they loathe and despise him. Journalists are upper middle class people, many of whom have PHDs. Going toe-to-toe with the Idiot King, they could easily humiliate him in public. They are far more knowledgeable than Trump, yet they put up with him. There is no reason why journalists could not unite as a group, walk out of his press conferences and shout him down together publicly. But they don’t. The editors of most every neoliberal newspaper probably hate Trump. But day after day, week after week Trump’s stupid opinions are trotted out and his moronic mug appears constantly in the news. These papers are the organs of the ruling class. Why don’t they refuse to print what he says?

The instability of capitalism

There is one other factor I want to consider and that is the instability of capitalism. The ruling class has never understood the system from which their wealth derives. Capitalism has been in a decedent phase since the 1880s or so. If we follow the work of Michael Roberts in his book, The Long Depression, capitalism is haunted by the tendency of the rate of profit to fall. In the last 150 years it has used investment in the military and finance to forestall this decline.

But now, all around the world the limits of the system are showing. Ecological forecasters say at this rate the earth will be unlivable in 30 years. Countries on the periphery of the world-system, taken as a whole, have been in hell for at least 50 years. Even Europe, the home of capitalism, is in big trouble. Southern Europe is swamped with debt. The EU is on its last legs and the centrist parties have taken a beating. Macron had been stung by Yellow Jackets for six months. Even Germany, the mighty jewel of Europe, has ceased to develop its manufacturing sector. World-systems theorists have said that relative to world-capitalism, the US has been in decline for 50 years. Strikes around the world have been increasing. Even the World Economic Forum has been worried about the potential for world rebellion.

The capitalists who run the world are cannibalizing their own infrastructures and their working class and all they can do is invest in wars and finance capital. They have no answers. It used to be that a capitalist would say to a socialist, triumphantly, “name one country where socialism works?”. We can now say without any hyperbole or dogma “name one capitalist country that works”. You know – the way Adam Smith described it and the way economics professors in the United States teach it.

Is the ruling class finally drawing a line in the sand?

Up until now, the ruling class has benefitted from Trump’s “policies” of tax cuts and deregulation. But these are both domestic policies. His relationship with the ruling class around international issues is another story. In his trade war with China and now Mexico, Trump has been disrupting supply chains all over the world. The companies affected include General Motors, Delphi, Constellation Brands, Cummins, Black & Decker and Fiat-Chrysler (partly American). Not exactly small potatoes. Some companies are switching suppliers to countries not affected by Trump’s tariffs like Vietnam, Taiwan and Korea, according to Capital Economics. The patience of the heads of these corporations with Trump must be wearing thin. There are the costs of pulling out and setting up shop in a new place with no guarantee of a better deal than China, and for what?

The Idiot King is allowing his hatred of CNN, the NYT and the Washington Post to get in the way of international capital. He is on a collision course with the ruling class. His has encouraged a boycott of AT&T which owns CNN. He is considering Antitrust proceedings against Google, Facebook, Apple and Amazon, owner of the Washington Post.

Has the ruling class lost its capacity to rule?

Even if the ruling class finds a way to stop Trump, this doesn’t account for why it has taken them so long. The self-assured silkiness of Mr. Jensen of Network is gone. The calm inevitability of capitalism is gone. The ruling class the world over is fumbling. Their efforts seem to be focused on how to climb higher and higher up the mountain to avoid the rising flames below. The ruling class is lost.

For those of us who are revolutionaries, the most important question is to understand why the ruling class is so weak and how we can exploit those weaknesses. We cannot expect to overthrow capitalism if we don’t understand where the ruling classes are weakest and act accordingly. I welcome your thoughts.

• Originally Published in Planning Beyond Capitalism

Snubs, Bumps and Donald Trump in Britain

He may not be popular in Britain, but he still has shavings of appeal.  For a country that has time for Nigel Farage, pro-Brexit enthusiast and full-time hypocrite (he is a member of the European Parliament, the very same institution he detests), President Donald Trump will garner a gaggle of fans.

