Elite power and weakness across time and space

Who thinks coming hostilities with Iran are about military, material and religio-ideological support for Shiite militias, or even construction of a nuclear energy plant? Only in the context of a several-decade scan does the Bush regime’s panicky neoconservativism make sense.

Taking a relatively longer view than is typically invited by post-9/11 or even post-Cold War analysis, we can discern political-economic and geopolitical dynamics that help us situate ongoing military aggression and economic volatility.

Setting aside the neocon movement’s fading power and Bush’s macho personality, at a structural level I think we’re dealing with an extreme case of ‘uneven and combined development.’

I’ll try to cover the motor dynamics within this theory in the next column, but meantime, what are the major events of the last third-century or so that we would want to deploy it to explain?

Artificial as it may appear initially, consider first the realm of political conflict and associated geographic realignment; and then some major economic events that mark the rise and fall of neoliberalism.

Major geopolitical changes since the 1970s include at least four developments:

- the 1975 US defeat by the Vietnamese guerrilla army (after Washington carpet-bombed much of Southeast Asia), which reduced the US public’s willingness to use its own troops to maintain overseas interests;

- the demise of the Soviet bloc in the early 1990s, as a result of economic paralysis, foreign debt, fast-declining state illegitimacy and burgeoning democracy movements;

- Middle East wars throughout the period, with Israel generally dominant as a regional power from the 1973 war with Egypt until its 2006 defeat in Lebanon; and

- the rise of China as a potentially potent competitor to the West (in political as well as economic terms) during the 1990s-2000s, once its student and worker movements were decisively repressed.

These were merely the highest-profile of crucial geopolitical processes that have unfolded from the 1970s-present, leaving a sole superpower in their wake, yet one with much lower levels of legitimacy, dubious military dominance, slower economic growth, higher poverty and inequality, and vastly reduced financial stability over the past third of a century.

Chronologically, other crucial ‘moments’ associated with the splintering and polarisation of the political sphere since the 1970s included the following:

- formal democratisation arrived in large parts of the world – Southern Europe during the mid-1970s, the Cone of Latin America during the 1980s and the rest of Latin America during the 1990s, and many areas of Eastern Europe, East Asia and Africa during the early 1990s – partly through human/civil rights and mass democratic struggles and partly through top-down reform by enlightened bourgeoisies – yet because this occurred against a backdrop of economic crisis in Latin America, Africa, Eastern Europe, the Philippines and Indonesia, the subsequent period was often characterised by instability, in which ‘dictators passed debt to democrats’ (as the Jubilee South movement termed the problem) who were compelled to impose austerity on their subjects, leading to persistent unrest;

- the ebbing of Third World revolutionary movements – in the wake of transformations in Nicaragua, Iran and Zimbabwe in 1979-80 – was hastened by the US government’s explicit attacks on Granada, Nicaragua, Angola and Mozambique (sometimes directly but often by proxy), as well as on liberation movements in El Salvador, Palestine (via Israel) and Colombia, as well as former CIA client regimes in Panama and Iraq, hence sending signals to Third World governments and their citizenries not to stray from Western mandates;

- after Vietnam, the US’s subsequent ground force losses in Lebanon during the early 1980s and in Somalia during the early 1990s (followed by Afghanistan and Iraq in the mid-late 2000s) shifted the tactical emphasis of the Pentagon and NATO to high-altitude bombing, which proved momentarily effective in situations such as the 1991 Gulf War (decisively won by the US in the wake of Iraq’s invasion of Kuwait), the Balkans during the late 1990s, the overthrow of Afganistan’s Taliban regime in 2001 and the initial ouster of Saddam Hussein in Iraq in 2003;

- the 1989-90 demise of the Soviet Union had major consequences for global power relations and North-South processes, as Western aid payments to Africa, for example, quickly dropped by 40% given the evaporation of formerly Cold War patronage competition (until the resurgence of Chinese interest in Latin America and Africa during the 2000s);

- the consolidation of European political unity followed corporate centralisation within the European Economic Community, as the 1992 Maastricht treaty ensured a common currency (excepting the British pound which was battered by speculators prior to joining the euro zone), and as subsequent agreements established stronger political interrelationships, at a time most European social democratic parties turned neoliberal in orientation, and as voters swung between conservative and centre-right rule, in the context of slow growth, high unemployment and rising reflections of citizen dissatisfaction;

- persistent 1990s conflicts in ‘Fourth World’ failed states gave rise to Western ‘humanitarian interventions’ with varying degrees of success, in Somalia (early 1990s), the Balkans (1990s), Haiti (1994), Sierra Leone (2000), Cote d’Ivoire (2002) and Liberia (2003), although other sites in central Africa – Rwanda in 1994 and since then Burundi, northern Uganda, the eastern part of the Democratic Republic of the Congo, Somalia and Sudan’s Darfur region – have witnessed several million deaths, with only (rather ineffectual) regional not Western interventions;

- the 2001 attack on the World Trade Center in New York City and the Pentagon near Washington (followed by attacks in Indonesia, Madrid and London) signalled an increase in conflict between Western powers and Islamic extremists, and followed earlier bombings of US targets in Kenya, Tanzania and Yemen which in turn received US reprisals against Islamic targets in Sudan (actually, a medicines factory) and Afghanistan in 1998 and Yemen in 2002; and

- the early-mid 2000s rise of left political parties in Latin America included radical swings in Venezuela (1999), Bolivia (2004) and Ecuador (2006), as well as turns away from pure neoliberal economic policies in Brazil, Argentina, Uruguay and Chile, and these were joined during the mid-2000s in Europe by left coalitions in Norway and Italy.