One of them was not the London Mayor, Sadiq Khan, trenchant in his belief that the US president should never have been granted a state visit.  “It’s quite clear that Theresa May was premature in making this invitation, and it’s backfired on her.” But Trump’s tendency to unhinge his critics is not so much levelling as lowering: Khan’s coarse remarks a day before Trump arrived were timed to create a Twitter scene.

Trump, he wrote spitefully in The Guardian, was leading a push from the right “threatening our hard-won rights and freedoms and the values that have defined our liberal, democratic societies for more than seventy years.”  The UK had to stop “appeasing” (that Munich analogy again) dictatorial tendencies.  (Oblivious, is Khan, to the illustrious record Britain has in providing receptions and banquets for the blood thirsty and authoritarian.)

This semi-literate historical overview had the desired result.  Just prior to landing in London, Trump tweeted that Khan “who by all accounts has done a terrible job as Mayor of London, has been foolishly ‘hasty’ to the visiting President of the United States, by far the most important ally of the United Kingdom.”  For good measure, Trump insisted that the mayor was “a stone cold loser who should focus on crime in London, not me…”

The mood was set, and the presence of the president overseeing Britain’s increasingly feral political scene reminded The New York Times of boardroom takes of The Apprentice (reality television, again) though it came uncomfortably close to an evaluation of the “rear of the year” or a wet t-shirt competition of the fugglies.  This was aided by the absence of a one-to-one meeting between Trump and the soon to depart Theresa May, there being no preliminary meeting in Downing Street.

Trump felt at home, sizing up candidates to succeed May as British prime minister.  While he could muster choice words to describe Boris Johnson and Jeremy Hunt, Michael Gove barely registered. “Would do a good job, Jeremy?  Tell me.”

A few candidates did their best to impress, a spectacle that did, at points, verge on the grotesque.

The Conservative Party is deliriously panicked: Farage’s Brexit Party is proving so threatening its pushing the old guard to acts of pure desperation.  This is riveting, if troubling stuff for political watchers such as Tim Bale of Queen Mary, University of London.  “A lot of the constraints have come off British politics.  Whether they’ve come off permanently, or whether it’s because the Conservative Party is at panic stations, is something only time can tell.”

Foreign secretary Hunt was particularly keen to show his wet shirt to the ogling Trump.  He no doubt felt he had to, given that Johnson had already been praised as a person who “would do a very good job” as British prime minister. To repay Trump for his acknowledgment, Hunt dismissed the views of the London mayor.  “I agree with [Trump] that it is totally inappropriate for the Labour party to be boycotting this incredibly important visit.  This is the president of the United States.”

The situation with Johnson cannot but give some amusement.  Trump, rather memorably, had been a subscriber to the theory that parts of London had become a dystopian nightmare replete with psychotic, murderous residents of the swarthy persuasion.  Johnson, for all his faults, was happy to give Trump a nice slice of demurral on his city when mayor.  He also opined that Trump was “clearly out of his mind” in making the now infamous suggestion on December 7, 2015 for a “total and complete shutdown of Muslims entering the United States.”   But politics is an odd stew, throwing together a strange mix of ingredients.  For his part, Johnson declined an invitation to see Trump in person, preferring the comforting distance of a 20-minute phone call.

Away from rear of the year proceedings were those who had consciously boycotted any event associated with Trump.  Prince William and Prince Harry preferred to avoid a photo opportunity with the president at Buckingham Palace.  Jeremy Corbyn of the Labour Party preferred to join protests against Trump over attending the state banquet.  The act will no doubt be seen as admirable in some quarters, but hardly qualifies as those of a potential future prime minister.  “Corbyn,” noted The Independent, “has again dodged the stately bullet and had instead taken the easy way out.”  To the echo chamber he went.

Beyond the visit, more substantive matters are going to be troubling for diplomats in the UK Foreign Office.  One of the things touted during the Tuesday press conference was the prospect of a trade agreement between a Britain unshackled from the EU, and the United States.  Trump even went so far as to press May to stay longer for the negotiations.  Not one for briefings, he ventured a suggestion: “I don’t know exactly what your timing is but, stick around, let’s do this deal.”

The issue is fascinatingly premature: Britain, having not yet left the EU, let alone on any clear basis, faces an orbit of sheer, jangling confusion for some time to come.  In terms of numbers, the issue is also stark: the UK has the EU to thank for half of its trade; the United States comes in at 14.7 percent.

The troubling feature of any free trade proposal coming out of the Trump administration will be its rapacity, or, as Trump likes to call it, “phenomenal” scope.  Nothing will be exempt.  Agriculture and health are two fields of contention.  Access for US exports will entail easing limitations on animal feed with antibiotics and genetically modified crops.  More headaches, and bumps, await the relationship between troubled Britannia and groping Uncle Sam.

Trump: From China to Iran to Venezuela, Threats and Sanctions Everywhere

As of May 10, Mr. Trump has arbitrarily increased tariffs on Chinese goods imported into the US, worth about 200 billion dollars, from 10% to 25%. It is an action without any foundation. An action that makes no sense at all, as China can and will retaliate – and retaliate much stronger than what the impact of the US’s new “sanctions” may bear – because these arbitrary tariffs are nothing else but sanctions. Illegality of such foreign interference aside, there is hardly any serious economist in this world who would favor tariffs in international trade among “adults” anywhere and for any reason, and, of course, least as a punishment for a nation. All that such sanctions do is pushing a partner away. In this case it’s not just any partner; China is a key trading partner of the United States.

The new tariffs will hardly harm the American consumer. There are huge profit margins by US middlemen and importers of Chinese goods. They are competing with each other within the US  and the consumer may not even notice a thing. However, the US economy will likely suffer, especially from Chinese retaliatory actions.

A spoiled child, what Trump is, doesn’t get his way – and goes into a tantrum, not quite knowing what he is doing, and knowing even less what he may expect in return. Mr. Trump, himself, has not only reached a level of incompetence and ignorance which is scary – but he has also surrounded himself with inept, preposterous people, like, Pence, Bolton, Pompeo – who, it appears, have no other means left than running around the world amok, dishing out threats left and right and spending billions on moving aircraft carriers around the globe to make sure people are afraid of the great-great United States of America.

Back to trading with China. China has a million ways (almost) to retaliate. China can devalue her currency vis-à-vis the dollar, or China can dump some of their almost 3 trillion dollars-worth of reserves on the money market – just take a wild guess about what that would do to the hegemony of the dollar which is already in dire straits – with ever more countries departing from the use of dollars for international trade.

And just hypothetically, China could stop altogether exporting all that Walmart junk that American consumers love so much just for a while. Or China could stop making iPhones for the US market. Guess what kind of an uproar that would trigger in the US?  Or China could, of course, levy herself high tariffs on US imports, or stop US imports altogether. China being part of the Shanghai Cooperation Organization (SCO) – actually the co-founder of it – has many alternatives to cover her demand. No need to depend on the west.

Let’s not forget, the SCO which also counts as its members, Russia, India, Pakistan, most of Central Asia, and Iran poised to become a full-fledged member, covers about half of the world population and a third of the world’s economic output, or GDP. No need to look to the west for ‘survival’ – those times are long gone.

But more importantly, what all this looks like to me is the desperate thrashing around of a dying beast, or in this case a dying empire.