This list of political moments should not obscure the important social and cultural trends that seem to have accompanied them (e.g., postmodernism, the ‘network society’, demographic polarisations and family restructurings), as well as new technologies (transport, communication and computing revolutions), major environmental stresses and catastrophes (including climate change, natural disasters, depletion of fisheries and worsening water scarcity) and health threats (e.g., AIDS, Bovine Spongiform Encephalopathy, anthrax, drug-resistant tuberculosis and malaria, severe acute respiratory syndrome and avian flu).

Many of the political shifts can be traced to – or were prerequisites for – the rise and then decline of neoliberal policy influences across the world:

- in 1973, the Bretton Woods agreement on Western countries’ fixed exchange rates – by which from 1944-71, an ounce of gold was valued at US$35 and served to anchor other major currencies – disintegrated when the US unilaterally ended its payment obligations, representing a default of approximately $80 billion, leading the price of gold to rise to $850/ounce within a decade;

- also in 1973, several Arab countries led the formation of the Oil Producing Exporting Countries (OPEC) cartel, which raised the price of petroleum dramatically and in the process transferred and centralized inflows from world oil consumers to their New York bank accounts (‘petrodollars’);;

- from 1973, ‘los Chicago Boys’ of Milton Friedman – the young Chilean bureaucrats with doctorates in economics from the University of Chicago – began to reshape Chile in the wake of Augusto Pinochet’s coup against the democratically-elected Salvador Allende, representing the birth pangs of neoliberalism;

- in 1976, the International Monetary Fund signalled its growing power by forcing austerity on Britain at a point the ruling Labour Party was desperate for a loan, even prior to Margaret Thatcher’s ascent to power in 1979;

- in 1979 the US Federal Reserve addressed the dollar’s decline and US inflation by dramatically raising interest rates, in turn catalyzing a severe recession and the Third World debt crisis, especially in Mexico and Poland in 1982, Argentina in 1984, South Africa in 1985 and Brazil in 1987 (in the latter case leading to a default that lasted only six months due to intense pressure on the Sarnoy government to repay);

- at the same time, the World Bank shifted from project funding to the imposition of structural adjustment and sectoral adjustment (supported by the IMF and the ‘Paris Club’ cartel of donors), in the name of making countries more competitive and efficient;

- the overvaluation of the US dollar associated with the Fed’s high real interest rates was addressed by formal agreements between five leading governments that devalued the dollar in 1985 (Louvre Accord), but with a 51% fall against the yen, required a revaluation in 1987 (Plaza Accord);

- once the Japanese economy overheated during the late 1980s, a stock market crash of 40% and a serious real estate downturn followed from 1990, and indeed not even negative real interest rates could shake Japan from a long-term recession;

- during the late 1980s and early 1990s, a series of crisis-management techniques – such as the US Treasury’s Baker and Brady Plans – ensured that potentially dangerous Third World debt was lifted from the books of New York, London, Frankfurt, Zurich and Tokyo banks exposed in Latin America, Asia, Africa and Eastern Europe, and although bank losses were mainly socialised this way (and through tax relief on writedowns), debt relief was denied the borrowers;

- in late 1987, crashes in the New York and Chicago financial markets (unprecedented since 1929) were immediately averted with a promise of liquidity by Alan Greenspan’s Fed, a corporate welfare philosophy which in turn allowed the bailout of the Savings and Loan industry and various large commercial banks (including Citibank) in the late 1980s notwithstanding a the recession and serious real estate crash during the early 1990s;

- likewise in 1998, when a New York hedge fund – Long Term Capital Management (founded by Nobel Prize-winning financial economists) – was losing billions in bad investments in Russia, the New York Fed arranged a bailout, on grounds the world’s financial system was potentially at high risk;

- starting with Mexico in late 1994, US Treasury’s management of the mid- and late 1990s ‘emerging markets’ crises again imposed austerity while offering further bailouts for investment bankers exposed in countries – Thailand (1997), Indonesia (1997), Malaysia (1997), Korea (1998), Russia (1998), Brazil (1999), Turkey (2001) and Argentina (2001) – whose hard currency reserves were suddenly emptied by runs; and

- in addition to a vastly overinflated US economy (with record trade, capital account and budget deficits) whose various excesses have unravelled sometimes spectacularly – as with the dot.com stock market (2000) and real estate (2007) bubbles – two Asian economies, China and India, picked up the slack in global materials and consumer demand during the 2000s, but not without extreme stresses and contradictions that in coming years threaten world finances, geopolitical arrangements and environmental sustainability.

This, then, is a list of major events that reflect tensions and occasional eruptions, but never genuine resolutions to the overall volatility that has wracked world politics and economics over the last generation. Such chaos in global political economy and geopolitics contrasts to a more stable, predictable, prosperous and evenly-distributed set of political-economic relations during the immediate post-War quarter-century (1945-70).

How we might theorise these incidents and then better react to them is the subject of a coming essay.

(Patrick Bond – [email protected] – and colleagues in Durban have recently produced four works on political economy, available soon for free download at http://www.ukzn.ac.za/ccs: The Accumulation of Capital in Southern Africa: Rosa Luxemburg’s Contemporary Relevance; Beyond Enclavity in African Economies: The Enduring Work of Guy Mhone; the Review of African Political Economy’s March 2007 special issue on primitive accumulation; and the Africanus development studies journal’s April 2007 issue, Transcending Two Economies. Zed Books will publish a second edition of his Looting Africa: The Economics of Exploitation, mid-year.)

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