We have the US and Venezuela – threats after threats after threats – Maduro must go, or more sanctions. Indeed, according to a study by the Center for Economic Policy Research (CEPR), these horrifying, totally illegal sanctions or blockages of imports, most of them already paid for by Venezuela, have killed some 40,000 people in Venezuela. Of course, Washington doesn’t care about legality and killing, also typical for a fading mighty power – no respect for law and order, no respect for human rights and human lives. One only has to see what type of psychopaths are occupying the tasks of “Foreign Minister” and of “National Security Advisor” or of Vice President, for that matter – they are all sick, but very sick and dangerous people.

Well, in Venezuela “regime change” didn’t work out – so far. Pompeo has been clearly told off by Mr. Lavrov during their recent get-together in Helsinki,  and China is in the same line of supporting the government of Nicolas Maduro.

Next – Iran. Attacking Iran has been a dream of Bolton’s ever since the US 2003 “Shock and Awe” invasion of Iraq. Bolton and Pompeo are of the same revolting kind: They want wars, conflicts, or if they don’t get wars, they want to sow fear, they enjoy seeing people scared. They want suffering. Now they didn’t succeed – at least so far – with Venezuela, let’s try Iran. Pompeo – “Iran has done irregular things” – not saying what in particular he means – so Iran has to be punished, with yet more sanctions. And any argument is good.

The entire world knows, including the Vienna-based UN Economic Energy Commission, and has acknowledged umpteen times that Iran has fully adhered to the conditions of the Nuclear Deal from which the US exited a year ago. Of course, no secret here either, this at the demand of Trump’s Big Friend Bibi Netanyahu. The European Union vassals may actually turn for their own business interests, not for political ethics, but pure and simple self-interest – towards respecting the Joint Comprehensive Plan of Action (JCPOA), or Nuclear Deal. China and Russia are already holding on to the Deal, and they are not impressed by Washington’s threats. So, there is very little Trump and his minions can do, other than saber rattling.

Therefore, the nefarious Pence-Pompeo-Bolton trio must invent another warning: Iran or any proxy of Iran shall attack an ally of the US, and Iran will be devastated. In fact, they consider the Houthis in Yemen who fight for their sheer survival against the US-UK-France – and NATO supported Saudis, as a proxy for Iran. So, the US could start bombing Iran already today. Why don’t they?

Maybe they are afraid – afraid Iran could lock down the Strait of Hormuz, where 60% of US oil imports have to sail through. What a disaster that would be, not just for the US but also for the rest of the world. Oil prices could skyrocket. Would Washington want to risk a war over their irrationality? Maybe, Mr. Halfwit Trump might, but I doubt that his deep-dark state handlers would. They know what’s at stake for them and the world. But they let Trump play his games a bit longer.

Moving the aircraft carrier USS Abraham Lincoln, loaded with war planes, close to Iranian waters costs hundreds of millions or billions. Just to enhance a threat. A show-off. Bolton and Pompeo will entertain their sadism, enjoying seeing scared people. But the cost of war doesn’t matter – it’s just more debt, and as we know, the US never, but never pays back its debt.

Next, or simultaneously, is China. The trade war with China that started last year, then had a respite to the point of the recent joint negotiations and suddenly the Trumpians are veering off again. They must smash China, wanting to appear superior. But why? The world knows that the US is no longer superior by a long shot, and haven’t been for the last couple of years, when China surpassed the US in economic strength, measured by PPP – Purchasing Power Parity – which is the only parity or exchange rate that has any real meaning.

Guess what!  All these three cases have one common denominator: The dollar as a chief instrument for world hegemony. Venezuela and Iran have stopped using the dollar for their hydrocarbon and other international trading, already some years ago. And so did China and Russia. China’s strong currency, the Yuan, is rapidly taking over the US-dollar’s reserve position in the world. Sanctioning China with insane tariffs is supposed to weaken the Yuan; but it won’t.

All of these three countries, China, Iran and Venezuela are threatening the US dollar’s world hegemony and without that the US economy is dead, literally. The dollar is based on thin air, and on fraud.  The dollar system used around the globe is nothing but a huge, a very big and monstrous Ponzi-scheme, that one day must be coming crashing down.

That’s what’s at stake. New FED Board member, Herman Cain, for example, is pledging for a new gold standard. But none of these last resort US measure will work, not a new gold standard, not a trade and tariff war, and not threats of wars and destruction and “regime change”. The nations around the world know what’s going on, they know the US is in her last breath; though they don’t quite dare saying so, but they know it, and are waiting for the downfall to continue. The world is waiting for the grand fiesta, dancing in the streets, when the empire disappears or becomes utterly irrelevant.

• First published in New Eastern Outlook (NEO)

France and the EU: Recognizing Yet Supporting Apartheid Reality in Palestine

A recent statement made by the outgoing French Ambassador to the US regarding the nature of Israeli apartheid accentuates a larger ailment that has afflicted the European Union foreign policy.

The EU is simply gutless when it comes to confronting Israel’s illegal occupation of Palestine.

Ambassador Gerard Araud was, of course, right when he told the US magazine, The Atlantic, that Israel is already an apartheid state.

Noting the “disproportion of power” between Israel and the Palestinians, Araud said, “The strongest (meaning Israel) may conclude that they have no interest to make concessions.”

And since Israel “won’t make (Palestinians) citizens of Israel  … they will have to make it official, which we know the situation, which is apartheid.” Araud added, “There will be officially an apartheid state. They are in fact already.”

The fact that Araud has only divulged such obvious truths at the end of his five-year diplomatic assignment is expressive of the nature of politics, in general, and European politics, in particular.

The unpleasant truth is that the EU has served as an American lackey in the Middle East and has consistently operated within Washington’s acceptable margins. EU diplomacy rarely ventures away from this maxim. The fact that Araud dared to speak out is the exception, not the rule.

But Araud’s revelations are unlikely to translate into anything substantive. Moreover, they will not inspire a serious rethink in the EU’s position regarding the Israeli occupation or the US’ blind support for Israeli Prime Minister Benjamin Netanyahu’s militant and racist policies towards the Palestinians.

Some had hoped that the advent of an erratic and abrasive president in the White House could jolt the Europeans into action. They were encouraged by the January 2017 Paris Middle East summit that took place, despite American protests.

More than 70 countries added their voices to that of their French host, declaring their opposition to the illegal Jewish settlements and calling for the establishment of an independent Palestinian state as “the only way” to achieving peace.

The summit’s final statement urged Israel and the Palestinians to “officially restate their commitment to the two-state solution.” Then-French President, François Hollande, explained that his country’s motive was to merely ensure the ‘two-state solution’ is the frame of reference for future negotiations.

But what good did that do? Israel and the US ignored the summit as if it never took place. Tel Aviv continued to pursue its Apartheid policies, crowning these efforts with the Nation-state Law in July, which declared Israel as “the nation-state of the Jewish people”.

Trump, too, ignored the French and the EU altogether. On December 15, 2016, he selected an ardent Israeli supporter, David Friedman, to be his Ambassador to Israel. Friedman opposes the two-state solution and still refers to the Occupied Palestinian Territories in some ancient biblical designations, Judea and Samaria.

Nor did Trump consider the French position when he moved his country’s embassy from Tel Aviv to Jerusalem last May.

How did the EU respond to the concrete, albeit illegal, American actions? With more redundant statements that merely emphasized its political position but lacked any mechanism for serious action.

Last December, eight EU ambassadors, including that of France, issued a statement at the UN that was clearly aimed at the US. “We, the European Union members of the (UN Security) Council, would like to reiterate once more and emphasize the EU’s strong continued commitment to the internationally agreed parameters for a just and lasting peace in the Middle East, based on international law, relevant UN resolutions and previous agreements,” the statement read, in part.

Again, words and no action. The same pattern was repeated after Trump took it upon himself to grant the Occupied Syrian Golan Heights to Israel, defying the UN, the EU and, needless to say, the aspirations of millions of Arabs.

The EU foreign policy chief, Federica Mogherini, countered with another statement, on behalf of 28 EU states that Europe “does not recognize Israeli sovereignty over the occupied Golan Heights.”

So what? While the US defies international law with concrete steps, the EU settles for mere words, emphasizing a status quo that, even when it was embraced by Washington itself, wrought nothing but misery for Palestinians.

EU ineptness is only matched by its hypocrisy. Israel still enjoys advantageous trade privileges with Europe, and diplomatic ties between Israel and most EU member countries are at an all times high.

The only collective European initiative that seemed to matter at the time was in 2013, when the EU requested that Israeli products made in illegal Jewish settlements be labeled as such. After years of haggling, the EU admitted that monitoring Israeli trade practices as far as labeling is concerned has proven “impossible”.

The French position on trade with the illegal settlements was particularly disgraceful. While the Irish Senate had voted on December 5 to end the import of settlement-produced goods, in October 2018 the French did the exact opposite by suspending the special labeling rules.

In truth, the ineffectiveness of EU policies is nothing new, nor can it be blamed on Trump’s unilateral measures, either.  In fact, the words of French Ambassador Araud are consistent with the frustration felt by other EU diplomats throughout the years.

In February 2013, a report issued by EU diplomats described illegal Jewish settlements as “the biggest single threat to the two-state solution”, calling on Brussels to take decisive measures to stop Israel’s “deliberate and provocative” settlement enterprise.

It has been over six years since the report was issued. The EU did nothing to stop the illegal settlements, which have grown in leaps and bounds since then.

Worse, in the latest elections won by Netanyahu, he promised to annex the illegal Jewish settlements into Israel.

Considering the unconditional American support regarding Israel’s previous illegal annexations of Jerusalem and the Golan, this, too, could be a tangible reality in the near future. After all, the Jewish Nation-state law recognized Jewish settlements as “national value” and the state “will labor to encourage and promote (their) establishment and development.”

In the face of the US backing of Israel, EU foreign policy is inconsistent, weak and, ultimately, a failure. Alas, the idea which gained momentum during the early months of Trump’s presidency that the EU can develop a truly independent foreign policy position on Israel and Palestine has proven wrong.

To change all of that, EU members should heed the words of the French Ambassador, recognize the apartheid reality in Palestine and act against it as forcefully as the world acted against South African apartheid, which led to its final, irreversible collapse in 1994.

The Iron Fist of “Free Trade”

President Donald Trump is against the big, multilateral “free trade” deals (which have little to do with trade) supported by so-called “liberal elites” (who are not really liberal), like Hillary Clinton and Barack Obama. Such deals include the Trans-Pacific Partnership, from which Trump withdrew, and the Transatlantic Trade and Investment Partnership, which appears to be dead in the water, due in large part to popular opposition. The more moderate wing of the Democratic Party (represented by the likes of Bernie Sanders) also opposes the big, multilateral deals, but for opposite reasons. Unions, working people and small businesses see the TPP and TTIP as a way of undermining their rights. Trump, on the other hand, sees them as not going far enough to maximize US corporate profits. Trump prefers bilateral (or one-to-one) deals because, in a bilateral deal, the US is the biggest partner, whereas in an association, the US position is weakened.

But in terms of the basics—privatizing public resources, cutting back on workers’ rights, opening the environment to exploitation—there’s little difference between bi- and multilateralism when it comes to “free trade.” In poor countries, “free trade” is underpinned by the iron fist of militarism. Consider the case of Congo in the 1960s: the US, Britain and Belgium overthrew the government, backed a dictatorship and laid the foundations for an exploitative Bilateral Investment Treaty (BIT) that enabled US corporations to sue to the government of the impoverished people.

The US State Department’s website lists three broad aims of BITs: “protect investment abroad…[;] encourage the adoption of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory way; and support the development of international law standards consistent with these objectives.” BITs are only “nationalistic” in the sense that they benefit national corporations. They undermine domestic workers and investors by allowing country x to open businesses or acquire businesses in country y. “Nationalism” in this context really means US corporate dominance.

In the 1980s, the Reagan administration signed BITs with several countries, most of them extremely poor. Early test-subjects included: the Democratic Republic of Congo (DRC, 1984), the Republic of Congo (1990), Bangladesh (1986), Cameroon (1986), Egypt (1986), Grenada (1986), Haiti (1983), Senegal (1983) and Turkey (1985). Let’s look at the DRC, also known for a time as Zaire.

In June 1960, the Belgian Congo became independent of its European master. Patrice Lumumba came to power on a popular vote and made clear his intentions to use Congo’s resources in the interests of the Congolese: “The exploitation of the mineral riches of the Congo should be primarily for the profit of our own people and other Africans,” he told New York businesspeople. In September 1960, President Kasa-Vubu dismissed Lumumba, who had been Prime Minister for less than three months before the British, Belgian and US intelligence services conspired to murder him.

In Britain, MI6 officer and later peer, Daphne Park, was asked if MI6 was involved in Lumumba’s assassination. “I organized it,” said Park. The BBC acknowledges: “Lumumba made a fateful step − he turned to the Soviet Union for help [economic and military]. This set off panic in London and Washington.” Lumumba and his supporters, Maurice Mpolo and Joseph Okita, were tortured and executed by forces from Belgium and Congo’s Katanga region, before being dissolved in acid.

From the South African Truth and Reconciliation Commission we learn that British intelligence plotted Operation Celeste, the murder of UN Secretary-General, Dag Hammarskjöld, who died in a plane crash. Hammarskjöld refused to withdraw UN troops from Congo, fearing further massacres between the warring factions. Britain’s MI5 and the Special Operations Executive were involved in the plot, which was hatched in apartheid South Africa via the South African Institute for Maritime Research. The CIA was also involved. Letters exchanged between agencies state: “Dag is becoming troublesome… and should be removed… I want his removal to be handled more efficiently than was Patrice.” The plan was to explode Hammarskjöld’s plane with a bomb allegedly supplied by Union Minière, a Belgian mining company with private interests in the copper-rich Katanga region.  In 1965, Lumumba’s pro-US Chief of Staff for the Congolese National Army, Mobutu Sese Seko, came to power. Mobuto quickly garnered an international reputation for brutality, banning political parties and crushing secessionist movements.

By 1984, when the US signed its first-ever BIT with the country, Congo was importing 60 per cent of its food, despite having plenty of arable land; half of all Congolese children died before the age of five; and wages were 10 per cent of what they had been prior to independence. The New York Times reported at the time: “Zaire has one of Africa’s largest markets and a liberal investment code.” The BIT stated that the objective was “to provide US investors with significant investment guarantees and assurances as a way of inducing additional foreign investment.” Another aim was “to encourage, and facilitate participation by private enterprise to the maximum extent practicable.” It also noted: “Each of these models was developed after lengthy and extensive consultations within the US Government and with the private sector.”

As well as the generic misery and mass deaths that come with propping up a dictator, one of the other anti-democratic facets of the BIT is the fact that American companies could now sue the Congolese government for alleged inhibitions of profit. In 1993, the firm American Manufacturing Trading sued Zaire in a case “based on the provisions of a [BIT].” The law suit chides Mobutu’s failure to prevent looting of foreign-owned corporations. It says that this is the fault of the Congolese people (“the government”), who must compensate companies like American Manufacturing Trading.

This model of using the iron fist of militarism to impose the “velvet glove” of so-called free trade is an in old one that generalizes around the world.

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This article is an excerpt from my new book, Privatized Planet: “Free Trade” as a Weapon Against Democracy, Healthcare and the Environment, (New Internationalist).